The Information's 411 Faceless Brands of Braavos
Happy Friday, everybody. It's the information's for one one your weekly podcast. Brought to you by the reporting team at the information we go behind the scenes on all the best stories at this week, I am joined this week is a very exciting episode both from a story perspective and a technical perspective, I think I got all the mic setup as they need to be because I'm joined by both Corey Weinberg here in San Francisco, and Zoe Renard out in our New York office, who this week, both publish stories about companies that have been in the news, while they're in the news, because we publish things about them, but so we had a great story about brand, lists, a company that delivers you products, without brand names on them for a low price and they had had an interesting run with their investor SoftBank. And then Corey Alfred Lee wrote a story about we work and why it may not be worth the forty seven billion dollars that investors once valued at we work, of course, is probably the largest experiment that SoftBank has running the pump billions of dollars into that operation and the fact. It may not be worth its last valuation. Certainly has lots of implications for SoftBank so anyway, that's the story. That's the mega podcast Zoe Corey, thank you for joining me today. Hello. Hey, Zoe, let's start off with you, and Brandis. Pretty pretty fascinating piece investigation. You had going here. I did maybe a mediocre job of explaining it in the intro. So why don't you do me better and explain exactly what brand is? So brainless is a consumer packaged good company that delivers directly to consumers, they sell everything from, you know, like food items and conditioner, you can get avocado oil, a whole bunch of different items on there, and they just recently launched it a pen, baby line. The name kind of comes from this idea that consumers have lost faith in traditional brands and they are more. They're paying a brand. Ptacs when you're buying from Johnson and Johnson or whatever your brand may be. So why not sell to consumers brand that doesn't necessarily have grant, even though this brand ran list, and sell it to them directly at lower prices products that are just as good as what they would be selling. But buying from other companies, I love, like indicator of the company deserves a little bit more digging under the hood, is that it's maim as right? It's baseless. It's like a faceless person of Bravo. But the idea, I mean, this is a tech company in the sense that, I mean, the operations are entirely online, and they're trying to scale like a tech company like evaluation kind of matches that. Yeah, that's exactly right. They've taken auto venture funding. They most notably. Obviously SoftBank, one of the biggest investors, and they are trying to lot of different things at the same time, and they were into a lot of difficulties right? Okay. So, so let's, let's get the difficulties. So SoftBank invest in this company when was last year. This was this was like July two eighteen. Yeah. Okay. And I mean and core you can chime in here too, because you've done a lot of work cut of looking into SoftBank, but kind of surprise investment on soft bank's part, I know they've kind of spread their investments far and wide, and there's not really maybe as much one central thesis. But a lot of eyebrows were raised when they came in there and put the money in that they did, right? Yeah. It was like one of these companies that there's been several of these now where SoftBank puts in a bunch of money into kind of more, mid stage, start up a company that has been exactly like broken out or gotten to like, you know. Hundreds of millions of dollars in revenue necessarily. But SoftBank takes a pretty big chunk of the company they own about, I think Bramlett Zoe reported that it was about forty percent of the company, which is a big steak for a sort of mid range venture venture investor and banquets with a handful of companies. And you contrast that with, like a slack, which is more typical that your investment like they came in didn't take a huge ownership ships lice, but just invested, you know, if you hundred millions of dollars brand-new kind of fit in that category of companies were stopping owns a ton of it, but it's future is a little bit more uncertain. Right. And what state was the company in Zoe went went SoftBank came in. I mean, why did they feel like they needed that money? What was also super early. Like so the company had kind of the idea of it had been sort of thought up in December two thousand fifteen and then they launched in two thousand sixteen so the companies like, I don't know two years old. If. At the time that saw fake makes an investment. So it's still really early. They have a lot of different ambitions ideas for what the future brands can be. I had heard. The course report is out that they had presented a deck to people to potential investors that included brand-new airplanes and Bramlett hotels on. So there were a lot of big ideas of what the company because announcement SoftBank walks in and Masa, Bloomberg had a story of currently, the founder of vision fund, apparently loved the idea from the get-go, right? And so they take on this money and like all msrp vestments, there are strings attached and before even gets just the internal turmoil. That happened post the SoftBank investment. It looked like soft bank's the string attached here. Was that this was to be investment done in entrenches in several different kind of periods? Is that right? Yeah. That's right. So this investment, there's some trench investments where they're tied to reaching certain financial goals. This one it was not tied to any financial goals. It seemed to be like a time base trunch investment after period of time. They're gonna put in more money so offing so far has put in a hundred million their total investment is two hundred that they've committed of a two hundred forty million dollar investment that they lead. Right. And as others reported before they are hands on, and very specific ways when they come into these companies. So what was the experience at brand? Listen and why did so many events come up right after the investment? So there had been issues with at Brandeis, even before the SoftBank investment. And after the launch they were having trouble trying to figure out how to gauge customer demand. They would sell out of items after that. Shortly after launch over a out of a third of the items that were on the site, and then it was like they would buy too much of one thing. And then there were just like difficulties of shipment problems shipping glass containers, that would break in the mail. There is some salsa jars that people were picking out little pieces of glass shards from their salsa. Right. And I don't have it was like from this at self but people said that they cut their fingers upon opening the boxes. What one former employee had told me of logistical issue so then softening steps in, and they put two board members on, on friendless board, and it seems like some people had told me did SoftBank, even really know what they were getting into with investment. It was like they didn't really even understand the way that the company worked, and I think that there were some people that felt that perhaps there was too much pressure that they. Were really driving this company just to make our money when they were still really early into the process and still focusing on growth and still spending a ton of money on, like marketing. Right. It's funny. I mean you hear that story a lot. It almost sounds like an issue of Silicon Valley companies from three or four years ago, where VC would come in and try to supercharge growth with a ton of capital member. That was an issue with this company's fits and entries and Horowitz coming in, and then kind of turning them into a medium, come to a super growth company, and all the issues that came after that it's just funny to hear that still happens from time to time at least from the perspective of people at, at Brandis. Yes, that definitely seems to be the case. And so, I mean, they have quarterly board meetings at ran list, and I believe it would have been, maybe the first it was like the second board meeting in January by the time the softening or members came in were sitting in and from what I heard it seemed like it was semi disastrous. That some decisions were made in the course of that board meeting that they, they were burning way too much cash. They need to figure out what was going on and have a more senior executive step to Tina Sharkey the spot. Court, you've written stories about SoftBank and their investments in various real estate of ventures. And we'll get to we work in a second. But does this kind of sound familiar to you? I mean, do you hear these sort of experiences coming up of SoftBank, sort of, you know, not necessarily as negative, but SoftBank stepping in and like, either pushing for bigger growth or revisiting what the business could be, and that being, you know, something that these companies have to work through. Yeah. It's interesting to some degree. I mean, we're now a couple of years in to the vision fund, you know, which is a hundred billion dollar fund for, you know, startups, the largest tech investment arm ever. So we're, we're two to three years into this thing. And, you know, you have situation where, you know, the whole thesis of the vision, find is we're gonna plow a bunch of capital into companies, and that cop, it'll will create like undue advantages in spaces like Thomas, vehicle ecommerce real estate. All this stuff. What's turned out to be the case like a lot of this money hasn't really creative? Like a lot of winners just off the back of SoftBank capital. You know, like like you would have thought brand Lois would have had, like, what's happened is like sopping invested in a lot of companies that are already involved, and just really capital, heavy businesses like real estate with we work, Uber ride hailing DD, you know, these businesses these type of businesses have needed money, no matter what, and they'd just like sort of tap top Bank at the right time. But I've been trying to look for more examples where the SoftBank money really made a difference. And it's clearly like Brian Lewis is a one of those cases maybe not yet, maybe not yet. I mean they certainly turn it around. And I think a lot of people in the valley are watching sort of what's going to happen with SoftBank, and her Nally, and sort of who are they hiring to be these, like, influential, managing partners, like, how are they interacting? With their portfolio companies it's very possible. Like one, we didn't report this. But reading this Zoe story made me wonder, like to stop to some degree view. Brand has its own kind of experiment to some degree like the brand list got such a while. The check that they got was large in any in most worlds to SoftBank, it, you know, hundred. Yeah, it's like a tiny tiny tiny fraction of the vision fund. So what do you think I mean where are things now at the company sounds, the CO is Steph down? And there is, you know, obviously still money flowing into them. But what's the state of affairs now? So it's in kind of tense thought SoftBank has decided that they're going to delay the rest of that investment for now and it seems that the time had had passed where I'm not I don't know how the size of the installment was do they decided not to deliver on that installment. And they would like to see the company start making more money was sort of what I was told. So I think that being in a type of limbo would probably have some anxiety on a company Tina step down. She's still very much the face of the company, and I think she is speaking publicly on his behalf, and they do have a new CEO, who is a former exact from WalMart John Rittenhouse. He is joining they've recently laid off their presented the company, but there are still hiring for strategic roles. So it's kind of limbo. I'm interested to see how it plays out like there could be a lot of really interesting things at stake. Also. I think that they are going to be transitioning. It sounds like it might be a pivot in coming days, as far as exactly what they're selling that might be a little bit more streamlined. And that they might be tearing down the number products on their site. Interesting. But the, the fact that softening hasn't given the other trunch of its investment doesn't mean the company's any. Listen vault. I mean, there's still steering. Oh oh, yeah. Totally. Yeah. Just just as much as ever. Well, that I mean, I, I want to transition from that actually over into we work, which is very different company in almost every single regard, but the one that SoftBank has invested more of its capital in than almost any. I mean is that even top Uber? I think so. Yeah. I mean it certainly when I someone who hasn't reported on that many SoftBank back companies, I just think of that as the one. Yeah. That is probably the biggest bet on their art. We work asserting they have a good embodiment of the stopping good world. Right. And, and you know, there's this show expected, and that's obviously gonna put even more pressure and highlight the SoftBank investment. But also there's a lot of questions on just how much we work as worth they have this banner valuation of forty seven billion dollars. But it sounds to me Corey based on the story that you and Al for did that at least on the secondary market. People are trading it at far less than that. Yeah. So I mean basically, we went into this reporting just trying to understand what does this forty seven billion dollar number really mean you know, because over the past year, that's been the, the headline everyone, you know, has been using we work. There's been a lot more mainstream coverage short of going deep into kind of the quirks of Adam Newman and what is this? We were business model, particularly as they appeal, and it's always referred to as the sporty seven billion dollar company. Right. What we found a lot of this reporting was driven by, by Alfred was that essentially, you're, you have several indicators that shows that a lot of investors from employees and early shareholders, too, large mutual funds think that this thing is worth closer to between twenty and twenty five billion dollars almost half. Forty seven billion dollar valuation. There's a lot of complexities here. One is that SoftBank invested lots of different types of capital at different valuations over the years. The for the most recent investment that they made into we work was one that was very high profile. So if you remember around Christmas time, take you back to short elder watching green book. Exactly. Different different time and not that different. There was a lot of press around is stopping going to invest sixteen billion dollars. And we work and take a majority stake of the company turns out people inside of Bank as well as their LP's did love the site of sort of painting, a lot of their hopes, and lot of funds returns on one company, especially one that is heavily involved in real estate. What ended up happening was SoftBank invested two slugs of money a billion dollars helped by out. You know about nine percent of the shares of individual shareholders at a that was at twenty three ish billion dollar valuations somewhat similar to their Uber. Uber was a similar thing to, and then there was a billion dollars that went into we work at the forty seven billion dollar valuation. And so what we've seen is funds essentially taking the former valuation, a lot more seriously than the ladder. And, and what does this mean like for sup unclear in terms of what is this going to mean in terms of an IPO like what price do they need to get at to make their investors hole? And, but I think it's pretty clear that if you know if they go public, and it's not close to forty seven billion dollar number sopping loses. Somebody yeah. Yeah. And it's like we said, one of their biggest investment. So it has large implications. I mean, Salat to be kind of proved out with the we work experiments, and, you know how the market could ever value such a strange just non not very easy comp. Right. For a company like that. Did you get a sense? I understand this isn't quite the story that you, you were doing with Alfred but, you know, the effect that we were that softens money has had on, we work. I mean, similar to brand lists, where when you throw so much money on it. Suddenly, you know, the environment changes, there's a center of gravity shifts that reorients the way, a company can grow and position. It's business. Right. Well, I think just some degree, it's it is similar to brand lesson that you, you, you know, you certainly have SoftBank as a heavily involved investor that the difference with we work is it was kind of already on this track in some ways, SoftBank, and we work where the perfect. Marriage. We work led by Adam Newman. And, and a host of other executives, very been very growth at all costs driven for a long time since the company was founded in twenty ten and really took off around twenty thirteen. We were as you know, re continues to say that they are investing in growing at number of office spaces now. And with the understanding that it's losses are going to balloon. And that's what we're seeing, but the pitches that it's going to all payoff in the end, sort of once the officers once the leases are kind of paid down, and it's just they're able to essentially just cumulate more revenue. So Adam Newman and Masa from Southbank whereas centrally, you know, sort of have been tied at the hip, for sure. But I think they've been in lockstep in terms of the way forward. Right. Right. And I mean Zoe have you, as you're reporting out the brand's story, and talking to former employees did any of them, sort of looked more probably at these SoftBank portfolio, even we work specifically and see like oh yeah. This is what happens when they come in here and I sort of see the direction this is going to go now that we have SoftBank involvement in all this money. No. I mean there was not a ton of awareness about the softening. I mean there was there was some awareness, as far as I think people knew about the structure of the investment. Some people knew about, you know, the effect. It's been can have an accompany. But I think that it was just like sheer elation when they received at investment that with stepping in. Right, right, rich. It's christmas. Yeah, it's as reg but I don't think that anybody was like how is softening thinking about our company is strategically within their portfolio. It was a very different time. When pic- made that investment brand list of his before the Saudi, you know, the before Jamal kashogi was killed. And, and a lot of the Saudi Arabian tied investments got a ton of scrutiny of an also since then sought Bank of run through a good portion of the vision fund already, and there's a question about how much there was just saying there was a bigger halo effect. Act right around. Investment. Yeah. Exactly. Then yeah. I mean, just you know as reporters it's just been fascinating to watch this one fund come into the valley and do so much in a short period of time to again like chains, the physical the laws of physics in the valley, at least for a short period of time to try and create and determine outcomes, and we see in the case of both companies. It's just it's too soon to judge, whether or not this worked brand list, is obviously, going through a whole bunch of shit, and, and we were hasn't proved its business out, yet, and is about to face a major test when it goes public, if it goes public about how, you know, how easily tradable a company like this really is. So it's, it's pretty amazing to watch we I kind of think, and some people are probably take this comparison the wrong way. But it kind of is always a great way to start. This is going to be a baseball comparison. There are probably parallels to like SoftBank impact on the valley, as you know, in terms of trumps, the Trump administration's impact on DC. It's just like there are certain things about it that defied gravity and, like sort of have changed the way that sort of businesses done here in like a big way and you have a very charismatic. Leader who has like some Trumpian tendencies at. That's not supposed to be a knock. But you heard it here, first Masayoshi sun is Trump joking, but he may be trying to, like, this is this is organization that sort of doesn't speak, the language necessarily of traditional so come Dali right? Could be. Drain the swamp. It could be a good thing, right? No. But look, I mean, there's no doubting the capital they have and the impacts. I mean you know, like it or not. And criticize it or not. We're seeing the effects of what this amount of, of ammo in their arsenal and freedom to invest it really causes them. So a lot more to come on that, and swim for both of you. Yeah. And I'll just say that I got some brand less kitchen, utensils from my from my from my mother for Christmas. And they work great, and I've been and several we expresses and the coffee's lovely. So that's the OSCE on the ground reporting right up sides to every story. Just watch your hands third like glass shards sticking out. All right. Cory Zoe excellent work as always. Thank you for joining. And I imagine more to come on those companies and SoftBank is affected them. Thanks.