Although startups don鈥檛 have to weather the minute-by-minute valuation fluctuations of the public markets, the downturn in travel spending will obviously be disruptive to players in the space. And not in a good way.

Subscribe to the 附近上门 Daily

Travel cutbacks come at a particularly poor time for startup investors, who poured record sums into the space last year. Per 附近上门 data, globally in travel and travel-related sectors raised seed through growth-stage rounds in the past year, pulling in more than $7.7 billion.

Overall, travel-focused startups posted the highest annual funding total in 2019, raising over $7.9 billion. That鈥檚 up from $7.1 billion in 2018 and well above the totals for several prior years, as the chart below illustrates:

The total for the past year contains a number of supergiant funding rounds. The largest include India-based budget hotel chain ($1.5 billion Series F), Germany-based bus service ($564 million Series F), and ($484 million Series D), a platform for booking tours.

Overall, funding data shows booking platforms and upstart lodging brands as two categories within the travel space that generated the largest share of big rounds. Both of those are areas hit hard by coronavirus-related cutbacks.

OYO in particular is seeing deepening troubles in China, where until recently it had been working to scale up business. Now, the hotel chain is to lay off about 30 percent of its China workforce, or some 3,000 employees; part of a global layoff of about 5,000 people.

Reservations have at and other online booking sites, and cancellations are up. Beyond Airbnb, there鈥檚 a whole ecosystem of startups providing services tied to the short-term rental market.聽 Meanwhile, whether volatility will also delay plans for the year鈥檚 most talked about potential liquidity event – an Airbnb IPO–remains to be seen.

One smaller area that investors have bet on that might outperform in the current environment is remote lodging. That could bode well for and , venture-backed platforms for booking camping sites in remote spots. In a world where keeping away from crowds is the preferred public health practice, there鈥檚 something compelling about a getaway that comes with a buffer of many acres from the nearest neighbor.

Illustration: .

Subscribe to the 附近上门 Daily

As part of the deal, Softbank will invest an additional $100 million in the company in January 2021, according to tech news website . Currently, the company has about $418 million in funding, according to 附近上门.

FirstCry sells baby products and toys online, and calls itself 鈥淎sia鈥檚 largest online shopping store for kids and baby products.鈥� The company sells items like kids clothing, bath products, nursery items and toys.

The company raised the first part of its Series E, about $149 million, in January 2019 (the new $150 million is also part of the Series E). The company raised its $4 million Series A round in April 2011, and its investors include and

According to Entrackr, the company has a value of at least $1.2 billion in the SoftBank transaction. The bank now holds about 40 percent of the equity in the company.

FirstCry is among a growing number of unicorns based India, including payment platform and hotel company Oyo.

Based in Pune, India, FirstCry carries more than 5,800 brands and has more than 7.5 million registered users, according to its website. It also has more than 400 stores across India, in cities including Bangalore, Delhi and Hyderabad.

Illustration Credit:

A few months ago, we reported that , the popular India-based hotel startup, was raising new capital. That wasn’t a huge surprise: The company has raised a during its relatively short life (, before today’s new round).

Subscribe to the 附近上门 Daily

And, in an era that has brought us the high-growth, high-spend success story of , and the high-growth, high-spend cautionary tale of , the fact that Oyo was looking to take on new funds wasn’t a surprise.

Today we got a clearer look at what is going on. According , Oyo is raising $1.5 billion more, inclusive of $700 million from its founder.

How might the founder be able to buy so large a piece of the company? At least in July, the founder’s plan was to use external capital to buy shares from the company’s existing investors, making the deal a large secondary transaction. Now, however, things could look different. Back :

Agarwal, 25, will spend $700 million to buy new shares in the company as part of a previously reported $2 billion plan to triple his ownership stake. Existing investors SoftBank鈥檚 Vision Fund, Lightspeed Venture Partners and Sequoia India will contribute the rest of the current round.

In this telling, the CEO is working with its existing venture capitalists to buy new shares in the company. Previously, it was reported that the CEO was going to buy secondary shares from its investors. So it’s a bit confusing. What does seem limpid, at least, is that the company is raising new money. We’ll figure out the rest as we go.

I bring all this up for a reason. In July, when we covered Oyo’s news, I called the decision of the founder to boost his stake in the company as bullish. A lot of folks . Using someone else’s money to buy out existing investors was, in their view, more bearish than anything. (This is due, I presume, to the fact that some early investors were at least considered at the time to be willing to part with their shares far before a traditional liquidity event.)

The new round also fits into a theme we’ve all noted in recent years. It goes something like this: The more exotic a financing path that a startup takes, the less good that turns out to be. Consider very complex Uber transactions or the entire makeup of WeWork’s financial structure. Simpler companies, like 聽SaaS startups that have gone public this year, haven’t had to deal with similar issues.

Oyo may indeed continue growing and expanding, go public, and make everyone involved quite wealthy. But standing where I am today, its growth story is impressive, but its complicated financing efforts are a bit of a worry.

滨濒濒耻蝉迟谤补迟颈辞苍:听

Subscribe to the 附近上门 Daily

The acquisition, announced on Monday, will help the travel company further refine its pricing, manage inventory, and manage revenue, according to a statement provided by OYO to 附近上门 News. The roll out will start with Europe, which adds to OYO鈥檚 promise to invest 鈧�300 million in the vacation homes business, 鈥渨ith a special focus on strengthening the relationship with homeowners and enabling them with the resources,鈥� according to the aforementioned statement.

, OYO offers hotel rooms for rental. It optimizes budget hotel rooms and leases them out to individuals and offers fresh linens, wifi and tech support. In India鈥檚 fragmented hotel industry, OYO鈥檚 model is apparently in demand as the company has raised $1.7 billion in known venture capital funding and acquired seven companies to-date, .

鈥淒ata sciences across Pricing, AI, and Imaging Sciences have been a cornerstone of OYO鈥檚 proprietary revenue enhancement technology. It is also a huge missing piece in the way traditional vacation rentals industry is run,鈥� said , the global head of OYO Vacation and Urban Homes and chief strategy officer of OYO Hotels & Home, in the statement.

It鈥檚 notable that $10 million isn鈥檛 much for a company that has raised billions in the past. In fact, as I reported back in June, OYO raised so much money at that point that it is distorting India鈥檚 venture market, accounting for 92 percent of the past year鈥檚 total funding in India鈥檚 hospitality startups.

In the past, OYO鈥檚 CEO has credited his company鈥檚 proprietary technology for its competitive edge amid other travel giants in the world. But as it expands (the company currently hosts guests around the world in over 23,000 franchised and leased hotels in 800 cities in 19 countries across the world, ), the extra help might be what it needs to keep up.

滨濒濒耻蝉迟谤补迟颈辞苍:听.

Subscribe to the 附近上门 Daily

Let’s check it out and unpack what it can tell us about the most famous investing entity in the world.

Vision Fund 1: Q2 2019

This morning we’ll extract the of the earnings report. If you want to read the full document regarding SoftBank’s performance, which we recommend, .

In sum, Vision Fund 1 had a good quarter. It saw a number of markups to the value of some of its investments, leading to strong, “unrealized valuation gain[s].” That said, the fund did see some liquidity in the period.

The headline figures are as follows:

Operating income from SoftBank Vision Fund and Delta Fund was 楼397.6 billion, mainly attributable to an unrealized valuation gain of 楼408.5 billion, reflecting an increase in the fair values of OYO and its affiliate, Slack, Doordash, and other investments.

Putting that into less-jargony prose, the Vision Fund and Delta Fund (where , ) saw the value of some of their prior investments go up as they were repriced in new, more richly-valued private investments.

Let’s explore those markups.

Markups

You knew this already, implicitly at least. Recall that recently went public in a direct listing that greatly expanded its valuation (the company is worth $15.4 billion this morning; its was just over $7 billion; the Vision Fund put capital into the company ).

Continuing, recently raised a raft of cash at . That was higher than the March 1, 2018 round that the Vision Fund led. Indeed, while SoftBank took part in the company’s most recent round (), it led the firm’s 2018 Series D which valued the firm at a after the $535 million investment.

And has been on a tear as well. In short, some of SoftBank’s biggest investments generated impressive paper returns in the second quarter. (Recalling the above-quoted operating income figure, SoftBank calculates income from the group as the “gain and loss on investments at SoftBank Vision Fund and Delta Fund [minus] operating expenses.”)

Viewed in aggregate, the first Vision Fund’s investment tallies are impressive in scale. According to the company, the capital vehicle:

[h]eld 81 investments as of the first quarter-end at cost totaling $66.3 billion, with fair value amounting to $82.2 billion (excluding exited investments).

On that theme, how do the SoftBank Vision Fund’s extant, un-exited segment investments stack up with each other in terms of performance? Observe the following chart from the Q2 earnings document:

So, enterprise investments appear to be the strongest in percentage terms (up 64 percent, give or take), while consumer investments have generated the largest paper gains. That fintech has generated the smallest positive paper income is a bit surprising, given that the category has been hot in recent quarters.

Markdowns

Before we stop this morning, let’s dredge up the bad news.

Regular 附近上门 News readers will recall that IPO was priced lower than its investors hoped, and shares in the company have since shed value. You can see those results inside the Vision Fund’s earnings.

Here’s SoftBank explaining how the Vision Fund’s figures were tabulated [Bolding: 附近上门 News]:

Segment income was 楼397,630 million, compared with income of 楼239,944 million in the same period of the previous fiscal year. This was mainly attributable to unrealized gain on valuation of investments of 楼408,514 million. Of this, unrealized gain on valuation of investments totaling 楼603,840 million was recognized due to the increase in the fair values of investments in OYO and its affiliate, Slack, Doordash, and others. Conversely, unrealized loss totaling 楼195,326 million was recorded for the decrease in the fair values of investments in Uber and others.

Recall that the Vision Fund poured money into primary, and secondary Uber shares at a blended valuation聽lower than the topline price the firm commanded at the time. And SoftBank was still forced to mark its investment down. It’s a reminder of the struggles of ride-hailing companies in recent years; Lyft and Uber and others have seen market hype about their businesses slip after their growth slowed and steep losses persisted.

Vision Fund 2

We bring all of this to you as the background context for the impending Vision Fund 2, which has $108 billion in committed capital and perhaps more on the way. Of course, the first Vision Fund has a lot of work ahead of it to turn the rest of its illiquid private investments into liquid returns, but SoftBank will get at least one more go.

So long as DoorDash et al manage to defend their new, higher valuation, the bet on building Vision Fund 2 looks good. If the above-listed markups slip, the entire project could look a bit misshapen in retrospect. We’ll see.

Illustration: .

Subscribe to the 附近上门 Daily

If you recall our recent work regarding — better known by its former name WeWork — you can see where we’re going with this. But let’s not get ahead of ourselves.

OYO’s New Valuation

附近上门 News first covered OYO, an Indian company building low-cost hotels around the world, in September of 2018 when the Vision Fund into the company. Noting that normally “hospitality is a bit afar from the world of high-growth startups and their attendant sectors and investors,” we were surprised at the scale of capital that OYO was putting to work.

A company working to invest $1 billion in growth capital is very much our jam, meaning that OYO has been on our radar since that key investment.

And we’re not the only folks with one eye on the rocketship hotel-focused startup. The firm has raised three primary rounds since, including with , with several groups including , and from .

As you can see, a number of platform-aspirant companies (ride-hailing apps all want to become super apps, and Airbnb as a “people-to-people platform”) are putting cash into OYO as it looks like a future partner and integration mark.

Having some of the most highly-valued private companies in the world line up to put money into your growth-oriented business is a mark of confidence. As such, we can presume that OYO’s growth rates are very high. I’d also toss in that the company is probably pretty unprofitable today; recall how Luckin’s insane build-out translated to sharp deficits as it grew.

All this money and optimism brings us to today’s news. Here’s the impending $2 billion transaction that will reprice OYO far above its prior worth:

Oyo Chief Executive Ritesh Agarwal is buying part of the shareholdings of聽early investors Sequoia Capital and Lightspeed Venture Partners. The聽buyback, which is still subject to shareholder and regulatory approvals, will be through a Cayman Islands company called聽RA Hospitality Holdings, and financed by institutional banks and finance partners, the company said.

The secondary transaction gives OYO a shiny new $10 billion valuation, pushing the hotel chain into the decacorn range, and making it part of a far more elite club than its prior unicorn horn society.

Secondaries, Redux

News last week that WeWork’s founder has sold or borrowed against a piece of his stake in his own firm. It wasn’t the best timing for the company, which is both looking for additional debt capital and an IPO.

But, as with all things, if WeWork’s S-1 drops and shows solid growth and paring losses, no one will care what Neumann did before the numbers were shared; that ‘growth cures all ills’ is a market adage is no accident.

But what did catch my eye is that in the case of OYO, we’re seeing a founder work to recapture share in his company, instead of potentially reducing their exposure. It seems tonally important.

In the venture capital world, you’ll often here about “signaling.” Perhaps “signaling risk” is a better way to phrase it. There were, once upon a time, a set of unwritten rules in venture regarding what various moves would “signal” to the market. For example, if you raised a round from Billy Bob Capital, and then raised your聽next round from Billy Bob Capital, that was read as a “signal” that you couldn’t find a new lead investor for the new capital event.

In 2019 all that action might indicate is that Billy Bob Capital was desperate to double-down on the deal to fend off dilution by preempting the round before someone else could swoop in. So, things have changed.

But no matter what has changed in the world of venture, seeing a founder seek to control more of their company聽飞丑颈濒别听it is in hyper-growth mode is pretty bullish I reckon. We’ll see a WeWork S-1 before we see a similar filing from OYO, but the former will inform the latter.

And given that OYO is taking baby steps towards WeWork’s bread and butter, this is all going to get even more interesting.

Illustration: .

News broke this morning that , an Indian company that provides budget hotels, has . Normally a transaction of this sort wouldn’t hit our radar鈥攈ospitality is a bit afar from the world of high-growth startups and their attendant sectors and investors.

Follow 附近上门 News on

Not this time.

OYO has raised new funds to the tune of $1 billion, a staggering amount of capital for any company, let alone a firm that isn’t well known and operates in a sector that doesn’t normally attract growth capital of this sort. But in this case, it’s a very us story: OYO is a SoftBank-fueled affair.

You likely already guessed that its latest round included participation from SoftBank’s Vision Fund, a capital vehicle with an itchy trigger finger and a seemingly bored and restless investing disposition. But the SoftBank-OYO relationship is older than just this one round.

Indeed, per 附近上门, SoftBank led OYO’s ($100 million), its ($90 million), and its ($250 million) before today. That’s an incredible string of checks for any company to raise, let alone for one company to lead.

So what does OYO do? TechCrunch’s :

“OYO was started in May 2013 by Thiel Fellow聽Ritesh Agarwal, who was then aged 19. The company aggregates budget hotels and hostels in India, ensuring that they include minimum standards such as clean sheets, hot showers and free WiFi. It has since branched out into other kinds of lodgings, and verticals that聽.

Today, OYO claims to have over聽10,000 franchised or leased hotels in its network, which it says spans 350 cities across five countries.聽聽and it is also present Nepal and Malaysia. More recently, it聽recently entered the UK market this month.”

Russell goes on to note that the firm’s Chinese ambitions aren’t small, with OYO claiming nearly 90,000 rooms in the country.

While the model must have some organic legs鈥擨 can’t attest to the India hotel market per se, making it hard to comment as to why or why not OYO was founded there and what market gap it serves鈥攊t’s worth noting that many countries already have what OYO promises: clean and decently-equipped hotels. I wonder if that will cap its rapid growth in time.

But even more, it’s a bit hard to see why the Vision Fund is interested in the company. After all, we’ve been told that the Vision Fund, a taking aim at growth companies around the world, wants to work on perhaps . Or just big deals with fast-growing companies, as 聽seem to indicate. Whatever. Now it’s hotels, too.

So the Vision Fund, along with and and , are in the hospitality business. Either this is brilliant and I’m boring and old, or 2018 is proving to be a bit odder than I could have guessed. That or there just aren’t that many places in the world you can stuff a billion dollars in a single go (aside from the ever-unprofitable Uber, WeWork, Didi, Grab, Lyft, and Go-Jek), so you wind up funding a five-year-old hotel upstart as you have to put the money somewhere.

For the company, it’s a great day. For the investing classes, I’m mostly just confused. So much for margin hunting.