SoftBank Group Corp. ’s Vision Fund has agreed to sell its nearly 50% stake in Wag Labs Inc. back to the struggling dog-walking startup, according to people familiar with the matter, marking another disappointment for the Japanese investing giant.
Wag, which earlier this year laid off several dozen employees, is letting go a significant amount of the remainder of its workforce today, according to one of the people and an internal memo viewed by The Wall Street Journal.
In a memo sent to Wag employees Monday, Chief Executive Garrett Smallwood said: “We are amicably parting ways with SoftBank and SoftBank will no longer have board representation.”
He added: “Today, we said goodbye to a number of our friends and colleagues as we align our organization with the needs of our business.”
Through its app, Wag offers on-demand dog-walking services around the U.S. through a network of tens of thousands of dog walkers. Its other investors include venture firms General Catalyst, Battery Ventures and Acme.
The price at which SoftBank is exiting couldn’t be learned but is well below the roughly $650 million valuation at which the Japanese conglomerate invested $300 million early last year. The Vision Fund received two board seats with the Wag investment, which it is now relinquishing.
The startup had only been seeking $75 million in funds. The Vision Fund’s strategy of flooding promising young companies with cash has backfired elsewhere including at the parent of WeWork, the shared-office startup whose valuation plummeted as it was forced to abandon its highly anticipated IPO earlier this year.
Wag had planned to use the cash to expand internationally and move beyond dog-walking into related pet services including grooming, boarding, food and veterinary care. But it has failed to deliver on its expansion plans and fallen behind rivals including Rover.
Recently, there was a difference of opinion between the Vision Fund and some other investors in Wag, according to people familiar with the matter, with officials at the $100 billion fund preferring to sell or liquidate the company and other investors preferring to downsize the business while focusing on sustainable growth and profitability.
Wag has recently held discussions with potential acquirers and when the company didn’t move forward with a sale, SoftBank opted to take a writedown on its investment and cut its losses, some of the people said.
Mr. Smallwood said in the memo that the company has plenty of capital to accelerate its progress toward profitable growth. He was named CEO in late November when Hilary Schneider left the company to take the reins at Shutterfly Inc.
Write to Cara Lombardo at cara.lombardo@wsj.com
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December 10, 2019 at 02:36AM
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