FAST FIVE: Galloway: "What Quakes Are To California, Softbank Is To Real Estate Unicorns"

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The pattern of tectonic plates grinding: SoftBank, real estate, red flags.

OYO Business model Buy or franchise run-down hotels, fix up, train staff, and take a commission (25-30%) Yogababble “To offer tasteful spaces, whenever you need them, at unbeatable prices.” Funding SoftBank investment: ~$1 billion Total funding: $1.6 billion Valuation: $10 billion on $200 million in revenues (50x revs) Differentiation Improving fallow assets (old/out of date hotels) No global player for budget hotels Uses a tech platform to help hotel partners with distribution Feces (red flags) Bought Hooters Casino in Las Vegas for $135 million (sold for $54 million 4 years ago, signal of overpaying) Leadership: Ritesh Agarwal – 25, first venture Lightspeed Ventures and Sequoia Capital getting out of dodge: selling 50% of their stake for $1.5 billion SoftBank (and founder) putting money in: Ritesh Agarwal invests $700 million in latest $1.5 billion fundraising round with Softbank helping to fund the remainder SoftBank has been a lead investor in every round since 2015 (smoking own supply) Reviews = sh*t Summary/prediction: OYO feels like the WeWork of budget hotels with red flags the size of Days Inns.

That means he's hugely committed and immature.  Lightspeed and Sequoia also have too much capital and are under pressure to deploy additional money in portfolio firms where they've negotiated pro-rata investment rights for subsequent rounds.

Summary/prediction: A compelling value proposition in a market that's hugely dislocated/inefficient.

My money/success was a virtue that gave me license to demonstrate poor character and a lack of empathy.

Categories: ZH