As Wag’s business struggles, the dog walking start-up has announced an ‘amicable’ split from SoftBank.
As the dust settles on the WeWork saga, SoftBank has been put under the spotlight for its investments once again.
This time it has nothing to do with WeWork, or even SoftBank-backed Uber, but rather a California-based dog walking start-up named Wag, which received $300m in investment from SoftBank in 2018.
Founded in 2015, Wag is an on-demand dog walking service, with an app that is available 43 states and 110 cities in the US. The start-up is based in Los Angeles and has a number of celebrities among its clientele, including Mariah Carey and Kendall Jenner.
In recent months, the company has seen the departure of its founder and CEO Hilary Schneider, who left Wag to pursue a new opportunity. Schneider was replaced by Garrett Smallwood on 29 November.
A few days after Schneider’s exit, Smallwood announced that the company was “amicably parting ways with SoftBank”, meaning that the Japanese conglomerate will no longer have representation on the board of Wag. SoftBank previously held two seats on Wag’s board.
Putting the dog to sleep
SoftBank has agreed to sell its near 50pc stake back to Wag, in a deal that will see the Japanese investor lose money. According to the Wall Street Journal, SoftBank initially asked the start-up to cut costs and consider “strategic alternatives” such as liquidation.
After SoftBank’s latest earnings report, the group’s billionaire founder Masayoshi Son alluded to the problems at Wag while talking about the impact WeWork has had on SoftBank’s Vision Fund 2. Son said: “Is there any other similar concern? In fact, yes, there is. Like a dog-walking company and other portfolio companies, we may see similar problems surfacing.”
Meanwhile, Wag has cut 80pc of its staff in an effort to keep the business buoyant, according to a source that spoke to CNBC. This source also said that the company had received two acquisition offers from pet companies.
Keeping Wag on a tighter leash
In a memo to Wag’s employees, Smallwood wrote: “As a more focused company with a solid capital base that is right-sized to the needs of our business and strategy, we have plenty of runway to execute our plans to accelerate our progress toward profitable growth.
“The decision to move in this direction was based on the strong conviction of our investors that this is the right course for the company. We are amicably parting ways with SoftBank and SoftBank will no longer have board representation. We thank the Vision Fund for their support in the company to date.
“I’m going to be completely honest: we have a lot of work ahead of us. But it will be gratifying and rewarding work, as we come together as a team to secure for Wag a bright and successful future.”
The new CEO thanked the employees who will remain at the company, who he said will now have “to do more with less”.