SoftBank is backing out of its investment in struggling dog-walking start-up Wag.
The Japanese conglomerate is selling its stake in Wag back to the company, according to people familiar with the matter and an internal memo viewed by CNBC. The news was first reported by The Wall Street Journal.
"We are amicably parting ways with SoftBank and SoftBank will no longer have Board representation," Wag CEO Garrett Smallwood said in the internal memo to employees. "We thank the Vision Fund for their support in the company to date."
The price of the deal is unclear, but it's said to be below the $650 million valuation Wag earned when SoftBank first invested nearly two years ago, according to the Journal.
Wag, which pairs dog owners with available walkers in their neighborhood, landed its first investment from SoftBank's Vision Fund in January 2018. Since then, SoftBank's $100 billion Vision Fund has come under scrutiny for plowing money into unprofitable start-ups, such as WeWork and Uber. WeWork's spectacular rise and fall has shaped SoftBank's decision to curb its high-risk investment strategy for Vision Fund 2.
Alongside the move, SoftBank is giving up its two seats on Wag's board. Wag has cut 80% of its staff in an effort to streamline the business, said a person with knowledge of the matter who asked not to be named because the details are confidential. The company has considered selling itself and had two offers from pet companies, the person said.
Smallwood, who was named CEO in November, confirmed in the memo that the company is laying off "a number" of employees as it focuses on the needs of the business, including achieving profitable growth.
"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," Smallwood wrote. "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."
"Is there any other similar concern? In fact, yes, there is," Son said. "Like a dog-walking company and other portfolio companies, we may see similar problems surfacing."
Here's the full memo Wag sent to employees:
To the Wag! Community,
Today, we said goodbye to a number of our friends and colleagues as we align our organization with the needs of our business. We recognize, and regret, the impact that this will have on those whose positions have been eliminated, and are providing them support to ease their transition.
This was an extremely painful and difficult step.
But it was also an important one for our future.
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.
Both our management and our investors see an amazing future ahead for Wag! as we refocus on delivering sustainable growth by:
· Doubling down on our pet caregivers by being the best platform for their pet care business as a way to meet and service pet parents
· Delivering a superior pet parent experience, every time, by matching pets with a consistently excellent pet caregiver and delivering the most convenient in-home pet services solution
· Simplifying pet ownership by being the fastest, easiest and most convenient solution for all of their pet needs
Each of these goals is well within our grasp.
A great team is partnering with me to lead these efforts, including:
· David Cane, currently Senior Director of Operations, will become VP of Customer Success and Trust and Safety, reporting to Dylan Alread
· Dylan Allread, currently Vice President of People, HR and Recruiting, will become Chief Operating Officer, responsible for customer experience, trust and safety, communications, and people and places
· Mazi Arjomand, Vice President of Engineering, will become Chief Technology Officer, responsible for products and technology and analytics
· Alec Davidian, Corporate Controller, will be responsible for Finance and Accounting
· Julie Xu will continue to lead our Legal Department
· Patrick McCarthy, Senior Director of Acquisition Marketing will become VP of Marketing
We have a strong foundation on which to build, with a great brand, the best-designed and most efficient app in the business, a passionate community of pet caregivers and pet families, and employees who focus on providing them the best experience, every day.
Thank you to those who are remaining with us for the next several weeks to assist us in the transition period. Your efforts to assure that our pet caregivers and pet families are well supported through this period is much appreciated.
And I'd like to thank everyone for the incredible commitment you've shown to our company through some challenging times – including today -- and having to do more with less.
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.
Thank you for your continued efforts and support.