4 BUSINESS JOURNAL JUNE 15, 2018 5 COVER STORY COVER STORY

SOFTBANK’S BIG BAY AREA DEALS SoftBank Vision Fund has $100 billion io invest. Here are some of the mega-funding rounds that its led this year:

RR$8 BILLION The rise to buy shares in San Francisco- based from existing investors and another $1.25 billion invested directly into the on-demand ride unicorn.

RR$2.25 BILLION investment in of the San Francisco- based self- driving vehicle tech business Cruise Automation on May 31.

RR$865 MILLION investment in Menlo Park- Ajeet Singh, CEO of Palo based pre-fab PIPO construction Alto-based ThoughtSpot, business Katerra raised $145 million in $100 MILLION-PLUS ‘PRIVATE IPOs’ HAVE OUTNUMBERED on January 24. May 2018. WALL STREET DEBUTS SINCE 2014. HERE’S WHY. RR$535 MILLION VICKI THOMPSON investment in San Francisco- BY CROMWELL SCHUBARTH tors say private IPOs are just another indi- of over $9 billion today is between four The Vision Fund is investing from a said. “It’s going to happen and continue based delivery “There are more startup DoorDash [email protected] cation of how much the startup investing and five times what it was estimated to record $100 billion fund that SoftBank to happen. So there’s capital from every large tech on March 1. 408.299.1823, @SVBizCrom landscape has evolved in the past 10 years. be worth in its last funding as a private CEO Masayoshi Son said last month will corner trying to chase that growth.” companies being “There are more large tech compa- company. be followed by another one in the not-too- RR$250 MILLION houghtSpot Inc. CEO Ajeet Singh set out to raise $70 million from investors built today and nies being built today and there is a lot Cohesity’s Aron said he could have distant future. Among the outsized bets Bigger than the dot-com bubble? investment in earlier this year. Instead, his Palo Alto enterprise search business scored $145 of capital available to help them remain raised a lot more in the latest round if it has placed are an $8 billion share pur- One observer who believes this isn’t a San Jose-based there is a lot of data storage Tmillion and earned a place among the unicorns — startups that are valued at capital available private,” said ThoughtSpot’s Singh. “So he wanted to: “We actually had to say no chase and a $1.25 billion direct investment good thing is Keith Wright, who teach- business $1 billion or more. they are tending to do that. That’s why to some people. We see a huge opportu- in Uber in January. Another is a $2.25 es accounting and information services Cohesity on Cohesity Inc. CEO Mohit Aron has a similar story. He went to investors to raise to help them the number of IPOs hasn’t kept pace nity in the market, and in the end, we billion investment on May 31 in Cruise, at Villanova School of Business. He June 11. $150 million for his San Jose secondary data storage startup and wound up with $250 remain private.” with investments.” were able to raise the money we needed the Y Combinator autonomous driving explained why in an essay he wrote for million in the latest “shock and awe” funding led by SoftBank Group’s Vision Fund. Singh and Aron co-founded another at a very attractive price.” alumnus that General Motors bought for CNBC titled, “Silicon Valley tech bubble AJEET SINGH, Cohesity and ThoughtSpot are part of a parade of pre-profit venture-backed busi- local unicorn — San Jose-based hyper- around $1 billion in 2016. is larger than it was in 2000, and the end ThoughtSpot Inc. CEO nesses in the Bay Area that are privately raising the kind of funding they would pre- converged storage business Nutanix The SoftBank effect SoftBank’s “shock and awe” invest- is coming,” which pointed in particular viously have sought from public investors on a stock exchange. Inc. It lived up to its valuation, and then “It’s undeniable with a fund the size of ing — and the delayed unicorn IPOs and to a pair of recent studies. These $100 million-plus “private IPOs” — as a report from Silicon Valley Bank some, when it went public in the fall SoftBank’s Vision Fund and the pace at buyouts it is causing — has many of Sili- One of those came from the National dubbed them — have outnumbered Wall Street IPOs among U.S. tech companies in of 2016 after raising a pair of $100 mil- which they’re investing, that it’s having con Valley’s biggest venture firms raising Bureau of Economic Research. It estimat- every quarter since 2014. They are on pace to do so again in the current quarter that lion-plus late funding rounds. Shares of an impact on the number and the size of record funds of their own to keep pace. ed last year that U.S. unicorns are, on aver- ends on June 30. Nutanix, led by co-founder Dheeraj Pan- these large rounds,” said Bob Blee, who “There’s a broad consensus around the age, roughly 50 percent overvalued. About Some observers say this has put off the reckoning day for a growing herd of uni- dey, have jumped more than 250 percent heads the corporate finance group at Sil- idea that the innovation sector is where corns, many of whom they predict won’t live up to their lofty valuations. But inves- since its Wall Street debut. Its valuation icon Valley Bank. outsized growth is going to be,” Blee CONTINUED ON PAGE 6

GAME-CHANGING VENTURE FUND $100 The $100 billion Softbank Vision Fund has raised the bar on the amount of money raised by other venture firms. The nine biggest from Silicon Valley have collectively raised less than a third of that amount. $12 billion $3.9 billion (2017) $1.8 $2.5 $3.3 (2018) $1.5 $1.5 $1.5 $1.6 billion billion (2018) billion (2017) billion billion billion billion billion (2016) (2018) (2017) (2016) (2016) (2018)

NORWEST INSTITUTIONAL ACCEL ANDREESSEN LIGHTSPEED TECHNOLOGY NEW ENTERPRISE INSIGHT SEQUOIA SOFTBANK VENTURE PARTNERS VENTURE PARTNERS PARTNERS HOROWITZ VENTURE PARTNERS CROSSOVER VENTURES ASSOCIATES VENTURE PARTNERS CAPITAL VISION FUND 6 SILICON VALLEY BUSINESS JOURNAL JUNE 15, 2018 7 COVER STORY Elias covers technology, diversity JENNIFER ELIAS and public companies.

I [email protected] 408-299-1822 @SVBIZJENN CONTINUED FROM PAGE 5 Mohit Aron, CEO of San 11 percent were overvalued by more than Jose-based Cohesity, 100 percent, the study’s authors said. raised $250 million in a WORKFORCE The other is from a professor at the round led by SoftBank University of Florida’s Warrington Col- Vision Fund. lege of Business. It found that 76 per- Musk pulls trigger on Tesla reorganization cent of the companies that went public in 2017 were unprofitable on a per-share esla CEO Elon Musk strongly hint- questions about Tesla’s output, his man- basis in the 12 months leading up to their ed last month this moment would agement style and the effectiveness of IPOs. That’s the highest number since “Given that Tesla has never made an come, and on Monday it started — the its board. Earlier this spring, when the the peak of the dot-com boom in 2000, T annual profit in the almost 15 laying off of as much as 9 percent of Tes- company reported it had Model 3 pro- when 81 percent of newly public compa- la’s workforce, or about 3,000 employees. years since we have existed, profit duction delays, Musk said he was tak- nies were unprofitable. The news was first reported on the site is obviously not what motivates ing over direct oversight of production “Billion-dollar startup valuations are Electrek and Musk quickly followed up of the model and would be sleeping in not an indicator of safety. They represent us. What drives us is our mission via Twitter by releasing the statement he the factory. a huge danger of widespread overvalu- to accelerate the world’s transition made to employees Tuesday. In it, he said He also laid the groundwork for a sig- ation,” Wright wrote. “Companies burn- that the “difficult, but necessary reorg” to sustainable, clean energy, but nificant reorganization: “To ensure that ing more than what they raised will not be will impact salaried employees. we will never achieve that mission Tesla is well prepared for the future, we able to return to the well for more. The ‘get “Tesla has grown and evolved rapid- have been undertaking a thorough reor- big fast’ strategy that many investors and unless we eventually demonstrate ly over the past several years, which has ganization of our company,” Musk wrote venture capital firms adopted will fail.” that we can be sustainably resulted in some duplication of roles in an to employees last month. “As and some job functions that, while they profitable. That is a valid and fair part of the reorg, we are flattening the Investors are confident made sense in the past, are difficult to criticism of Tesla’s history to date.” management structure to improve com- Arif Janmohamed, a partner at Light- justify today,” Musk wrote. munication, combining functions where speed Venture Partners, disagrees. His ELON MUSK, Tesla CEO “Given that Tesla has never made an sensible and trimming activities that are firm backed Nutanix and ThoughtSpot, annual profit in the almost 15 years since not vital to the success of our mission.” along with another unicorn that is a we have existed, profit is obviously not In another announcement this week, rival of Cohesity’s that raised a $180 mil- VICKI THOMPSON what motivates us,” he wrote. “What Musk also said that Tesla, which now drives us is our mission to accelerate the owns the solar installer SolarCity, has not world’s transition to sustainable, clean renewed its residential sales agreement 25 energy, but we will never achieve that with Home Depot “in order to focus our RISE OF mission unless we eventually demon- efforts on selling solar power in Tesla strate that we an be sustainably profit- stores and online.” Most Tesla employees THE MEGA- able. That is a valid and fair criticism of currently working in Home Depot stores

FUNDINGS 20 Tesla’s history to date.” will be offered the chance to move to Tes- The number of $100 The layoffs will not affect manufactur- la retail stores, he said. million rounds in the ing roles, meaning the company’s giant Tesla’s workforce has grown rapidly Bay Area peaked in 2015 Fremont factory — which hosts thousands since the acquisition of SolarCity, which and dipped in 2016, of workers feverishly working to produce pushed Tesla’s total headcount to more but jumped in all but 15 one quarter since. The its Model 3 sedan — won’t be impacted, a than 30,000 employees, Electrek noted. dotted line shows a company official told the Business Jour- While Tesla reported record reve- trend line of the steady, nal. The company actually will continue nues in the first quarter of 2018, it also yet significant, growth to hire for manufacturing jobs, he said. reported record losses of $784.6 mil- of 9-digit funding 10 Tesla is the Bay Area’s largest manufac- lion. Its shares have shown a steady rate rounds over the past six turer with with about 10,000 employees of increase over the past month, rising years. Counts > $100M Round Bay Area VC at the Fremont auto plant. from nearly $292 a share on May 14 to Musk has been faced with a series of $342.77 a share on June 12. SASHA MASLOV/THE NEW YORK TIMES 5

0 PERSONNEL CHANGE Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 2017 2018*

*2018 TO DATE THROUGH 6/13/18 | SOURCE: PITCHBOOK What drew Palo Alto Networks’ new CEO to the company? LEADER WANTS TO of the board. McLaughlin, who said the growth” trends and innovative securi- lion round last year — Palo Alto-based “It’s a very good clicks than rational boring ones, right?” “I don’t think it’s a comparable situa- search for his successor was planned for ty platforms drew him to the company: Rubrik Inc. he said in a May 31 Silicon Valley Open tion at all,” Rosen said. “I don’t think the SECURE A FUTURE IN a while, told CNBC that the company “I look at the cloud revolution,” he told use of private “Companies that are raising these big Doors fireside chat at the Computer His- end is near.” ENTERPRISE CLOUD would not look the same in a few years CNBC. “It’s very, very early on the enter- rounds have shown product market fit but capital. It takes tory Museum. At the current rate that unicorns are as it focuses on a slew of new initiatives prise space. I look at the fact that we’re still have a lot of value creation ahead of a lot of money “And if you look at the data from back going public, it could take a very long Palo Alto Networks Inc. is bringing on a around the cloud, and going to have to secure our digital future them before they are ready to go public,” to scale these in 1999, when there were 370 tech IPOs, time to find out whether the bulls or big name in the tech world as its new new software. in there, and Palo Alto is already an early Janmohamed said. “From our perspec- the companies had been in business an bears are right about the companies CEO, just as it enters a period of transi- “The company’s going to look differ- leader in that space.” tive, it’s a very good use of private capital. companies up average of four years and had average that are raising unprecedented amounts tion for the next few years. ent in five years than it has today because This year alone, the company has It takes a lot of money to scale these com- to what public revenue of $12 million,” he said. “In 2016, of money in “private IPOs.” Last week, the Santa Clara-based com- of the real drive toward those platforms invested heavily in data and endpoint panies up to what public markets look for markets look for when there were 40 tech IPOs, the com- But ThoughtSpot CEO Singh believes pany named former and SoftBank and those capabilities,” McLaughlin told security with two consecutive hun- when they go to Wall Street.” when they go to panies on average had been around for 11 the bulls will win the argument: “More executive Nikesh Arora as its new CEO, CNBC’s Jim Cramer. “In looking for the dred-million-dollar acquisitions: Pleas- Another investor who takes exception years and had median revenue of $105 money is moving toward technology which drew some skepticism because he perfect person to do that, we wanted anton-based Evident.io for $300 million with Wright’s CNBC piece is Alex Rosen Wall Street.” million. The percentage that were prof- from places where people were invest- doesn’t have a cybersecurity background. Nikesh Arora, former president of somebody who is a very demonstrated cash and Israel-based Secdo for a report- of Ridge Ventures, whose investing expe- ARIF JANMOHAMED, itable when they went public was rough- ing because that is where the growth is. Arora’s $128 million pay package SoftBank Group Corp., will be the new business executive at scale and would ed $100 million. rience dates back to the dot-com era. a partner at Lightspeed ly double the percentage of the number The world is becoming more digital and would also make him one of the high- CEO of Palo Alto Networks Inc. Former bring those key attributes to the table to Arora told CNBC he hopes to use the “Outlandish headlines get a lot more Venture Partners that were profitable in ’99.” investors want a part of that.” est-paid chief executive officers in tech. CEO Jim Cramer says the company take us where the company’s going to be lessons he learned while working at Former CEO Mark McLaughlin will wanted someone to guide it through in five years.” Alphabet-owned Google to “take Palo become the company’s vice chairman changes in the next five years. Arora said Palo Alto Networks’ “hyper- Alto into the future.”