How SoftBank taught the market to love lossmaking startups
TOKYO -- A few years after Bom Suk Kim dropped out of Harvard Business School to launch what would eventually become Coupang, South Korea's largest e-commerce company, he was at a crossroads. He already had a fast-growing e-commerce site on his hands, and was considering taking it public.
Kim had big ambitions: to pivot the company to an Amazon-like model, which he could push even further by building an exclusive delivery network. The problem was that Coupang would need lots of money -- likely to the tune of billions of dollars. If the company were to list, investors in public markets might balk at the investment-heavy model.
That was the perfect backdrop for Masayoshi Son's SoftBank Group. His investment team in Seoul had conducted an analysis of Coupang and its rivals, and found that while others had better cash flow, Coupang had good user experience, according to a person involved in the deal. In June 2015, SoftBank made its move: It injected $1 billion into the company, shattering the country's startup funding record at the time.
Backed by an unprecedented amount of cash, Coupang began building out logistics centers all across the country. That year, Coupang's revenue tripled from the previous year even while gross profit fell, according to its financial statements.
