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SoftBank’s vision fund loses billions, how this impacts the startup ecosystem

(BUSINESS FINANCE) Pizza making robots and cannabis start-ups are among the many non-tech companies losing venture capital because of Softbank’s vision fund collapse.

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One day you are eating free lunch, drinking beer after hours and slacking on your company phone. The next day you are handed your walking papers.

Life at a start-up has always been turbulent. As more Unicorns have IPO bids falling flat – Uber, Lyft and Casper – and funding sources drying up, start-up life has grown stormy.

While things may not be as bad as they were at the start of the 2000s, the last quarter of 2019 and the start of 202 has proven challenging. Many of the companies that have sent thousands of employees packing were backed By SoftBank, a Japanese firm which had $100 billion Vision Fund specifically for start-ups.

According to this story in the NY Times, during February 2020, SoftBank reported its Vision Fund and other investments experienced $2 billion in operating losses in the last quarter of 2019. The Times speculates that the pullback in funding will not be as harsh as it was at the start of the 2000s and some companies – particularly those in the tech field – will continue to be lucrative, raise interest and capital.

In some cases, SoftBank was writing checks it couldn’t cash for companies like Zume, a San Francisco start-up that was known for its pizza making robots. The company saw a huge influx in funding from SoftBank, only to have the funding stop. Employees felt they “got screwed” by SoftBank because it didn’t provide additional funding to boost the $375 originally raised, according to CNN Business.

“There’s no doubt that there’s an excess amount of capital in the private markets and that it has been exacerbated by SoftBank’s Vision Fund,” Kathleen Smith, a principal at Renaissance Capital, which manages IPO-focused exchange-traded funds, told CNN.

Because of the size of SoftBank’s VisionFund it was positioned to take risks, but those gambles didn’t always pay off, said David Erickson, a senior fellow in finance at the University of Pennsylvania’s Wharton School in the CNN story. The Vision Fund premise was “ill-conceived from the get-go,” Erickson said in the story.

Companies from different spheres, whether food delivery, mattresses, scooters or cannabis are facing losses in cash and employees. Airbnb and Door Dash were expected to go public this year, but both are losing money. Cannabis start-ups will be weeded out as many are not expected to survive the year.

The NY Times cited data from PitchBook, which stated more than 300 cannabis firms had raised $2.6 billion in venture capital during 2019 only to have investors take a second look. With investors doubting cannabis companies could deliver the goods legally, funding dried up and staffs were cut back.

Meanwhile, many employees who once were drinking the start-up cool aid are now leery to work for the companies, which offer perks galore one day only to slash staff the next.

Mary Ann Lopez earned her MA in print journalism from the University of Colorado and has worked in print and digital media. After taking a break to give back as a Teach for America corps member and teaching science for a few years, she is back with her first love: writing. When she's not writing stories, reading five books at once, or watching The Great British Bakeoff, she is walking her dog Sadie and hanging with her cats, Bella, Bubba, and Kiki. She is one cat short of full cat lady status and plans to keep it that way.

Business Finance

COVID-19: Governors fail renters, a 90-day rent freeze is the only option now

Independent contractors whose only sin is renting instead of owning, are facing evictions even as Governors put tiny bandaids on the situation. A 90-day freeze is the nation’s only option to avoid mass migrations or spikes in homelessness.

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2020, it seems, is the year of rebranding—even when it comes to our impromptu recession brought on by a variety of factors (but largely thanks to COVID-19). Despite the negative connotations of widespread economic disaster, some people, such as St. Louis Federal Reserve President James Bullard, are regarding this instance as “an investment in U.S. public health.”

Should we all be so optimistic? Bullard seems to think so.

To be fair, James Bullard’s “optimism” also accounts for taking a “$2.5 trillion hit” to the economy, so it’s not all sunshine and dancing unicorns (this time). However, the long-term outcome of handling this crisis correctly—a process which involves bailing out small businesses, matching wages, and contributing to rebuilding and supporting our healthcare infrastructure—will be, according to Bullard, positive.

Bullard’s optimism does come with an important message: As with pretty much anything, the simpler we can keep solutions to this problem, the better the outcome will be. We’re not off to a great start; between states’ varying responses to COVID-19 procedures and mixed congressional support for a stimulus package, the process of dealing with economic fallout has become more complicated than some—Bullard included—would consider “ideal”.

Unfortunately, there isn’t really an “ideal” outcome here that is also practical without requiring a heretofore unseen level of cooperation and cohesion between political parties and state-based cultures. In the event that we can actually pull together and actively invest, as Bullard suggests, in our infrastructure, the implications for our economy will ultimately be positive—even if only in a pyrrhic victory kind of way.

In unprecedented times of crisis—you know, like right now—a little bit of optimism doesn’t hurt. Over the course of the next few months, you’ll hear all sorts of different takes on the situation; some people—those who identify as “realists” but really just enjoy bumming people out—will actively speak out against positive attitudes, while others will avoid “getting their hopes up” because they don’t want to be disappointed.

But, if Bullard’s optimism is to be believed—and we’re choosing to think it is—you have full permission to let yourself hope, at least for now.

Remember, there are a couple of things you can do to bolster your immune system without medicine during this time. One of them involves keeping a positive outlook, and the other one is eating plenty of garlic; we’ve found that one accompanies the other.

This story was first published in our Real Estate section.

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Business Finance

Gov. Cuomo first to issue 90-day moratorium on commercial, residential evictions

(NEWS) NY Governor, Andrew Cuomo is the first state leader to put a halt to all commercial and residential payments in an effort to stem the COVID-19 crisis.

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New York Governor, Andrew Cuomo is the first state governor to put a moratorium on residential and commercial evictions in response to the COVID-19 outbreak, specifically hitting pause for 90 days in his state. This is part of a $10B relief package that includes utility payments missed during this outbreak as the state (and all states) are strained by the global pandemic.

This will not only help renters to find stable footing as so many have lost their jobs overnight, but commercial renters (like restaurants) that are worried about being evicted during a time that they were shut down by the government.

Reactions have mostly been positive, but many are still pushing for a freeze on rent, essentially rent forgiveness during this period since mortgage holders can roll their 90 days on to the end of their loan term, but renters cannot.

For many landlords, rent is their exclusive income and they have very few units, but they too will be under a mortgage freeze on their buildings under this Order, providing some relief. Not to mention Tax Day just moved from April 15 to July 15.

Meanwhile, a state group, Housing Justice for All, is calling for the rehousing of every homeless individual using emergency rent assistance and in vacant homes. They cite the risk of viral spread through the homeless shelter system, as well as viral possibilities among homeless people living on the streets.

There is no known answer in this time of being tested, but a freeze on rents and mortgages in New York will likely lead to other governors taking the same route, and renters might be able to breathe a little better soon, especially those who have lost their jobs and independent contractors whose business immediately died on the vine.

We’ll be watching for other states’ reactions to rents and mortgage payments.

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Business Finance

COVID-19: Self employed Texans get some relief benefits

(BUSINESS FINANCE) Self employed? Worried about the corona virus hurting your business? Texas says you’re STILL eligible for cash-related COVID-19 coverage!

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When I heard ‘It’s hard being your own boss’, I thought people meant employee reviews were harder to do since you have to carry both parts of a tough conversation in your home office.

Now, watching as self-employed artists, caterers, events specialists and more are struggling in the wake of the COVID-19 pandemic, the image is less ‘Ha!’ and more ‘AH!’.

It’s bad out there, y’all. And my heart goes out virtually, as per CDC guidelines. But in every viral cloud, there’s a colloidal silver lining. In the great state of Texas, that lining is: You’re probably eligible for disaster-based unemployment.

Yes, really!

Straight from the Texas Workforce Commission’s mouth: If your employment has been affected by the coronavirus (COVID-19), apply for benefits either online at any time using Unemployment Benefits Services or by calling TWC’s Tele-Center at 800-939-6631 from 8 a.m.-6 p.m. Central Time Monday through Friday.

Now how does that cover the self-employed? Simple…kinda.

You’ll need to apply through the Disaster Unemployment Assistance and then take the extra steps of providing different proof than your 9-5 friends.

Firstly, you have to prove you’re self employed. If you’ve been paying you under the table, this is where the poop hits the fan, I’m afraid. The government will need things like (any given one of these): Insurance bills, business license, a recent ad, an invoice, or sales records.

Were you just about to start your own business when all this went down? Fortunately you’re covered too, so long as you have proof of prospective self-employment, say: The deed to a building you just bought, loan documents, ‘Grand Opening’ announcements, and so forth.

For the full list of documents that suffice, visit the TWC site directly and check what proof your pudding needs.

This situation is a Corona-cluster-cussword, but there’s help out there.

Reach out. Grab it. And then wash your hands.

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