Wag was looking to raise $75 million. It went to SoftBank and was like “will you give us $75 million?” SoftBank was like “no haha we’ll give you $300 million,” because that is SoftBank’s whole thing, it loves to give startups vastly more money than they want or need. And so Wag took the money. And then like a year and a half later Wag will get rid of SoftBank by giving back, I don’t know, but I am going to say some number less than $225 million (“well below” the valuation at which it invested). Wag got the $75 million it needed for free.
The trade, to be clear, is: If you need a little bit of money to grow your business modestly, you can raise a lot of money from SoftBank to grow your business crazily, and then put most of it in the bank and use a little bit of it to grow modestly instead. SoftBank will be disappointed with the modest growth, and you can say “sorry it didn’t work out” and then buy them out at a lower valuation with the money you have left over from not growing your business crazily. Free (modest) growth capital!
I am sure that this was not the plan, and it was not the actual experience at Wag, which is laying off employees and which genuinely seems to be struggling. (Also if this was your plan it would be complicated by, like, SoftBank having board seats and you having fiduciary duties and so forth.) Still doesn’t this kind of sound like my imaginary version?
Matt Levine's commentary on this was amusing: