SoftBank (SFTBF) raised eyebrows nearly two years ago when it pumped a staggering $300 million into a dog-walking startup called Wag. Now, after a series of stumbles at the company, SoftBank (SFTBF) appears to be giving up on the investment.
New Wag CEO Garrett Smallwood informed staffers on Monday that the company was “amicably parting ways with SoftBank,” according to the email obtained by CNN Business. Softbank will no longer have representation on its board, he told employees in the email. SoftBank is also selling its stake in Wag back to the company.
The Wall Street Journal first reported the news Monday. A SoftBank spokesperson confirmed the report to CNN Business.
The news highlights the remarkable downfall of a startup that once appeared poised to be tech’s next Big Thing, powered by an on-demand business model similar to companies like Uber and by SoftBank’s seemingly limitless checkbook. Now, not only is the company losing its biggest backer, but it’s also undergoing layoffs.
For SoftBank, the failed Wag investment is just the latest shadow cast over its nearly $100 billion technology investment fund, which has pumped vast amounts of capital into flashy tech startups. Uber (UBER) and Slack (WORK), two SoftBank-backed companies, have both struggled on Wall Street since going public this year while WeWork failed to pull off an IPO and required a multibillion-dollar bailout from the Japanese conglomerate.
Even with SoftBank’s substantial backing, Wag struggled to keep up with the competition. The startup went through multiple rounds of layoffs, endured management changes, and shuttered its customer service hub in the Hollywood Hills, according to a CNN Business investigation published in late September. Additionally, Wag’s anticipated global expansion has yet to happen.
Meanwhile, some former employees claimed that then-CEO Hilary Schneider had yet to get a handle on fundamental issues facing the business, including growth, pet safety and customer service. Just two weeks ago, Wag named Smallwood its new CEO as Schneider left to run Shutterfly.
Prior to the decision to sell its stake, SoftBank had been exploring a number of options for the startup, including selling Wag to a strategic investor, according to a source familiar with the matter. In late October, tech news site Recode reported that the company was in talks with Petco about a possible sale.
With SoftBank backing away from the company and seemingly no sale on the horizon, Wag is now cutting more jobs in an effort to “align our organization with the needs of our business,” according to the CEO’s email to staff.
It’s unclear how many staffers in total will lose their jobs, but in a filing with the California Employment Development Department on Monday, Wag confirmed it is shuttering its West Hollywood office entirely in a mass layoff. About 90 staffers in this office location will be impacted, the filing said. The company also has offices in the Bay Area and Phoenix.
In his email, Smallwood refers to the layoffs as an “extremely painful and difficult step.” But, he added, “it was also an important one for our future.”