Bloomberg Línea — For many, Bolivia-born Marcelo Claure (51), former SoftBank COO, was a kind of King Midas who created huge value for the companies invested by Masayoshi Son’s fund. After all, he was responsible for putting the Japanese conglomerate’s investments such as Sprint and WeWork (WE) in order. Claure joined the group in 2014 when SoftBank bought his company Brightstar. From Tokyo, he moved to Miami to start SoftBank’s presence in Latin America, and then to New York to work on the restructuring of WeWork.
In an exclusive interview with Bloomberg Línea, Claure details the first steps he will take as a born-again entrepreneur, now from his own outfit, the Claure Group, and delves into what separates founders like Adam Neumann (WeWork), and Larry Page (Google) in terms of scale and execution of their companies.
According to Claure, who took over the helm at WeWork as chairman after Neumann was deposed as CEO in 2019, SoftBank was able “to fix the company during the pandemic and get it ready for (its) IPO.” WeWork, which once had a value of $47 billion, eventually went public via a SPAC in 2021 at a $9 billion valuation. Today, the company has a market cap of $4.76 billion. “Now the company is on track to deliver profitability in the next few quarters,” Claure said.
Claure, who left SoftBank in late January over disagreements with Son over his compensation, says he’ll keep his relationship with SoftBank private and prefers to focus on his next steps investing with his multi-billion dollar Family Office Claure Group, which will announce new investments soon.
We like to back exceptional founders that build great companies, pretty much in the broad area of all sectors of the economy, so we are looking for great founders with great companies that we can not only bring more capital but bring my expertise of what I’ve learned these years
See the interview with Marcelo Claure below, edited for conciseness and clarity purposes:
Life after SoftBank
Bloomberg Línea: How has been your transition as a standalone venture capitalist?
Claure: Transition is going great. It is very nice to have time for me and my family after probably 30 years of working to be able to dedicate my time to things that I like to do, which is basically helping different entrepreneurs in the world with everything that I’ve learned these last 30 something years, so it has been very good.
Bloomberg Línea: How is your life after SoftBank and your relationship with Masayoshi Son?
Claure: My relationship with Masa and SoftBank is very good of course. I think it’s time for me to leave after I have done everything that I had to do inside SoftBank, they were fascinating years that started in 2014 when SoftBank bought my company Brightstar then took me to turnaround Sprint, then took me to Tokyo to be Chief Operating Officer at Softbank, then to Miami to launch SoftBank’s presence in Latin America, and then back to New York to help with the turnaround of WeWork. So, I agreed that everything that I had to do at SoftBank was done and I wanted to go back to being an entrepreneur, so everything is going well, going as planned.
It is not easy to create large companies, you hire more people than you need, so good entrepreneurs sometimes kind of tighten their belts, and when they grow again they hire new people, there is no secret. Few companies don’t have to go through these phases
Bloomberg Línea: How was the WeWork takeover for you?
Claure: It was great, it was another amazing experience of taking the head of an amazing company that was founded by a great visionary that needed some help in the execution.
We were able to fix the company during the pandemic during pretty difficult times and set the company on track for an IPO, which was a dream we always had, and now the company is on track to deliver profitability in the next few quarters. It was amazing to have an opportunity to bring an amazing company with amazing employees with the needed direction in the execution area.
Bloomberg Línea: Some VCs say they focus more on the founder, rather than on the business, that the founder is the most important thing in a startup. How do you feel about founders like Adam Neumann?
Claure: There are different types of founders. I think Adam Neumann had a great vision for the business. To scale, he had execution problems that prevented him from fulfilling expectations. This is why I think companies have different stages in their life. For example, I think the idea, the dream that was brought by Adam Neumann and I think, in the execution, companies go through different cycles and they need different types of people.
I think probably the best case study of that is when you look at Larry Page, who founded Google, as the company scaled they had the vision to bring in professional management, who transformed Google from different dimensions, so I think there are different founders. Some founders can take it all the way, from developing an idea to starting the business to scaling the business, and other founders realize that their strength is not in scaling the business and running a large organization, so they bring in different management. It depends on the founder, depends on the circumstance, and it depends on the industry. Not all companies are created equal.
Latin American markets where the user does not have much trust in their local governments or banks, I think there is a greater opportunity for crypto, for Blockchain, to be a more disruptive model in Latin America than in other markets
Bloomberg Línea: What are the definition and the status of Claure Group?
Claure: It is basically my Family Office, a multi-billion dollar Family Office that is investing in companies. I’m not allowed to set up my own fund, for the time being, I have no competition agreement for setting up my own fund; however, I’m allowed to invest from my own Family Office, and in the next few weeks, you will see we’re investing several hundred million dollars. In the next few weeks, we will start announcing the first investments.
Bloomberg Línea: Can’t you have your own fund due to SoftBank issues?
Claure: No issues, it’s part of my separation agreement. For a certain period of time, I’m not allowed to raise capital from third parties and invest. But I’m allowed to invest directly from my Family Office and that is what I have been doing.
Bloomberg Línea: And these investments from Claure Group, are they focused on Latin American startups?
Claure: It’s based on everything. We invest in real estate, technology, in gaming, we will be investing in crypto, public, private, and seed funding, it’s a combination of everything. What I’m not allowed to do is that I’m not allowed to raise a specific fund, but what I am allowed to do is basically invest in funds. So you will see me help entrepreneurs by investing in funds, and I can invest directly into companies. I’m just not allowed to raise my own fund.
Bloomberg Línea: What is the type of startup that Claure Group would like to invest in? Do you focus more on the company, the sector, or the founder?
Claure: It’s the same. We like to back exceptional founders that build great companies, pretty much in the broad area of all sectors of the economy, so we are looking for great founders with great companies that we can not only bring more capital to, but bring my expertise of what I’ve learned during these years.
I believe that new technologies and trends are bigger than governments, money, and inflation because they change the way we live. Technology improves the way we live. Of course, it is a little more difficult when governments are not in favor of foreign investment, but no one, no government has the strength to stop the technological world that makes people live better
Latin America: Ripe for Crypto
Bloomberg Línea: How do you see the scenario for venture capital in Latin America now with this scarce liquidity due to macroeconomic issues?
Claure: I’m very bullish for Latin America. I think Latin America will have great years ahead. We have a lot of tailwinds on our side, such as the price of commodities. Commodities will play a key role in the future, especially because of the geopolitical situation, but also because the electric pick revolution can affect that.
We know we control most of the lithium, 60% of the lithium today sits within the lithium triangle, in Chile, Argentina, and Bolivia. And Mexico has a great commodities supply so therefore there is going to be a lot of capital inflow going into commodities.
Also, the geopolitical situation has forced a lot of companies to rethink their supply chain. We’re moving with a trend, moving away from globalization to regionalization, meaning the Western markets like the U.S. want to have supply chains that may be not as efficient, but they would have less risk and I think in that case Mexico will play a key role in moving manufacturing to Mexico to serve supply chains in the Western economies.
Thirdly, Latin America is arriving late to tech disruption and innovation. So, therefore, even though we have had some fantastic last three years, we’re coming from behind, so there’s a lot of investment, and innovation, there’s a lot of disruption for entrepreneurs going on in Latin America. So I’m very bullish on Latin America as a whole.
Obviously, we’re in difficult times, if you look at the triple storm of financial crises that could potentially lead to recession. We have the war going on in Ukraine, and then we have a pandemic that seems to never go away. When we think it is finally going away, then you get China going into lockdown. So I look at two different worlds, good for Latin America, with strong headwinds on the macro side.
I think the venture capital world will adjust, nothing will change, and there will be capital flowing, but I think valuations will be adjusted. I think the market will not pay for growth. The market will pay for profitable growth, which is something that venture capital is going into in many cases because of the cost of capital being so low, there was a lot more tolerance for profitability to come at a later stage. I think companies are now being forced to show a clear path to profitability. It doesn’t mean that companies have to be profitable, but there needs to be a break-even year roadmap to profitability, and also the companies are going to benefit from that.
It is just another cycle, and we have to be smart about how we can get through this new economic cycle that is coming.
Bloomberg Línea: The strongest part of Latin America in this cycle would be commodities rather than technology?
Claure: No. The physical infrastructure of Latin America is not so good. So, therefore, technology has a higher disruption. The good thing about commodities rising is that it means more inflows to Latin America, which means investment in disruptive models. I don’t think things are going to change. Great companies are going to get funded, I think companies that are not so strong are going to have bigger trouble, companies that don’t have a clear path to profitability, but we’re living in such an incredible time, pretty much everything that we know is going to get disrupted in the next few years, and the way we do everything is going to be different in five years.
We never had a time when there had been so much innovation and disruption in history, we’re in the middle of a revolution where tech companies are basically disrupting, we’re in the middle of the Blockchain revolution. You have Blockchain, crypto, and others disrupting the financial systems, and at the same time, you have the EV revolution, where you are going to see most of the cars changing from combustion to electric in the next 10 to 15 years. And we haven’t even talked about the potential of what is going to happen in space.
There is so much innovation and disruption that is going on in the world that will continue. You can’t stop it, no financial crisis can stop that. The only thing that is going to change is that it is going to be harder for companies that don’t have a clear path to profitability to raise at the same valuations that they raised in the past. That is the only difference.
Bloomberg Línea: How do you see crypto in Latin America?
Claure: Regarding cryptocurrencies in Latin America, I sincerely believe that the world of Blockchain will be a disruptive model on the ground in Latin America and the world. But Latin America is between Blockchain, crypto, Bitcoin, different tokens and different currencies, and different infrastructures. In Latin American markets, where the user does not have much trust in their local governments or banks, I think there is a greater opportunity for crypto, for Blockchain, to be a more disruptive model in Latin America than in other markets. That is why we have seen big companies like Bitso, Ripio, and exchanges getting stronger. I think the future of crypto and Blockchain in Latin America is promising, as it is in other places in the world.
Bloomberg Línea: How do you see this trend in Latin America with some new governments, the so-called pink wave, more left-wing oriented, and that could somehow affect the flow of investments, especially in new technologies?
Claure: I believe that new technologies and trends are bigger than governments, money, and inflation because they change the way we live. Technology improves the way we live. Of course, it is a little more difficult when governments are not in favor of foreign investment, but no one, no government has the strength to stop the technological world that makes people live better.
The best example is Uber, right? How many governments in the world are fighting to stop Uber, and today Uber is the way we move in São Paulo, Mexico City, and New York because the value proposition is stronger than all the governments that tried to stop it. It will just continue in Latin America, especially where we have so many shortcomings in so many areas.
In the area of education, health, and logistics, there are so many deficiencies in the physical infrastructure that the digital, and virtual infrastructure will always be competitive when you have strong macroeconomic aspects, for example, half of the population of Mexico is unbanked. However, the transactions are done with cash and it is easier than in the world of technology. Once people learn to use cell phone payment, the world will change. Yes, we are going to go through moments of crisis, we are going to go through a change in the financing mechanism, but the world of entrepreneurs, the technological world is so strong that I think no government can stop it.
Bloomberg Línea: In recent days we have reported about some unicorns in Brazil that have begun laying people off. From the point of view of venture capital, how can you choose initiatives that avoid this type of situation, and how can you shield yourself?
Claure: You can’t, no. We lived through a few years of prosperity where capital abounded. Capital will continue to exist, whatever entrepreneurs change to have, let’s say, profitable growth. They will have to show investors how to bequeath this. In the world, layoffs, and everything else, it’s normal. If you look at Amazon, Amazon reminds me of a time when they had to lay people off because there was no financing, companies like Amazon or Facebook had to return the money at a price lower than the last fundraising they carried out. It is not easy to create large companies, you hire more people than you need, so good entrepreneurs sometimes kind of tighten their belts, and when they grow again they hire new people, there is no secret. Few companies don’t have to go through these phases.
– With Alejandro Ángeles