The founder of a $1 billion startup reveals why he took SoftBank's cash after the murder of Jamal Khashoggi

Tech startups in the US, Europe, and Asia continue to take cash from SoftBank's $100 billion Vision Fund, despite the fund's deep financial ties to Saudi Arabia.

It raises uncomfortable questions given Saudi Arabia crown prince Mohammed bin Salman was credibly linked to the brutal murder of dissident and journalist Jamal Khashoggi in October 2018.

Despite talk of a “reckoning” among tech startups about taking Saudi-linked money, startups have continued to raise hundreds of millions of dollars from the Vision Fund after the murder.

Cesar Carvalho, the founder of Vision Fund-backed startup Gympass, said accepting cash from SoftBank meant the ability to do business with other companies such as Uber and WeWork.

He added that SoftBank firms are “changing people's lives for the better.”

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It has been eight months since the brutal murder of the Saudi Arabian dissident journalist, Jamal Khashoggi, in Turkey.

A UN report released on Wednesday crystallizes what intelligence officers and Turkish authorities have believed for months — that Saudi Arabia's crown prince and ruler, Mohammed bin Salman, is directly connected to the killing. Khashoggi was a direct critic of bin Salman and some of his policies.

After the murder in Turkey last October, Wired and The Washington Post wrote that the murder had triggered a “reckoning” in Silicon Valley and the wider tech industry, which is awash with cash from SoftBank's $100 billion Vision Fund. Saudia Arabia's Public Investment Fund ploughed $45 billion into the investment vehicle, making it one of the fund's biggest backers.

In November, SoftBank's CEO Masayoshi Son denounced the “horrific and deeply regrettable act,” condemning the murder as an “act against humanity, journalism, and free speech.” He added that SoftBank had raised its concerns with Saudia Arabian officials but would not shirk its financial commitments to the country. He added that his firm was helping diversify its economy and modernise its society.

The thinking was that tech startups could take a moral stand. Lofty ambitions to improve the world are at odds with accepting money from an organization with such close ties to a murderous regime. But eight months on, it isn't clear how much of a reckoning there has really been.

A number of US venture capitalists spoke out at the time. And it is possible the Vision Fund quietly lost out on deals due to founder queasiness. If this is the case, it hasn't been publicly discussed. And there are still plenty of startups willing to take SoftBank's cash.

Vision Fund investments announced after Khashoggi's murder include UK banking startup Oak North, US delivery firm DoorDash, health firm Collective Health, Germany's GetYourGuide, Uber, and Asian ride-hailing service Grab. In each case, these startups raised hundreds of millions or even billions of dollars in a single round.

Money from SoftBank means dinners and business with WeWork and Uber

One of the most recent companies to join the Vision Fund portfolio is Gympass, which partners with workplaces and gyms to get employees working out for the first time. Earlier this month, the firm raised $300 million in a round led by the Vision Fund, reportedly boosting its value to more than $1 billion.

Read more: Gympass raises $300 million from SoftBank's Vision Fund and other backers to get office workers into the gym

Business Insider raised Khashoggi's murder with Gympass CEO Cesar Carvalho during a wider interview and asked whether accepting SoftBank's money had given him any pause.

He said: “SoftBank is this worldwide organisation, it is investing in a ton of businesses that are changing people's lives for the better and increasing productivity on multiple fronts. WeWork improves corporate cultures. I have confidence that SoftBank was the right partner for us. I was super comfortable to move forward.”

Carvalho then echoed something other SoftBank startups have told us: that being in a portfolio with category-leading companies like WeWork and Uber is too valuable an opportunity to throw away.

For Gympass, that had immediate and tangible benefits. Carvalho said Gympass' round was over-subscribed, meaning the startup had its pick of who to accept as an investor.

As a condition of accepting funding from SoftBank, Carvalho asked the Vision Fund to facilitate business ties with its other portfolio companies. As a result, Gympass counts both Uber and WeWork among its customers, giving it instant access to millions of employees, drivers, and shared office members and, presumably, a revenue boost.

“It happened simultaneously,” Carvalho said. We already asked [SoftBank] to help us during the process to prove it was a valuable thing. We had done partnerships with several companies in the portfolio and the idea now is to take that to every single market that we are in.

“In the UK, we have WeWork and two other portfolio companies. We have one in France, we're starting one in Latin America, and another in the US. It's access to that ecosystem that will move the needle for us more than the capital.”

The other pull is SoftBank's ties to Asia. “It's a key market when we think about the future for us,” said Carvalho. “We had many other offers on the table, but we made the decision to go with them.”

Other startups have talked about the value of the SoftBank network

Gympass isn't alone. Others have cited the cross-portfolio links as a benefit of taking SoftBank cash.

In an interview in September 2018, Oyo founder Ritesh Agarwal told Business Insider: “It's about working with us, and the broader family of the Vision Fund, which has top companies in every segment worldwide, to help us gain knowledge, and how to share our proprietary knowledge... that's the group you become part of.”

Last year, CNBC reported that SoftBank's CEO and founder, Masayoshi Son, holds regular dinners with the portfolio firms and that the founders treat each other like “family.”

Ali Diab, CEO of Collective Health, also accepted financing from the Vision Fund this year, telling the Wall Street Journal: “The Vision Fund is the pre-eminent global growth fund in the world that is known for backing category leaders. Of course, we are going to work with them.”

WeWork and Uber have come under greater scrutiny over their SoftBank links due to the billions they have raised. WeWork, additionally, bills itself as a moral company that doesn't allow employees to eat meat and pushes the idea of “community.”

Asked about how he could square the SoftBank connection with his firm's ethics, CEO Adam Neumann said only SoftBank's first investment in 2016 came from the Saudi-linked Vision Fund, prior to Khashoggi's death. The rest came from SoftBank itself.

This is what he told Business Insider in May:

I think the world has a global problem of extremists, together with a huge shift in what different countries can allow their citizens to do or not. I think the only way we're going to solve it is if we come together and agree on a certain level of moral standards, that there are a few things and behaviors we don't accept no matter what.

“If that means we can't get money because of it, then I agree with you. But if we don't find a way to come together and see the best in each other and find ways to collaborate even if it's hard in the beginning, then I think things will only get worse.”

SoftBank declined to comment.