Clay Christensen’s Low-Profile Family Firm And A History-Making Woman Investor At SoftBank Are Among The Big Winners Of South Korea’s Answer To Amazon.
When Coupang CEO Bom Kim was a first-year student at Harvard Business School, he called a former coworker, Matthew Christensen, about a startup idea. A native of South Korea, Kim had sold his previous venture, a magazine for Harvard alumni, and watched it get shut down. For his next company, he wanted to go back to Seoul to start a company offering Groupon-like discounts.
Christensen, the son of famed academic and business guru Clayton Christensen, was a friend of Kim’s from working at Boston Consulting Group. He’d personally invested in Kim’s previous media business “without a whole lot of optimism,” then stayed in touch. The younger Christensen’s first reaction: interesting idea, but finish graduate school. Still, Kim was persistent. By their third chat, Christensen changed his tune: “You’ve got to get out of here,” he told Kim in 2010. “You need to start now.” And Kim did, dropping out to found Coupang. Christensen invested shortly after, off no more than a PowerPoint.
When Coupang went public via an old-fashioned IPO on the New York Stock Exchange on Thursday, the 42-year-old entrepreneur raised $4.55 billion in the biggest IPO by an Asian company debuting in the U.S. since Alibaba in 2014; his net worth momentarily reached $11 billion before ending the week at over $8 billion. Christensen had his own reasons to cheer. His firm Rose Park Advisors – low-profile, with barely a website and no press coverage – owned 5.1% of Coupang at IPO, per its S-1 regulatory filing, a stake worth more than $4 billion as of Friday’s market close.
As first detailed in the Midas Touch newsletter on Sunday, Rose Park is one of the unlikeliest big winners in the rise of Coupang, which generated revenue of $12 billion last year and ended its week with a market capitalization of $83 billion. But the Christensens aren’t the only investors with a historic gain, nor the biggest. Greenoaks Capital, founded by former 30 Under 30 Neil Mehta, held a 16.6% stake now worth nearly $14 billion; Maverick Ventures, which backed Coupang in 2011, held 6.4%, a stake worth more than $5 billion. At SoftBank, investor Lydia Jett’s massive position in Coupang didn’t just validate founder Masayoshi Son’s controversial strategy – it’s made history.
SoftBank’s e-commerce expert, Jett poured $2.7 billion into the company between 2015 and 2018, amassing a stake of about 33% of Coupang. As of Friday, Son’s Vision Fund held a position valued at more than $27 billion. That’s not just almost certainly the largest cash-returning position for a woman startup investor – it’s one of the biggest for anyone, ever.
“We gained confidence that if we put this scale of check into the country of South Korea, paired with this management team, we would build something that would be very hard to replicate,” says Jett. “We’re excited to have that thesis proved out today.”
Clay Christensen’s Legacy
Founded in 2007, Rose Park launched with a simple strategy: invest the Christensen family and friends’ money in companies that fit the elder Christensen’s research. Born in Salt Lake City, Utah (his childhood neighborhood inspired the firm’s name) Clayton Christensen had studied at Brigham Young University and as a Rhodes Scholar at Oxford University before receiving his MBA at HBS. He worked as a consultant at BCG, cofounded a materials startup with MIT academics, a public policy think tank, and eventually ended up in academia. His book ‘The Innovator’s Dilemma’ in 1997 became a seminal handbook for a generation of entrepreneurs, and in 2011, Christensen appeared on the cover of Forbes.
With a steady stream of investors and businesspeople filtering companies to Christensen to evaluate as potential “disruptive innovators,” he teamed up with his son, Matthew, a former basketball player at Duke who’d followed his path to BCG, HBS and the think tank, to invest in those that fit their metrics. The younger Christensen and his two siblings had already helped their father talk through his research and edit his books, Matthew Christensen says.
By structuring Rose Park as one evergreen fund instead of a typical venture fund, the Christensens were able to invest in a mix of public and private companies, building a portfolio that includes Netflix and Salesforce, startups like HireVue and CircleUp, and companies that have since gone public including Coupang and DocuSign.
“We’re allowed to invest in any type of security in any geography, any industry, any stage, but only when the investment thesis derives from my dad’s research,” Christensen says. “So if we thought something was really exciting for some other reasons, then we have to pass on those things.” When Kim set out to launch Coupang, the entrepreneur’s experience with his magazine venture gave him what Clayton Christensen’s framework would rate a strong “school of experience,” one of Christensen’s criteria for assessing managers, given Kim’s work managing the magazine’s writers and business concerns, Matthew Christensen says now. A Coupang board member, he’s stuck by Kim all these years. “The transition from marketplace to retail required a lot of pulling rabbits out of hats, an insane amount of work, thought and creativity,” Christensen says.
Since his father’s death in January 2020, Christensen has served as the sole partner at Rose Park. His family, initially the sole backers of the evergreen fund, remain its largest limited partners, he says. His firm’s structure, unusual for venture capital, helped keep away any pressure to sell shares during its 11-year commitment; it also means that despite Rose Park’s early stake, Christensen has no plans to sell soon.
Jett Leads Way
Today, SoftBank’s $100 billion Vision Fund is infamous in tech circles for outsized checks and for its close ties to flameout co-working unicorn WeWork. But when Jett met Coupang in 2015, the Vision Fund didn’t exist yet. Instead, Jett, an alum of Goldman Sachs and JP Morgan, was a new member of a small group at SoftBank Investment Advisers that led a $1 billion investment that year in the South Korean startup.
When Vision Fund launched in 2017, SoftBank’s investment in Coupang rolled over into the new fund. That same year, Jett and the Vision Fund went on to write a similar sized check to sports-focused online retailer Fanatics in the U.S., then made a bigger $2.5 billion overall bet on Indian e-commerce company Flipkart.
When it came time to look at Coupang again in 2018, Jett was more cautious. After nine months of due diligence, she felt satisfied that Kim could responsibly deploy another $2 billion to complete its transition to a full-stack online and physical retailer (it operates more than 100 fulfillment centers today). Debate within the Vision Fund partnership and SoftBank, about the position, which for the Vision Fund ended up being a $2.7 billion one post-transfer, was intense. But Son, the final decision-maker, came around. “Masa was able to find conviction and be a deep supporter,” Jett adds.
On March 3, 2020, Coupang presented at SoftBank’s “Pre-IPO Summit,” an event in which Son showcased some of the firm’s leading portfolio companies for key Wall Street IPO insiders. Coupang, which presented virtually as South Korea grappled with Covid-19, wasn’t thinking seriously about its own IPO ambitions at that moment, Jett says now. And soon, Coupang had other problems to deal with as it scrambled to respond to record demand from its customers and safety concerns for its workers.
“We weren’t talking about an IPO last summer. I can’t believe we’re here.”
It all came at high cost. The Korean Workers’ Compensation & Welfare Service ruled an October 2020 death of an employee as work-related; Coupang acknowledged the verdict and promised to support the worker’s family. Last week, the Financial Times reported that eight people employed by Coupang have died over the past year due to unfavorable working conditions. The company spent hundreds of millions on safety technology, according to Jett, part of an “incredibly heart-wrenching and challenging” time for Coupang. “They’ve been very focused, and they’ve invested heavily in protecting people, but this has been hard, without a doubt,” she says. “Did I think we’d be here? No, we were not talking about an IPO a year ago. We weren’t talking about an IPO last summer. I can’t believe we’re here.”
But Coupang’s business soared during the pandemic, with sales up 90% off of shrinking losses. And with capital markets roaring back – if they ever really slowed – to embrace tech equities, IPOs and SPACs, Coupang shares jumped 40% in its first day of trading. SoftBank’s combined position closed the week up about $25 billion in value.
For Jett, the deal is “absolutely a validation” of the big-check strategy that the Vision Fund put to work in the past few years, one that faced a heightened chorus of doubts last spring when Son told Forbes his strategy remained unchanged despite doubts about whether his holding company was facing sunrise or sunset.
“In Korea, we believed if we wrote a really large check, we could build something that was unmatched. That’s harder to do in markets with the depth of the U.S. and China,” Jett says. “So I’d do it again, absolutely. I would do it again, in the right market.”