The mounting difficulties of Softbank Inc., one of the world's largest tech investment firms, rippled to the online retailer Brandless Inc.
Softbank, which on Wednesday reported a 99% profit drop for the last three months of 2019, became the major investor in San Francisco-based Brandless two years ago via its $100 billion Vision Fund led by founder and chief executive Masayoshi Son.
Two of the fund's other major investments, WeWork and Uber, produced huge unrealized losses. On Wednesday, Softbank said that the difficulties in the Vision Fund and another produced an operating loss of $2 billion in the latest quarter.
Brandless -- which developed and sold food and household staples at two prices, $3 and $9 -- formed in 2017 and was still finding its footing as difficulties mounted for its main backer. The firm started with snacks and other foods, then expanded to baby items and pet goods.
Employees were told Monday that the company was closing. It stopped taking orders and a three-paragraph statement appeared on the company's homepage announcing the closing.
"While the Brandless team set a new bar for the types of products consumers deserve and at prices they expect, the fiercely competitive direct-to-consumer market has proved unsustainable for our current business model," the company said in a portion of the statement.
The firm did not mention Softbank in its public statement.
On Tuesday, the Brandless office in downtown Minneapolis was still filled with merchandise, but only two appeared to be working. An employee who answered the door declined to answer questions, referring inquiries to its public relations staff. No one responded to calls and e-mails to internal and external PR representatives.
Brandless founders Tina Sharkey and Ido Leffler, entrepreneurs with a track record in Silicon Valley, believed they could provide quality goods at lower prices by reducing distribution and marketing expenses. By focusing on two pricepoints, the firm simplified the need for a variety of product sizes.
The company opened its Minneapolis office when Sharkey and Leffler recruited Rachael Vegas away from Target Corp. to become the company's new chief merchant. Vegas didn't want to relocate to the Bay Area and persuaded executives that the Twin Cities had plenty of workers with experience in the retail and food industries.
SoftBank promised to invest $240 million in Brandless contingent on the company hitting some performance goals. The firm never made the full investment. Last March, Brandless laid off about 10 people and Sharkey left the company. Vegas left the firm a short time later and became a grocery executive in Texas.
At its peak, the Minneapolis office grew to more than 30 people, including food science, packaging and customer service operations. It wasn't clear how many people were still working in the office when the closing announcement came this week.
The company said it would retain about 10 of its approximately 80 overall employees during the shutdown process.
With its name and concept, Brandless tried to craft a middle path between name brands and generic ones. In an interview last year, Vegas said that portraying Brandless goods to be generic was "probably the most insulting thing someone could say to our employees."
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