How SoftBank Has Disrupted VC and Start-Up Investment by Paul Bilot

TL;DR - SoftBank has disrupted the venture capital industry with its giant funds and aggressive investing strategy.

Helpfulness - 5

Tags - SoftBank, Masayoshi Son, venture capital, VC, Vision Fund, Vision Fund II, startup investing

Questions answered:

  • What is Softbank?
  • How has SoftBack disrupted the VC industry?
  • What is the Vision Fund?
    • How successful have SoftBank’s investments been?
  • What is the Vision Fund II?
    • Who are the investors?
    • For whom is the Vision Fund II going to be a big opportunity?

Summary:

  • SoftBank is an heteroclie conglomerate mainly focused on tech that has established several venture capital funds (e.g. the Delta Fund, the Vision Fund, the Vision Fund II).
  • The Vision Fund (started in 2017)
    • The stated mission: investing in late-stage tech start-ups that will revolutionise the future
    • Total capital contributed: approx. $100 billion
    • Has reshaped the venture capital landscape.
      • The amount of cash it brought on the table led to a renewed equilibrium and reshaped the balance of forces across the board.
      • Helped push valuations of private tech startups to new heights and delayed their IPOs.
      • Some VCs raised larger funds to compete, but they are still not even comparable to the Vision Fund in terms of size.
    • Impressive overall results (Q2 2019): “held 81 investments at the end of Q1at cost tataling $66.3 billion, with fair value amounting to $82.2 billion”
      • Some of its prior investments went up as they were repriced in new, more richly valued private investments (e.g. Slack, DoorDash, OYO)
      • Critics say there is no way to verify the values of many of its investments because so few of them are listed on public markets.
      • Some of its investments were unsuccessful (“unrealised loss totalling ¥195,326 million”) - e.g. Uber and WeWork
  • The Vision Fund II
    • The stated mission: investing in start-ups designing and producing “next-generation enterprise technology” using AI.
    • Total expected capital contributed: approx. $108 billion (approx. $38 billion from Softbank)
    • Notable contributors: three Japanese Mega banks (Mizuho Financial Groups, Mitsubishi UFJ Financial Group Inc, and Sumitomo Mitsui), Apple, Foxconn, Microsoft
    • Saudi Arabia and Abu Dhabi (who contributed $40 billion and $20 billion, respectively, to the first Vision Fund) might not be involved this time.
    • Seen as a big opportunity for:
      • Uniforms needing capital but too immature for an IPO
      • Heavy weight startups looking for late, supergiant rounds (over $100 million)
      • China’s VC scene (which has seen a steep decline)
  • SoftBank’s aggressive approach to investing
    • The Vision Fund has made unprecedented VC investments in late-stage companies seeking between 20% to 40% ownership.
    • Its investment strategy (mostly investing in late-stage unicorns that largely dominate their markets) is driven by the CEO (Masayoshi Son)’s unique vision for the future.

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