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
- 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?
- 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.
Follow up links:
- SoftBank’s Vision Fund results (more recent), https://techcrunch.com/2020/05/18/what-softbanks-vision-fund-results-tell-us-about-troubled-startup-sectors/
- SoftBank’s Vision Fund II key backers opting out (more recent), https://www.reuters.com/article/us-softbank-group-results-vision-fund/softbanks-vision-fund-2-stalls-as-key-backers-opt-out-idUSKBN2061SU
- Chinese VC industry trend (more recent), https://pitchbook.com/news/articles/chinas-vc-industry-bounces-back-after-coronavirus-induced-winter