SUMMARY
SoftBank announced the Vision Fund II earlier this year with commitments from leading investors
The loss over the WeWork investment has forced some investors to renegotiate terms with SoftBank
Softbank has invested $38 Bn in the second vision fund
With its investment in US-based coworking company WeWork resulting in a loss this year, Masayoshi Son-led Japanese conglomerate Softbank is having trouble convincing investors to commit to its much-awaited Softbank Vision Fund II.
According to a report by The Sunday Telegraph, Softbank is likely to fall short“significantly” to its target of raising $108 Bn for the second Vision Fund. The report adds that the Softbank Vision Fund II could be 30% smaller than the first fund, which had closed at $100 Bn. Softbank has made 88 investments from the first fund and will not be making any more new investments from that fund, saving the remaining corpus for follow-on rounds.
The report says that investors in the fund were concerned about Softbank’s investment strategy, especially after the Japanese conglomerate lost more than $4.7 Bn in the WeWork fiasco that resulted in the company’s valuation falling to $8 Bn, with SoftBank having invested close to $14 Bn in the company.
Originally, Softbank announced that it was expecting to raise $108 Bn based on the memorandum of understanding (MoUs) it has signed with investors. Softbank wanted to use this fund to invest in 100 companies across the globe.
The investors included Ireland-based mixed martial art academy SBG, which committed to invest $28 Bn, Apple, Goldman Sachs and Kazakhstan sovereign fund that planned to invest $40 Bn. The list of investors also included Foxconn Technology, Microsoft, Mizuho Bank, Sumitomo Mitsui Banking Trust Bank, MUFG Bank and more.
Just like the investors of Softbank, even founder Son has been rethinking the investment firm’s strategy. Son, in a news conference, said, “My own investment judgment was really bad. I regret it in many ways.”
The statement was in reference to WeWork, which had ended up dropping its valuation from $47 Bn in January this year to $8 Bn in October.
Therefore, Softbank has reportedly decided to narrow down its portfolio to the companies that have a clearer path to profitability and initial public offerings (IPO). The Japanese investment firm has also decided to slow down its investment pace, especially due to the losses incurred by its Vision Fund I portfolio companies like WeWork, Wag, Slack and Uber.
According to reports, Son has told Softbank’s portfolio company’s top executives —including Indian companies like Ola, Oyo, Policybazaar, Delhivery, Paytm — that public investors are not going to tolerate gimmicks that privilege founders over other stakeholders. Therefore, Son asked the companies to get in shape years before they consider going public.
In addition to this, Softbank has reportedly set a 5 year deadline for Paytm to go public. The media reports also add that if Paytm is not successful in meeting the deadline, then Softbank will sell its 19% stake in the company to other investors.
