SoftBank’s Masayoshi Son Warns Of Longer Funding Winter For Unicorns Unwilling To Accept Cut In Valuation

SoftBank boss Masayoshi Son, in the post-earnings calls for the quarter ending June 2022, said that the ongoing funding winter will last longer for unicorn founders who are unwilling to accept a lower valuation to raise funds.

“Our Vision Fund saw huge losses but unfortunately unicorn company leaders still believe in their valuation and they would not accept the fact that they may have to see their valuation [go] lower than they think. So, until the multiple of unlisted companies is lower than [that] of listed companies, we should wait,” Son said.

Not just unicorns, all unlisted companies may face a longer, harsher winter than the listed ones, Son added.

SoftBank reported a net loss of $24.5 Bn in Q1 FY22 as opposed to a profit of $5.6 Bn in Q1 FY21. The loss of its Vision Fund, on the other hand, stood at $21.7 Bn in the June quarter.

The SoftBank chief owned up to his mistake of getting overexcited in 2021 when technology stocks were booming and now feels ‘embarrassed’ by that reaction. 

The investment giant has now resorted to selling shares of some of its portfolio companies (such as Uber) to raise cash and is also cutting internal operations costs.

Previously, SoftBank has mentioned plans to write down assets worth $30 Bn as rising interest rates and inflation, the Russia-Ukraine war, and the plummeting value of its investments in China plague the company’s fund value.

SoftBank’s India Portfolio 

SoftBank’s current portfolio of listed startups in India includes Paytm, Delhivery and Policybazaar. 

While the shares of Paytm and Policybazaar are trading over 57% and 51% lower, respectively, from their listing last year, those of Delhivery are up 30.4% from their listing. 

SoftBank has invested a total of $1.6 Bn in Paytm so far and its current invested value stands at $1.19 Bn. The fund has invested $397 Mn in Delhivery and $199 Mn in Policybazaar so far and the investment value stands at $907 Mn and $583 Mn, respectively.

Paytm contributed $407 Mn gross loss to the fund, while Delhivery contributed $510 Mn of gross profit to the fund. Policybazaar contributed $384 Mn profit to Vision Fund 1, as per SoftBank Group’s earnings release.

Blinkit, Cars24, Meesho, Zeta, OfBusiness, Lenskart, among others, are the unlisted startups in SoftBank’s India portfolio. 

The comments by Son will likely cause some discomfort in the Indian startup ecosystem as well.

The Indian startup ecosystem continues to witness a major decline in funding. Homegrown startups raised $19.7 Bn in the first seven months of 2022, down nearly 8% compared to the same period last year. At $1.12 Bn, the funding raised by startups was over 75% lower in July as compared to January 2022. 

The fears of an impending recession coupled with high interest rates, reduced liquidity and market volatility amid the Russia-Ukraine war have sent the startup ecosystem in a cost-cutting overdrive. 

This has resulted in startups laying off employees to cut costs. According to Inc42, more than 11,360 employees have so far been laid off in 2022 by startups like Unacademy, MPL, Ola, BYJU’S, among others.