What: Japanese SoftBank’s $100 billion investment fund has had a profound impact on Silicon Valley’s tech space, but now some people are starting to question its viability going forward.
SoftBank’s Vision Fund, backed by some of the largest global venture capitalists, including Saudi Arabia’s Public Investment Fund, is focused on AI and other tech companies and is considered by many to be the world’s largest fund in the space.
In mid-2019, the company announced plans to launch its second fund, Vision Fund 2, which at the time had capital commitments of more than $108 billion. SoftBank said it had memoranda of understanding (MOUs) for investment with companies like Apple, Microsoft, Foxconn and other international funds.
Many are not as enthusiastic this time around, however, with some even pronouncing the new fund “dead” before its launch.
Why: The doubts have intensified in the past weeks due to the misfortunes of WeWork which is currently undergoing major restructuring ahead of its delayed IPO. The Japanese company is its largest shareholder after several investments totaling almost $11 billion.
If WeWork’s valuation goes down to $15 billion from $47 billion at which SoftBank had invested, the latter will take a loss of $2 billion, the New York Times says.
Further, the Vision Fund has other large investments that are not doing so well, with the notable example of Sprint.
And yet: Not everything looks gloomy for the investment vehicle, however, which boasts stakes in 80 of the hottest startups out there like Uber, Slack, NVIDIA, TikTok and others.
In August 2019, the company said that its Vision Fund portfolio value was $82.2 billion, up from the $66.3 billion which the company had initially invested.
Also, its follow-up fund will be in a good position to snatch bargains, given a correction for companies with lofty evaluations.
If anything, looking at the Vision Fund and its performance, there isn’t anything unusual from a VC standpoint. The industry is used to casting a wide net in hope that a handful out of 10 investments will turn out superstars and make up for the duds.
Same thing here with the exception of the big scale and large amounts that SoftBank is betting, making many market participants and analysts antsy.
The name of the game.