SoftBank is no stranger to being one of the deepest capital pools in all of tech. While not technically a financial institution, the Japanese conglomerate has nonetheless bankrolled a number of high-flying ventures.
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Though its dalliances with Uber and WeWork are not the first times SoftBank CEO Masayoshi Son has flown a little too close to the sun, SoftBank’s influence over the global venture capital industry has reached new heights.
Analysis by Crunchbase News uncovers an astonishing fact: SoftBank, its nearly $100 billion Vision Fund, and its related investing entities have dealt in over 10.5 percent of known venture capital dollar volume, worldwide, so far in 2019.
The chart below shows the percentage share of total global venture dollar volume in which SoftBank, its Vision Fund, the now-dormant SoftBank Capital, and other investing entities, were either lead or participating investors, by year since 2009.
To be clear, SoftBank alone is not responsible for all this capital investment—the data aggregates dollar volume from rounds in which a SoftBank entity was the sole investor, as well as more widely-syndicated deals where a SoftBank entity was a mere listed participant—but it points to SoftBank’s sway in the global VC market, as well as the company’s abrupt shift in investing strategy to capitalize on the trend of ballooning late-stage rounds.
It wound down new early-stage investments by SoftBank Capital in July 2015, one year after former Google executive Nikesh Arora joined SoftBank Corp. as its president. In an interview about the strategic shift, Arora told ReCode, “As we look at the future for the next tens of years, we believe that the way to preserve the long-term sustainability of SoftBank is to be large minority shareholders of many assets.” He continued, “We believe that it’s less crowded in the large-check marketplace, and it’s a smaller universe of companies we have to understand and support.”
In October 2016, SoftBank announced its intent to form the SoftBank Vision Fund. In its press release the company said that, “The objective of SBG to establish the Fund is to accelerate SBG’s global growth strategy through the investments via the Fund and alliances with portfolio companies of the Fund.”
SoftBank called down $93 billion in subscribed capital in May 2017. An important clause in that press release reads, “Certain investments with the Fund’s investment strategy negotiated by SBG subsequent to the Establishment Release may in future be assigned, transferred or allocated to the Fund following requisite approvals of Limited Partners under the Fund documents.” Basically, this means that SoftBank is able to transfer some of its assets to the Vision Fund, so long as the fund’s stakeholders agree to it.
It’s an important stipulation, because it gave SoftBank significant leeway to make investments of its own and subsequently shift the assets to its pooled investment vehicle. That’s what allowed SoftBank to transfer part of its stake in chipmaker ARM Holdings, which SoftBank acquired before the Vision Fund was initially announced, to the Vision Fund as part of SoftBank’s general partner commitment to the Vision Fund. Similarly, SoftBank transferred its $5 billion stake in chipmaker Nvidia to the Vision Fund in August 2017. The investment ultimately flopped though; in February 2019, the Vision Fund liquidated its Nvidia position for $3.6 billion.
It’s the permeability between the Vision Fund’s portfolio and SoftBank’s independent corporate investments which, at least in part, has allowed SoftBank to start making very large investments of its own. With little except for LP approval to transfer the assets and working capital on the balance sheet, SoftBank can make investments now and shift them to the Vision Fund later.
SoftBank and the Vision Fund’s bets are some of the biggest tech has yet seen, but whether they’ll ultimately pay off is very much an open question. To successfully raise Vision Fund 2, for which SoftBank is targeting $108 billion, Vision Fund 1 needs to show better performance than it has been. With executive departures across many of its portfolio companies (most recently at Compass), delayed IPOs, downward repricing post public debuts, and other factors, long-run portfolio performance is very much up in the air.
This being said, Masayoshi Son has a 300 year plan for the company. And to have that kind of vision, you make no small bets.
Illustration: Li-Anne Dias