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What Does A SoftBank Vision Fund II In The World Look Like?

Morning Markets: SoftBank’s aggressive investing efforts are set to scale up, according to the company. We could be in for a Vision Fund II. 

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Big news out in the last 24 hours indicates that the great Vision Fund boom may not be close to done. In fact, SoftBank said this week that it intends to double its investing staff from 400 to 800, and it may raise a second fund.

The personnel news (TechCrunch has more here) is notable. But the news concerning the second fund is even more eye-opening. Here’s how Fortune described it this morning:

He also dropped more news around its plans to start fundraising for a second investment vehicle that will be “the same size” as its $100 billion Vision Fund. “We will hopefully start raising our second fund in the next few months,” [the CEO of the Vision Fund Rajeev Misra] said at the Milken Institute conference in California.

If a second Vision Fund, call it the Vision Fund II, is created, and it is the same size as its predecessor, we’re going to run into an interesting confluence of trends. Notably, however, the two trends are in contrast to one another.

Here are some things that are still mostly true:

  • Highly-valued technology companies are waiting longer to go public than in prior decades. Ample private capital has fueled many private tech shops well past normal, private market size. SoftBank and its Vision Fund have invested in a chunk of these companies.
  • Some of the largest companies built during the current technology cycle are racing to go public while conditions appear favorable. SoftBank and its Vision Fund have invested in a chunk of these companies.

I can’t help but expect there to be some tension between the diverging trends over time: If SoftBank wants to invest another $100 billion into private technology companies, those firms will have huge amounts of cash on their balance sheets, allowing them to stay private longer. At the same time, there’s a growing push among tech shops to get public now while they can. And the Vision Fund must appreciate liquidity, as it will have hundreds of billions of dollars behind it that are often not traditional venture funds.

Is a Vision Fund II a bet, therefore, that the current liquidity thaw is not going to last? It’s gamble that a lot of unicorns won’t go public in today’s open IPO window—either because they are unwilling or unable to do so—even though the market is currently welcoming unprofitable companies. Are those companies expecting better options in 12 or 24 months down the road?

Or perhaps the Vision Fund II is merely a bet on the status quo of most unicorns staying private and growing while grazing on private funds raised in nine-figure chunks? That the unicorn phenomenon is no fluke, but the new normal? In that world, the Vision Fund II might do well, provided that public market investors and larger public companies are willing to pick off enough independent tech shops of scale to keep sufficient returns coming in.

The Vision Fund impact has been huge to date. We learned just this week that the fund and its parent firm are putting $1 billion into a Colombian company (spreading capital more widely? check) and quietly put money into Slack ahead of its IPO (more here).t

Can $100 billion more defer gravity for a few years for the whole tech market? Or would the new bet hit the felt even as the hot streak cools?

Illustration: Li-Anne Dias.

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