July 30, 2019
SoftBank Group changed technology venture capital when it launched the Vision Fund in May 2017, by setting $100 million as the minimum investment. Since then, the Vision Fund, which raised almost $100 billion, has invested in Uber Technologies, Didi Chuxing Technology and other startups. Now, the Japanese company is debuting Vision Fund 2 and jumpstarting it with its own $38 billion investment. The fund, which will focus on artificial intelligence, has already drawn investment commitments from Apple and Microsoft.
The Wall Street Journal reports, “Vision Fund 2 … expects to gather some $108 billion in capital from more than a dozen investors,” including Standard Chartered and Kazakhstan’s sovereign-wealth fund. According to sources, Goldman Sachs Group is also “in active talks to invest.” Vision Fund 2 “is a victory for SoftBank chief executive Masayoshi Son, who started the first Vision Fund just two years ago amid widespread doubt about its viability.”
By becoming “much larger than any other single investment fund,” SoftBank “forced other investors such as Sequoia Capital to raise multibillion-dollar investment funds to get stakes in valuable startups, lifting valuations and allowing more late-stage companies to stay private.”
SoftBank reported that “it has earned a return of 29 percent, mostly on valuation gains in its holdings,” resulting in now attracting “a bigger and more diverse group of potential investors” to Vision Fund 2. Whereas the first fund was “backed largely by the sovereign-wealth funds of Saudi Arabia and the United Arab Emirates … [those] pledging money for Vision Fund 2 includes several Japanese and Taiwanese banks, insurers and pension firms — a more conservative and risk-averse type of investor.”
Vision Fund 2’s investment in AI, said Son, “will benefit from the rising amount of real-world data gathered by sensors, cameras and other machines.” “The power to predict the future is about to emerge,” he said. “The amount of data will grow by a million times over the next 30 years.”
The merger between SoftBank-controlled Sprint and T-Mobile US will help, since “Sprint’s debt of some $40 billion has weighed on SoftBank’s balance sheet.” With the merger, SoftBank will “have a minority stake in the combined entity and Sprint’s debt would no longer be included on SoftBank’s books, freeing up the Japanese company to take on more risk.” SoftBank’s ability to take on risk is also “due to its stake in Chinese e-commerce company Alibaba Group Holding, which is valued at more than $100 billion based on Alibaba’s current stock price.”
SoftBank’s first Vision Fund is nearly out of money; Dealogic reported it has invested $64 billion in 71 companies … [and] since then … has participated in at least $5 billion worth of deals.” It also “set money aside to pay a 7 percent annual return to some investors.”