Is SoftBank Overpaying for Tech-Firm Commitments?
It may be an exaggeration to say that the party is over for big-ticket venture capital investment in growth-stage technology firms. However, the biggest of the big, SoftBank Group’s Vision Fund, is now under scrutiny by major investors who wonder whether the fund has paid too much for its capital commitments.
Specifically, Saudi Arabia’s Public Investment Fund (PIF) and Abu Dhabi’s Mubadala Investment Co. have complained about the prices SoftBank has paid. PIF has also expressed concerns about SoftBank’s practice of investing in companies first, and later transferring the stakes to the Vision Fund, often at a higher price, the Wall Street Journal reported.
Between them, PIF and Mubadala have contributed almost two-thirds of the Vision Fund’s pledged capital, according to the WSJ. If they’re not happy with the fund, it could become more difficult for SoftBank chief executive Masyoshi Son (pictured) to “raise fresh money or start a new fund,” the WSJ reported.
That SoftBank’s fundraising style could be cramped is a big deal when the group is accustomed to, well, big deals. Forbes noted that the plan for the Vision Fund is to raise a new fund every couple of years, and invest $50 billion a year.
“To put this in perspective, consider that in 2018, venture funds globally raised $79 billion and invested $275 billion globally, according to statistics from alternative assets provider Preqin in London,” reported Forbes.
Thinking big isn’t limited only to the sums that SoftBank invests. Forbes reported that in contrast to the industry specialization and deep tech dives that are emerging as trends in VC investing, the Vision Fund “looks more broadly across big market opportunities, and well-known and higher-profile companies.”
That approach is reflected in two of the Vision Fund’s highest-profile investments: WeWork and Uber, which now carry “valuations in the unicorn-plus stratosphere,” Forbes reported. “Uber is the second-most valuable startup at $72 billion, while WeWork is ranked fourth at $47 billion on the CBI Insights unicorn tracker.”
More recently, though, the fund appears to have trimmed its sails, at least when it comes to WeWork—recently rebranded as the We Company. Last month, the Vision Fund committed an additional $2 billion to the company, a significantly smaller investment than the $16 billion it was considering as of late 2018.
For comments, questions or concerns, please contact Paul Bubny
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