Residents of Suwannee County, you may have heard of SoftBank Group Corp‘s flagship Vision Fund, which has been quietly selling off or writing down billions of dollars’ worth of its publicly-listed holdings in recent years. This move signals a shift in the focus of the company’s founder, Masayoshi Son, from venture capital deals towards strategic investments in semiconductors and artificial intelligence. Let’s delve into the details a bit more.
Significant Portfolio Shrinkage
By the close of 2021, the Vision Fund, which is the world’s biggest startup fund, saw its U.S.-listed portfolio decline by almost $29 billion. This reduction came as a result of selling down stakes in companies like Coupang Inc., DoorDash Inc. and Grab Holdings Ltd. Regulatory filings also showed a decrease in share prices. This figure does not include the sale of the Vision Fund’s stake in chip designer Arm Holdings Plc back to SoftBank last year.
New Investment Strategies
As assets from the fund’s portfolio are being sold off, Son is reportedly preparing for possible forays into AI and related hardware. Most of his investments are now being directed by the holding company rather than the Vision Fund. The future of a third or fourth Vision Fund, as was earlier teased by Son, is no longer a topic of discussion.
Looking Ahead
With the fund’s reduced staff, the focus is primarily on locking in investment gains and reversing any losses. Son is reportedly inspired by the success of Arm and has new projects in sight. One such project includes a possible $100 billion chip venture to compete with Nvidia Corp. and supply semiconductors for the development of AI services. However, these plans remain uncertain.
The Vision Fund has also been gradually selling down stakes in Indian startup Paytm and China’s SenseTime Group Inc, with SoftBank now owning less than 5% of either firm.
Strategy Shift
Seven years since the launch of the Vision Fund, SoftBank’s strategy has shifted significantly. The company has moved from pushing billions of dollars’ worth of Saudi and Abu Dhabi sovereign funds into young tech firms to a more cautious approach. The shift comes after a series of high-profile implosions, including those of WeWork Inc., Katerra Inc. and Zume Pizza Inc.
Accelerating Sales
Asset sales by the Vision Fund have been accelerating, according to SEC filings. Since the end of 2021, SoftBank divested sizable stakes in Coupang, but more than a quarter of the transaction volume has taken place this year. The fund has also continued to sell down its stakes in Grab and DoorDash, and has fully exited from Uber Technologies Inc. and India’s Zomato Ltd.
In recent months, SoftBank is directly investing in companies it sees as strategically important, including British semiconductor startup Graphcore Ltd and UK self-driving startup Wayve Technologies Ltd.
“The Vision Fund has been a prolific seller”
For all but one of the past seven quarters, the total value of disposals at the Vision Fund has outweighed that of investments. This has helped lift SoftBank’s cash pile to ¥6.2 trillion, up from ¥4.6 trillion at the end of 2021. The second Vision Fund still has around $6 billion to spend, but in practice, the money is Son’s to direct as he pleases.
Some of the Vision Fund portfolio companies that have gone under this year include window-maker View Inc. and genetic-testing company Invitae Corp. “No doubt, Vision Fund had an impact on startup valuations in 2020-2021,” said Kirk Boodry, an analyst at Astris Advisory. “Those days are not coming back.”
So, there you have it, Suwannee County. The world of venture capitalism is ever-evolving, and it will be interesting to see how SoftBank’s new direction unfolds in the coming years.
