SoftBank’s second Vision Fund speeds up pace of investment

SoftBank’s second Vision Fund poured about $13bn into more than 50 companies during the second quarter, according to two people briefed on the numbers, marking a sharp increase in the pace of its investments.

During the first three months of the year, the fund invested less than $2bn in fewer than two dozen companies, according to public disclosures. Many of its latest investments had not yet been publicly announced, one of the people said.

SoftBank’s increase in spending comes as other deep-pocketed investors such as Tiger Global Management have pumped money into highly valued start-ups, contributing to the most active first half for private tech funding on record.

The first $100bn Vision Fund became known for taking multibillion-dollar stakes in companies such as Chinese ride-hailing app Didi Chuxing and the flexible working group WeWork, subsidising heavy losses as they battled competitors in large markets. 

Its returns have been boosted recently after a number of companies it had invested in came to the public market, including South Korean ecommerce group Coupang and US meal delivery company DoorDash.

With the second Vision Fund, the Japanese group has altered its approach — instead placing more modest bets on healthcare and software businesses rather than multibillion-dollar investments in urban mobility and heavy industries, such as construction.

The first Vision Fund needed to invest at least $100m per deal as part of an agreement with its investors, said one person briefed on the matter, limiting its ability to make investments in relatively young companies.

SoftBank, led by chief executive Masayoshi Son, has committed $30bn of its own capital to the new fund after failing to raise capital from outside backers, such as Abu Dhabi and Saudi Arabia government funds.

Deep Nishar, senior managing partner at the Vision Fund in the US, said the second Vision Fund had begun “partnering at earlier stages in a company’s lifespan” in an attempt to find attractive investments. 

“In the current market environment, the valuations are more attractive in the earlier stages of a company’s life cycle compared to the very late stage,” Nishar said.

Video communications start-up Mmhmm said on Wednesday it had raised $100m in so-called Series B funding led by the second Vision Fund. The fund also led a $140m second round of funding for the artificial intelligence company Vianai Systems in June.

In other start-ups, such as the celebrity video message app Cameo, the second Vision Fund has taken a back seat to rival venture capitalists, investing tens of millions of dollars rather than hundreds of millions at a time.

SoftBank does not expect to raise any money from outside investors for the second Vision Fund, though it could commit more of its own capital, said one person familiar with the matter. The company originally said it would raise as much as $108bn for the fund.

Vision Fund executives have sought to play down WeWork and other high-profile setbacks from the first fund, touting a renewed focus on start-ups making use of artificial intelligence.

The new fund had invested about $20bn in more than 90 start-ups and had plans for investments in at least 30 additional companies, said two people briefed on the numbers. By comparison, the first Vision Fund has invested $85.7bn in under 100 companies.

“There is a reduction in the number of companies being formed that require a lot of capital to succeed to begin with,” Nishar said.

SoftBank has not always had success investing in smaller companies. The consumer goods start-up Brandless and dog walking app Wag both ran into trouble after receiving large investments from the first Vision Fund.

The second Vision Fund has not shied away completely from big bets. In May, the fund led a $775m round of investment in Perch, one of several well-funded groups aiming to consolidate independent Amazon merchants.

Several partners and other high-ranking executives have recently exited the team that manages both the Vision Funds, including Ervin Tu, a partner who oversaw investments in ByteDance and the ride-hailing company Uber. Jeffrey Housenbold, who made many of the fund’s largest consumer investments in the US, left earlier this year.

SoftBank said it had added 30 people to the investment team in the past four months. In February, the fund hired Microsoft executive Nagraj Kashyap as a managing partner to lead investments in consumer companies.