Ask investors from Silicon Valley to Wall Street what’s had the biggest recent impact on tech start-up exits and most will answer: Masayoshi Son’s almost $100 billion Vision Fund.
Now Mr Son, the the founder and chief executive officer of SoftBank Group, has a version 2.0 in the works, according to people familiar with the matter. It’s likely to be similar in size to the first - already the world’s biggest tech fund - and it could be coming as soon as next year, the people said, asking not to be identified.
Another mega fund rooting for deals among private tech companies would give founders cash to grow their businesses, and early investors a potential opportunity to sell and get liquidity. But it also could help further inflate already-pumped private valuations, crowding out other investors and delaying the inevitable sale or initial public offering - and the scrutiny of public markets.
“There’s already too much money chasing too few private companies,” said Kathleen Smith, principal at Renaissance Capital, which manages IPO-focused exchange-traded funds. “When there’s too much money, the returns get eroded. That’s what we have here.”
Japanese entrepreneur Mr Son has held preliminary discussions with investors about committing to a second fund, which would likely draw a wider pool of investors than the first one, the people said. For the first Vision Fund, most contributions came from sovereign wealth funds in Saudi Arabia and the UAE. No final decisions have been made and the billionaire businessman may also change his plans, they said.
A representative for SoftBank declined to comment.
Although the fund held its first close only a year ago, about $45bn has already been deployed on investments, the people said. While come of the cash has gone on stakes in publicly traded companies, like chipmaker Nvidia, much has been used to buy into private companies. The Vision Fund was the biggest investor in a $9.3bn sale of Uber stock; $4.4bn went toward WeWork.
“I’m not sure where he can find more good investment opportunities,” said Dan Baker, an analyst at Morningstar Investment Management Asia in Hong Kong. “That seems like a lot of additional capital.”
Mr Son hasn't shied away from sharply driving up the valuations of private companies the Vision Fund invests in, even when there's not a material change in the business itself. At a Wall Street Journal event in Tokyo this month, the 60-year-old billionaire talked at length about how he makes investments. Mr Son invoked the mindset of Yoda, the Jedi master from the Star Wars films.
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“Yoda says use the force. Don’t think, just feel it,” he said. “My first insight in the first few minutes is sometimes more meaningful than detailed calculation.”
“You do it so many times, you don’t even need to think,” Mr Son said. “You can just feel it.”
His instincts have led him to stakes in private companies that dwarf all but the biggest IPOs and send companies’ valuations soaring overnight. In the past decade, US IPOs have had an average size of $250 million, according to data compiled by Bloomberg; that’s the typical minimum investment size for the Vision Fund’s private stakes.
In 2015, London-based virtual reality start-up Improbable Worlds was valued at about $100m. After SoftBank led a $502m investment in the company last year, it was suddenly worth 10 times that.
SoftBank spent $300m in March 2017 on an initial stake in WeWork at a valuation of about $17bn. Just five months later, the firm paid another $4.4bn for private WeWork shares in a deal that bumped its valuation to $20bn, a person familiar with the matter said at the time.
The largest US pension fund will also be on the hunt for private technology investments. The $349bn California Public Employees’ Retirement System plans to pour as much as $13bn a year into non-public companies, including late-stage and early growth startups, chief iInvestment officer Ted Eliopoulos said this month.
A looming question remains: how is Mr Son going to realise returns on his investments? While the IPO market has come back strong this year, concerns about not living up to lofty private valuations have still slowed the pipeline.
SoftBank hasn’t shown the “fine pencil on valuation that public investors will have”, Ms Smith said. That could make it difficult to exit some stakes if other investors aren’t willing to match their stunning valuations, she said.
While the Vision Fund - and its potential successor - has the dry powder and leverage to get into the most valuable companies, they will need deep-pocketed buyers to get out.
Bloomberg
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MATCH INFO
Uefa Champions League last 16, second leg
Liverpool (0) v Atletico Madrid (1)
Venue: Anfield
Kick-off: Thursday, March 12, midnight
Live: On beIN Sports HD
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hall of shame
SUNDERLAND 2002-03
No one has ended a Premier League season quite like Sunderland. They lost each of their final 15 games, taking no points after January. They ended up with 19 in total, sacking managers Peter Reid and Howard Wilkinson and losing 3-1 to Charlton when they scored three own goals in eight minutes.
SUNDERLAND 2005-06
Until Derby came along, Sunderland’s total of 15 points was the Premier League’s record low. They made it until May and their final home game before winning at the Stadium of Light while they lost a joint record 29 of their 38 league games.
HUDDERSFIELD 2018-19
Joined Derby as the only team to be relegated in March. No striker scored until January, while only two players got more assists than goalkeeper Jonas Lossl. The mid-season appointment Jan Siewert was to end his time as Huddersfield manager with a 5.3 per cent win rate.
ASTON VILLA 2015-16
Perhaps the most inexplicably bad season, considering they signed Idrissa Gueye and Adama Traore and still only got 17 points. Villa won their first league game, but none of the next 19. They ended an abominable campaign by taking one point from the last 39 available.
FULHAM 2018-19
Terrible in different ways. Fulham’s total of 26 points is not among the lowest ever but they contrived to get relegated after spending over £100 million (Dh457m) in the transfer market. Much of it went on defenders but they only kept two clean sheets in their first 33 games.
LA LIGA: Sporting Gijon, 13 points in 1997-98.
BUNDESLIGA: Tasmania Berlin, 10 points in 1965-66
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Tom Fletcher on 'soft power'
Company%20Profile
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What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
THE CLOWN OF GAZA
Director: Abdulrahman Sabbah
Starring: Alaa Meqdad
Rating: 4/5
Ballon d’Or shortlists
Men
Sadio Mane (Senegal/Liverpool), Sergio Aguero (Aregentina/Manchester City), Frenkie de Jong (Netherlans/Barcelona), Hugo Lloris (France/Tottenham), Dusan Tadic (Serbia/Ajax), Kylian Mbappe (France/PSG), Trent Alexander-Arnold (England/Liverpool), Donny van de Beek (Netherlands/Ajax), Pierre-Emerick Aubameyang (Gabon/Arsenal), Marc-Andre ter Stegen (Germany/Barcelona), Cristiano Ronaldo (Portugal/Juventus), Alisson (Brazil/Liverpool), Matthijs de Ligt (Netherlands/Juventus), Karim Benzema (France/Real Madrid), Georginio Wijnaldum (Netherlands/Liverpool), Virgil van Dijk (Netherlands/Liverpool), Bernardo Silva (Portugal/Manchester City), Son Heung-min (South Korea/Tottenham), Robert Lewandowski (Poland/Bayern Munich), Roberto Firmino (Brazil/Liverpool), Lionel Messi (Argentina/Barcelona), Riyad Mahrez (Algeria/Manchester City), Kevin De Bruyne (Belgium/Manchester City), Kalidou Koulibaly (Senegal/Napoli), Antoine Griezmann (France/Barcelona), Mohamed Salah (Egypt/Liverpool), Eden Hazard (BEL/Real Madrid), Marquinhos (Brazil/Paris-SG), Raheem Sterling (Eengland/Manchester City), Joao Félix(Portugal/Atletico Madrid)
Women
Sam Kerr (Austria/Chelsea), Ellen White (England/Manchester City), Nilla Fischer (Sweden/Linkopings), Amandine Henry (France/Lyon), Lucy Bronze(England/Lyon), Alex Morgan (USA/Orlando Pride), Vivianne Miedema (Netherlands/Arsenal), Dzsenifer Marozsan (Germany/Lyon), Pernille Harder (Denmark/Wolfsburg), Sarah Bouhaddi (France/Lyon), Megan Rapinoe (USA/Reign FC), Lieke Martens (Netherlands/Barcelona), Sari van Veenendal (Netherlands/Atletico Madrid), Wendie Renard (France/Lyon), Rose Lavelle(USA/Washington Spirit), Marta (Brazil/Orlando Pride), Ada Hegerberg (Norway/Lyon), Kosovare Asllani (Sweden/CD Tacon), Sofia Jakobsson (Sweden/CD Tacon), Tobin Heath (USA/Portland Thorns)
Killing of Qassem Suleimani
