SoftBank Group Corp. is one of the world’s leading and most diversified technology companies, with a portfolio of innovative and disruptive investments and businesses worldwide that span various sectors including internet and mobile, media, hardware, logistics, financial services, energy technology and more. Through its corporate venture capital arm SoftBank Vision Fund (SVF), SoftBank has invested in some of the world’s most innovative startups including Uber, WeWork, ARM Holdings Plc and NVIDIA Corporation. As of May 2020, SoftBank Vision Fund is valued at over USD 100 billion.
In recent years SoftBank has been increasingly identified for its expansive portfolio of worldwide investments in many disruptive technologies across industries such as fintech/banking remittances/payments; ecommerce / retail; transportation; food delivery services; quantum computing; robotics; autonomous vehicles/mobility solutions; artificial intelligence/machine learning (AI/ML); virtual reality (VR) interactive gaming ; blockchain etc.,
As a result, it’s no surprise that the performance of individual portfolios within this vast enterprise is of great interest to all stakeholders. Accordingly, this article provides an overview of how SoftBank’s various portfolios are doing in terms of overall financial performance.
SoftBank’s Vision Fund 1
SoftBank, a leading Japanese company, has made headlines recently regarding its future fund Vision Fund 2. First, however, it’s important to take a step back and consider how its current fund Vision Fund 1 is performing.
With a portfolio of over $100 Billion, Vision Fund 1 has made some huge profits which will undoubtedly have positively affected SoftBank’s finances.
In this article, we will take a closer look at SoftBank’s Vision Fund 1, and the profits it has generated.
Overview of investments
SoftBank’s Vision Fund 1 is a 100 billion dollar fund with investments worldwide. It has stakes in various tech companies, ranging from ride-hailing giants Uber and Didi Chuxing to chipmaker Nvidia and virtual reality specialist Magic Leap.
Here is a brief overview of some of the most notable investments made by SoftBank’s Vision Fund 1:
- Uber: Softbank holds 17.5 percent stake in Uber, making them the 2nd largest shareholder after private equity firm Benchmark Capital. They invested 7.7 billion dollars into the ridesharing company in 2018, valuing Uber at about 70 billion dollars then.
- Didi Chuxing: SoftBank’s Vision Fund 1 holds a 15 percent share in Didi Chuxing, one of China’s biggest ride-hailing firms. The fund invested 5 billion dollars into Didi in 2017 in exchange for an initial 20 percent stake. However, this was later reduced to 15 percent due to follow-on investments by other investors like Hillhouse Capital and Sequoia China.
- WeWork: Softbank owned 29 percent of WeWork as part of their 11 billion dollar investment in 2017, when WeWork was valued at 47 billion dollars. After the company’s failed IPO attempt last year, they were forced to take a massive write down on their investment due to WeWork’s drastic valuation drop.
- Nvidia: Back in 2017, SoftBank paid 4 billion dollars for an 6 percent stake in chipmaker Nvidia. This stake gave Softbank access to industry-leading technological assets and exposure to NVIDIA’s rapidly growing gaming business and rapidly expanding data center presence through its products like DGX AI servers.
- Magic Leap: The Vision Fund also holds an estimated 10+ million dollar stake in virtual reality hardware startup Magic Leap thanks to its 3 million dollar investment back in 2016. Despite its high profile, this bet seems to haven’t paid off for SoftBank yet, as Magic Leap continues to struggle financially with slow sales growth.
Performance of investments
SoftBank raised $100 billion for Vision Fund 1 (VF1) throughout 2017 and 2018. The fund has invested in some of the world’s most valuable, cutting-edge startups — from Uber to ARM to WeWork — with a few missteps, such as investing in SoftBank’s publicly traded stock.
Performance has been quite good, with notable exits like Flipkart and Dogvacay and significant investments in future-changing tech companies such as WeWork and Uber. However, it has also taken losses on its investments in several companies including Uber, WeWork, Didi Chuxing, Ola and Coupang.
The overall performance of VF1 is hard to gauge due to company size and values fluctuating and other ambiguities like whether or not appreciation from current investments are taken into account when calculating returns for VF1. However, an estimated 70 percent of capital deployed by VF1 has already been fully or partially returned to SoftBank through cash distributions and sales proceeds from issuance of convertible debt investments.
SoftBank Goes It Alone on Vision Fund 2 As Portfolio Profits Leap
SoftBank recently announced the launch of Vision Fund 2, the latest installment of its impressive venture capital portfolio. The fund is expected to bring in more than $108 billion investor capital, making it one of the largest venture capital funds ever.
With its portfolio companies performing well, SoftBank is now looking to leverage its existing investments via Vision Fund 2 to further expand its reach. Let us look at how SoftBank’s portfolio is doing and what this could mean for its future.
Overview of investments
As part of SoftBank’s Vision Fund 2, the company has invested in hundreds of technology startups. The core focus of these investments has been artificial intelligence, self-driving cars, semiconductors, cloud computing, and e-commerce. The portfolio contains a mix of early stage, mid-stage and late-stage companies. It includes names such as China giant ByteDance, driverless car innovator Cruise Automation Inc., chipmaker Arm Holdings, electric car company NIO Inc., food delivery firm DoorDash Inc., and robot manufacturer Boston Dynamics.
SoftBank’s portfolio companies have seen successes and losses in recent months. In December 2020 it was announced that SoftBank was selling its stake in Chinese billionaire Richard Liu’s JD.com, while DoorDash is among several unicorns whose share price have shot up following the IPO process. Meanwhile arm holdings saw substantial losses due to a profit warning from its Japanese parent Softbank group Corp Other names from the fund that are struggling include online campaigns service Udemy Inc., whose stock plummeted after missing revenue targets for three successive quarters.
The future performance of Vision Fund 2 remains to be seen. Still, it remains an intriguing portfolio conglomerate of tech industry innovators with potential for significant growth in the coming years.
Performance of investments
SoftBank’s Vision Fund 2, a massive technology investment fund, was launched in July 2019 with a mandate to finance and mentor tech startups worldwide. The $100 billion fund has invested in dozens of companies including Apple, Nvidia and WeWork. Now that years have passed since the launch, how is SoftBank’s portfolio doing?
Softbank’s bet on tech companies is paying off as some of its most prominent investments show strong performance. Apple has seen a surge in its stock price since SoftBank’s investment in 2017 and is one of the major contributors to the Vision Fund’s success so far. Nvidia, another major player in the tech space, has also seen its share price rise significantly after SoftBank invested $4 billion in 2018.
Aside from the more established names, Vision Fund 2 has supported several early-stage startup companies such as Peloton and Guardant Health. Many of these are showing encouraging performance, with Peloton crossing $1 trillion market cap after its successful IPO late last year.
Overall, it appears that Softbank’s investments are doing well. Although risks will always be associated with any venture capital fund, it seems that Vision Fund 2 is off to a good start with robust returns from prominent names such as Apple and Nvidia and encouraging signs from newer companies like Peloton.
Comparison of Vision Fund 1 and Vision Fund 2
SoftBank is forging ahead with Vision Fund 2, despite the dramatic losses of its first Vision Fund. Therefore, it is important to compare the two investments to determine what, if any, lessons from the past can be applied to the current Fund.
Let’s examine how Vision Fund 1 and Vision Fund 2 compare.
SoftBank’s investment strategy for its first Vision Fund, Vision Fund 1, was characterized by large venture capital investments in a relatively small number of mainly tech-related companies. These investments, while sometimes risky, were expected to drive innovation and create value in the long run.
For its second Vision Fund, Vision Fund 2, SoftBank seeks to broaden its portfolio with more and larger investments. The fund has invested in a greater variety of businesses beyond just tech and has pursued more globally diversified deals that spread risk among different countries worldwide. In addition, SoftBank has announced plans to move away from direct investments and toward investing in venture capital firms instead.
SoftBank’s broader strategy with Vision Fund 2 is designed to boost investment returns over the long term. While some investments may see slower or smaller returns than predicted initially due to market conditions and other factors, SoftBank hopes its experience with start-ups will help it identify profitable and valuable investments going forward.
SoftBank’s Vision Funds were two separate pieces of its corporate portfolio, each aiming to target technology companies to gain profit from investments. As of 2021, Vision Fund 1 has outlasted Vision Fund 2 and is performing well.
Vision Fund 1 was based on the company’s $100 billion commitment in 2016 and has earned an estimated total return of over $73 billion so far. The fund’s major exits include Uber, WeWork, Jio Platforms and Ideanomics which were sold at substantial profits.
The second fund was formed in July 2019 with a commitment of $108 billion of which around $30 billion came from SoftBank. It has realized gains of approximately 25%, slightly below the 30% gains delivered by the original fund but still quite respectable by any standards. Major exits included Point72 Ventures, Doctors Without Borders, Lucid Motors and Open Robotics.
All told, SoftBank’s combined investment portfolios have seen significant returns that have helped to propel the company’s financial growth over the long-term. Moreover, portfolios like these can allow investors to gain exposure to established technologies without taking on too much risk or capital allocation in one area at any given time while diversifying their portfolio beyond standard stocks or bonds.
There is no doubt that SoftBank’s portfolio—dependent on the global economy, technology, the success of its unicorns and its nimbleness—is an ever-evolving entity. While SoftBank’s Vision Fund does not have a lengthy track record or deep data to provide insights into its performance, it has thus far proven to be a successful venture capital vehicle. It has invested quickly in approximately 78 companies since its founding in 2017 and produced more than 50 exits, with several promising investments yet to come.
SoftBank is undoubtedly aware that it must manage risk while continuing to make calculated and effective investments. Its past success stories will indicate the Vision Fund’s immediate future strategy and the goal of positioning SoftBank as one of today’s most exciting players in venture capital.