The prospect of SoftBank's Vision Fund appears to be grim as the unit that invests in startups has sharply cut back on financing tech companies.
The startup investor was known for being prolific. Two years ago Vision Fund invested $15.6 billion in the June quarter, according to data from Bloomberg. But the slowdown has been massive, as only seven startups received $550 million in funding during the June quarter.
DON'T MISS: Big Japanese Investor Finds Itself Caught In Another Debacle
The investment fund is facing turmoil after five quarters of consecutive losses - for the fiscal year ending March 31, the firm reported a loss of $39 billion. Tech valuations have taken a nosedive and Softbank has focused on exiting some of its investments, including the sale of most of its shares in Chinese e-commerce company Alibaba in April.
Raising cash has been critical as the Japanese firm that is led by Masayoshi Son, its founder, chose the "defense mode," the billionaire investor said last quarter
SoftBank's CFO Yoshimitsu Goto recently said the firm also needs to include defense in their strategy.
After not commenting in public for seven months, Son said the company's previous losses will not stop them from making additional tech investments, including artificial intelligence.
“A huge revolution is coming,” he said during SoftBank’s annual shareholder meeting. “SoftBank Group won’t be deterred by a few short-term losses. We will rule the world in the end.”
The conglomerate is currently working on taking chip designer Arm public soon, which has boosted the stock valuation of SoftBank by 23.54% during the past month.
Son said he has focused on speaking with Sam Altman, CEO of OpenAI about how Z Holdings, the company's search engine, can work together, such as incorporating ChatGPT for users that speak Japanese.
“We will not rest. We will be ever more fierce,” Son said. “With Arm at the core, we will continue to pursue arenas including in quantum.”
Arm, whose investors also include Intel, plans to raise $10 billion in its IPO, according to Bloomberg News.
“I’ve made many, many mistakes in my AI investments, some of them embarrassing,” Son said, “But among the many failures, there are a number of buds that will blossom very soon.”
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SoftBank Vision Fund's Previous Investments
SoftBank struck out on several its recent investments since several of them have proved to be nearly worthless.
One of the largest Japanese investors, SoftBank made a bet on cryptocurrency by investing $100 million into bankrupt brokerage FTX. Investors such as Sequoia Capital said last November their investment was worth zero.
SoftBank said last Nobember that its investment into crypto exchange FTX has a minimal impact in its $100 billion Softbank Vision Fund.
FTX, based in the Bahamas, was valued at $32 billion only last year.
Goto had said the investment in FTX was a minor stake.
“If any case of markdown but still that is very not material for us,” he said during the company’s second quarter results.
Vision Fund's priority is to invest in artificial intelligence companies, not cryptocurrency, but it believed that blockchain technology as more of an investment opportunity, he said.
“Investing in currency is actually a bit different from our vision,” Goto said. “Through the business of cryptocurrency there may be something that comes to the technology revolution like blockchain that can be a positive for AI. So that can be some interpretations to make an investment.”
SoftBank had been dependent on its Vision Fund to generate more profit.
SoftBank's Massive Investment Losses
Recent missteps from SoftBank include massive losses in shares of companies such as WeWork, a co-sharing company, DoorDash (DASH), a food delivery company, and Compass, a real estate brokerage.
SoftBank had posted a $5.8 billion markdown on its holdings of over 300 startups, including companies in autonomous driving and biotech.
Dozens of private equity and venture capital firms along with wealthy individuals such as quarterback Tom Brady invested in FTX, which was founded in 2019 by Sam Bankman-Fried.
Sequoia and SoftBank were some of the larger investors in FTX, which filed for bankruptcy on Friday.
FTX raised $420 million in an October 2021 funding round that included Ontario Teachers' Pension Plan, Canada's third-largest pension fund. Other investors included Temasek, Sea Capital, IVP, ICONIQ Growth, Tiger Global, Ribbit Capital, Lightspeed Venture Partners, and funds and accounts managed by BlackRock.
Sequoia sent a letter to its limited partners on Nov. 9, stating that it now values its $210 million investment in FTX as $0 and that it was a total loss.
