The SoftBank Vision Fund appears to be delivering returns that justify the notion that such a massive fund can function as a venture capital investor and still return money in a field typically associated with much smaller players. The US$100 billion fund’s operating profit rose 66% to $3.74 billion for the quarter ended June, beating consensus estimates handsomely.
SoftBank has already said that it has secured $108 billion in pledges for a planned Vision Fund 2, with backers including Microsoft and Apple. According to news reports and statements by Masayoshi Son, founder and chief executive of the SoftBank Group, the second fund could start investing in September, with SoftBank itself contributing some $38 billion from Vision Fund I proceeds and other assets.
The statements say that the Vision Fund has invested some $66.3 billion so far into 81 technology companies, which has now grown to $82.2 billion. Perhaps it’s simply a demonstration of the benefits of spread betting, but whatever the secret, going by the numbers, it works.
If those figures hold water, then it is easy to see how SoftBank could expect to raise and commit the kind of amounts it’s talking about for the follow-on fund.
Bets are definitely that it’s going to happen. According to a recent report in The Wall Street Journal headlined “Why SoftBank Needs a Second Vision Fund”, it’s the valuation boost that the Vision Fund has achieved for many technology unicorns that has enabled its profits, and that another fund is going to be a necessary sequel to keep those valuations pumped.
If the Vision Fund’s real value creation plan is simply to keep on pumping its huge volume of money into targets until their value is driven up enough to allow profits to be booked, then there’s no reason why it shouldn’t keep on working. But is that classic venture capital-style value creation? As financial engineering, it seems pretty workable, but the venture capitals associated with the great technology companies used to be linked to a different kind of engineering, one related to the true creation of giants instead of bubbles.
And let’s not leave without touching on the participation of Saudi Arabian money in the current and the mooted fund. As I’ve argued before, that money can be seen as the personal wealth of a regime that kills journalists. Mr. Son’s answers on this topic can be politely described as diplomatic.
Oh, and also, according to the Nikkei Asian Review, SoftBank Group was able to avoid paying any tax in Japan last year by transferring its assets in UK chip maker Arm Holdings to the Vision Fund. Who wouldn’t want to keep such a useful thing around?