SoftBank’s No Good, Terrible, Bad 2020
#cancel2020pls
Hasn’t this year been, well... kind of a bummer?
During Christmas of last year, I wished and wrote to Santa Claus; that since I was really good last year, I expected him to deliver to me a nice beach house in La Jolla and the keys to my very own Lamborghini Aventador to flex on the average plebeians. I was so damn sure this was the year that I was going to receive those presents.
Safe to say, those presents never came. But Santa probably conspired with God himself and said, since Kavin was a bad person last year and asking for things out of his reach, let’s give him something he’ll remember.
Santa Claus delivered alright, something memorable and worse than coal on your stockings. Thank you, COVID-19...
(As of writing this today: Santa if you’re listening, I’m still asking for you to give me the beach house and a Lambo. I’ve been a good, good person these past 6 months 😭.)
So, who had a worse year than me? SoftBank
Especially, their Vision Fund.
Who?
SoftBank is a telecommunications conglomerate headquartered in Tokyo, Japan. Its current CEO is the founder Masayoshi Son, who has been leading the company since its inception. As a company, they pay special attention and hold investments in technological domains such as internet, semiconductors, internet of things (IoT), artificial intelligence, robotics, and e-commerce, to name a few. It would seem normal for a conglomerate this size to try its hands at different things.
But what if I told you, they wanted to aim higher than the status quo? Perhaps use the term Silicon Valley CEOs and tech bros like to often use: revolutionize the world and the very way we live. Now, do they have your undivided attention?
Money, Money, Money...
Softbank decided on May 2017, to create Softbank Vision Fund. Since its inception, it is still the world’s largest private equity fund by far, valued at around 100 billion dollars. To make this fund work, Softbank partnered with Saudi Arabia’s Public Investment Fund, which in turn invested $45 billion into the initial fund.
The Vision Fund ideally was supposed to find, fund, and support startups and founders that, according to their website, are ambitious with a clear vision and a deep understanding of their customers. Seems simple enough, right?
Mo’ Money, Mo’ Problems
Armed with this new financial clout, Softbank Vision Fund decided to aggressively invest in companies that they felt were going to revolutionize the world, especially when it came to startups working on artificial intelligence, robotics, and internet of things.
WeWork, Uber, Wag, Zume, and OpenDoor were just some of the heavy highlight investments that Vision Fund made. And boy, did they spend the money hard and fast.
For CEO Son, who had hit the previous jackpot by investing $20 million in Alibaba when it was struggling, to profit around a cool $60 billion when the Chinese conglomerate went public in 2014, the initial days of the investments and slight profitability made him look like a genius.
It looked like nothing could go wrong, at least that’s what we all thought early on.
What The Hell, Then Happened?
Remember WeWork, the co-working startup? Maybe you’ve heard of them messing things up badly recently...
(Again, what did WeWork even do, other than renting space to people wanting to co-work?)
While Softbank is making money, there were some questionable (I may now add, quite foolish) investments from the fund. One prime example was WeWork, in which SoftBank poured in a cool $4.4 billion. Charmed by the aloof Adam Neumann, he essentially pulled the wool over Son’s eyes and effectively tricked him into investing a sh*tload of money.
While I definitely can rant about WeWork (I’ll save that for another time), they had plenty of supporters, but that also came with plenty of naysayers. Financial analysts and people quickly became confused as to what the heck their business model even was (co-working or elevating people’s consciousness?). But WeWork hummed on, even ballooning in valuation to $47 billion at one point.
But, that all came crashing down when they tried to go public, unleashing a trove of financial documents that made WeWork, and especially CEO Adam Neumann look like incompetent frauds.
WeWork aside, there were signs of things not going well inside the fund. Examples include a dog-walking startup named Wag was sold for a loss, the robotics pizza-making startup Zume unfortunately going under, Uber still losing money even when going public, and numerous stories of how the Vision Fund investments not exactly panning out were reported by news outlets.
And to rub salt in the wound, internal documents released by SoftBank this year made it all come to a harsh reality: the fund since its inception in May 2017, lost nearly $100 million, per day.
😐😑.
The Inglorious Year Of The Rat (Rat Zodiac = 2020)
SoftBank’s documents also show that they recorded an operating loss of $13 billion this past April. Unprofitable investments became a black mark against the Japanese conglomerate.
Even with these losses mounting up, there was talk of a second Vision Fund, with Saudi Arabia investing even more money.
Then, COVID-19 hit. It is now unlikely that the second round of funds will be raised.
What’s Next?
As much as some of their investments have been poorly performing or even, dare I say it, outright foolish, SoftBank Vision Fund isn’t going away anytime soon, especially with a boatload of money still tied up with other startups in their portfolio. There may also be potential for SoftBank to recoup their losses, in the near future.
What I’m trying to say is this: yes, money is nice, great even. You need loads if you’re trying to start a startup.
But money oftentimes can’t buy success, even though we’d like to believe this statement to be true. It is not as simple as buying a European soccer team and pumping loads of money so that the team can attract the best talents and staff, and be successful.
If only business was that easy...