Aug 11, 2022
Titan’s Takeaway: After years of success taking bets on big tech, Softbank's Vision Fund suffered its largest losses to date, as high-growth businesses get hammered amidst rising rates and plummeting valuations. As businesses and consumers adjust to a changing market, we expect to see more investors entering "defense mode."
Last week, the Japanese giant SoftBank’s “Vision Funds” revealed a whopping record loss of 2.93 trillion yen, or 23 billion for the quarter.
The Vision Funds, founded in 2017, is the world’s largest technology focused venture capital fund and has backed over 470 startups globally. Notable investments from the fund include: Uber, Slack, DoorDash, and ByteDance – the maker of TikTok. In 2021, the Vision Funds made a record $36.99 billion in profit due to its successful investment in American-South Korean e-commerce company Coupang which is since down 33% year to date. The Fund’s future has been staked on big bets on tech… until now. Or as founder Masayashi Son said, they've been making “big swings but couldn’t hit the ball.”
To combat these losses, the Vision Fund sold its entire stake in several companies – most notably Uber – in order to raise capital. Wednesday morning the sell off continued – SoftBank announced plans to trim its stake in Alibaba, also down 70% year to date, from 23.7% to 14.65%.
As rising interest rates and recession fears rise, these rapid-growth technology giants – once seemingly untouchable money making mavericks – are taking a beating. It’s not just large consumer centric tech companies that are struggling to keep up – the Fund’s early stage investments are losing billions in value as well amidst an ongoing venture capital slowdown.
All of these headwinds will directly impact the profits – or lack thereof – of a firm like Vision Fund. Reflecting on this quarter’s loss, Son said that they will be choosing smaller and more strategic investments going forward, rather than big gambles.
As businesses and consumers adjust to a changing market, we expect to see more investors dial back their risk and adjust strategy accordingly.
Cash Management
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