Less than two years ago, Japanese telecom conglomerate, SoftBank Group, became the king of Silicon Valley almost overnight after its $100 billion venture capital arm, the “Vision Fund,” scooped up large stakes in a slew of American tech unicorns like Uber, WeWork and Slack.
Since then, the Vision Fund has been a growth engine for SoftBank, generating an annual return of 29 percent through March of this year. Now, as several of its prize investments have made their way to the public market—or in VC parlance, an ideal “exit”—SoftBank founder and CEO Masayoshi Son is looking to raise a second mega-fund to keep the venture capital spree going.
Turns out, it’s already a different world out there.
To start with, Saudi Arabia’s Public Investment Fund (PIF), which contributed $45 billion to the first Vision Fund, has shown little interest in committing to the second one, The Wall Street Journal reported on Sunday, citing people familiar with the fundraising effort.
Several other major institutional investors, including Canada Pension Plan Investment Board (managing $392 billion in assets), were also reluctant to put money toward SoftBank’s pool.
Sources said that with many of the world’s largest money managers setting up their own venture capital arms since the first Vision Fund, they no longer need to pay SoftBank hefty fees to make startup investments. And to those who still value SoftBank’s ability to find deals, many were concerned with the firm’s lack of transparency and governance.
CEO Son first floated the possibility of raising capital for the “Vision Fund II” in March last year. “Vision Fund II will definitely come… I think our existing partners are extremely happy about how we are progressing,” he told a conference in Tokyo.
But the prospect grew uncertain seven months later as Son’s biggest partner, the Saudi royal family, became the center of international criticism over the alleged murder of Washington Post journalist Jamal Khashoggi.
The Journal‘s sources said Son wanted a more diverse investor pool for the “Vision Fund II” anyway, so no single investor would have too much of a say in specific deals. (Saudi’s PIF and Abu Dhabi’s Mubadala Investment Co., which invested $15 billion in the Vision Fund, reportedly played a role in breaking up a planned $6 billion investment in WeWork last year.)
SoftBank has hired New York-based investment bank Cantor Fitzgerald L.P. to help with the fundraising effort. The bank’s president, Anshu Jain, is friend with Rajeev Misra, who heads the Vision Fund. Cantor is looking to tap Jain’s network for potential investors and had planned to seek contributions as small as $50 million, but the plan was ultimately rejected by SoftBank, the Journal reported.