Son’s comments come at a time when SoftBank has had its hardest months.
Editor’s note: This article comes from “ Tencent Technology “, review: Jiao Alas.
According to foreign media reports, Japan’s SoftBank Group CEO Sun Zhengyi recently conveyed the message to many companies invested by Vision Fund: Need to focus on creating cash flow.
Sun Zhengyi ’s radical changes have shown that the company now wants more than just revenue, not just more users, but more cash.
Sun Zhengyi made the above statement to a group of CFOs of companies invested by Vision Fund in a pre-recorded short video at a two-day SoftBank event in Half Moon Bay, California last week. Speech. Of the 88 companies invested by the Outlook Fund, more than 50 are attended by CFOs or others.
Sun Zhengyi’s comments come at a time when SoftBank has had its hardest months. The company is rescuing WeWork, a co-working space startup, and shares of companies like Uber and Slack Technologies, which are held by Vision Fund, have fallen sharply, hurting the reputation of SoftBank, Vision Fund, and Son Zhengyi.
“The world has changed now,” Sun said in a short pre-recorded video. “We must prepare a strong enough foundation for each of our companies so that investors can believe that the company will do well. It’s not just revenue, total merchandise value, and number of daily active users.”
He said companies should go public with “profitable, cash flow sufficient and sustainable.”
Sun Zhengyi explained later that the best way to measure a company’s value is a multiple of cash flow in a “steady state.” He said that data on listed companies show that corporate valuations with revenue growth of 30% are often about 25 times the free cash flow.
He added that for companies that set their cash flow targets at five years from this level, the number needs to be discounted in a compounded scenario in order to provide strong potential returns for investors such as SoftBank. He reiterated that the only important metric remains cash flow.
“There is no such thing as total product value, revenue, or multiples of the number of users”,” He said. “It’s hard to prove them right. After all, it is a multiple of free cash flow, and there is no other measure. Forget the hype … I learned a lot from recent examples (obviously referring to WeWork), I don’t need to repeat … What is the company’s valuation? It is the multiple of cash flow under steady state.