“We will work hard to survive.” Sun Zhengyi said.
Editor’s note: This article is from ” Tencent News periscope “, author: Ji Zhenyu.
Since its birth, Sun Zhengyi ’s Vision Fund has been controversial. Whether it is the fund’s organizational structure or specific investment operation behavior, it has largely subverted the traditional VC industry’s inherent cognition.
Just a year ago, Sun Zhengyi made a bold statement: In the future, every two to three years, he will complete a new fund raising of more than 100 billion US dollars.
The 62-year-old head of the Softbank Group has given this group of funds a resounding name-“vision fund” (vision fund), each of the planned size of 100 billion US dollars, bearing his future The great idea of life in science and technology.
However, when the Vision Fund disclosed a huge loss of $ 17 billion in investment performance a year later, Sun Zhengyi had to admit that there may be no Vision Fund in the future.
“If the result is poor, you can’t get money from investors.” Sun Zhengyi said bluntly at the performance meeting.
But this is not the first time Sun Zhengyi has encountered a crisis. During the burst of the Internet bubble, he lost 70 billion US dollars. Looking back on that experience, he described that only “two fingers” were on the edge of the cliff, and This time he encountered setbacks, which he thought were far less than the last time.
The Softbank Group under Sun Zhengyi still has a large amount of high-quality assets and basic business operations are still stable. It is foreseeable that even if the story of the Vision Fund has come to an end, Sun Zhengyi ’s investment legend is far from over. .
Vision Fund investment has a huge loss of 17 billion US dollars
Because SoftBank Group has incorporated the Vision Fund as one of its business segments, in SoftBank ’s annual financial report, it can more clearly and intuitively understand the operation of the Vision Fund in the past year.
According to the results of the 2020 financial report released by Softbank on the 18th, the Vision Fund suffered an investment loss of US $ 17 billion that year, the fair value of the Uber and WeWork shares it invested in has shrunk significantly, and other companies invested The fair value decline caused by the impact of the new crown epidemic in the first quarter is due to investmentThe main reason for the huge loss.
Softbank disclosed in its financial report that as of the end of fiscal year 2020 (March 31, 2020), its Vision Fund held a total of 88 investments, with a total investment cost of 75 billion US dollars, eliminating the projects that have been withdrawn, and currently holding Some investment assets have a fair value of US $ 69.6 billion. According to this calculation, Softbank ’s investment assets have shrunk by 7.2%. Nevertheless, since the establishment of the fund, realized investment income (including exited investments) has reached US $ 4.8 billion.
In terms of vertical comparison, SoftBank’s investment performance has also declined in the past year. In FY 2019, the investment income of SoftBank’s Vision Fund and other managed funds was 1.3 trillion yen, and the investment income of FY 2020 was -1.8 trillion yen, a decline of 238%. At the same time, as the fund’s operating expenses increased by 87.2% year-on-year, the fund’s operating performance declined even more, reaching -365%.
From the perspective of specific investment projects, the loss of investment in Uber and WeWork accounts for more than half of the total investment loss. Among them, the value of Uber ’s equity held by the Vision Fund has decreased by 5.17 billion US dollars. Some WeWork shares have fallen in value by $ 4.58 billion. The total valuation of other invested companies was reduced by 7.5 billion US dollars, accounting for less than half of investment losses.
As Sun Zhengyi said at the performance meeting, the new crown epidemic has a huge impact on the valuation of the projects it invests in. In the fourth quarter of fiscal 2020 (first quarter of 2020), its investment assets except Uber and WeWork Valuation fell by 8.98 billion US dollars.
Among the 88 projects that it has invested in, only 19 valuations have risen in the past year, and as many as 50 valuations have been lowered. 19 valuations have not changed.
From the perspective of the specific industry invested by the Vision Fund, Sun Zhengyi bets heavily on transportation, logistics and cutting-edge technology-related fields, with a total of 33 investments, with a total investment of up to 43.9 billion U.S. dollars Nearly 60%, but these sectors are also the main reasons for the huge losses of the Vision Fund.
According to the Vision Fund ’s previous investment terms, the investment period ended on November 20, 2022 or the invested amount reached 85% of the raised amount. The financial report shows that on September 12, 2019, the Vision Fund ’s investment period has ended. The reason is that the amount of investment it has completed has reached the upper limit of 85% of the total amount of funds raised, and the remaining 15% of the funds are reserved for follow-up investment of previously invested projects. This time is more than 3 years ahead of the previously planned time.
After the investment was completed early, the Vision Fund will have a duration of nearly 10 years, and the fund will not officially end until November 20, 2029.
The first vision fund may become a sing song
Since its birth, Sun Zhengyi ’s Vision Fund has been controversial. Whether it is the fund’s organizational structure or specific investment operation behavior, it has largely subverted the traditional VC industry’s inherent cognition.
The Vision Fund was established in 2017. According to the information disclosed in its financial report, of the 98.6 billion US dollars raised, Softbank Group itself invested 33.1 billion US dollars and third-party investors invested 65.5 billion US dollars. These investors include Saudi Arabian Public Investment Fund, Abu Dhabi Investment Authority, Apple, Qualcomm, Foxconn and Oracle Founder Family Fund, etc. Of the 45 billion US dollars invested by the Saudi Public Investment Fund, about 28 billion US dollars exist in the form of preferred shares, the remaining 170 USD 100 million exists in the form of equity. Of the total USD 15 billion invested by the Abu Dhabi Investment Fund, USD 9.3 billion exists in the form of preferred shares. SoftBank has committed to an annual coupon rate of 7% for this US $ 44 billion investment in preferred stock. This means that during the ten-year duration of the fund, Softbank is facing huge debt pressure.
In the financial report released on the same day, SoftBank also disclosed the amount of Vision Fund rebates to third-party investors, up to nearly 6 billion US dollars (611.3 billion yen).
In terms of specific investment operations, Softbank has also left a notorious reputation in the Silicon Valley investment circle in a brutal and unreasonable style. A person who has been engaged in venture capital business in Silicon Valley for many years told Tencent News “Perception” that many Silicon Valley venture capitalists hated SoftBank. It was like a “barbarian at the door” and broke many previous industry rules.
With the huge scale of the vision fund of hundreds of billions of dollars, Softbank often intervenes in many VC rounds, breaking the previous negotiation pattern between startups and VCs, and re-entering in accordance with the goals it leads Financing negotiations.
SoftBank has also affected the financing rhythm and scale of other venture capital in Silicon Valley to a certain extent. Sequoia, Benchmark and other established venture capitalists have announced the recruitment of new funds in recent years. The financing competition has become an unspoken rule in the industry. The valuation has also risen.
According to the investment goals previously given by the Vision Fund, its main purpose is to invest in and strive for “unicorns” with high growth potential, using AI technology, and valuations of more than US $ 1 billion from the perspective of medium and long-term investment. Maximize return on investment.
From the perspective of Softbank ’s already invested projects, it has indeed implemented its declared investment path: that is, focusing on high-growth potential startups with investment valuations above US $ 1 billion. Softbank usually intervenes in the middle and late stages of startups, lowering valuations with large sums of money, requiring more equity ratios and board seats, and greater control and voice over the bids. Its investment in Uber and WeWork are Such an example.
But at least from the current investment performance of the first phase of the Vision Fund, such investment logic has suffered a major setback. Sun Zhengyi was frank at the performance meeting that day. If the performance is not good, no investors will be willing to give you money. In other words, there may not be a new vision fund of hundreds of billions of dollars in the future. Or will become a swan song.
But Sun Zhengyi ’s investment career is far from over. The 62-year-old Softbank manager said on the day that despite the bad situation, he will still invest with his own money in the future.
Sun ZhengyiThe so-called “own money” refers to the Softbank Group’s own funds. When the Vision Fund, which is dominated by external investors’ funds, encountered major setbacks, Sun Zhengyi still has the foundation of the Softbank Group and continues to support its investment business. .
Last month, SoftBank announced that it will sell $ 41 billion in assets to expand its cash reserves and use it to support its up to $ 23 billion stock repurchase plan. On the day of the 18th performance announcement, Softbank announced another deadline By the end of March 2021, the $ 47 billion share repurchase plan will double from the previous basis.
In FY 2020, Softbank ’s other businesses other than investment achieved an operating profit of 566.7 billion yen, a year-on-year increase of 7%, and its performance was relatively stable. As of the end of the year, the cash balance on Softbank ’s account remained at 33.69 trillion yen.
For Sun Zhengyi, it is not that he has not seen a worse situation. During the burst of the Internet bubble, Sun Zhengyi lost nearly 70 billion US dollars. Looking back on his experience at that time, Sun Zhengyi said that he seemed to have only two fingers on the edge of the cliff.
“Compared with the last crisis, I now look from the top to the bottom of the valley.” Sun Zhengyi said at the performance meeting that day.
But before the situation gets better, it may get worse, “We will try to survive.” Sun Zhengyi said.