Japan's SoftBank plans a second giant technology fund

Masayoshi Son's brainchild hasn't finished raising money but the next could be double in size

SoftBank Group Corp., which runs what is already the world’s biggest technology investment fund, is planning to create a second fund that could be even larger, according to people close to the Japanese telecommunications and investment giant.
 
SoftBank, whose $100 billion Vision Fund hasn’t finished raising money, is floating tentative plans for a second Vision Fund that could be about $200 billion in size, said one person familiar with the company’s plans.
 
In an interview with Japan’s Nikkei business daily published Friday, SoftBank chief executive Masayoshi Son said he hopes to launch a new fund every two or three years, amassing a huge pool of capital to invest in technology companies around the world. The first Vision Fund, backed by contributions from sovereign-wealth funds and tech giants such as Apple Inc., was started earlier this year.

 

“The Vision Fund was just the first step. Ten trillion yen ($88 billion) is simply not enough,” Mr. Son told the Nikkei, saying that the Vision Fund will have invested its entire $100 billion investment pool in about two years. “I want to create a mechanism by which we can build our funding capability by ¥10 trillion, ¥20 trillion, ¥100 trillion.”
 
Through the funds, SoftBank hopes to invest in about 1,000 companies in 10 years, he said. A SoftBank spokesman confirmed Mr. Son made those statements.
 
Several people close to the company said the plans are at an early stage and that SoftBank hasn’t started marketing a second fund. SoftBank said in May it plans to complete capital raising for the first Vision Fund by the end of November.

 
The gigantic numbers Mr. Son has thrown about show how his ambitions are shaking up the tech-investment world. Backed by a $45 billion pledge from Saudi Arabia’s state-owned Public Investment Fund, the first Vision Fund already dwarfs other rival tech investors. The $100 billion targeted for the first Vision Fund — of which $93 billion has so far been raised—is roughly equal to the total amount invested in venture businesses globally last year, according to research firm CB Insights.
 
Rival tech investors say the fund’s sheer size has the potential to inflate company valuations, while some entrepreneurs worry that spurning investments from the Vision Fund could send capital to rival businesses. The availability of private money from the fund is also enabling late-stage technology companies to put off going public for longer periods, say analysts and investors.

 
“It will take opportunities away from public markets,” Sam Altman, president of the tech incubator Y Combinator, said at a panel at The Wall Street Journal’s D.Live technology conference earlier this week. “That’s really bad.”
 
SoftBank declined to say where the money for additional Vision Funds would come from. One idea is that SoftBank could open a portion of one fund to retail investors, according to a person familiar with the company.
 
There is also the question of what companies additional Vision Funds could invest in. The first fund has largely targeted companies with valuations of at least $1 billion. It has so far committed more than $25 billion in investments, according to calculations by the Journal, and is trying to pump as much as $10 billion into ride-hailing firm Uber Technologies Inc., according to people familiar with the matter.

 
There are 217 private companies globally valued at $1 billion or more, worth roughly $750 billion in total, according to CB Insights. Many of these so-called unicorns have raised money at lofty valuations but have yet to deliver promised growth.
 
The Vision Fund is the brainchild of Mr. Son, 60 years old, a Korean-Japanese entrepreneur known for his brash investment style and long-term views on technological trends. He was behind SoftBank’s early investments in companies such as Yahoo Inc. and Alibaba Group Holding Ltd. that were highly profitable.
 
Mr. Son has said his goal is to create a loose global network of companies that will solve future technological problems together, and capitalise on bewilderingly fast-moving changes in areas like artificial intelligence, robotics and biotech.  Source: The Wall Street Journal