- SoftBank's Vision Fund was meant to be the world's most powerful technology investor.
- But the Saudi-backed fund reported full-year losses of $32 billion on Thursday.
When SoftBank founder Masayoshi Son launched his $100 billion Vision Fund over half a decade ago, the economy was sunny, startups were being sprayed with money and a new technology-led era was on the horizon. At the time, he claimed to have a 300-year plan.
The Vision Fund, backed by tens of billions of dollars of sovereign wealth money from the Gulf region, was meant to showcase the enormous might of technology companies, generating off-the-chart returns for investors by betting on founders with the verve to revolutionize society.
That apparently took the form of WeWork's Adam Neumann, the fantastical robot-pizza maker Zume, and the dog-walking app Wag.
But on Thursday, the Japanese conglomerate's technology investment unit reported a seismic $32 billion loss for its full year, as soaring interest rates, a raging war in Europe, and a general economic malaise weighed on earnings.
Son's ambitious, almost ludicrous, project may no longer be fit for purpose in a world that's returning to its senses.
SoftBank symbolized tech excess
Son, an eccentric CEO who has reportedly compared himself to Jesus and Yoda, has recognized for a while just how tough the economy has become.
When the downturn was getting started, the SoftBank chief declared last year that he was going into "defensive mode." His comment came after a pandemic software boom, which led to record profits for the company, went into reverse.
In reality, this has meant slowing down spending. Filings show Vision Fund investments totalled just $3.1 billion for the year versus $44.3 billion the previous year. Investors at SoftBank also resisted the urge to bet big on tech fads such as the metaverse and Web3.
But even defensive mode hasn't stopped SoftBank from getting pummeled. In the good times of cheap money, the Japanese firm came to symbolize all the excess that the market is now doing its best to excise.
In filings, SoftBank noted that its losses were attributable to price drops across a whole range of its portfolio. Rapid-delivery company DoorDash and Chinese facial-recognition company SenseTime were two of many of its publicly held bets that experienced slides.
Its private holdings have not been immune either, with unlisted companies in Vision Fund 2 contributing towards an overall, unrealized valuation loss in the second Vision Fund of $18.8 billion, filings show.
Though SoftBank notes that 94% of the private companies in its portfolios have enough cash to survive the next year, several, such as HR firm Remote, are making layoffs. The Vision Fund itself has also laid off just under a third of its staff.
SoftBank Group, the holding company, is offloading swathes of its other valuable holdings to make up for heavy Vision Fund losses. This includes a treasured stake in Chinese firm Alibaba, which first made Son a billionaire during the dotcom boom, and an IPO for chip firm Arm.
Son remains willing to speculate. During a press conference on Thursday, SoftBank's chief financial officer Yoshimitsu Goto said he "can't explain clearly how excited" Son is about the new opportunities presented by AI – tech's flavor of the moment.
Son is right to see an opportunity in AI. The ChatGPT era of tech introduced by OpenAI is only just getting started. But hype also brings speculation and snake-oil salesmen, and the SoftBank boss will need to make learn from his mistakes and make smart moves here if he wants to preserve his 300-year vision.