The Vision Fund Needs More Vision
Last quarter, the tech ($COMPQ) bellwether venture fund Softbank lost $23 billion!
The Founder Masayoshi Son is a genius at losing money.
For those doing the math, that’s over $10 million PER HOUR in Q2 or $3000 per second.
His poor decisions cost the likes of Saudi Arabia, The UAE, and other cashflow-rich entities.
The Saudi oil money got sold on the dream of “reimagining salad delivery” and building coupon apps for dogs.
It didn’t work.
It's fair to say there was a gross misallocation of funds buoyed by an era of cheap capital, and now many of these business models have blown up.
Over-capitalization of startups has a way of masking fundamental business models.
Even Uber. The unit economics make zero sense as a ride-share with higher gas prices, expensive car insurance, higher gross wages, and expensive debt issuances.
They have never justified their valuation and they are still in business only because they are a monopoly.
It’s crazy to think a company like this is still worth an overinflated $61 billion today because it should be closer to $15 billion.
CEO Masayoshi Son's multibillion-dollar investment spree over the past few years has shredded his fat ego as rising interest rates and recession fears decimated tech shares and venture capital investments.
Warren Buffet likes to say when the tide comes in, we get to see who’s swimming naked.
Son added that he will be making big changes over the coming months, looking to be “more selective in making investments,” because “the market and the world are in confusion.”
Vision Funds have backed over 470 startups globally in the past six years, but SoftBank approved just $600 million in investments for the funds in the April-June quarter, a 97% decline in spending from the same quarter last year.
Son is also firing a bloated staff which clearly, he doesn’t need since performance and stock prices have gone out the window.
SoftBank was also forced to sell $10.5 billion of the Chinese e-commerce giant Alibaba’s stock to raise cash in the April-June quarter and dumped an additional $6.8 billion in shares after the quarter ended.
SoftBank saw its losses from stock market investments pile up during the April-June quarter. The Vision Fund alone saw $2.18 billion in losses from its stake in the South Korean e-commerce leader Coupang, which is down 33% year to date, and $1.64 billion in losses from DoorDash, which has dropped 46% since January.
But it’s the Vision Funds' early-stage investments that are seeing the worst results amid an ongoing venture capital slowdown, with startups such as the buy-now, pay-later darling Klarna losing billions in value so far this year.
Startups don’t thrive in this current high inflation, high interest rate, supply chain bottleneck economy.
Stagflation fears have skyrocketed.
Son is finding out the hard way with these young companies decimated and is grasping at straws.
In this world, tech investors must filter the strong amongst the pitiful and the broad-brush approach of buying a massive basket of emerging tech won’t work anymore if a good chunk of them are fat zeroes.
The massive tech bubble is still deflating as the Fed is pedal to the metal with raising interest rates.
