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When the announced its $100 billion in 2017, it stunned the venture industry. This single fund was 50 times the size of the largest venture funds at the time, and far larger than most private equity funds.

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At the core of SoftBank鈥檚 startup investment approach was betting huge amounts on its portfolio companies to help them become market leaders, creating a so-called against competitors.

But fast-forward three years and the Vision Fund had racked up a long list of flameouts and lost billions in market value.

parent , in which Tokyo-based SoftBank had invested , pulled its planned IPO in late 2019 amid pointed questions about its path to profitability and possible self-dealing by founder .

A few months later, , an e-commerce company in which the Vision Fund led a $240 million Series C funding, shut down in February 2020. , which aimed to revolutionize fast food, raised $375 million in November 2018 but closed down its pizza business just over a year later in January 2020. Budget hotel site from India reported layoffs in early 2020, before the pandemic impacted the travel industry.

All told, Vision Fund 1 (SVF1) had $8 billion wiped off its fair value聽1between December 2019 and March 2020, going from $90 billion to $81.9 billion, according to SoftBank earnings reports.

While SoftBank and its Vision Fund have continued to hit bumps this year鈥� including the collapse of two high-profile unicorn portfolio companies, construction tech 鈥攃ompany leaders say there鈥檚 also a behind-the-scenes turnaround in the works. Despite its high-profile misses, SVF1 has seen its value improve significantly in the past year as the result of successful exits including and . And SoftBank is now taking a very different approach with its second fund, shunning the 鈥溾�� approach of its first fund in favor of smaller and earlier-stage investments in startups.

Take 2

While SoftBank is still investing heavily in startups鈥攊ncluding $14.2 billion just last quarter largely via its second fund鈥攖he Japanese conglomerate has undergone a fundamental shift in its approach to venture funding.

鈥淭he biggest聽change聽in Fund 2 is not to be concentrated,鈥� , the Vision Fund鈥檚 managing partner and CFO, said in an interview with 附近上门 News, speaking on the strategy behind its second fund. 鈥淭he differences are that we’re doing a lot smaller ticket sizes. It’s not the large multi-billion dollar ticket size.鈥�

SoftBank announced its second investment vehicle, Vision Fund 2 (SVF2), in July 2019. After many limited partner commitments evaporated due to the WeWork debacle, the fund now totals $40 billion鈥攁ll raised from SoftBank itself, with no external LPs.

SVF2 has significantly increased its investment pace in the last quarter and led some heady funding rounds including a $775 million Series A in, a $676 million Series D in , and a $640 million Series E in .

It also led a $639 million round in . The Stockholm-based 鈥渂uy now, pay later鈥� unicorn is the most highly valued of Vision Fund 2鈥檚 companies, at $45.5 billion.

But while the second fund has made a total of 91 investments鈥攁 similar count to SVF1鈥攊t鈥檚 invested just $19.5 billion to date as those deals tend to be smaller.

鈥淭he other change is to come in at earlier stages, and then get to participate in follow-on rounds as a company does well,鈥� Govil said.

In the past quarter alone, the Vision Fund has increased its investment count to 47 new companies with $14.2 billion invested.

Fund 1 turnaround

Along with a new investment thesis for SVF2, SoftBank has also worked on turning around its fortunes with its first fund.

The value of the portfolio for Vision Fund 1 has improved significantly in the past year to $146.5 billion.聽

鈥淥n the first fund we’re really focused on two things, which is helping our companies go public and on monetizing our positions and returning capital to our limited partners,鈥� Govil said.聽

As of March 31 of this year, SVF1 has substantially upgraded its outlook with an investment gain of more than $57.1 billion, per SoftBank鈥檚 earnings report. The most recent quarter is up by $60.3 billion.

SVF1 investments tally up to $86.2 billion, with a portfolio worth $146.5 billion per the company鈥檚 most recent earnings report.

The investment window for new company investments from the first fund closed in September 2019, but the fund has a life of 12-14 years in which to provide liquidity to its limited partners.

The majority鈥�69 percent鈥攐f value in SVF1 is represented by portfolio companies that have exited, or in public companies where the Vision Fund still holds stock. Private companies in the first fund鈥檚 portfolio, including , , and other highly valued unicorns, are valued at $45.5 billion collectively, according to its earnings report.

The standout exit from SVF1鈥檚 portfolio in 2021 is . The Seoul-based e-commerce platform was valued at $60 billion in its IPO, with the Vision Fund鈥檚 multiple at 8.7x as of SoftBank鈥檚 most recent earnings report. SoftBank invested $1 billion in Coupang in 2015, prior to the Vision Fund, and another $2 billion in the company in 2018 via SVF1.

Another large exit for the Vision Fund this year was from , which went public at a $73 billion valuation, which has trended down since its debut and is valued around $42 billion as of August 24, 2021, below its private valuation of $56 billion in 2017. The Vision Fund鈥檚 multiple on Didi stands at 1.1x as of SoftBank鈥檚 June 30 earnings report.

Funding competitors

The fund has looked at close to 3,300 companies, to date, and invested in 183 of them, Govil said.

It does invest in competing companies, as it did with and Didi, but creates firewalls between rivals, according to the firm. 鈥淭he markets are large enough that there’s a place for more than one,鈥� said Govil.

The Vision Fund鈥檚 current private portfolio includes worth $655 billion based on the companies’ last private valuations. It also includes 14 companies that are emerging unicorns鈥攙alued between $500 million and less than $1 billion鈥攁nd collectively valued at $8.3 billion.

鈥淲e want to see companies that have meaningful revenues, and either have positive unit economics, and are profitable or have a path to profitability in the near term,鈥� said Govil, underscoring further a significant departure from the first fund鈥檚 investment approach.

附近上门 Pro queries relevant to the SoftBank Vision Fund

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