The new Vision Fund, expected to top $108 billion, will be the biggest private tech investment fund ever. Artificial intelligence will be its focus.
Founder Masayoshi Son announced plans for the new fund on July 26. SoftBank itself will contribute $38 billion in proceeds from the original Vision Fund, worth nearly $100 billion. This is markedly higher than its $25 billion investment in the first fund, and makes SoftBank the new fund’s largest investor. Others include Apple, Microsoft and Foxconn, Japan’s three mega-banks, and a newcomer, Kazakhstan’s sovereign wealth fund.
Son’s enthusiasm for artificial intelligence (AI) is well known. In its filing with the Tokyo Stock Exchange, SoftBank stated, “The objective of the Fund is to facilitate the continued acceleration of the AI revolution through investment in market-leading, tech-enabled growth companies.”
The Japanese conglomerate made history in May 2017 when it launched the first Vision Fund, the world’s largest tech investment fund and largest private equity fund. SoftBank said at the time that the Vision Fund resulted from a “strongly held belief that the next stage of the Information Revolution is underway, and building the businesses that will make this possible will require unprecedented large scale long-term investment.”
The first Vision Fund dwarfed other venture capital funds, the next-largest of which are in the single-digit billions. Vision Fund 1 has also moved quickly, with $70 billion going to a range of firms worldwide, including America’s Uber, DoorDash and WeWork, Arm in the U.K., and German firm GetYourGuide, in less than three years. Son claimed returns of 29% as of March 2019.
“That record now seems set to unlock another gargantuan pile of capital”, The Economist reports. The pledges have been rolling in. SoftBank said it is still talking to potential investors and it expects the fund’s anticipated capital to grow. Its investor base shows diversification beyond the Middle East, where most of the previous fund’s outside capital originated. Notably absent is Saudi Arabia, which brought $45 billion to the first fund, though its participation cannot yet be ruled out entirely.
“Those investing two years ago were investing in the vision, there was no proof the concept was going to succeed,” said Sanford C. Bernstein analyst Chris Lane. “Given the track record achieved over the last two years Vision Fund 2 has been substantially de-risked,” he added.
Others criticize the mega-fund model, pointing out that it is too soon to judge the success of the first Vision Fund, which runs until 2029. Some accuse SoftBank of inflating tech valuations; they will no doubt be scrutinizing WeWork’s initial public offering, expected in September. In the meantime Softbank’s balance sheet could receive a major boost from the likely merger of T-Mobile and Sprint, in which it owns an 84% stake, allowing it to focus even more on tech investment.