SoftBank Vision Fund is eyeing investment deals in India at a time when most of the venture capitalists are stretched, trying to help their portfolio companies manage their cash runways.
Rajeev Misra, chief executive officer, SoftBank Investment Advisers, who oversees the SoftBank Vision Fund, in an interview with local media Economic Times (ET), said the firm has USD 13 billion in unspent capital that they are going to deploy in India, and globally.
“We are actively looking at India, to invest at the right valuation. SoftBank Vision Fund (SVF) 1 and SVF 2 are both interested in buying secondary positions from early-stage investors who are wanting to exit as their fund lives come to an end,” Misra said.
The Vision Fund is expected to announce the deals soon as the firm is currently in discussion with about 15-20 companies for both secondary and primary investments.
Over the last couple of months, startups in India have been scrambling to cut costs, laying off employees, freezing new hiring, and reducing operational expenses, among other things, as the business for most of them have come to halt due to over five-week-long lockdown in India to prevent the coronavirus spread. A recent survey by LocalCircles, a Noida-based online platform for communities, said 47% of Indian startups and SMEs have cash reserves for less than one month, while many have already run out of money.
SoftBank’s Vision Fund has come forward and is scouting for good deals amidst the uncertainty in the Indian startup ecosystem, which may force many investors to look for exits across their portfolio companies.
This comes at a time when the USD 100 billion SoftBank Vision Fund (SVF 1) has reported a USD 16.7 billion investment loss in the year ended March, as the novel coronavirus has hit its portfolio companies across the globe. According to a Reuters analysis, more than half of the fund’s capital is in startups “that are suffering from the virus impact or exhibiting stress pre-dating the outbreak.” While many of its portfolio companies were dealing with problems of their own before the coronavirus outbreak, the pandemic has proved to be the litmus test for these startups. SoftBank has long been criticized for its risky strategy of writing large cheques for companies with unproven business models.
“The Vision Fund has been a mess. It has been a case of an organization with too much money just splashing it around without doing enough due diligence,” Joe Bauernfreund, chief executive of SoftBank shareholder Asset Value Investors told Reuters recently.
While the first Vision fund has been mired in difficulties, the second Vision Fund (SVF 2) hasn’t been able to raise as much money as it thought it would. Initially, the Japanese conglomerate had an ambitious goal of raising USD 108 billion for its second technology fund, launched in July last year. However, investors have refused to take part unless the first USD 100 billion Vision Fund can turn around its performance, said another Reuters report citing sources.
“The challenges we faced early on were common to fast-growing organizations and we’ve fostered major improvements in our culture. Our employee attrition rate is less than 5% and significantly lower than others in the industry,” said Misra.
SVF 1 has reportedly invested USD 81 billion across startups over the last three years and returned USD 10.7 billion to its investors.
According to Misra, SoftBank has invested USD 5 billion of its own money in SVF 2 of which it has spent USD 3 billion. “We can put in some more, it won’t be an issue,” Misra said. For a turnaround, the fund is relying on its investments in companies such as ByteDance, food delivery players like Ele.me and Doordash, Coupang in Korea and Policybazaar, Delhivery, and Grofers in India.
“We are also convinced that because of COVID-19, the shift to technology will be more rapid.”