SoftBank adjusts its vision
A high-profile $800 million investment led by SoftBank Group propelled U.K. online payments company Revolut to a $33 billion valuation last year, making it one of the most valuable private fintech companies in the world.
Yet barely a year later, Revolut suffered a significant setback. The Japanese government in September hit its local unit with an administrative disciplinary action — the first targeted at a holder of a money transfer license in eight years.
The Ministry of Finance highlighted multiple problems, such as “failing to sufficiently establish an appropriate money laundering and terrorism financing risk management system in accordance with the expansion of business scale.” Revolut posted an apology on its website and said it would revamp its internal controls.
The growing headwinds facing Revolut mirror those facing SoftBank itself after a turbulent year. Half a decade since the technology giant led by Masayoshi Son disrupted the venture capital industry with the launch of its nearly $100 billion Vision Fund, it has cut back on the size of its bold solo deals and increasingly turned to ostensibly safer industry practices like co-investing. Its venture capital rivals have evolved too, raising billion-dollar war chests and sometimes outbidding SoftBank for a slice of the hottest startups.
Meanwhile for startups of the type that benefited from SoftBank’s largesse, the environment is no less radically changed.
Takeshi Ebihara, founding general partner at Rebright Partners, an Asia-focused VC firm, says that “by taking advantage of excess liquidity and the technology boom better than anyone else, SoftBank used financial leverage and took risks to cause the hyperinflation of startup stocks.”
“It is a very challenging time for a growth-stage company,” said the head of a major tech investment firm in Asia.
“They require a lot of capital now, but the cost of capital is all going up. So everyone is focusing on cash burn, how sustainable you can be. In the past, only growth, growth at all costs [mattered]. I think those days are definitely gone.”
An analysis by Nikkei Asia shows how SoftBank’s strategy has evolved over the years. The first Vision Fund raised nearly $100 billion by May 2017 and made concentrated bets on a number of late-stage companies such as ride-hailing companies Uber Technologies and Didi Global. Vision Fund spent about $20 billion on those two companies alone, underscoring its ambitions to dominate the sector.
The second vehicle, launched in 2019, was entirely funded by SoftBank’s own capital, after efforts to raise external funding were unsuccessful. Compared to Vision Fund 1, the successor made smaller but more investments — backing 269 companies as of June — spread across a wider range of industries and geographies. It ramped up investments in Europe, Asia and the Middle East, such as Revolut, Bangladesh fintech company bKash and Turkish e-commerce company Trendyol.
Source: Asia Nikkei