In the wake of WeWork’s catastrophic IPO attempt, SoftBank’s Vision Fund — the co-working space’s lead investor — has reportedly been dropping out of startup investment deals last minute, and seemingly without warning.
A report from Axios suggests the fund, the investment arm of Japanese SoftBank Group, issued substantial term sheets to several startups. However, after due diligence processes, final background checks and box-ticking dragged on, the deals were pulled at the eleventh hour.
According to the article, the startups concerned had no notion there would be a problem.
However, since the whole WeWork debacle, things have been less than rosy for SoftBank.
According to sources, it has been struggling to raise money for its Vision Fund 2, which is likely to be considerably smaller than first suggested. In fact, it’s not clear whether the fund has attracted any outside investment at all, to top up SoftBank’s own $US38 billion ($55 billion) contribution.
In November, it was reported that SoftBank suffered $US9.2 billion in write-downs on WeWork. And the fund is a significant investor in Uber, which also suffered a troubling 2019.
At the time, SoftBank founder Masayoshi Son put the blame on himself.
“There was a problem with my own judgment, that’s something I have to reflect on,” he said.
While watching some of the global goliaths of startup life crash and burn from afar — and we are watching from particularly far away — can hold a kind of perverse enjoyment, this serves as a reminder that we’re not so far removed.
SoftBank’s apparent backing away from deals that were almost set-in-stone shows the effect that big events have on the wider ecosystem. Founders have had their time wasted, and could now face barriers sourcing funding elsewhere.
A seismic funding failure calls business models into question and makes investors a little more wary.
But, it’s also affected the reputation of SoftBank’s Vision Fund. The fund invested in more than 40 startups in 2018 alone, contributing to anything from Series A to Series H rounds.
If that investing power is damaged, we could see a ripple effect in the ecosystem, on a global scale.