SoftBank cuts back spending, leaving start-ups desperate for cash

TOKYO (BLOOMBERG) – Start-up Light, backed by SoftBank Group, is struggling to lift funds after the world’s largest tech investor baulked at placing extra money into it, folks accustomed to the matter mentioned.

SoftBank owns about 30 per cent of Light by its first Vision Fund, which led an injection of US$121 million (S$166 million) into the superior digicam developer in 2018. SoftBank’s continued assist is crucial for the cash-strapped start-up, which has been spending tens of millions of {dollars} to develop into self-driving expertise at SoftBank’s urging.

Hurt by plunging tech valuations, SoftBank is strolling away from a few of its loss-making portfolio companies to adjust to stricter funding standards, mentioned the folks. Many of the 2 Vision Funds’ portolio of 300-plus corporations are loss-making.

The Japanese funding agency provided to contribute cash if Light may discover one other investor to steer the following fund-raising spherical, one of many folks mentioned. But with its largest backer providing solely a token quantity, different buyers have been cautious about stepping in, the particular person mentioned. The start-up has employed a consulting agency to discover choices, together with winding down operations.

“Their purse strings are tight as they have ever been,” the particular person mentioned.

A Vision Fund spokesman and Light chief government officer Dave Grannan declined to remark.

The adoption of prudence at SoftBank’s Vision Fund – which rewrote the principles of enterprise capital by deploying billions of {dollars} from the sovereign wealth funds of Saudi Arabia and Abu Dhabi into start-ups – is an about-face from its previous freewheeling largess.

For years, SoftBank founder and CEO Masayoshi Son persuaded start-up founders to simply accept Vision Fund cash by encouraging them to suppose larger and promising continued assist to assist them develop. He would usually make investments extra money than founders have been wanting for if they’d attempt to speed up development.

In the early years after the primary Vision Fund’s launch in 2017, SoftBank lifted the valuations of start-ups equivalent to WeWork and Uber by billions of {dollars}, adhering to a minimal funding threshold of US$100 million per deal.

But whereas SoftBank’s large bets on long-term development gained over a whole lot of entrepreneurs, they uncovered the investor to immense volatility in tech shares and mounting loans, whilst its struggle chest of recent share gross sales threaten to dry up.

The firm subsequent month might report its biggest-ever quarterly loss on the plunging worth of its most precious holdings, together with South Korea’s Coupang and China’s Didi Global, estimated Redex Research analyst Kirk Boodry.

Mr Son mentioned throughout an earnings name in February that the Vision Fund would proceed to speculate, however at a slower price given privately held companies’ lofty valuations amid a rout on publicly traded corporations’ share costs.

“Venture capital firms besides us are renegotiating terms with companies that are fund-raising,” he mentioned. “We are looking at the whole picture, while operating within the bounds of cash on hand.”

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