SoftBank is under extraordinary pressure to deliver competitive returns on investments garnered from its $100bn Vision Fund, a new report from EquityZen has revealed. The New York-based fintech company has evaluated SoftBank's unprecedented strategy to invest billions of dollars into late-stage tech firms and summarized the challenges the bank will likely face.
The SoftBank Vision Fund which is led by Masayoshi Son, has invested in a myriad of different tech startups, notably a number of mobility services such as Uber and more recently, Getaround[link].
As the report noted, a modest internal rate of return (IRR) of 20% would mean SoftBank would need to generate at least $142bn for the fund. However, due to the risky nature of SoftBanks investments, the IRR will more likely be in the realm of 30–40% which would mean the fund would have to generate between $35bn to $55bn every year.
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Masayoshi Son has been clear about his objectives and the importance of funding the next generation of technological innovations with a near philanthropic approach. However, he is still accountable to his investors and only time will show if he has made the right choices.
"Masa's ability to raise money is staggering," said EquityZen CEO and co-founder, Atish Davda. "SoftBank cemented $93bn in only seven months for its Vision Fund. Compare that to the entire US venture industry that took over three years starting in 2014 to cross $100bn raised.
"The real question for Masa now is whether he'll be able to generate competitive equity returns, especially following the mega rounds SoftBank is leading at seemingly frothy valuations," he added.