Without any doubt, SoftBank’s elephantoid $100bn Vision Fund – led by Masayoshi Son and Rajeev Misra – is putting the entire venture capital industry under pressure. And the growth stage is becoming the battlefield.
Investing massively in private tech companies and granting them higher valuations than competitors, the Vision Fund is forcing growth stage venture capital firms to rething theirselves and adapt to the new scenario.
The fact that tech companies stay private much longer in terms of time gets things worse for incumbents.
The Vision Fund
Launched in 2016 by SoftBank Group Corp., with an anchor investment from Investment Fund of the Kingdom of Saudi Arabia (“PIF”), and managed in the United Kingdom by a subsidiary of SBG, the fund makes investments in the technology sector globally. To better understand its firepower, let’s have a look at same investments the fund has made to date.
Among others, it has invested over 1 billion in:
– Uber, $9.3 Billion
– NVIDIA, $5.0 Billion
– WeWork, $4.4B Billion
– GM Cruise, $2.3 Billion
– OneWeb, $1.2 Billion
– Roivant, $1.1B Billion
– Fanatics, $1.0B Billion
– SoFi, $1.0B Billion.
Other backed companies include Katerra, Auto1, Doordash, Improbable, Compass, Guardant Health, Wag, Slack, Plenty, Mapbox, etc.
The venture capital industry reaction
Given the above, is the industry reacting? Yes, of course. We can already witness the launch of larger funds. Some examples came from:
– Sequoia, which is said to have raised an $8 billion fund,
– Tiger Global Management, which reportedly closed a $3.75 billion fund, and
– Bond, the new firm spun out of Kleiner Perkins, which is raising a new $1.25 billion fund.
Others firms are also beginning to make (smaller) efforts in this new arena. Among them, Thrive Capital, a New York-based venture capital firm focused on internet and software investments, recently raised $1 billion, including a $400m fund designated for early stage companies, and a $600m fund for later stage companies. In addition, Bessemer Venture Partners, whose $1.85 billion fund is dedicated to investing in seed to Series B rounds of tech companies.
The end of 2018 and start of the new year has seen the launch of smaller opportunity funds, vehicles expressely dedicated to investing in the growth of portfolio companies already backed by the firms in the earlier stages.
This is the case of:
– Union Square Ventures, which raised $429m for two funds, USV 2019 ($190.575m) and USV Opportunity 2019 ($238.218m),
– Menlo Ventures, which is raising a $450m second opportunities fund, and
– Atlas Venture, which closed its first Opportunity Fund, at $250m.
This new context brings both new challenge to face and new opportunities to take. In this framework, we can forecast two trends whith 1) some firms tightening their focus on early-stage rounds, and 2) other firms increasing their efforts in the growth stage expanding their partnerships and raising more opportunity funds. We will let you know…