US Head Of SoftBank's Vision Fund Leaving After Expressing Concerns About "Issues"

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US Head Of SoftBank's Vision Fund Leaving After Expressing Concerns About "Issues"

Back in October, in the aftermath of the historic WeWork fiasco, we asked if the company's new majority owned and anchor investor SoftBank is the bubble era's (that would be now, for those unclear) short of the century.

While that thesis has yet to play out especially since the post-WeWork period was marked by another major reflation of asset bu

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bbles courtesy of the Fed's QE4 and the return of the ECB's own QE, it appears that one by one the rats are starting to leave the sinking ship.

According to the FT, the US head of SoftBank’s $100bn Vision Fund is leaving after expressing concerns about "issues" at the technology conglomerate, which as regular readers know all too well, has suffered a string of setbacks over the last year, not only its catastrophic investment in WeWork, but disappointing returns on both Uber and OyO.

Michael Ronen, who as luck would have it is a former Goldman banker who joined SoftBank in 2017, told the Financial Times he had been "negotiating the terms of my anticipated departure" for several weeks. Ronen was the managing partner of its US investment office and in charge of the Vision Fund’s US investments, "leading its bets on transportation and logistics start-ups such as Getaround, GM Cruise and Nuro. According to the FT, Deep Nishar, a former LinkedIn and Google executive, and Colin Fan, a former Deutsche Bank executive and close associate of SBIA chief Rajeev Misra, are likely to take on Mr Ronen’s responsibilities in the Americas.

Michael Ronen, a SoftBank managing partner, was in charge of Vision Fund’s US investments.

Ronen departure comes as SoftBank has failed to raise any outside investment for the company’s second Vision Fund, the FT notes.

He is not the only one expressing doubts about the fate of what until recently was the world's most generous investor in startups: SoftBank is also in discussions about Ron Fisher’s future at the company, according to FT sources. Fisher, who is not a former Goldman banker, is SoftBank's vice chairman and one of Masa Son’s "longest-serving lieutenants and was a leading advocate of SoftBank’s outsized bet on WeWork."

Fisher joined in 1995, making him one of Son’s closest advisers, and while Son signed off on SoftBank’s $10bn-plus investments in WeWork, it was Mr Fisher who sat on the board of the co-working office-space provider and who worked closest with management on its strategy and growth plans.

So after WeWork took a multi-billion writedown on WeWork in Q4, one can see why he may be concerned about his future there, even though a SoftBank spokesperson told the FT, Fisher was “a valued member of the SoftBank family” and was "not going anywhere."

Yet while Ronen and Fisher's future is nebulous at best, a far bigger question is what happens to the man at the top: after a series of catastrophic investments shook confidence in the Vision Fund, founder Masayoshi Son has struggled to raise any outside capital for its sequel fund.

As a reminder, last July Son unveiled a roster of investors including Apple, Microsoft and the National Bank of Kazakhstan for the fund, which he said committed a total of $108bn, even without any funding from the first Vision Fund’s largest outside backers, Saudi Arabia and Abu Dhabi. However, none of the would-be investors have yet to firm up their non-binding commitments in the second Vision Fund, even though SoftBank has provided around $5bn in backing for the second Vision Fund to begin making investments, a lot of it "extracted" from the company's own "volunteer" employees.

Ironically, even Saudi Arabia which for years was considered the world's dumbest money, appears to have learned its lesson about "investing" with Masa Son: after contributing $60BN to the first Vision Fund, the Gulf investors "have become worried about the perception of pouring money into SoftBank funds following several high-profile flops from the first Vision Fund", the FT cited people familiar with the discussions.

For its part, since the pulled WeWork IPO, SoftBank has scrambled to show the world it is a disciplined investor, announcingd new management at WeWork, and pressuring other companies it has backed to cut their losses and increase their profits. Alas, the investing world has not been impressed, and SoftBank’s share price tumbled 25% since last April when it hit its highest level since the early 2000s before a string of high-profile SoftBank-backed companies had embarrassing stock market debuts, including Uber and Slack.

Luckily for Masa Son, much of its poor performance has continued to be masked by stock price gains at China's ecommerce giant, Alibaba, which has seen its shares climb sharply and reached a market value of $600bn. SoftBank, in its best investment ever, purchased and still owns a 25% stake in Alibaba.

Tyler Durden

Tue, 02/04/2020 - 15:00


Business Finance


For Softbank's Son, "Conflating Luck And Talent Is Dangerous"

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For Softbank's Son, "Conflating Luck And Talent Is Dangerous"

Authored by Scott Galloway via ProfGalloway.com,

Third Base

The Dunning-Kruger effect posits that dumb people are too stupid to know they are dumb. They are not perplexed by difficult situations but overconfident — not knowing what they don’t know. As few people believe they are stupid, or a bad driver, a more relatable component of Dunning-Kruger is incorre

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ctly believing one area of skill translates to another. 

I suffer massively from this. I’m smarter than your average bear when it comes to marketing, so I’ve come to believe that makes me an expert on pretty much anything. I don’t know much about physics but constantly reference Galileo despite knowing little besides the fact that he dared challenge the church. 

There is evidence of this all over the marketplace. Great P/E guys believe they would make great VCs and vice versa. Hedge fund managers believe two years of above-market returns means they are also great operators. To disabuse anybody of this notion, take them to a Sears. Billionaires running for president, actors starting skincare lines, and tech CEOs founding media firms. Being rich also naturally makes you a great film producer. 

Masayoshi Son created $64 billion in shareholder value, mostly through deft acquisitions. Mr. Son can also boast of perhaps the best venture investment in history, $20 million into Alibaba that became $100 billion. That investment is tantamount to Michael Jordan hitting a grand slam on his first at bat wearing a Birmingham Barons hat.

Mr. Son has mistaken luck in venture investing for the ability to responsibly allocate billions based on a gut feeling. The size of SoftBank investments, relative to the diligence, now looks stupid, if not negligent. A writedown on an investment in a dog-walking app may have been avoided had someone in the SoftBank diligence team taken the time to discover they were investing $300 million in … a dog-walking app.

Conflating luck and talent is dangerous. As I get older, I’m struck by how big a part luck played in my life, and how much I mistook it for skill, well into my forties. The Pareto principle shows that even if competence is evenly distributed, 80% of effects stem from 20% of the causes.

Not recognizing your blessings feeds into the dark side of capitalism and meritocracy: the notion that success is a choice, and that those who haven’t achieved success are not unlucky, but unworthy. This leads to regressive policies that further reward the perceived winners and punish the perceived losers based on income level. The most recent example of our belief that poor people are guilty: The US now has the fourth-lowest tax rate in the world, and billionaires have the lowest tax rate of any cohort.

First Base 

I constantly humblebrag that I was raised by a single immigrant mother who lived and died a secretary. But truth is I was born on third base. My parents got me to first base before I was born, immigrating to the US. This took courage, desire, and a dose of selfishness. Both left families that needed them. My mom left London when her two youngest siblings were still in an orphanage.

In Europe I’d make much less money being an entrepreneur and challenging institutions. In China I’d likely be in jail. Having one of my companies fail would have bankrupted me in Europe, as the tolerance for risk or failure is scant. I have no idea what would have happened in China. In the US, a tolerance for failure meant a lifestyle my parents couldn’t have imagined crossing the Atlantic on a steamship in 1961. 

Second Base 

I have some talent and have worked really hard, but mostly my success is due to being born in the right place at the right time, and being a white heterosexual male. Coming of professional age as a white male in the nineties was the greatest economic arbitrage in history. Today’s 54-to-70-year-olds saw the Dow Jones increase an average of 445% from 25-40, their prime working years. For other ages, it doubles at most.

Economic liberalization (globalization, technology, market deregulation) coupled with social norms that clung to the past meant 31% of America (white males) were given license over a lion’s share of the spoils. In nineties San Francisco, I raised over $100 million for my start-ups. I didn’t know a single woman under 40 who raised more than a million. And it seemed normal. Even today, white men hold 65% of elected offices despite being 31% of the population.

Third Base 

Rich, fabulous people are the ideal billboards for luxury brands. Our nation’s best universities have adopted the same strategy. Universities are no longer nonprofits, but the highest-gross-margin luxury brands in the world. Another trait of a luxury brand is the illusion of scarcity. Over the last 30 years, the number of applicants to Stanford has tripled, while the size of the freshman class has remained static. Harvard and Stanford have become finishing school for the global wealthy. 

In the class of 2013 in the Ivy League, five of the eight colleges (Dartmouth, Princeton, Yale, Penn, and Brown) had more students from the top 1% of the income scale than the bottom 60%.

Fast and Slow Thinking

According to @thetweetofgod, intelligence looks in the mirror and sees ignorance; ignorance looks in the mirror it sees intelligence. The sectors that have enjoyed the greatest prosperity spread across increasingly few people — technology and finance — have created an unprecedented level of arrogance among people born on third base.

When we feel threatened, we are more prone to see each other as an enemy, rather than someone who has a different opinion. We want to dismiss and fight the whole person, rather than just what they said. From primeval times, our brains have been set up to identify “enemy” or “one of us,” that simple binary distinction. Do I trust them as a person or are they not “one of us.” When we are in our more evolved, slow thinking mode (Daniel Kahneman), we evaluate arguments. When we are in our knee-jerk, threatened fast thinking, we decide the person is our enemy and argue from our amygdala, not our forebrain. 

When we are threatened, we are also less empathic. Altruistic behavior decreases in times of greater income inequality. The rich are more generous in times of lesser inequality and less generous when inequality grows more extreme. When the poor need our help more, we are less likely to offer it, because we don’t see the poor as one of us. They become “them.” 

Michael Lewis writes, “The problem is caused by the inequality itself: it triggers a chemical reaction in the privileged few. It tilts their brains. It causes them to be less likely to care about anyone but themselves or to experience the moral sentiments needed to be a decent citizen.” 

Tyler Durden

Sun, 12/15/2019 - 12:15

SoftBank's Vision Fund 2 Likely Shelved After WeWork Blow Up 

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SoftBank's Vision Fund 2 Likely Shelved After WeWork Blow Up 

SoftBank Group founder and CEO Masayoshi Son is having tremendous difficulty attracting new investors to his Vision Fund 2 amid new developments that his current Vision Fund is taking a beating after the WeWork implosion and sliding valuations of its other major investments, according to several of Reuters' sources. 

Despite the implosions of Vision Fund's investments in the last seve

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ral months, Son's top advisors are urging the billionaire to halt Vision Fund 2, two people with information of SoftBank's internal discussions told Reuters.

SoftBank Group has committed $38 billion to Vision Fund 2, but sources said no other significant commitments are outstanding.

The spectacular implosion of WeWork's valuation over the last month has severely damaged Son's reputation and leads Reuters to believe that Vision Fund will experience a significant writedown in the coming quarters.

SoftBank/Vision Fund plowed nearly $10 billion into WeWork, investing some of that capital at a $47 billion valuation in 1Q19. But since WeWork's IPO was shelved, the startup is now only worth $10-12 billion.

On Tuesday, we noted how Son's aggressive risk-taking in technology companies left him overlooking valuation metrics in the last several years. 

Another terrible judgment call on Son's part was the announcement of a $5.5 billion share buyback program of SoftBank Group's shares, earlier this year. The billionaire decided to buyback company stock because valuations of WeWork and other investments, like Uber and Sprint, saw significant valuation increases. 

SoftBank's stock has plunged 30% in the last 46 trading days, as the market has finally figured out Son and Vision Fund made some bad bets. 

If macroeconomic headwinds continue to mount in the global economy, Son's second fund could be scrapped in the near term. 

As we've highlighted in the last week or so, the global IPO and M&A markets are starting to falter. 

We even reported on Tuesday that veteran venture capitalists called an emergency meeting of the technology unicorns in Silicon Valley to advise them on the turbulent times ahead.  

Reuters noted that Vision Fund raised $97 billion, capital that was used to invest in unicorn startups. The fund was so large that it had more money than the entire U.S. venture capital industry raised in 2018.

Vision Fund's investments in Uber, Slack, and WeWork (startups that have seen their valuations implode this year) are warning signs that the proverbial tide is going out, and it's those who ignored valuations, like Son, are the ones currently swimming naked. 

Back in July, Apple, Microsoft, a handful of Japanese banks, and Britain's Standard Chartered indicated that they would commit to Vision Fund 2. Three months later and several of Vision Fund's investments deeply underwater, there is no word if these mega-corporations are still committed. 

"I think that it's incredibly likely that they'll postpone their plans for … fundraising efforts around Vision Fund 2," said Andrea Lamari Walne, a Silicon Valley-based partner at Manhattan Venture Partners. 

And just like that, Vision Fund 2 has likely died, can't attract the slightest bit of money from investors after Son's wreckless investing spree in Vision Fund, has left investors with the possibility of significant losses ahead.

Everyone on the funding side is a genius in a synchronized recovery as central banks flood markets with liquidity, but it's only when the tide goes out, those geniuses become clowns.


Tyler Durden

Fri, 10/04/2019 - 18:45


Business Finance

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