The Japanese investment giant backing WeWork, Gopuff and more is considering a third Vision Fund to invest in startups, The Wall Street Journal reported Wednesday.
SoftBank Group is once again considering a foray into the high-risk world of startups, after its two previous Vision Funds have failed to bring in significant returns. Several real estate companies have suffered losses in valuations after SoftBank invested in them, especially this year amid the larger sell-off in tech stocks.
The new proposal under consideration would reportedly use SoftBank's own cash rather than outside money. Compensation for SoftBank staff is tied to the performance of its funds, and a third stab at turning substantial profits may give the firm a boost at a time when it is receiving growing criticism.
The investor drew $60B in investment from the Saudi and Emerati wealth funds for its initial $100B fund, but that fund has so far seen minimal returns, according to the WSJ.
SoftBank's Vision Fund 2 has also performed poorly, as its valuation is currently 19% lower than the $49B initially invested, the WSJ reported.
Losses from WeWork and other high-growth, low-profit startups have led SoftBank CEO Masayoshi Son to admit last month he was "quite embarrassed" over the firm's performance after posting a $23B quarterly loss in the second quarter of this year.
Son is personally on the hook for $2.6B toward the Vision Fund, and he is paying a 3% annual interest rate toward the balance, the WSJ reported. But he stands to make personal gains if the fund begins to bring in large profits.
The investment firm had said in April that it implemented stricter investment criteria for its funds, leading SoftBank to potentially pull out of startups that were hemorrhaging money.
But a new fund could see the investment firm inject more cash into its the startup world and make more big bets on firms aiming to disrupt real estate.
SoftBank's splashiest flop was WeWork, which reached a $47B private valuation before getting bailed out by SoftBank with an $8B valuation in 2019.
Since that time, other real estate startups backed by the investor have also experienced challenges.
Ghost kitchen operator REEF Kitchens, which uses trailers in parking lots for its operations, has faced shutdowns in major cities across the U.S. over permitting issues and other regulatory violations. In May, it laid off 5% of its staff, roughly 750 employees, in part because it owed $8M to vendors, Insider reported.
Discount hotel chain Oyo, in which SoftBank controls 50% of ownership shares at a $10B valuation, has also been accused of having a "toxic" work environment and knowingly withholding payments from its independent operators.
Other proptech firms backed by SoftBank like Katerra and View have also seen declining valuations after going public.
View, which has received more than $1B from SoftBank, was threatened with delisting from Nasdaq in May after failing to file its quarterly reports on time, pushing its stock price to just 50 cents at its lowest point. Its shares trade at $1.65 as of Sept. 14.
Modular construction firm Katerra, meanwhile, lived and died by SoftBank investment, and liquidated at the end of 2021.
