News that SoftBank is struggling to raise a second Vision Fund could have a chilling effect on European startups, given the fund accounts for just over 6% of venture capital flows in the region.
Analysis by Sifted based on Dealroom data shows that funding rounds involving SoftBank’s venture fund and related entities accounted for 6.1% of all venture capital to European startups last year. It is not that SoftBank provided exactly 6.1% of the funding (often the precise investment numbers are not disclosed) but it took part in funding rounds making up this share of European funding. If the company pulls in its horns in Europe now a significant funder will be missing for many deals.
A number of European startups have been looking to SoftBank for investment, with UK fintech Monzo rumoured to be seeking £100m from the fund.
So far, SoftBank appears to have been keeping up its meetings with European startups, but it is clear the fund will have far less firepower after it emerged last week that SoftBank's Vision Fund 2 is set to fall far short of its original $108bn target. According to a report by the Wall Street Journal, several of the fund’s backers are pulling out after becoming disillusioned with its approach, meaning almost all the capital for the technology giant’s second Vision Fund will have to come from SoftBank itself.
SoftBank’s European bets
In 2019, Dealroom documented eight rounds involving SoftBank, coming to a total of €2.3bn. This compares to €38bn in total funding documented in the entire European ecosystem.
This is not the peak of its European presence — in 2017, the Japanese conglomerate was involved in 6.3% of all venture flows, while in 2018, SoftBank-backed rounds made up 2.6%.
Over the past three years SoftBank has played a part in funding rounds amounting to €4.5bn across Europe, investing largely in the UK, Switzerland and Germany.
During this time, it has bankrolled everything from comparatively tiny companies like UK-based deep-tech startup Kami to bigger investments like that in the Swedish pharmaceutical company Roivant Sciences.
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But its substantial presence in European tech can mostly be accounted for by a select few big bets. Notably, its investment in UK fintech Greensill made up the lion’s share of its European spend last year, with the company receiving $1.45bn from SoftBank over the course of two funding rounds.
Other significant investments last year included leading a $484m round for Berlin-based event tech startup GetYourGuide and $110m on Swiss energy company Energy Vault SA.
SoftBank’s spending spree showing signs of strain
Famous for its unorthodox style and on-the-spot dealmaking, SoftBank Vision Fund’s global spending spree on tech companies has seen it invest almost $90m over the course of just two years.
When launching the $100bn fund in 2017, Masayoshi Son said he planned to spend it all in five years, but went on to run it down even quicker.
The extent of its influence was put in perspective last year when Crunchbase revealed that SoftBank was involved in over 10% of global venture flows in the first half of 2019, either via its Vision Fund or related entities.
But faced with disillusioned investors, a disastrous WeWork initial public offering attempt and job losses at more than ten of its US-based investments, the fund’s inner operations are showing signs of strain.
Several of its senior staff have left the company including managing partners Michael Ronen and Praveen Akkiraju and David Thevenon, who has now moved to Balderton Capital.
Looking ahead, Son reportedly suggested that he is considering the idea of launching the second Vision Fund in two stages, with the first providing some time to regain investor’s confidence.