SoftBank Group’s Vision Fund is planning deep cuts in staffing after reporting about $18 billion (Dh66bn) in losses from the declining value of its startups, according to people familiar with the matter.
The reductions could affect about 10 per cent of the fund’s workforce of roughly 500, said two of the people, who asked not to be identified discussing personnel decisions. The Vision Fund’s headquarters are in London, with additional operations in Tokyo and California. The cuts will be across all levels of staff, said one person.
A spokesman for the Vision Fund declined to comment.
SoftBank founder Masayoshi Son and his $100bn Vision Fund changed the tech industry by handing out enormous checks to relatively unproven startups. But the fund went from SoftBank’s main profit contributor a year ago to its biggest drag on earnings. It lost 1.9 trillion yen ($17.7bn/Dh65bn) last fiscal year after writing down the value of investments, including WeWork and Uber.
Mr Son originally said he hoped to raise a new Vision Fund every two to three years, but he has conceded he can’t attract money now because of the poor performance.
The fund, led by Rajeev Misra, operates as a SoftBank affiliate with most of the money coming from limited partners.
“It makes sense that SoftBank is cutting positions at the Vision Fund as they are in an extremely difficult situation, and they may start targeting highly paid workers to cut costs,” said Koji Hirai, head of merger and acquisition advisory firm Kachitas in Tokyo.
The Vision Fund grew rapidly after launch three years ago as Mr Misra recruited scores of people from the finance industry, including many of his former colleagues from Deutsche Bank. Among its managing partners are several of the German bank’s ex-employees, including Colin Fan, former co-head of its investment banking division.
The fund also set up an unusual compensation structure that includes a $5bn loan to employees. The debt is swapped for equity in the fund and generates profit when deals make money and losses when they don’t, scaled by seniority, people familiar with the matter have said. The poor performance so far along with the layoffs may prompt some employees to look for other positions.
“One side-effect is that the best people at SoftBank may exit to find better funds,” said Mr Hirai. “If so, their fund business may become even worse, sliding down from a slope.”
The Vision Fund has struggled since WeWork botched its efforts to go public last year and SoftBank stepped in to bail the company out. The Vision Fund currently manages more than 80 portfolio companies, but Mr Son expects about 15 of the fund’s startups will likely go bankrupt while predicting another 15 will thrive.
“Vision Fund’s results are not something to be proud of,” Mr Son said earlier this month as he announced record losses. “If the results are bad, you can’t raise money from investors. Things aren’t good, that’s why we are investing with our own money.”
The fund has already unwound some investments, including selling a nearly 50 per cent stake in dog-walking startup Wag Labs back to the company last year. Mr Son has said he plans to sell off about $42bn in assets to finance stock buybacks and pay down debt.
SoftBank disclosed it’s selling shares in Alibaba and is in talks to sell about $20bn of T-Mobile US, Bloomberg News reported. It’s also exploring selling a minority stake in industrial software maker OSIsoft that could be worth $1.5bn.
SoftBank shares, after plummeting in March, have recovered and are little changed for the year. The stock rose just more than 1 per cent in Tokyo trading.
One emerging question is how Alibaba, SoftBank’s most valuable holding, will be affected by the clash between the US and China. A bill just approved by the US Senate could force Chinese companies like Alibaba to stop trading their shares on US exchanges.
“The big picture is SoftBank is caught up with US-China conflict right now, and SoftBank may need to conduct a drastic restructuring if Alibaba was delisted from New York,” said Mr Hirai. “Its main banks and the capital markets are anxiously awaiting an outcome for the situation.”