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07 January 2020 06:42

SoftBank Group Softbank Vision Fund Investment fund

SoftBank's Vision Fund has recently backed out of several start-up investments following the public spiral of its portfolio company WeWork, Axios reported Monday. After submitting term sheets worth hundreds of millions of dollars, according to Axios, SoftBank ultimately walked away from investing in three start-ups. Sources familiar with the dealings between SoftBank and start-ups Honor, Seismic and Creator told Axios the firm repeatedly delayed the final sign-off on their investments before finally dropping them altogether. However, a person familiar with the situation says talks with Creator remain active. "Given we're a fiduciary and investing very large amounts of capital, our investment process is more rigorous than unregulated investors and typical VCs," a SoftBank spokesperson said in a statement to CNBC.

"There have been a few cases where our process took longer than anticipated, which we regret. We're always upfront with founders about what to expect and we try to keep them informed every step of the way." SoftBank's decision to pull away from potential investments could be a symptom of its more cautious approach as it ramps up its second multibillion-dollar Vision Fund. CEO Masayoshi Son is considering focusing the investment strategy on profitability and public offerings, rather than rapid growth alone, people familiar with the matter previously told CNBC. The strategy includes slowing the investment rate for Vision Fund 2. SoftBank's original $100 billion Vision Fund spent about $80 billion in less than three years.

SoftBank had initially planned to raise $108 billion for its Vision Fund 2, but Son is now targeting a significantly lower amount, according to people familiar with the matter. Discussions with Saudi Arabia's Public Investment Fund and Mubadala Investment Company are still ongoing for both debt and equity investments, the people said. SoftBank has discussed an investment with PIF in the $15 billion range, two of the people said. That's well under the $45 billion PIF committed to Vision Fund 1, and there's no guarantee PIF will invest at that level, the people said. The Vision Fund was called into a public reckoning after one of its most notable investments, WeWork, failed to go public after a wave of criticism over the company's financial record and unconventional corporate governance.

SoftBank and the Vision Fund invested about $10.6 billion in WeWork. WATCH: The impact the WeWork fallout could have on VC funding Japanese giant SoftBank is walking away from startups, bailing on deals and leaving startup in the lurch, according to the news first reported by Axios. In its report on Monday, Axios reported that SoftBank Vision Fund has walked away from investing in several startups, months after submitting term sheets worth hundreds of millions of dollars and promising that closing delays were only temporary. Among the startups affected by SoftBank are: Honor, Seismic, and Creator. Honor is a San Francisco home care company for older adults that's raised over $100 million from firms like Andreessen Horowitz, Naspers, and Thrive Capital.

According to Axios, Honor received a term sheet from SoftBank in mid-November, with subsequent reports putting the deal size at around $150 million. But SoftBank later killed the deal one week before Christmas, telling Honor that Son had changed his mind. SoftBank has investments in many startups and its highly unusual behavior could threaten its ability to invest in highly sought-after companies. SoftBank's decision is so alarming that Paul Graham tweeted the following: "Whoah, SoftBank is breaking termsheets. This is one of the most damaging things that can happen to a startup. — Paul Graham (@paulg) January 6, 2020 "Given we're a fiduciary and investing very large amounts of capital, our investment process is more rigorous than unregulated investors and typical VCs. There have been a few cases where our process took longer than anticipated, which we regret. Softbank Vision Fund has stakes in the following companies: Arm Holdings, Fortress Investment Group, Boston Dynamics, Sprint (85%), Alibaba (29.5%), Yahoo Japan (48.17%), Brightstar (87.1%), Uber (15%), Didi Chuxing (ca.20%), Ola (ca.30%), Renren (42.9%), InMobi (45%), Hike (25.8%), Snapdeal (ca.30%), Fanatics (ca.22%), Improbable Worlds (ca.50%), Paytm (ca.20%), OYO (42%), Ping An Insurance (7.41%)[6], Slack Technologies (ca.5%), WeWork (ca.80%), ZhongAn Online P&C Insurance (5%), Compass (ca.22%), AUTO1 Group (ca.20%), Wag (45%), Katerra (ca.28%), Cruise Automation (ca.19.6%), ParkJockey[7], Tokopedia (Indonesia), and many more. "Hurry up and wait" is how numerous sources describe negotiations with SoftBank, saying that the process was time-consuming, expensive, and ultimately fruitless. Honor is a San Francisco home care company for older adults that's raised over $100 million from firms like Andreessen Horowitz, Naspers, and Thrive Capital. It received a term sheet from SoftBank in mid-November, with subsequent reports putting the deal size at around $150 million. SoftBank CEO Masayoshi Son gave his blessing during a meeting at his Woodside, Calif. Per a source familiar: "SoftBank kept saying it had to run some 'process stuff' before getting the term sheet fully-signed, but said they wanted to get it funded by year-end, so it started confirmatory due diligence—law firms, background checks, EY going through stuff, etc... SoftBank killed the deal one week before Christmas, telling Honor that Son had changed his mind. Son did not personally communicate his decision or rationale to the company. Seismic is a San Diego-based maker of B2B sales software that's raised over $180 million in VC funding, most recently at a $1 billion valuation, from firms like General Atlantic, Jackson Square Ventures, Lightspeed Venture Partners, and JMI Equity. It wasn't looking to raise money but, over the summer, SoftBank came with a term sheet that was hard to refuse. The two sides struck a deal by early August, with CEO Doug Winter getting Son's initial okay via a phone call. "It was originally supposed to be the last company in Vision Fund 1, but SoftBank kept dragging its feet so suddenly it's supposed to be the first or second deal in Vision Fund 2," says a source close to the situation. Winter traveled to Japan in October for an in-person meeting with Son, after which Seismic was given "three more boxes to check... SoftBank signed the company to an exclusive, six-month term sheet for a round that was many multiples of the $25 million it had raised to date. "Totally screwed," is how one source close to Creator refers to what happened next. But the "hurry up and wait" persisted, with multiple sources telling me last month that the original deal was dead. Things may have since changed, however, as a source close to SoftBank says negotiations remain active. Company executives and investors all declined to speak on the record, when contacted by Axios. Some sources believe a driving factor is SoftBank's struggle to raise Vision Fund 2. Vision Fund 2 so far has done five deals, although that all appears to be via SoftBank Group's $38 billion commitment to the fund. SoftBank sent Axios the following statement: "Given we're a fiduciary and investing very large amounts of capital, our investment process is more rigorous than unregulated investors and typical VCs. There have been a few cases where our process took longer than anticipated, which we regret. We're always upfront with founders about what to expect and we try to keep them informed every step of the way." SoftBank Vision Fund (OTCPK:SFTBF,OTCPK:SFTBY) walked away from several startup investments after submitting term sheets worth hundreds of millions of dollars, according to Axios sources. Home care startup Honor received a SoftBank term sheet in November. SoftBank said it needed some time for standard due diligence, and then abruptly pulled the deal in late December. Similar deals died for B2B sales software startup Seismic and food prep robotics company Creator. Sources attribute the turbulence to struggling funding for Vision Fund 2 and the failed WeWork IPO and bailout.