SoftBank Vision Fund 2 is a venture capital fund established in 2019 by the SoftBank Group, following the original SoftBank Vision Fund founded in 2017. It is managed by SoftBank Global Advisors, a subsidiary of the SoftBank Group, and focuses on investments in technology companies, particularly those involved in artificial intelligence, machine learning, and other emerging fields. The fund was created to continue the investment strategy of its predecessor, targeting startups with the potential to shape global technological trends.
The fund operates alongside the original Vision Fund, which was launched in May 2017 with over $100 billion in capital, making it the world's largest technology-focused investment fund at the time. Vision Fund 2 was initially planned to raise $108 billion, but due to market conditions and performance issues, it secured less than half of that goal, with all capital coming from SoftBank itself after failing to attract external investors.
History and Formation
SoftBank Vision Fund 2 was founded in 2019, building on the success and challenges of the first Vision Fund. The original fund, created in May 2017, was backed by the Public Investment Fund of Saudi Arabia, Mubadala Investment Company, and other investors including Apple. Masayoshi Son, SoftBank's CEO, envisioned the fund as a vehicle to invest in companies aligned with global artificial intelligence trends across sectors such as finance and transportation. The project was internally codenamed "Project Crystal Ball."
By early 2019, the first Vision Fund had accumulated a 4.9% stake in Nvidia, but was forced to sell those shares due to a prolonged decline in Nvidia's stock price. The fund had used a collar strategy to protect against losses, which limited its upside. It recorded a $3.3 billion return on the Nvidia investment, but by June 2024, the market value of those shares had exceeded $150 billion, leading Son to remark that "the fish that got away was big."
The first fund faced significant difficulties in 2020, with portfolio companies like Getaround, Oyo, Rappi, Katerra, and Zume cutting staff. Elliott Management, an activist hedge fund, acquired a $2.5 billion stake in SoftBank and pushed for restructuring and transparency. In May 2020, SoftBank announced that the Vision Fund had lost $18 billion, leading to layoffs of 15% of the fund's 500 staff. These challenges affected the launch of Vision Fund 2, which raised less than half of its $108 billion target, entirely funded by SoftBank.
Performance and Challenges
In May 2021, SoftBank reported that the total fair value of both funds as of 31 March 2021 was $154 billion, with a record profit of $36.99 billion driven by its investment in Coupang. Following this success, SoftBank increased Vision Fund 2's size to $30 billion and continued self-funding it, though it considered seeking external investors again. Bloomberg reported that the Vision Fund could go public through a $300 million SPAC in 2021, listing in Amsterdam.
However, the fund's performance deteriorated sharply. In 2022, SoftBank Vision Fund posted a record loss of 3.5 trillion yen ($27.4 billion) for the financial year ending 31 March 2022, as stock valuations plummeted. Failed investments included Katerra, Wirecard, and Zymergen, leading to criticism of insufficient due diligence. In July 2022, CEO Rajeev Misra announced he would step back from managing Vision Fund 2, and several other executives departed. In August 2022, the fund reported a $23.1 billion loss for the April-June quarter and planned headcount cuts. Masayoshi Son expressed embarrassment and shame over the performance, and media outlets like The Wall Street Journal and Bloomberg criticized his investment strategy.
By early 2023, the fund had invested just $300 million in startups in the October-December quarter, down more than 90% from the previous year. In May 2023, SoftBank disclosed that the Vision Fund lost a record $32 billion in the fiscal year ending March 2023. In November 2024, Misra formally stepped down, succeeded by Alex Clavel.
Investment Strategy and Focus
SoftBank Vision Fund 2 is managed by SoftBank Global Advisors, while the original fund is managed by SoftBank Investment Advisers. Both are subsidiaries of the SoftBank Group. The investment team evaluates and selects companies for the funds, making mostly venture capital or private equity investments. In Silicon Valley, most investments exceed $100 million. The fund focuses on companies developing technologies aligned with artificial intelligence, including Artificial intelligence, Machine learning, Deep learning, and Large language model startups.
Notable investments by Vision Fund 2 include AI companies such as Cohere, which develops large language models and generative AI technologies. The fund has also invested in other AI-focused startups, continuing the strategy of supporting firms that leverage Transformer (architecture) architectures and Generative AI capabilities.
Management and Operations
SoftBank Investment Advisers is headquartered in London, with additional main offices in Silicon Valley and Tokyo. It also has offices in Abu Dhabi, Hong Kong, Mumbai, Riyadh, Shanghai, and Singapore. The management team has undergone significant changes, with Rajeev Misra stepping back in 2022 and formally leaving in November 2024. Alex Clavel succeeded Misra, taking over management of the Vision Fund.
The fund's operations have been marked by volatility, with significant losses and criticism from shareholders and media. Despite these challenges, Vision Fund 2 continues to invest in technology startups, particularly in the AI sector, aiming to capitalize on long-term trends in Neural network and Generative AI technologies.
Impact and Legacy
The SoftBank Vision Fund, including Vision Fund 2, has had a significant impact on the global startup ecosystem, providing large-scale funding to technology companies. While the first fund faced high-profile failures, Vision Fund 2 has focused on AI investments, aligning with the broader industry shift toward Artificial intelligence and Large language model technologies. The fund's performance has been mixed, but its investments in companies like Cohere highlight its continued relevance in the AI space.
As of 2024, the fund remains active, with a focus on AI startups, and its management continues to adapt to market conditions. The legacy of the Vision Funds is complex, marked by both record profits and record losses, but their role in funding transformative technologies is undeniable.