Vision Fund 2 is a venture capital fund established in 2019 by the SoftBank Group as a successor to the original Vision Fund. It is managed by SoftBank Global Advisors, a subsidiary of the SoftBank Group, and focuses on investments in technology companies, particularly those advancing Artificial intelligence capabilities. The fund was created amid the growing global interest in AI-driven innovation, with an emphasis on sectors such as finance, transportation, and enterprise software.
The fund's formation followed the mixed performance of its predecessor, which had raised over $100 billion in 2017. Vision Fund 2 initially aimed to secure $108 billion from external investors, but ultimately raised less than half of that target, with all capital coming from SoftBank itself. This self-funding approach reflected waning investor confidence after high-profile losses in the first fund, including the troubled buyout of WeWork and failed bets on companies like Katerra and Wirecard.
History and Development
Vision Fund 2 was founded in 2019, building on the investment strategy of the original Vision Fund, which had been created in May 2017 with backing from the Public Investment Fund of Saudi Arabia, Mubadala Investment Company, and Apple. The first fund's mandate, as articulated by SoftBank CEO Masayoshi Son, was to invest in companies developing technologies aligned with global AI trends, a vision that carried over to the second fund.
In May 2020, SoftBank announced that the Vision Fund had lost $18 billion, leading to layoffs of 15% of its 500 staff. This downturn prompted a restructuring, and by May 2021, the total fair value of both funds reached $154 billion, with a record profit of $36.99 billion driven by a successful investment in Coupang. Following this, SoftBank increased Vision Fund 2's size to $30 billion, continuing to self-fund it while considering external investment options.
Performance and Challenges
The fund faced significant headwinds in 2022, posting a record loss of 3.5 trillion yen ($27.4 billion) for the fiscal year ending March 31, 2022, as stock valuations plummeted. This was followed by a $23.1 billion loss in the April-June quarter of 2022, prompting headcount reductions and public criticism. Masayoshi Son expressed embarrassment over the performance, and media outlets like The Wall Street Journal and Bloomberg characterized the fund's strategy as flawed, with some attributing it to reliance on the greater fool theory.
By early 2023, the fund had reduced its startup investments to just $300 million in the October-December quarter, a decline of over 90% from the previous year. In May 2023, SoftBank disclosed a record $32 billion loss for the fiscal year ending March 2023, underscoring the fund's ongoing struggles.
Leadership Changes
In July 2022, CEO Rajeev Misra announced he would step back from managing Vision Fund 2, with several other executives also departing that year. Misra formally stepped down in November 2024, succeeded by Alex Clavel. These changes reflected broader efforts to restructure the fund's management and address its performance issues.
Investment Strategy and Focus
Vision Fund 2, like its predecessor, focuses on venture capital and private equity investments, often exceeding $100 million in Silicon Valley companies. The fund's investment team evaluates opportunities across AI-related sectors, including Machine learning, Generative AI, and Large language model technologies. It has also invested in companies like OpenAI and Anthropic, though specific details of these investments are not publicly disclosed.
Legacy and Impact
Despite its challenges, Vision Fund 2 has played a role in funding AI innovation, contributing to the broader AI boom that began in the early 2020s. The original Vision Fund's early exit from Nvidia in 2019, which later became one of the world's most valuable companies, has been cited as a missed opportunity, with Son remarking in June 2024 that "the fish that got away was big." The fund's experience highlights the risks and rewards of large-scale technology investing.