After about a year of essentially sitting on the sidelines, SoftBank Group—once notorious for writing enormous checks at rapid speeds—is crawling back into the ring.
“We've been carefully restarting our investment activities,” CFO Yoshimitsu Goto said on SoftBank’s earnings call from Minato, Tokyo yesterday, noting that—for the first time in six quarters—SoftBank’s Vision Funds had reported a net investment gain, rather than a loss. But SoftBank executives are favoring words like “slow” and “careful” as they come back into market. And they made something very clear on the call: Their investors are only looking at A.I. deals right now.
“The bar for investing is very high,” managing partner Navneet Govil said. “There has to be investments that meet our targeted threshold and they have to be companies that are focused on next-generation A.I. with high growth potential.”
That directive is coming down from the top at SoftBank—from infamous tech investor Masayoshi Son, who has made a name for himself writing enormous checks, sometimes with no due diligence. As Goto said on the call: “[Masayoshi is] very much focused and dedicated [to] A.I. business: What can we do? What should we do? That's something that he is thinking around the clock—24/7.”
SoftBank’s investment team is likely hoping A.I. can give its portfolio the pick-me-up it sorely needs. The Tokyo-based investor, which raised a $100 billion fund from Saudi Arabia, Abu Dhabi, and others six years ago and started deploying unprecedented piles of cash into companies like WeWork and Uber, has been entirely battered in recent years as valuations for some of its most important portfolio companies deflated.
SoftBank reported yesterday that, as of the end of June, 343 of its portfolio companies had deteriorated in value (112 companies have grown in value). Even with improvement this quarter, the firm has reported cumulative losses of $6.3 billion across its two Vision Funds and Latin American funds. And, within the last 12 months, there have been two layoff events—the latest taking place this past quarter.
Executives acknowledged the difficult past few quarters but stated they believed things were starting to turn around. In the last three months, SoftBank has made $1.8 billion in new investments, exceeding its activity from the last three quarters combined. Goto brought up chipmaker Arm’s impending IPO on several occasions, noting that “I believe that Arm will contribute to Vision Fund 1 a lot” and said there are “a lot of companies” in its portfolio that can be listed on the public markets.
Over the last three years, SoftBank Vision Fund 2, which has no outside LPs, has reported cumulative investment losses of $19.2 billion. SoftBank’s first fund, Vision Fund 1, has been faring better, with more than $14 billion in investment gains.
But SoftBank has seemed to have learned its lesson about one thing. While moving quickly was once core to its investing philosophy, no longer.
Goto specifically stated that, three years ago, SoftBank’s investment committee discussion was “probably focusing on speed.”
And this year? “Focusing on A.I. is something that we value this time,” he said.
The venture capital affirmative action fight…As mentioned in one of last week’s Term Sheet editions, American Alliance for Equal Rights—the conservative activist group behind the recent Supreme Court case over affirmative action at colleges and universities—filed a racial discrimination lawsuit last week against the women of color-focused early-stage VC firm Fearless Fund. My colleague Emma Hinchliffe dived into the case and its broader implications in yesterday’s edition of The Broadsheet, Fortune’s newsletter covering the most powerful women in business. You can read it here.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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