Should SoftBank’s Masayoshi Son try angel investment?

Masayoshi Son speaks at the Milken Institute conference in Tokyo on March 25. Photographer: Kiyoshi Ota/Bloomberg

The reputation of Masayoshi Son, the world’s most prolific unicorn breeder, came crashing down last year with the collapse of WeWork. An 80% writedown on The We Co., and a 970 billion yen ($8.8 billion) loss at the SoftBank Vision Fund delivered some cold hard truths about his vulnerability.

You might think that Son would have learned his lesson. Instead, he’s doubling down, with plans to start a $108 billion fund that’s even bigger than the first. To win back investors’ confidence, though, the chairman of SoftBank Group Corp. might want to consider a different tack: becoming an angel.

That’s not just a euphemism. Angel investing would take Son back to basics. Compared with the SoftBank Vision Fund, a SoftBank Angel Fund should be:

  • Much smaller: $50 billion max.
  • Write lighter checks: Nothing larger than $10 million.
  • Invest earlier: No later than Series A.

This concept of smaller, lighter, earlier ought to become a mantra. But it takes guts — Son would have to rein in the swagger that comes with writing fat paychecks. Not that his habit of throwing billions at Southeast Asian startups isn’t bold; but when that business already has a product, traction, brand awareness and market leadership, then you can’t exactly call it brave — especially when it’s other people’s money.

Angel investors take a punt on new companies at the earliest stages, often before a product has been fully developed or any revenue acquired. In the past, they were generally rich individuals who knew the founders and were parting with a relatively modest amount of cash to give young entrepreneurs a leg up. The average angel and seed deal size in the fourth quarter was $1.8 million, according to Crunchbase News.

When Son entered the venture capital scene in 2016 with a $97 billion checkbook, this old-school model of investing — based on the careful assessment of a startup’s revenue, return and growth — was thrown out the window. Son’s Vision Fund tends to invest much later, in rounds such as Series E, F or even H.

Son also wielded his giant fund to pick winners, and by extension nominate losers, in ways that defied logic. He offered WeWork founder Adam Neumann just 12 minutes to make his pitch, and then told him that his company wasn’t being crazy enough, New York Magazine reported last year. Neumann should aim to make WeWork ten times bigger than originally planned, the founder of the co-working space operator was told.

WeWork was by no means an exception. Son muscled his way into a host of startups, often forcing founders to choose between playing for Team SoftBank or getting defeated by it. Consider online lending startup Social Finance Inc. Co-founder Mike Cagney told Bloomberg Businessweek that Son gave him a choice: Take SoftBank’s money, or watch it go to a competitor. (He took the deal.) In 2019 alone, SoftBank was an investor in four of the world’s five largest funding rounds, according to a report by CB Insights.

The result was not only implosions like WeWork, but overvalued unicorns like Uber Technologies Inc. and Slack Technologies Inc. whose stocks have fallen since their IPOs. It also made many founders and investors wary of Son and his approach, which may be making it harder for him to cut deals.

Masayoshi Son isn’t timid, to be sure. His reputation is built upon decades of courageous bets that netted him, his investors, and his founders billions of dollars. The most famous being Jack Ma and a little e-commerce company that became Alibaba Group Holding Ltd. But the past few years suggest he’s forgotten those roots as a supporter of scrappy young upstarts.

Most recently, he’s reported to be offering up to $40 billion to help Indonesia build its new capital city. He’s already opted to join a steering committee that will oversee construction of the new metropolis on Borneo Island — 1,200 kilometers (746 miles) away from current capital Jakarta — alongside former British Prime Minister Tony Blair and Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan. While there’s something noble about offering advice to a developing nation as it grapples with congestion and flooding, it’s hard not to feel that Son is perhaps straying a bit far from his core mission. After all, he has his investors and staff to look after.

Shifting to angel investing wouldn’t be entirely altruistic. This segment is the hottest sector of funding right now, according to data compiled by Crunchbase News. Whereas late-stage investing — the type the SoftBank Vision Fund specializes in — has declined over the past year, angel and early-stage investing is on the rise.

Son prides himself on being a visionary, with a 100-year time horizon. That makes for good headlines and big numbers. But if he wants to secure his legacy, there’s nothing more honorable than being an angel.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.