SoftBank’s Masayoshi Son warns of a longer funding winter for unicorns who refuse to accept a valuation cut
- ByStartupStory | August 10, 2022
In the post-earnings call for the quarter ending June 2022, SoftBank CEO Masayoshi Son stated that the ongoing financing winter will endure longer for unicorn founders who seem to be unwilling to accept a lower value to obtain capital. “Our Vision Fund suffered massive losses, but regrettably, unicorn business CEOs continue to believe in their valuation and refuse to acknowledge the possibility that their worth may be lower than they believe.” So, we should wait till the multiple of unlisted firms is lower than that of public companies,” Son remarked.
Not only unicorns, but all unlisted firms may endure a longer, harsher winter than public companies, according to Son. In Q1 FY22, SoftBank recorded a net loss of $24.5 billion, compared to a profit of $5.6 billion in Q1 FY21. In the June quarter, however, the loss of its Vision Fund was $21.7 billion. The SoftBank CEO admitted to being overly thrilled in 2021 when technology stocks were surging and now feels ’embarrassed’ by his attitude.
To obtain funds, the investment firm has resorted to selling shares in some of its portfolio businesses (such as Uber), as well as decreasing internal operational expenses. SoftBank has already stated that it intends to write down assets worth $30 billion due to rising inflation and interest rates the Russia-Ukraine war, and the collapsing value of its Chinese investments.
SoftBank has invested a total of $1.6 billion in Paytm thus far, with a current investment value of $1.19 billion. So far, the firm has invested $397 million in Delhivery and $199 million in Policybazaar, for a total investment value of $907 million and $583 million, respectively. Paytm provided $407 million in gross loss to the fund, while Delhivery contributed $510 million in gross profit. According to SoftBank Group’s results report, Policybazaar provided $384 million in profit to Vision Fund 1. Unlisted firms in SoftBank’s India portfolio include Blinkit, Cars24, Meesho, Zeta, OfBusiness, and Lenskart, among others.
The Indian startup ecosystem continues to see a significant reduction in financing. In the first seven months of 2022, domestic entrepreneurs raised $19.7 billion, an almost 8% decrease from the same period the previous year. Startup financing was approximately 75% lower in July, at $1.12 billion, compared to January 2022. Fears of an oncoming recession, along with rising interest rates, decreased liquidity, and market volatility as a result of the Russia-Ukraine conflict, have pushed the startup environment into a cost-cutting frenzy. As a result, startups are laying off people to save money. According to Inc42, firms such as Unacademy, MPL, Ola, and BYJU’S have already laid off around 11,360 people in 2022.
Follow Startup Story
Related Posts
