SoftBank Explores Offering Credit Funds to Tech Startups
- ByStartupStory | May 23, 2023
According to sources familiar with the matter, SoftBank Investment Advisers, the entity responsible for managing two Vision Funds, is reportedly considering the possibility of introducing a private credit strategy aimed at offering debt or debt-like structured financing solutions for late-stage technology startups.
With the objective of providing liquidity options to technology startups, including those within SoftBank’s own portfolios, the fund is looking to address the challenges posed by a sluggish venture funding landscape and a lackluster market for IPO exits. According to one source, the fund aims to achieve returns in the mid-teens range.
According to report, the plan, which is still in its preliminary phase and subject to potential modifications, has been revealed. SoftBank has chosen not to respond to a comment request from Reuters regarding this matter. Over the past few weeks, prominent investment and private equity companies have taken action to address the void left in tech funding, particularly in terms of debt financing, following the collapse of Silicon Valley Bank in March.
SoftBank Group Corp, the renowned Japanese investor in fast-growing technology companies, is poised to leverage the swiftly expanding private credit market. This move will enable SoftBank to offer capital to pre-IPO companies, supporting their survival in a challenging environment where raising new capital has become significantly more difficult.
In the previous month, SoftBank Group Corp reported a considerably reduced annual loss following a successful capital raise utilizing its stake in Alibaba Group Holding Ltd. This move helped mitigate the investment losses incurred by its Vision Fund investing arm, which has faced significant setbacks due to the underperformance of notable investments like WeWork Inc and Didi Global Inc, a prominent ride-hailing company.
SoftBank’s Vision Funds comprise notable companies such as Chime and Revolut in the neobanking sector. The deployment of the $56 billion capital in Vision Fund 2 is nearing its completion for SoftBank. Furthermore, Arm Ltd, a chipmaker under the ownership of SoftBank Group, recently filed for a confidential U.S. stock market listing. This move sets the stage for one of the largest technology initial public offerings (IPOs) in the United States this year.
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