Text/Han Ying
Editor/Letter Lee
On the afternoon of May 12, 2022, SoftBank Group CEO Sun Zhengyi appeared at the company's performance conference as usual. What is different from the past is that at this performance meeting, Sun Zhengyi repeatedly mentioned the words defense and caution, and his face was solemn.
This is in stark contrast to son Zhengyi, who was full of spirit at the last fiscal year's results meeting. At the time, Son said SoftBank made more profits in a quarter than any Japanese company in history.
Now Son Zhengyi suddenly adjusted his tone, which was seen by the outside world as a signal for Sun Zhengyi to slow down the pace of investment.
In fact, as early as March this year, at an internal meeting of SoftBank, Son Zhengyi asked executives to slow down the pace of investment. Subsequently, the managing partner of SoftBank Vision Fund said to the outside world: the fund is planning to reduce investment.
Son Zhengyi, who has always been a hero in the investment circle, makes such actions and decisions very rarely.
You know, Sun Zhengyi, who once invested in Alibaba in 6 minutes and WeWork in 28 minutes, still makes the investment circle remember it vividly.
Son Zhengyi, who is extremely gamblers and controlling, makes his investment style can be described as crazy. Along with it is the high valuation and crushing progress of The SoftBank Group.
But just this year, a historic scene happened. SoftBank Group reported financial results for fiscal 2021 (April 1, 2021 to March 31, 2022), and as of March 31, 2022, SoftBank Group's net loss for fiscal year 2021 was approximately $90 billion. Turning over the history of venture capital over the past two decades, such huge losses appeared for the first time.
Faced with pressure from the hugely loss-making SoftBank Group and shareholders, Son has worked hard to reassure investors that SoftBank's debt burden is manageable and that he is adopting different strategies to adapt to volatile markets, such as halving or a quarter of SoftBank's investment in 2022.
Obviously, Son Zhengyi, who had gambled heavily on the future, did not dare to take any more risks.
In fact, a similar scene also happened to the domestic venture capital circle. Affected by the epidemic and the macro environment, China stocks have ushered in a low tide in 2022, and the investment market is entering the darkest hour. The conservative investment style of "if you can't shoot, you can't sell" has become the consensus of the industry.
Today, Son Zhengyi is 64 years old, and it has been 4 years since the retirement time of the "life plan" he made when he was 19 years old. But at present, Sun Zhengyi is far from reaching retirement, and then Sun Zhengyi does not dare to continue the crazy investment style of the past, and caution has become his next keyword.
1. Sun Zhengyi, who had gambled heavily on the future, did not dare to take any more risks
"The only cap on a company is the ambition of the founders." Son zhengyi once told WeWork founder Neumann when investing in co-working enterprise WeWork, "In a battle, crazy people are easier to win than smart people." ”
As with this saying, Son's investment style is also radical.
It is also this investment style that has brought two fateful turning points in his investment journey. And both of these turning points are related to numbers, 6 and 28, respectively.
Quantify these two numbers into time, and two investment projects unfold before us. The former was decided to invest in Alibaba after Sun and Ma met in Beijing in 1999 after meeting for six minutes; the latter was only 28 minutes when he first invested in WeWork.
Two investments that rely only on intuition and do not care about valuation have once become the myth of the venture capital circle.
But today, everything is changing.
Especially after weWork's first failed impact IPO led to a sharp drop in market value; the stock prices of Companies such as Didi and Uber, which Sun Zhengyi heavily took a heavy position, and after the huge losses of OYO, an Indian economy hotel chain... Son also began to reflect on himself, saying in an interview with Forbes that "tactical reflection, strategy unchanged, vision unchanged." ”
Unfortunately, Son's reflection did not bring good results to SoftBank.
Not long ago, in the face of SoftBank's unprecedented losses, Sun Zhengyi, who looked solemn at the scene, said that SoftBank Group will officially slow down investment and adopt a conservative investment pace, compared with 2021, this year's investment amount will be reduced by 25%-50%.
In fact, Son Zhengyi had long anticipated the onset of this crisis. Two months ago, Son had asked executives to slow down their investments in an internal SoftBank meeting, marking the first time Son had said that investment would shrink globally and outward.
According to data from CB Insights, an independent think tank in Silicon Valley, in terms of the number of investments, SoftBank ranked 9th in the ranking of the world's most active investment institutions in Q1 2022, with a total of 55 companies invested. Compare that number to the 120 companies that Tiger Global managed to invest in, more than double that number.
Top 10 active investment institutions in the world in Q1 2022, the source of the picture CBInsights Chinese WeChat public account
In Q4 2021, SoftBank invested in 60 companies, ranking seventh among the most active investment institutions in the world. It can be seen that both the number of investments and the degree of activity, SoftBank Group is declining.
Even in the financial technology field that SoftBank is optimistic about, in terms of the number of investments, in Q1 2022, among the top six most active investment institutions in the world, SoftBank Group ranked last, investing in a total of 17 companies.
The top six investment institutions in the world that are most active in the fintech field in Q1 2022, the source of the picture cbinsights Chinese WeChat public account
Not only slowing down the pace of investment, Son zhengyi also began to let SoftBank sell shares in some companies. In March, SoftBank sold shares of South Korean e-commerce giant Coupang for less than $21 a share, 40 percent below the issue price of last year's Coupang IPO.
So far, SoftBank, which has been soaring all the way, has rarely slowed down the pace of investment and has attracted attention in the global investment circle. It should be known that Son Zhengyi and SoftBank have always been regarded as one of the first-class market vanes, and their investment style has also been talked about by the outside world.
In the investment circle, Son Zhengyi even has a resounding name "Mr. Ten Times". The so-called Mr. Ten Times, the industry is widely circulated that many founders met with Sun Zhengyi, after a short dialogue, Sun Zhengyi will immediately interrupt the direct negotiation of money, and give four or five times or even ten times the amount of financing.
A well-known venture capitalist once told Late Post that Son's investment method has not changed for decades. At that time, VC invested hundreds of thousands and 1 million US dollars, he dared to invest tens of millions of US dollars; today VC can invest tens of millions or even hundreds of millions of US dollars, he invested 3 billion, 5 billion US dollars.
It can be seen that Sun Zhengyi's investment style was radical and strong, but now in the face of huge losses and uncertainty in the future, Sun Zhengyi does not dare to take any more risks, and eventually slows down the pace of investment.
2, once radical, let SoftBank huge losses
In 2019, SoftBank Suffered its first loss in 14 years. At a subsequent press conference, 62-year-old Son Zhengyi said his investment judgment was terrible.
At the earnings release on May 12, 2022, 64-year-old Son Zhengyi said, "In this chaotic world, the approach we should take is defense." ”
Although, previous failures have given Son and SoftBank a chance to turn the tables against the wind. But today is different from the past, in the case of a downturn in the capital market, SoftBank Group has finally fallen to the altar.
According to CB Insights, an independent think tank in Silicon Valley, SoftBank invested in 195 private companies last year and still maintained a crazy shot. Under the premise that the overall investment environment is not good, this crazy shot naturally makes SoftBank suffer heavy losses - most of the SoftBank participating companies have stock prices below the issue price.
Last Thursday, Son Zhengyi released SoftBank Group's fiscal 2021 annual report in Tokyo, Japan, and the results surprised the outside world.
According to the financial report, as of March 31, 2022, SoftBank Group's net loss for fiscal 2021 was 1.7 trillion yen (about 90 billion yuan). Among them, the vision fund's net loss in fiscal 2021 was as high as 2.64 trillion yen (about 140 billion yuan), which is the main source of loss for SoftBank Group.
Specifically, both Phase I and Phase II of the Vision Fund have losses of varying degrees. The top three losses of Vision Fund Phase I came from Didi, WeWork, and Grab, and the top three losses of Vision Fund Phase II came from WeWork, JD Logistics and Dingdong Grocery Shopping.
As you can see, WeWork has borne the brunt of SoftBank's "mess." You know, the 28-minute "gut" investment has cost SoftBank nearly $19 billion in the WeWork project. CNN cites data from CLSA and Bernstein Research that softbank and the SoftBank Vision Fund had injected nearly $11 billion into WeWork, at least 27 percent, before the IPO.
Later, the story of WeWork's first listing and market value slashing is well known. Even at SoftBank's second-quarter earnings release in November 2019, Son said, "The misjudgment of WeWork Chairman Adam Neumann was the biggest mistake I made, and it made me feel ashamed." ”
Image source WeWork WeChat public account
Also "falling and falling" is the Singapore takeaway platform Grab. Since its listing on the NASDAQ at the end of 2021, its stock price has also continued to fall, and in the fourth quarter of fiscal 2021, Grab's stock price was directly "cut". Since its listing, Grab's market value has also fallen by three-quarters.
It is worth mentioning that when the South Korean e-commerce platform Coupang went public in March last year, its stock price rose by 40%, and SoftBank received nearly $25 billion in returns from it, which was once regarded by SoftBank as the second "Alibaba". Unfortunately, from the listing to the end of fiscal 2021, Coupang's stock price has fallen by nearly 50%. According to the financial report, the investment loss of the first phase of the Vision Fund in Coupang amounted to 1.6 trillion yen.
It should be noted that SoftBank Group's losses in fiscal 2021 were mainly concentrated in the fourth quarter of fiscal 2021 (the first quarter of 2022). According to the financial report, SoftBank Group's net loss during the period was 2.1 trillion yen (about 110.8 billion yuan), the largest quarterly net loss in history.
According to the Nomura Securities report, in the first quarter of 2022, 32 of the 34 technology stocks held by Vision Fund Investments lost money. What is more exaggerated is that according to the Wall Street Journal, most of the listed companies held by the Vision Fund Phase I have been cut since the beginning of the year, and if SoftBank has not reduced its holdings, the potential loss may have exceeded $25 billion.
The obvious contrast is that in the same period last year, the SoftBank Vision Fund also achieved a revenue of 4.03 trillion yen. In the face of huge losses, Son Zhengyi may be hard to blame.
At the end of "Faith and Son Masayoshi's Biography" written by Inoue Tadashi, Son Zhengyi said: "I am in a third-rate position and die with hatred, and I hate such results." I want to be number one, and far ahead. ”
Son Zhengyi is strong, and so is the SoftBank Group he leads. But the strength did not make SoftBank Group number one. All along, a voice from the outside world is that SoftBank may die in the madness of Son Zhengyi. A Silicon Valley investor once admitted to Tencent's "Deep Net" that the biggest risk of the Vision Fund may lie in Son Zhengyi himself.
One detail is that in the past, when Son Zhengyi made new investments, he would often tell the founders of the invested companies that their company could be as strong as Alibaba. Unfortunately, in addition to Alibaba, in recent years, the outside world has paid more attention to the case of Son Zhengyi's investment failure, and SoftBank cannot afford to make a huge loss.
3, the next decade, the entire investment community will become conservative
In 1976, 19-year-old Son bought a copy of Popular Electronics magazine at a small supermarket in Oakland, USA. What appeared in front of him was a photo of the Intel i8080 chip. The never-before-seen image struck Son's brain.
Perhaps because of that surging mood, he set himself a life plan for the next 50 years. Including 20 years old, he started a business and announced his existence to the world; at the age of 30, he earned enough seed funds of 100 billion yen to devote himself to a great cause; at the age of 60, he retired and handed over his career to his successor.
Today, the 64-year-old Son Zhengyi has also appeared on various occasions as the CEO of SoftBank, and retirement has not yet been put on the agenda. The main problem is that the external environment and internal losses make it impossible for Son to leave.
As SoftBank Group said at the earnings release: "The investment environment remains challenging, dominated by rapidly rising inflation, increasingly complex geopolitical risks and the global energy crisis." ”
At present, a similar scene of SoftBank is being staged in the domestic venture capital circle. Shocks, cold winters, and breakouts have become the keywords of the investment circle.
According to the statistics of Zero2IPO Research Center, the number of newly raised funds in the market in the first quarter of this year totaled 1374, of which the situation of foreign currency funds was worrying, and a total of 20 foreign currency funds in the first quarter of this year had a new round of fundraising, down 57.4% year-on-year; the disclosed amount raised was about 31.510 billion yuan, a year-on-year decline of 62.6%.
2019Q1-2022Q1 China Equity Investment Fund Raising in Each Quarter, Tuyuan Zero2IPO Research WeChat Public Account
Cherishing the existing cards in hand and slowing down the pace of investment have become the consensus of the industry. In the first quarter of this year, a total of 2,155 investments occurred in the domestic equity investment market, down 27.5% year-on-year; the disclosed investment amount was 196.822 billion yuan, down 47.1% year-on-year.
With the unsatisfactory return on investment and the inability to raise money, layoffs and cancellation of year-end bonuses occur from time to time in the investment circle.
According to investment reports, a certain head PE who has participated in star projects such as Yuanqi Forest has implemented internal layoffs in the first quarter of this year; a top PE in Beijing has completed its account in February this year and has not issued last year's year-end bonus in internal notice; a direct investor said that its boss directly called for the suspension of existing investment, and the company did not open for a quarter.
Even head agencies are shrinking their investments at a speed that is visible to the naked eye. According to the CB Insights report, the most active investment institution in the global fintech sector in Q1 2021 is Sequoia Capital. But by Q1 this year, none of the top six had Sequoia Capital.
Q1 2020-Q1 2021 Q1 The most active investment institution in the global fintech field, the source of the picture CBInsights Chinese WeChat public account
The reality is that with the general decline in Chinese stocks, investment slowdown, the cold winter has arrived, the investment circle is experiencing a cruel reshuffle period, and the original "two-eight rule" is also evolving to a more cruel "one-nine law".
Liu Xiaodan, founder of Chenyi Investment and former president of Huatai, mentioned in the speech "Insisting in Dynamics" delivered at the annual partner meeting of Chenyi Investment that the cold winter of investment institutions has just begun, and a large number of PE/VCs will be eliminated.
Huaxing Capital founder Bao Fan also mentioned in an interview with the "Deep Net" that the entire fundraising environment is not very good, the market is still insisting on fundraising estimates are a minority, the main LPs and investors of the US dollar institutions are in North America, and now there have been some changes in China's view, and the value creation in the past 10 years can be said to be very different from the value creation in the next 10 years.
Nowadays, the era of pe and VC for the whole people has long passed, and the myth of capital wealth creation is also close to the end, and the once crazy is bound to be pressed the pause button. In the next decade, perhaps the entire investment community will be in a conservative state.
At the same time, the "cash cow" CVC business of the once big Internet manufacturer has also collectively stepped on the brakes.
Tencent, known as the "top venture capital in China", has adopted a strategy of "not selling if you can't shoot" this year, and the official website of the investment has been quietly closed; Byte has directly dismissed the strategic investment department; Ali CEO Daniel Zhang withdraw from the board of directors of Weibo, and the shareholding in Tudou has also been changed to "indirect".
It is undeniable that after the bursting of the high valuation bubble, the once fanaticism has taught a lesson to the Chinese and even global investment circles, even Sun Zhengyi and the head investment institutions are not spared.
The performance of the contraction of the head investment institution is the epitome of the entire investment circle. Through these appearances, the deeper change is that the investment circle is returning to rationality and conservatism under the macroeconomic impact of repeated epidemics, geopolitics, policy tightening and other issues.
(The headline image in this article is from The Video of SoftBank's fiscal third quarter financial results conference in March 2022.) ）