SoftBank Vision Fund's finance chief has said that the mega tech investor has marked up valuations of portfolio companies such as Swiggy, FirstCry, and Ola Electric in the September quarter, a move that could be an early sign of private market prices of tech companies bouncing back after a prolonged slide.
“The India portfolio has actually been doing relatively very well. Swiggy, FirstCry, Ola Electric have all been marked up in this most recent quarter. Ola Electric raised from Temasek at a $5.4 billion valuation. For Swiggy, you can look where Zomato is trading at as both the companies are neck to neck,” SoftBank Vision Fund chief financial officer Navneet Govil told Moneycontrol after the company’s Q2 results.
For the quarter, SoftBank Vision Fund had a $300 million gain across its two funds that have cumulatively bet around $142 billion on 475 tech companies across the world. In Vision Fund 1, there was a gain of $2.5 billion and in Vision Fund 2 there was a loss of $2.1 billion in Q2, while the conglomerate’s LatAm funds were mostly flat.
“And you'll recall in the June quarter, we had a gain as well. Given macro uncertainties, we've now had the performance stabilise in the past two quarters,” said Govil.
Of a number of macro headwinds, the first is a continued geopolitical unrest, which has contributed to fears about a sustained energy crisis. Secondly, the US and Europe are in a longer interest rate regime. China, on the other hand, is seeing weak consumer demand that has prompted a deflationary environment. However, India is seen to be performing very well by the Japanese investment firm.
“Our portfolio has been resilient and agile in the face of these macro uncertainties. If you look at our portfolio of 475 companies, by fair value 92 percent have a cash runway of more than 12 months. So, a lot of these companies have pivoted to capital efficient growth,” argued Govil.
Meanwhile, two-thirds of SVF’s portfolio by fair value are companies that cumulatively have $250 billion of annual revenue, while more than half of its portfolio is showing top line growth of 25 percent annually.
In its earnings presentation, the investor highlighted 6 companies from its India portfolio — OYO, Swiggy, Ola Electric, OfBusiness, Lenskart, and FirstCry — among the top 15 of its private holdings worldwide that are cumulatively tracking $12 billion in gains at present.
Moreover, at least 4 of these 6 Indian companies are expected to debut in the public markets in the next one year.
Focus on AI
At a time when artificial intelligence (AI) has become the new ‘it’ theme in tech, SoftBank is shoring up its portfolio with the required chops. Moneycontrol had exclusively reported last month that the investor had taken the leadership of 20 of its portfolio companies from India on an AI tour to Silicon Valley.
“We took our Indian portfolio companies like Policybazaar, Lenskart, Meesho, Mindtickle, etc to Silicon Valley to meet the top AI companies such as Anthropic, OpenAI, Cohere, Databricks... I was in those meetings and the range of AI applications that could be done are just immense,” said Govil.
While old-world demand like product-market fit, rapid customer adoption and sustainability of growth still remain important yardsticks to select bets for SoftBank, a candidate’s utilisation of the AI opportunity has also become an important barometer of fundability in recent times.
In a recent public appearance, SoftBank founder and supremo Masayoshi Son reportedly said he believes artificial general intelligence (AGI) — artificial intelligence that surpasses human intelligence in almost all areas — will be realised within 10 years.
According to a Reuters report, Son said he believes AGI will be ten times more intelligent than the sum total of all human intelligence. He noted the rapid progress in generative AI that he said has already exceeded human intelligence in certain areas.
However, as SoftBank has slowed down its investing pace in the last two years amid a tightening interest rate regime and choppy public markets, some industry experts feel that it has missed out on taking large early punts on generative AI.
While big tech companies and venture funds in Silicon Valley are plonking down billions of dollars into buzzy generative AI outfits like ChatGPT maker OpenAI, Anthropic AI, Hugging Face and Cohere, the Japanese tech conglomerate’s name has been conspicuous by its absence from the hottest deals.
“The investments you are referring to, whether it's Amazon, Microsoft, Google, are strategic investments. These are hyper scalars that are trying to build the full stack AI solution. We are engaging with all of them, but we are financial investors. That's the difference,” Govil said.
Meanwhile, SoftBank’s Son is reported to be drawing up the blueprint of a hardware AI startup with OpenAI chief Sam Altman and famed iPhone designer Jony Ive. In a post-earnings call yesterday, a top SoftBank executive spoke at length about the group’s thesis and bets on AI, but declined to comment on the rumoured hardware startup.
