SoftBank Group is unlikely to invest in cryptocurrency or other blockchain business through the first half of 2023, sources familiar with the Japanese conglomerate’s Vision Funds tell Forbes.
The pause began sometime last year. “One of the partners there said, ‘Hey, we’re completely on the sidelines for the remainder of the year, maybe for the first quarter or two,” says a source familiar with SoftBank’s investments who requested anonymity.
Another source familiar with the technology-based conglomerate headed by Masayoshi Son, who also requested anonymity, says Softbank is concentrating on “long-term” projects and that its Vision Fund team is “continuing to evaluate opportunities.”
A dire quarterly earnings report, including a $5.9 billion loss in the company’s fiscal Q3 and an over 90% decrease in startup investments, combined with falling crypto market value have crushed expectations of high returns in the digital-asset sphere.
SoftBank did not respond to Forbes requests for comment.
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Analysts at Macquarie Capital attributed the slowdown in startup investment partly to their portfolio companies’ available cash—94% of SVF portfolio companies have enough money to fund operations for the next year, according to a February 15 analysis.
But the company hasn’t publicly invested in any crypto-related projects since June, when its Vision Fund 2 co-led a $66 million round for InfStones, a blockchain infrastructure company. Vision Fund 2, home to the majority of SoftBank’s crypto and blockchain portfolio companies, has lost $16.7 billion since its inception in June 2019 on $49.9 billion invested, according to a February report. The company has lost $34.5 billion across its Vision Funds since the start of its fiscal year in April.
“Expect that new investments will remain close to non-existent for the time being for SoftBank,” says Rolf Bulk, equity research analyst at Singapore-based New Street Research. “I would expect them to remain very defensive.”
Some businesses that had previously raised capital from SoftBank have turned to alternate sources.
Non-fungible token studio Candy Digital, home to Major League Baseball’s official NFT collection, raised $100 million from SoftBank in its October 2021 series A funding round, which the company said set its valuation at $1.5 billion. But a January extension of the Series A brought in only $38.4 million from three venture capital firms: Galaxy Digital, 10T Holdings and ConsenSys. Candid did not reveal the terms of the deal, but people familiar with the matter agreed with a CNBC report that said the round came after Fanatics, Candy’s former parent, decided to sell its stake. Candy did not update its valuation and Softbank did not participate.
LinkedIn data also revealed that SoftBank investor and former Candy Digital board observer Aaron Wong left his position in January. Wong did not respond to a request for comment.
It’s not surprising that a major investment vehicle like Softbank’s Vision Fund 2, which with $56 billion in commitments is one of the largest technology funds in the world, would want to step away from the high-risk, volatile world of investing in crypto companies, especially after a painful year for the industry. Softbank Vision Fund (SVF) investments lost $33.5 billion in the first half of the 2022 before the collapse of crypto exchange FTX caused the firm to write down its $100 million investment into the exchange to zero.
During the rise of crypto venture capital funding in 2021 and early 2022, Vision Fund 2 invested in 14 companies, in rounds of up to $450 million. “These are folks that were really not looking at their checkbook when they’re writing checks,” says the first source familiar with SoftBank’s investments.
Still, crypto and blockchain investments make up less than 1% of Vision Fund holdings, says Paul Golding, senior payments and digital commerce analyst at Macquarie Capital. There is a “continued interest in investing in the baseline infrastructure around blockchain that could enable future financial products and services and other technologies,” he adds. “But overall, their exposure is quite cautious.”