Another 11 billion lost, Masayoshi Son: you can not afford to play

This article is from WeChat public number: investment community (ID: pedaily2012), author: Zhou Jiali, Zhang Jiwen

Another 11 billion lost, Masayoshi Son: you can not afford to play

Masayoshi Son is the second company to close down this year.

The investment community has learned that Katerra, a smart building company heavily invested by SoftBank Vision Fund, is facing closure. As the largest shareholder of Katerra, SoftBank contributed a combined $1.8 billion (about RMB 11 billion over). Earlier this year, Greensill Capital, in which Masayoshi Son had invested $1.5 billion, had filed for bankruptcy protection.

Born in the U.S. Silicon Valley, Katerra’s three founders team luxury, and even not lack of Silver Lake Capital founder. 2018, Vision Fund strong entry, a move to make it the only unicorn in the technology and construction industry. In the following years, Vision Fund continuously injected capital and invested a total of $1.8 billion. Back to the sky, this investment is going to hit the water again.

Such a scene, it seems that Masayoshi Son is used to, and he is currently not commenting on the collapse of Katerra. Just this past May, Masayoshi Son delivered the most beautiful battle report in history: SoftBank Group net profit of 4.9879 trillion yen (about RMB 294.8 billion), a record high for Japanese companies listed on the stock exchange, known as “money printing machine”. Either make a big profit or lose it, Masayoshi Son has always refused to be mediocre.

The weather was great. Sun’s style is beginning to be emulated by the VC/PE community – from KKR to Tiger Global Fund, they are all rewriting the rules of the game with the advantage of capital volume. Such a scene is also being played out in the Chinese VC community.

Second company to fall this year, and this time, Masayoshi Son lost 11 billion yuan

Another unicorn has fallen suddenly.

According to The Information, construction startup Katerra is closing down. Before that, the company had raised about $2 billion from VC/PE firms like SoftBank. And SoftBank, with Masayoshi Son at the helm, is Katerra’s biggest investor – from January 2018 to the end of 2020, SoftBank has invested nearly $1.8 billion (about more than $11 billion) in Katerra.

In 2015, Katerra was formally born in California, USA, and set off a technological revolution in the traditional construction field with the model of “assembly building + platform integration”. The three founders behind Katerra have impressive resumes, including Michael Marks, the chairman of Katerra, who was at the helm of consumer electronics giant Flextronics and served as interim CEO of Tesla.

The other two co-founders are Jim Davidson, one of the founding partners of Sliver Lake, a leading PE firm that has been involved in investments in such notable companies as Dell and Skype, and Fritz H. Wolff, formerly executive chairman of the real estate investment firm Wolff & Co. The latter is the executive chairman of the former real estate investment firm Wolf & Co.

With such a luxurious team, Katerra has attracted several investors. According to SkyEye APP, in the six years since its establishment, Katerra has raised more than $2 billion in seven rounds of financing, with SoftBank, DFJ Growth, Khosla Ventures and Foxconn among its investment team.

In early 2018, Katerra received $865 million in Series D funding from SoftBank’s Vision Fund. After completing the financing, Katerra’s valuation was jacked up to $3 billion, making it the only unicorn in the tech construction industry. More details trickled out: At the time, Masayoshi Son wanted a 15 percent stake in Katerra, and although founder Marks didn’t want to give up that much, he eventually gave in.

A year later, SoftBank again led a $700 million Series D+ round of funding for the company, with a subsequent $1 billion rise in valuation and an increase in the size of customer orders. SoftBank’s growth path also seems to be visible in Katerra’s growth path – acquiring smaller construction companies and establishing a position as an industry disruptor. Marks has said, “This is part of their strategy. We will have enough money ready to show our customers, suppliers and competitors that we are the best company, the one that will win the dominant position in the industry.”

From the second half of 2019, however, the star unicorn began its downward spiral. Over the past year, Katerra has experienced several layoffs, even closing its first facility and laying off nearly 1,000 employees as a result, along with company cost overruns and large delays in project delivery. The departure of one of the co-founders, Wolf, has cast a shadow over the company’s future. In fact, Katerra’s management has been in constant turmoil, with a number of CEOs and CFOs having been replaced.

To help Katerra through the crisis, SoftBank invested another $200 million in Katerra in late December last year. At that time, the Katerra CEO said, “SoftBank’s new investment will enable the company to avoid filing for Chapter 11 bankruptcy, and the company needs SoftBank’s latest investment to continue operating.” Earlier, founder Marks had also publicly stated that the company planned to be profitable by 2020, with a possible IPO after 2021.

But in the end it was not to be, the former unicorn collapsed, and Masayoshi Son did not wait for the day to ring the bell.

And this has been the second collapse of the company this year – April 2021, he had high hopes and big hand $1.5 billion to support the Greensill Capital (Greensill Capital) filed for bankruptcy protection, 10 billion dollars for nothing.

Not long ago, Masayoshi Son reflected on a rare earnings call, “It’s true that for me there are many regrets, such as the investment mistakes in WeWork, Greensill and Katerra …… In many ways we still lack a systematic approach to investment, and these are all issues that need to be addressed the problem.”

Just a year wildly earn 300 billion, Sun Justice fierce, playing the heartbeat

A loss of 11 billion yuan, now Sun Justice may not be too much on the heart.

May 12, SoftBank annual report for fiscal year 2020 came out, as of the end of March 2021, SoftBank in the fiscal year net sales of 5.6282 trillion yen (about RMB 332.6 billion), compared with the same period last year 5.2389 trillion yen, an increase of 7.4%; net profit attributable to the shareholders of SoftBank parent company was 4.9879 trillion yen (about RMB 294.8 billion).

This time, Masayoshi Son not only created a profit record for Japanese companies, but also made SoftBank successfully surpassed Microsoft and became the third most profitable company in the world after Apple and Saudi Aramco.

SoftBank Vision Fund is undoubtedly the biggest contributor. According to the financial report, Vision Fund Phase I and Phase II invested in 125 companies and together with other investments created an annual investment income of about 6.29 trillion yen for SoftBank.

One of the biggest investment returns came from the Korean version of “Alibaba” Coupang, where SoftBank invested a total of $2.7 billion from its first investment in 2015 to March this year before Coupang was listed on the New York Stock Exchange, making it the largest shareholder with a stake of nearly 40%. Today, the company’s market capitalization has exceeded $70 billion, and Masayoshi Son has made a fortune, earning a return of $24.5 billion on his investment.

The company’s market capitalization has exceeded $24.5 billion, and Masayoshi Son has made a fortune. In August last year, SoftBank had heavily invested $1.35 billion in Shell’s IPO in the U.S. as expected, and then the stock price soared, peaking in November with a 375 percent return on investment for SoftBank. At the end of the same year, the U.S. restaurant delivery platform DoorDash also successfully went public, with Masayoshi Son again earning about $11 billion in profits.

Meanwhile, the Vision Fund’s health care landscape has been full of good news. The first phase of the Vision Fund has produced five public healthcare companies, which have generated high returns of $4.4 billion for SoftBank. Among them is early cancer screening company Guardant Health, which has made $2.4 billion for the Vision Fund in just two years, a rarity in the entire healthcare investment community. Now, Masayoshi Son has started to increase the layout of medical investments in the Vision Fund II, and has made more than ten medical projects.

Sun finally raised his eyebrows. 2019, WeWork, Uber to SoftBank Vision Fund brewed a huge financial hole, while at the same time its more than 80 investment projects, as many as 50 companies have plummeted in valuation, nearly 15 invested companies towards bankruptcy. In the face of the previous multi-billion dollar investment in WeWork, Masayoshi Son once concluded that “it was extremely stupid”.

The sudden outbreak of the new crown epidemic in 2020 directly aggravated the crisis of SoftBank Group. Even so, Masayoshi Son still optimistic response: “Vision Fund encountered difficulties like a child’s game, compared with the last crisis, I now like looking from above to the bottom of the valley, before the situation gets better, we will try to survive.”

Today, the SoftBank Vision Fund has turned the corner and the maniac Masayoshi Son has fought a beautiful turnaround. On the Forbes Real-Time Wealth list of billionaires, Masayoshi Son, 63, is firmly at the top of the Japanese billionaire list with a fortune of $44.6 billion (about $280 billion).

This scene is happening: they are following Sun’s example and changing the rules of the game with the volume of money

Half seawater, half flame, Masayoshi Son’s pugnacious style is unmatched.

A long-term observer of SoftBank investors concluded, “Most investors are Game winners (game winners), while Masayoshi Son is the rare Game changer (game changer).” Masayoshi Son’s best investment game is to use the advantage of capital to throw money at the target company, pushing the startup to expand the market scale and increase the valuation of the startup company.

At the same time, Sun also likes to invest heavily in several competing companies in the same track, seeking a large stake or even a controlling stake. It is also such a harsh and crushing investment style that has even changed the rules of the game in the VC/PE circle.

With such means, Masayoshi Son created the success stories of Yahoo and Alibaba in the Internet era, and also established his position in the jungle. Until 2016, Masayoshi Son had a hunch: a new era of change was about to happen. Along with the development of artificial intelligence, every industry will be disrupted.

So, in October 2016, Masayoshi Son created a behemoth of up to $100 billion in one fell swoop – Vision I Fund. Lu Qi has talked in a public interview: “At that time, everyone looked at this opportunity – the fund cycle will become longer and the scale will become larger. But the fact that Masayoshi Son raised $100 billion in one breath was a bit of a surprise to me.”

The Vision Fund is the “giant whale” of the venture capital community, and it gave the smallest check of $100 million. In the following years, Masayoshi Sun has invested a total of $70 billion in the Internet, cutting-edge technology, health care, real estate and other fields. “At that time, in the investment cases in which Masayoshi Sun participated, Vision Fund usually played the role of the lead investor or exclusive investor, and there were many investment institutions following Vision Fund to co-invest.” A first-tier investment institution recalls.

Only earn big money, spend time and energy on explosive projects, Sun’s style is staggering. Must know, many domestic VC/PE still rely on diligence to get rich and win by the number of IPOs. However, Masayoshi Son only gives himself two ways – either make a big profit or lose it.

“This is the most used word by domestic VC peers in the past to evaluate Masayoshi Sun, but on the other hand, it also means refusing to be mediocre. At the beginning, VCs/PEs were dissatisfied with Masayoshi Son’s wide-open style, but now, more and more people seem to start imitating it, just as some VC/PE giants have started to set up large-scale funds.

KKR started this year with a frenzy to replenish its ammunition, raising three funds in Asia alone. In January, in January this year, KKR raised the $3.9 billion (RMB 25.3 billion) KKR Asia Infrastructure Fund and the $1.7 billion (RMB 11 billion) KKR Asia Real Estate Fund; in April, KKR officially announced the successful raising of the $15 billion (RMB 98.2 billion) Asia IV Fund; in May, a source close to the matter revealed that In five months, KKR has raised over $39 billion (RMB 249.6 billion).

This year, Tiger Global Fund has become more and more aggressive: replenishing its ammunition while making wild bids. According to the data, Tiger Global Fund has made more than 100 bids since the beginning of 2021. Especially in the first quarter, Tiger Global has invested in more than 60 companies in the primary market. On average, as many as five projects are pitched out every week. According to research firm CB Insights, Tiger Global has been involved in more than $20 billion in investments this year alone, compared to SoftBank’s $17.8 billion. In other words, TIGER Global Fund is replacing SoftBank as the world’s most lavish fund.

And in China, TIGER Global Fund is even stronger. A VC investor in Beijing, who has competed with Tiger Global Fund, told the investment community, “The way Tiger Global Fund is playing, if it really lands in the Chinese market, many VCs won’t have a chance. Good projects are attracted to them in the past, give money fast also enough, enough money, resources, talent to cover the market, spend inexhaustible money …… to win the market by the power.” The other side played a metaphor, in front of the kind of power that can be called nuclear weapons, any carved insects and small skills are meaningless.

The Tiger Global Fund is very tough, quite like the style of Masayoshi Son. A Singaporean counterpart said that the strategy of TIGER Global Fund is similar to that of Vision Fund in that they are both “game changers with cash”. What does it mean when the VC/PE community starts to follow Sun’s example? The Chinese VC community is no stranger to such a scene. I just wonder who can copy Masayoshi Son?

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