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| Hey Insiders, Today we are bringing you an extra analysis of the financial performance of SoftBank's Vision Funds and TenSquared Capital's $200M crypto-focused fund.
Scroll down for some quick hits, then let us know if you'd like to see more in future issues!
Karan
p/karan-chafekar | |
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Japanese conglomerate SoftBank's Vision Fund investment division reported a loss of 297.5B yen ($2B) in the first quarter of this year. Losses in Q1 2023 were narrower than the 2.2T yen (~$16.3B) loss reported in the same quarter a year ago. The financial performance of Q1 2023 brings Vision Fund's total fiscal year loss to 4.3T yen (~$32B), nearly double the 2.6T yen (~$19B) loss reported in the previous fiscal year. SoftBank Group posted an overall annual loss of 5.3T yen ($39B). According to Bloomberg, the losses were higher than expected, considering the rebound in tech stocks this year. The Nasdaq 100 benchmark rose 20% in March, increasing the value of SoftBank's publicly held stocks. Values of portfolio publicly traded stocks, including Coupang and Didi Global, showed gains of 9% and 20%, respectively. SoftBank gained $1.9B after the rally of publicly held stocks in the recent quarter. However, the markdowns on private portfolio companies were higher than anticipated, contributing to the fund's poor financial performance. The Japanese investor lost $3.9B due to valuation markdowns of portfolio startups in the quarter. The fair value of SoftBank's portfolio at the end of Q1 2023 was $138B, $2.3B less than the previous quarter. 
Asymmetric Advisor's market strategist Amir Anvarzadeh said, "Unlisted names which account for something like 60% of its total investments had not been marked down more than 20%." SoftBank CFO Yoshimitsu Goto confirmed that the firm slashed the valuations of almost 350 portfolio companies. Vision Fund invested $3.14B into startups in the fiscal year, down 90% compared to the previous year. Both Vision Funds invested only $400M in the recent quarter. SoftBank sharply pulled back its investment activity in mid-2022 after losses mounted at the Vision Fund. It slashed the pay for its top executives to narrow losses. Earlier this year, the firm diluted its stake in Alibaba from 13.7% to 3.8% to recoup losses suffered on failed bets. The firm could nab $7.3B from its liquidation, which was used to cover debt and other obligations. The firm is also looking to sell its South Korean VC arm, SoftBank Ventures Asia, to SoftBank founder and CEO Masayoshi Son's youngest brother Taizo Son in a deal valued at $150M (200B won), representing a 65% premium over its book value from 2021. Taizo Son heads the Singaporean VC firm Mistletoe. Per FT, SoftBank is also looking to sell its stake in asset management firm Fortress Investment Group to Mubadala for nearly $3B. Goto expects the firm to gradually start investing more actively. He added, "Last year, unless something unusual happened, we would rather have passed on opportunities. But this year, if we're comfortable, after checking every aspect, we want to take steps, one by one." Goto talked about how Masayoshi Son — who was absent from the investor call — was excited about the prospects within the generative AI sector. SoftBank's focus is solely on the portfolio startup Arm's upcoming IPO listing in New York, which, if successful, could give it the boost to start making investments again. Bankers have pitched British chip designer Arm's valuation between $30B to $70B. Arm reported a net loss of 6.2B yen ($46M) in the recent quarter. |     | |
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| 2 | | New crypto-focused VC firm TenSquared Capital, or 10SQ, is looking to raise a $200M fund. 10SQ intends to back crypto startups across various stages. Unlike other crypto-focused investment firms, 10SQ will make more equity than token investments. However, the firm plans to become a registered investment advisor, following in the footsteps of Andreessen Horowitz and Sequoia Capital, which will allow it to invest more capital into public equities and crypto tokens than traditionally allowed for VC firms. With the funds raised so far, 10SQ has already lined up two investments, including a crypto wallet infrastructure startup. 10SQ was established by former employees of crypto-focused investment firm 10T Holdings, known for backing crypto exchange Kraken, digital wallet Ledger, and NFT creator Yuga Labs. 10T had nearly $1.2B in assets under management and was backed by Alan Howard and the Municipal Employees' Retirement System of Michigan. Several of 10T's limited partners have already committed capital to 10SQ's new fund. 10T co-founder and partner Stan Miroshnik is joining 10SQ as CEO and managing partner, per internal documents reviewed by Bloomberg. Several former 10T executives, including Polina Bermisheva, Christopher Cheung, George Dawson, and Ruby Hsu, joined 10SQ. The Los Angeles-based firm roped in StillBrook Capital's founding strategic advisor Elaine Co as general partner. In February, 10T's CEO Dan Tapiero informed The Block that he was establishing his own private equity firm called 1RoundTable Partners. 
10SQ's fundraising comes as VCs reduced their investments in the sector by 80% YoY in Q1 2023. Global VC funding in the first quarter of this year dropped to its lowest levels since 2020. VCs invested $2.4B into global startups in the recent quarter, 80% lower than the $12.3B invested in the same period last year, per Pitchbook. All sectors witnessed a VC funding pullback since last year. However, the reduction was more pronounced for the crypto industry due to a recent string of bankruptcies, market downturn, and regulatory headwinds. After the collapse of the crypto exchange FTX, VCs slowed down their investment pace sharply, citing the need to conduct extended due diligence before backing crypto startups. Going forward, crypto investments are "not going to be based on FOMO or what other investors are doing," said Pitchbook crypto analyst Robert Le. Crypto investments showed a slight uptick in February and March this year, possibly indicating that the worst of the funding drought may be over, Le added. Investors are still investing in crypto infrastructure, data analytics, and developer-focused startups, albeit at a slower pace than before. 
VCs have sufficient dry powder available for deployment when they eventually resume their normal pace of funding. Per The Block, investors raised $99.3B worth of crypto funds last year, of which several VCs have nearly 50% or more available for deployment. The largest crypto-focused funds launched last year include A16z's $4.5B and Haun Ventures' $1.5B crypto funds. At the end of December 2022, A16z partner Chris Dixon informed The Block that the firm had deployed less than 50% of its crypto fund. Sequoia launched a $600M crypto fund early in 2022 and deployed only 10% of the dry powder by the end of the year. Despite the large reserves of dry powder available, VCs will be thinking of deploying the capital "in terms of years, not months," said Haun Ventures' Sam Rosenblum. | | | |
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- Alto Pharmacy is in talks with investors to raise fresh funding, which it intends to use to acquire potential targets. The firm has raised more than $550M to date.
- Singapore's sovereign wealth fund GIC is looking to invest $2.2B (€2B) into German industrial gas maker Messer in return for a 20% stake. The deal will value the firm at over $10B.
- Early-stage VC firm AnD Ventures closed its first fund at $70M, exceeding the initial target of $50M.
- Indianapolis-based VC firm Ivy Ventures announced a $20M fund to invest in early-stage hardtech, enterprise software, and life sciences startups.
- Vanguard slashed portfolio startup Indian ride-hailing platform Ola's valuation by 35%. Vanguard invested $51.7M into the firm, the value of which has now declined to $33.8M. Ola's valuation is now estimated to be nearly $4.8B.
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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