For early stage investments, “There are no bad ideas, only early ones,” says venture capitalist Marc Andreessen. That argument works less well with late stage investments like Uber and We. Perhaps the Vision Fund allowed the hype to get the best of its assumptions about future growth and singular domination by these companies in the commercial real-estate and local travel markets. The fund says that valuation declines in those two were more than made up for from gains in investments in Indian budget hotel-booking startup Oyo, workplace messaging provider Slack Technologies Inc. and food-delivery company DoorDash Inc.
The other issue with Softbank is how its prominence influences others. This is a pattern we have seen in other markets. The firm’s rapid capital deployment created an auction-like atmosphere, pressuring other funds to race to invest.
When one huge fund waded into the fairly limited venture space, the result was that valuations ballooned. If lower valuations lie ahead, that will be good for future investment opportunities, but could mean big write downs for existing Vision Fund portfolio companies. And it will prove that even a fund as big as SoftBank's couldn't fight the skepticism of the public markets.
This column was provided by Bloomberg News.