On the afternoon of May 12, 2022, $SoftBank (ADR) (SFTBY.US)$ CEO Masayoshi Son appeared at the company’s results conference as usual. What is different from the past is that at this performance meeting, Masayoshi Son mentioned words such as defense and caution many times, with a solemn expression on his face.

This is in stark contrast to the high-spirited Masayoshi Son at the last fiscal year’s results meeting. At the time, Son said SoftBank made more profits in a quarter than any Japanese company in history.

Now Sun Zhengyi suddenly adjusts his tone, which is regarded by the outside world as a signal that Sun Zhengyi is slowing down his investment pace.

In fact, as early as March this year, at an internal meeting of SoftBank, Sun Zhengyi asked executives to slow down the investment speed. Subsequently, the managing partner of SoftBank Vision Fund stated externally: The fund is planning to reduce investment.

Masayoshi Son, who has always made great progress in the investment circle, makes such actions and decisions are very rare.

You know, Masayoshi Son, who invested in Alibaba $Alibaba (BABA.US)$ in 6 minutes and $WeWork (WE.US) $ in 28 minutes, is still fresh in the investment circle.

Sun Zhengyi, who is very gambling and controlling, makes his investment style can be described as crazy. What has developed together with it is the SoftBank Group, which has a high valuation and is rolling forward.

But just this year, a historic scene happened. SoftBank Group announced its 2021 fiscal year (April 1, 2021 – March 31, 2022) financial report. As of March 31, 2022, SoftBank Group’s 2021 fiscal year net loss was about 90 billion yuan. Looking at the history of venture capital in the past two decades, such a huge loss has appeared for the first time.

Faced with pressure from the loss-making SoftBank Group and shareholders, Son has worked hard to assure investors that SoftBank’s debt burden is manageable, and he is adopting different strategies to adapt to the volatile market, such as halving SoftBank’s investment in 2022 or a quarter.

Obviously, Sun Zhengyi, who once gambled heavily on the future, did not dare to take any more risks.

In fact, a similar scene also happened in the domestic venture capital circle. Affected by the epidemic and the macro environment, China concept stocks will usher in a low ebb in 2022, and the investment market is entering a dark moment. The conservative investment style of “no action if you can do it” has become an industry consensus.

Sun Zhengyi is now 64 years old, and it has been 4 years since he retired from the “life plan” he made when he was 19 years old. But at present, Sun Zhengyi is far from reaching the time of retirement. Next, Sun Zhengyi dare not continue the crazy investment style in the past, and caution has become his next key word.

Sun Zhengyi, who had gambled heavily on the future, did not dare to take any more risks

“The only ceiling for a company is the founder’s ambition.” When Masayoshi Son invested in the shared office company WeWork, he told WeWork founder Neumann, “In a battle, the lunatic is easier to win than the smart.”

Just like this sentence, Son’s investment style is also aggressive.

It is also this investment style that brought two fateful turning points in his investment process. And both of these turning points are related to numbers, 6 and 28, respectively.

Quantifying these two numbers into time, the two investment projects are slowly unfolding in front of us. The former was in 1999 when Sun Zhengyi and Ma Yun met in Beijing for 6 minutes and decided to invest in Alibaba; the latter was when Masayoshi Son invested in WeWork for the first time, only 28 minutes.

Two investments that rely only on intuition and regardless of valuation once became a myth in the venture capital circle.

But now, everything is changing.

Especially after WeWork’s first IPO failed, the market value plummeted; the stock prices of companies such as Sun Zhengyi’s heavy- holding $Didi (DIDI.US)$ and $Uber.US$ (UBER.US)$ fell; Indian economy hotel chain OYO has a huge amount of money. After the loss… Masayoshi Son also began to reflect on himself. In an interview with Forbes, he said, “Reflection on tactics, unchanged strategy, and unchanged vision.”

It is a pity that Sun Zhengyi’s reflection did not bring good performance to SoftBank.

Not long ago, in the face of SoftBank’s unprecedented loss, Masayoshi Son, who looked solemn at the scene, said that SoftBank Group will officially slow down its investment and adopt a conservative investment pace. Compared with 2021, this year’s investment will be reduced by 25%-50%.

In fact, Masayoshi Son had long anticipated this crisis. Two months ago, Masayoshi Son had already asked executives to slow down investment in an internal meeting of SoftBank. This was the first time Masayoshi Son had said that investment was shrinking both inside and outside the world.

According to data from CB Insights, an independent think tank in Silicon Valley, in terms of the number of investments, SoftBank ranks 9th among the world’s most active investment institutions in Q1 2022, investing in a total of 55 companies. Comparing this figure with the 120 companies invested by Tiger Global Management, the first place, the difference is more than double.

In Q4 2021, SoftBank invested in 60 companies, ranking seventh among the world’s most active investment institutions. It can be seen that both the number of investments and the activity of SoftBank Group are declining.

Even in the fintech field that SoftBank is optimistic about, in terms of the number of investments, SoftBank Group ranks last among the top six most active investment institutions in the world in Q1 2022, investing in a total of 17 companies.

Not only did he slow down the pace of investment, Sun Zhengyi also began to let SoftBank sell shares in some companies. In March, SoftBank sold shares in South Korean e-commerce giant $Coupang (CPNG.US) for less than $21 a share, a 40% discount from last year’s Coupang IPO price.

So far, SoftBank, which has been making great strides along the way, has rarely slowed down its investment rhythm and has attracted attention in the global investment circle. You know, Masayoshi Son and SoftBank have always been regarded as one of the vanes of the primary market, and their investment styles are also talked about by the outside world.

In the investment circle, Sun Zhengyi even has a resounding name “Mr. Tenfold”. The so-called Mr. Ten times, a widely circulated statement in the industry is that after many founders meet with Sun Zhengyi, after a short dialogue, Sun Zhengyi will immediately interrupt the direct talk about money and give four or five times or even ten times the financing amount.

A well-known venture capitalist once told LatePost that Masayoshi Son’s investment method has not changed for decades. Back then, when VCs invested hundreds of thousands or 1 million dollars, he dared to invest tens of millions of dollars; today VCs can invest tens of millions or even hundreds of millions of dollars, and he invested 3 billion or 5 billion dollars.

It can be seen that Sun Zhengyi’s investment style was aggressive and strong, but now facing huge losses and future uncertainty, Sun Zhengyi dare not take any more risks, and eventually slowed down his investment pace.

Once aggressive, SoftBank suffered huge losses

In 2019, SoftBank Group suffered its first loss in 14 years. At a subsequent press conference, 62-year-old Sun Zhengyi said that his investment judgment was very bad.

At the earnings conference on May 12, 2022, Masayoshi Son, 64, said, “In this chaotic world, the approach we should take is defense.”

Although, previous failures have given Son and SoftBank a chance to turn around. But today is different from the past. In the case of a downturn in the capital market, SoftBank Group has finally fallen to the altar.

According to data from CB Insights, an independent think tank in Silicon Valley, SoftBank invested in 195 private companies last year, and it still maintains a crazy shot. Under the premise that the overall investment environment is not good, this kind of crazy shot will naturally cause SoftBank to suffer heavy losses – the share prices of most SoftBank-joined companies are already lower than the issue price.

Last Thursday, Masayoshi Son announced SoftBank Group’s 2021 fiscal year annual report in Tokyo, Japan, and the performance surprised the outside world.

According to the financial report, as of March 31, 2022, SoftBank Group’s net loss in fiscal year 2021 was 1.7 trillion yen (about 90 billion yuan). Among them, the Vision Fund’s net loss in fiscal year 2021 is as high as 2.64 trillion yen (about 140 billion yuan), which is the main source of losses for SoftBank Group.

Specifically, both the first and second phases of the Vision Fund suffered losses to varying degrees. The top three losses in the first phase of the Vision Fund came from Didi, WeWork, and $Grab Holdings (GRAB.US)$ , and the top three losses in the second phase of the Vision Fund came from WeWork, $JD Logistics (02618.HK)$ and $ dingdongbuy Dish (DDL.US)$ .

It can be seen that WeWork bears the brunt of SoftBank’s “mess”. You know, 28 minutes of “intuitive” investment has cost SoftBank nearly $19 billion in WeWork. Before the IPO, SoftBank and the SoftBank Vision Fund had injected nearly $11 billion into WeWork, holding at least 27 percent, CNN cited data from CLSA and Bernstein Research.

Later, the story of WeWork’s first listing and its halved market value is well known. Even at SoftBank’s second-quarter earnings conference in November 2019, Masayoshi Son said, “The misjudgment of WeWork chairman Adam Neumann was the biggest mistake I made, and it made me ashamed.”

Also “falling and falling” is the Singapore takeaway platform Grab. Since its listing on Nasdaq at the end of 2021, its share price has also continued to fall, and Grab’s share price has been directly “halved” in the fourth quarter of fiscal 2021. Since its listing, Grab’s market value has fallen by three-quarters.

It is worth mentioning that when Coupang, a South Korean e-commerce platform, went public in March last year, its stock price soared by 40%, and SoftBank earned nearly $25 billion in return. It was once regarded by SoftBank as the second “Alibaba”. Regrettably, since its listing to the end of fiscal 2021, Coupang’s share price has fallen by nearly 50%. According to the financial report, the first phase of the Vision Fund’s investment in Coupang lost 1.6 trillion yen.

It should be noted that SoftBank Group’s losses in fiscal 2021 are mainly concentrated in the fourth quarter of fiscal 2021 (first quarter of 2022). According to the financial report, during this period, SoftBank Group’s net loss was 2.1 trillion yen (about 110.8 billion yuan), setting a record for the largest quarterly net loss in history.

According to a Nomura Securities report, in the first quarter of 2022, 32 of the 34 technology stocks invested by the Vision Fund lost money. Even more exaggerated, according to the “Wall Street Journal” report, the stock prices of most of the listed companies held by the Vision Fund Phase I have been cut in half since the beginning of the year. If SoftBank has not reduced its holdings, the potential loss may have exceeded 25 billion US dollars.

An obvious contrast is that in the same period last year, the SoftBank Vision Fund also achieved a profit of 4.03 trillion yen. In the face of huge losses, Sun Zhengyi may be to blame.

At the end of “Faith: Masayoshi Son Biography” written by Atsuo Inoue, Masayoshi Son said: “I am ranked third and die with hatred. I hate this outcome. I want to be number one and be far ahead.”

Masayoshi Son is strong, as is the SoftBank Group he led. But the strength did not make SoftBank Group No. 1. All along, there has been a voice from the outside world that SoftBank may die in the madness of Sun Zhengyi. A Silicon Valley investor once admitted to Tencent’s “Deep Web” that the biggest risk of the Vision Fund may lie in Sun Zhengyi himself.

One detail is that when Masayoshi Son made new investments in the past, he often told the founders of the invested companies that their companies could be as strong as Alibaba. It’s a pity that outside Alibaba, the outside world has paid more attention to the failure of Sun Zhengyi’s investment in the past few years, and SoftBank can’t afford another huge loss.

The entire investing world will be conservative over the next decade

In 1976, 19-year-old Sun Zhengyi bought a copy of “Popular Electronics” magazine in a small supermarket in Oakland, USA. What appeared in front of him was a photo of an Intel i8080 chip. The never-before-seen picture hit Sun Zhengyi’s brain.

Perhaps because of that surging mood, he set himself a life plan for the next 50 years. At the age of 20, he started a business and announced his existence to the world; at the age of 30, he earned enough seed funds of 100 billion yen to devote himself to a great cause; at the age of 60, he retired and handed over his career to his successor.

Today, the 64-year-old Masayoshi Son is still appearing on various occasions as the CEO of SoftBank, and retirement has not yet been put on the agenda. The main problem is that the external environment and internal losses prevent Sun Zhengyi from leaving.

As SoftBank Group said in this earnings release: “The investment environment remains challenging, dominated by rapidly rising inflation, increasingly complex geopolitical risks and the global energy crisis.”

At present, a similar scene of SoftBank is being staged in the domestic venture capital circle. Shock, cold winter, and breakout have become key words in the investment circle.

According to statistics from Zero2IPO Research Center, there were 1,374 newly-raised funds in the market in the first quarter of this year, of which foreign currency funds were worrisome. A total of 20 foreign currency funds had a new round of fundraising in the first quarter of this year, a year-on-year decrease of 57.4%; the amount of funds raised was disclosed. About 31.51 billion yuan, a year-on-year decrease of 62.6%.

It has become the consensus of the industry to cherish the existing cards in hand and slow down the pace of investment. In the first quarter of this year, there were 2,155 investments in the domestic equity investment market, a year-on-year decrease of 27.5%; the disclosed investment amount was 196.822 billion yuan, a year-on-year decrease of 47.1%.

With the unsatisfactory return on investment and the inability to raise money, layoffs and cancellation of year-end bonuses have occurred in the investment circle from time to time.

According to reports from the investment community, a top PE that has participated in star projects such as Yuanqi Forest has implemented layoffs internally since the first quarter of this year; a top PE in Beijing completed the settlement in February this year, and notified internally that last year’s year-end bonus would not be issued; a certain The direct investor said that its boss directly stopped existing investments, and the company did not open for a quarter.

Even the top institutions are shrinking investment at a rate visible to the naked eye. According to the CB Insights report, the most active investment institution in the global financial technology field in Q1 2021 is Sequoia Capital. But in Q1 this year, there is no Sequoia Capital in the top six.

The most active investment institution in the global financial technology field from Q1 in 2020 to Q1 in 2021, Tuyuan CBInsights Chinese WeChat public account

The reality is that, with the general slump in Chinese stocks, slowdown in investment, and the arrival of the cold winter, the investment circle is going through a period of brutal reshuffle, and the original “28 rule” is also changing to the more brutal “19 rule”. “Evolution.

Liu Xiaodan, founder of Morning One Investment and former President of Huatai, mentioned in his speech “Persistence in Dynamics” delivered at Morning One Investment’s annual partner conference, that the cold winter of investment institutions has just begun, and a large number of PE/VC will be eliminated.

Bao Fan, the founder of Huaxing Capital, also mentioned in an exclusive interview with “Shenwang” that the entire fundraising environment is not very good now. In North America, the perception of China has changed a bit, and the value creation in the past 10 years can be said to be very different from the value creation in the next 10 years.

Today, the era of PE and VC for all people has long passed, and the myth of capital making wealth is also coming to an end. The madness of the past is bound to be pressed the pause button. For the next decade, perhaps the entire investment community will be in a conservative state.

At the same time, the CVC business of the once “cash cow” of the Internet giants also stepped on the brakes collectively.

Tencent, known as the “top domestic venture capital”, has adopted the strategy of “if you can’t do it, you can’t do it” this year, and its official investment website has quietly closed; Byte has directly abolished its strategic investment department; Alibaba CEO Zhang Yong Withdrew from Weibo’s board of directors, and the shareholding in Tudou was also changed to “indirect”.

It is undeniable that after the burst of the high valuation bubble, the former frenzy has taught China and even the global investment circle a lesson, even Sun Zhengyi and leading investment institutions are not immune.

The shrinking performance of top investment institutions is the epitome of the entire investment circle. Through these appearances, a deeper change is that under the macroeconomic impact of repeated epidemics, geopolitics, and policy tightening, the investment circle is returning to rationality and conservatism.

This article is reprinted from: https://news.futunn.com/post/15758639?src=3&report_type=market&report_id=206310&futusource=news_headline_list
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