94% of portfolio companies have 12+ months runway: SoftBank

SoftBank Group Corp informed its investors that about 94% of its Vision Fund portfolio companies globally have enough cash to continue operations for at least a year, showing that the Japanese investor’s holdings are still well-capitalised despite the so-called funding winter.

SoftBank, in a separate presentation solely focused on the Vision Fund investment unit, claimed that while just 17% of its portfolio companies have a runway of more than 24 months, around 69% of firms either have a free cash flow or sufficient capital to achieve profitability. 

About 6% of its portfolio companies have less than 12 months of cash runway, the presentation showed, while 9% of firms had a runway of 12-24 months. The data only took into account private tech companies till the end of the latest quarter.

In the presentation, the investment giant revealed it is sitting on $56.7 billion in unrealised fair value from 384 private investments. This amounts to 73% of the total unrealised fair the company is sitting on. However, the fair value depreciated by nearly $200 million quarter-on-quarter.

Vision Fund 1, through which SoftBank invested in companies like Ola, OYO and FirstCry, gained $1.4 billion quarter-on-quarter (QoQ). While, Vision Fund 2—with investments in Ola Electric, Lenskart, Flipkart and Swiggy—saw its unrealised fair value decline by $1.5 billion. Interestingly, in the presentation, SoftBank identified Ola (Cabs), along with Swiggy, as companies expected to go public. Earlier this year, Swiggy confidentially filed the draft red herring prospectus with SEBI.

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In its last annual report, the investment conglomerate said that SoftBank Vision Fund companies accounted for over 50% of all growth capital invested in FY23 and 60% of all capital raised through IPOs since 2021.  

The presentation also showed that the digital media companies portfolio, which consists of Chinese giants ByteDance, had an unrealised fair value of $15.2 billion against an unrealised investment cost of $5.1 billion. Similarly, its ecommerce portfolio, which has companies including Flipkart and Lenskart, boasts an unrealised fair value of $5.3 billion.

The Japanese investment conglomerate reported a net profit of ¥10.46 billion ($70.7 million) in the April-June quarter, significantly lower than the previous quarter's ¥328.9 billion ($2.11 billion) profit (Q4 of the previous fiscal year).

In its post-earnings investor presentation on Wednesday, the company reported a $544 million loss on its $1.6 billion investment in Paytm. However, the net loss for SoftBank on its Paytm investment is expected to be around $150-180 million offset by gains from the upcoming public listing of PayPay, a Japanese payments company in which both Paytm and SoftBank hold stakes. SoftBank exited Paytm in the June quarter. The CapTable had reported this exclusively in May.

During the post-earnings call on Wednesday, SoftBank CFO Yoshimitsu Goto said the company aims to balance caution with optimism as it navigates through current market volatility after investing most in four quarters from its Vision Fund investment unit.

"The market is so volatile and of course, we are cautious about how the market reactions could lead to evaluation when it comes to a new investment. I think in a sense, maybe we should be protective and conservative. But in general, I think it's a good opportunity for investment," Goto said in the post-earnings call.

A dry funding period, compliance issues, and macroeconomic factors have troubled some of the Japanese investor's marquee investments, mirroring challenges faced by many startups in India, which is currently the third largest startup ecosystem in the world.

For instance, OYO, which received $1.5 billion from SoftBank, saw its valuation drop from a peak of $10 billion to $2.5 billion in a recent funding round. Meanwhile, Ola Electric and FirstCry, where SoftBank has invested over $750 million, have reduced their valuations for upcoming public listings. While Ola Electric is set to list on the bourses on August 9, FirstCry will make its debut on August 13.