The Japanese conglomerate and backer of Compass and Opendoor is scaling back plans for its second Vision Fund.
SoftBank reported Wednesday that its Vision Fund — the investment vehicle that’s gambled on real estate tech startups like Compass and Opendoor — reported a net loss of $2.1 billion in the third quarter of the fiscal year 2019. It’s a huge rebound from when the fund posted a net loss of roughly $8.8 billion in the second quarter, but far below the $1.5 billion in profit it posted in the third quarter of the fiscal year 2018.
“Just three months ago, at the last earnings results, I mentioned that I learned a lesson,” SoftBank CEO Masayoshi Son said at an earnings conference, through a translator. “Maybe over 20 times, I said I learned a lesson.”
“Last quarter’s results in one word — big negative results,” Son added, before explaining that it now feels like spring has come, as things are starting to turn around.
As the profits from the SoftBank Vision Fund continue to plummet — due largely in part to the struggles of WeWork and Uber — the company is shrinking plans for a second Vision Fund, which was supposed to raise an estimated $100 billion. Instead, the company is looking to invest in roughly 10 companies with its own capital, which Son described as, “creating a pipeline.”
The first SoftBank Vision fund made investments in 88 total companies.
Despite the struggles that appeared in the reported numbers Wednesday, Son said the Vision Fund is actually on a positive trajectory. He characterized the numbers as “turning the tide.”
The Vision Fund has posted a net profit of roughly $2.7 billion since January 1, 2020, according to Son, and most of that gain is thanks to Uber, whose stock has skyrocketed in the new year, starting 2020 at $29.74 per share and climbing over $40 per share this week.
At the investor conference, Son also outlined the changes that have come to its embattled investment, the co-working startup WeWork, once a tech darling.
“In the past, there were some issues in management, but under the new management, they have developed a new five-year growth plan and found a new business plan,” Son said.
Son explained that the co-working space has a total addressable market of $1.7 trillion and is growing at a rate 15 times faster than the commercial office space industry. He estimated that WeWork will be in 1,000 buildings by 2021, in 140 cities and 37 countries.
WeWork’s five-year plan includes having the company’s first $1 billion revenue quarter in 2020, have positive adjusted earnings before interest, taxes, depreciation and amortization in 2021, becoming free cash flow positive in 2022, reaching 1 million memberships in 2023 and hitting approximately $1 billion in free cash flow.
Overall, SoftBank posted a net profit of roughly $24 million in the third quarter of fiscal year 2019, far below the $3.9 billion it posted in the third quarter of fiscal year 2018.