The Vision Fund’s Method Of Valuing Companies Looks A Bit Off

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Morning Markets: News that WeWork’s leading investor is ready to ditch its controversial CEO is notable. Most investors leave founders alone. But when another SoftBank Vision Fund bet looks sideways, drastic times call for unconventional methods.

As The We Company (WeWork) stumbles towards an IPO at a price far under its final private valuation, its leading investor is considering working to remove its CEO. The possible reduction in the internal authority of Adam Neumann, prior media darling and now international business pariah, is the biggest news of the weekend.

But there’s more going on at SoftBank’s Vision Fund, a key WeWork backer, that I wanted to highlight. More precisely, it seems that the investment group has made some mispriced bets in recent years. Let’s talk valuations for a minute.

Down

The Wall Street Journal published an excellent report this morning, observing that several SoftBank Vision Fund investments were either giving up gains or, in fact, losing money for their famous investor.

It appears that SoftBank CEO Masayoshi Son is underwater on his Uber bet, and his various wagers into Slack are losing altitude as well. The Journal goes on to note that the Vision Fund’s investment into Guardant Health has lost value as well, “potentially requiring [the deal] to be marked down.”

It’s not hard, therefore, to look at the most valuable Vision Fund deals and spy weakness. I want to extend the point today by reminding ourselves of a few other deals that the Vision Fund took part in that I reckon are also underwater.

To jog your memory, three Vision Fund deals quickly came to mind this morning when I tried to recall what felt like the group’s least conservative bets:

Since then, Wag’s growth has come under questionBrandless’s CEO left, and I never had much hope that robotic pizza was going to wind up being the near-term future.

Naturally, these are just a handful of deals from a huge investment bucket. There will be winners in the Vision Fund 1 — LoggiCoupangAutomation Anywhere, perhaps — to offset other losses. But there are also some investments like WeWork and Zume that are more head-scratchers than wagers we understand.

What appears clear, however, is that a good chunk of the first Vision Fund’s deal makeup was either mispriced, fed too much capital, or both. That is not a recipe for success. But don’t trust your friendly local tech blogger. Listen to investor Keith Rabois talk to Kara Swisher earlier this year:

I think the mentality of throwing money at companies and making them successful just doesn’t work. I’ve never seen real examples of just, you take money and you crown a winner. That’s the philosophy, which I don’t believe that works. I think that’s the whole history of Silicon Valley, is that these upstarts with very limited resources and a bunch of misfits have rearranged every single industry, and they’ve done it over and over again.

Capping it all off, the Vision Fund is now hiring a “Valuations Director.” 2019.

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