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Yoshimitsu Goto, board director of SoftBank Group, used the company's earnings call on Thursday as an opportunity to proclaim that generative AI was too transformative an innovation for it to ignore.
"We must not miss investment opportunities," Goto said. He added that as long as SoftBank ensures its financial position is protected against market volatility, its "next step is to invest in the information revolution."
Having entered “defense” mode last year, SoftBank's Vision Funds missed out on the first wave of generative AI. The second Vision Fund has some $10.2 billion it could invest in generative AI, but it also needs to earmark a portion of that to its portfolio companies. Unless the exit market picks up, SoftBank is unlikely to deploy its remaining dry powder aggressively in new investments—but if it waits too long, it may miss out on some blockbusters and lose its reputation as an AI pioneer.
SoftBank's Vision Funds were designed to be first-movers on AI and machine learning. They led a host of investments in the vertical, including a $940 million Series B in autonomous vehicle company Nuro and a $499 million Series E for AI-powered digital experiences platform ContentSquare. Nuro is reportedly undergoing a restructuring, with layoffs expected, after cutting 20% of its staff in November.
SoftBank's venture unit invested $44 billion in FY 2021, but the Vision Funds deployed a mere $3.1 billion for the fiscal year that ended March 31. Meanwhile, the segment absorbed a $39 billion loss for the year.
Dive into the data with PitchBook's SoftBank Vision Fund Dashboard
"We have to ensure financial soundness and financial strength," Goto said when asked how big the fund's investments in generative AI could be. "So we have to be very selective in terms of investment. So we can't charge ahead right away."
Vision Fund II has around $10.2 billion in dry powder available for new and follow-on investments. But much of that capital may be needed to support the Vision Fund segment's 473 portfolio companies—nearly 10% of which have less than a year's runway left.
SoftBank has a few wild cards left to play: The IPO of chipmaker Arm, expected this year, will be a significant capital boost and its proceeds could be allocated in part to the Vision Fund.
In February, executive managing partner Navneet Govil told Bloomberg that SoftBank may consider launching a third Vision Fund. But with the Vision Fund's recent major losses, recruiting new LPs may be a tough sell.
VCs have invested a total of $15.5 billion into generative AI over the last 12 months, according to PitchBook data, and the space remains red hot. Even if SoftBank Vision Fund II started investing aggressively immediately, in reverse to the company's defensive strategy, the fund still may not be well-positioned to dominate the field in the way it has in the past.
But generative AI may be the impetus that brings the fund out of full defense mode. "As long as we can keep our financial policy, " said Goto, "then our next step is to invest in the information revolution."
Featured image by Yuichi Yamazaki/Getty Images
This article originally appeared on PitchBook News