SoftBank looks to put $5bn staff incentive scheme into Vision Fund
Tech investor seeks to tackle difficuties securing final cash commitments
SoftBank is in talks to pour $5bn into its giant technology fund on behalf of its employees, as the Japanese group scrambles to find ways to hit a $100bn fundraising target set for its so-called Vision Fund.
According to multiple people briefed on the discussions, the move comes in response to SoftBank’s difficulties in securing final investor commitments after announcing a first close of the fund last May at $93bn.
To plug the hole, SoftBank is drawing up plans for what amounts to an employee incentive scheme, or partners pool, for current and future staff at the Japanese company, accounting for $5bn of the remaining $7bn it needed to raise.
If approved, it will require employees to contribute a small amount of funding to a newly created facility while SoftBank will provide the bulk of it in the form of a loan to the employees, these people said. SoftBank has been in touch with Japanese banks to arrange the lending for the vehicle.
The Financial Times revealed last month that SoftBank had recruited new funds from investors including Mercedes-Benz carmaker Daimler, a Bahraini state fund, and Oracle co-founder Larry Ellison.
SoftBank declined to comment.
Jason Glover, a partner at law firm Simpson Thacher said investors in a fund liked to see executives put “skin in the game” as that creates a greater alignment of interest for both groups.
He said: “Typically that will amount to 2-5 per cent of funds raised and is often part-funded through leverage provided by third-party lenders. What is much less common is for executives to agree to commit to ‘skin in the game’ at such a late stage of a fundraising.”
The Vision Fund, which is principally backed by the state investment arms of Saudi Arabia and Abu Dhabi, has turned SoftBank and its founder Masayoshi Son into one of the most powerful and active investors in technology.
At $93bn, it already dwarfs the size of any fund ever created for private equity or venture capital, prompting the group to go on a deal spree where it has put tens of billions into lossmaking companies across the digital economy.
However, SoftBank has struggled to complete its fundraising because pension fund investors and sovereign wealth funds are fearful of making what would amount to a sizeable commitment only to have it pale in contrast to the $45bn committed by Saudi Arabia and $15bn put in by Abu Dhabi.
If signed off on by the Vision Fund investors and the SoftBank board, the extra $5bn would be separate to the $28bn that SoftBank itself has committed to the fund. That contribution from SoftBank includes a 25 per cent stake in Arm, the UK chip design company, worth about $8bn.
People close to SoftBank have previously told the FT that the remaining $20bn may come from a plan to swap the group’s stakes in a collection of ride-hailing companies included Uber. Any increase in the value of those assets beyond what SoftBank paid before contributing them to the fund would help meet the contribution,
Unlike other investors, who received a combination of preferred units that receive bond-like coupon payments and equity, SoftBank’s stake was purely in equity, meaning its upside or downside from the fund’s performance is more volatile.
The Japanese company also stands to make management fees and carry on the fund’s investments like a typical private equity or venture capital funds. The extra $5bn under discussion is also planned to be purely an equity stake.