SoftBank Deals Hit Record Low, Sapping Funding for Startups (bloomberg.com) 16
SoftBank Group's new startup bets hit a record low last quarter as valuations continued to slide, chilling an already frosty startup winter. From a report: The world's largest tech investor -- which at one point took part in $30 billion worth of financing rounds in more than 90 startups in a single quarter -- participated in just eight investment rounds totaling $2.1 billion in the three months ending in December, data compiled by Bloomberg showed. It was the first time the number of SoftBank's deals fell to single digits since the launch of its Vision Fund.
Startup investments by SoftBank's Vision Fund unit came below $350 million in the quarter just ended, a person familiar with the matter said. In total, the segment invested more than $144 billion in five-and-a-half years, which averages out to more than $6 billion per quarter. SoftBank is not alone. Rivals Tiger Global Management, Sequoia Capital and Coatue Management have also tightened their spigots after shouldering big writedowns in 2022. Denied lucrative exits by a rout in tech valuations, deep-pocketed investors have pulled back, hitting pause on billion-dollar funding rounds that had become common in recent years.
Startup investments by SoftBank's Vision Fund unit came below $350 million in the quarter just ended, a person familiar with the matter said. In total, the segment invested more than $144 billion in five-and-a-half years, which averages out to more than $6 billion per quarter. SoftBank is not alone. Rivals Tiger Global Management, Sequoia Capital and Coatue Management have also tightened their spigots after shouldering big writedowns in 2022. Denied lucrative exits by a rout in tech valuations, deep-pocketed investors have pulled back, hitting pause on billion-dollar funding rounds that had become common in recent years.
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So investing in ANY business right now is a bad idea.
I think investing in companies right now is a pretty good idea ... if you have the money. Buy low. But most investors don't have the money for the reasons you laid out.
Although I personally think the stock market is still about 25%-33% overvalued, so I guess I wouldn't invest now if I had a large sum of money. I still max out my 401k contributions though, but that is mostly for tax reasons and as a form of forced savings not a feeling of confidence in the market.
To invest, you need a viable product (Score:3)
Yes, I know, everyone here probably thinks that VCs are just some sort of crazy loonies who chase buzzwords, but ... ok, it's not that far off. But they still want to see at least the chance of a ROI.
And that's simply not the case anymore.
Now, "viable product" is maybe a misnomer. What they were actually hoping for was to create some kind of business that one of the big players like Facebook or Google would buy out for a billion or two to ensure that they carve out a new corner in the antisocial media circus. Because it hasn't really been possible to create an actually viable product, i.e. something you could sell to a consumer for a profit, for quite a while now. Consumers don't have money anymore for anything but the essentials. And the few that still do don't really matter. Actually, they're not consumers. They're looking for something to invest in. Just like you.
The problem is that the big IT players like Facebook and Google now also don't want to spend the money anymore because they can't monetize their products anymore either, because as stated above, their products don't have any money left so they could buy something from Facebook and Google's customers, so those customers don't waste money on advertising shit nobody buys.
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Now, "viable product" is maybe a misnomer.
I wouldn't call it a misnomer. There is plenty of research out there that the primary factor for startup success is not the idea, the team, or the execution, but instead the timing (the other factors are still #2-4 in most research). That luck of the draw is the biggest difference between a $10 billion startup and a $100 million startup. Investors know this, and aren't going invest when they think timing isn't right.
That makes it not a "viable product" to the investors.
They're doing it wrong (Score:1)
Whatever happened to "buy low sell high"? A "tech slump" is a great time for the rich to go on a buying spree.
I actually went on a mini-buying-spree (I'm not rich), but I mistimed the bottom and my purchases shrank in value, and I blew most my stock-shopping wad. The market is hard on blood-pressure. Hopefully the longer term will reward patience. Stocks are one of the few things that reward procrastinators, you can just "sit on it".
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Whatever happened to "buy low sell high"? A "tech slump" is a great time for the rich to go on a buying spree.
I actually went on a mini-buying-spree (I'm not rich), but I mistimed the bottom and my purchases shrank in value, and I blew most my stock-shopping wad. The market is hard on blood-pressure. Hopefully the longer term will reward patience. Stocks are one of the few things that reward procrastinators, you can just "sit on it".
Partially, but the rapid growth pattern these VCs like means that you'll need additional funding rounds, and in a slump those are harder to get. As well in times of uncertainty customers (of all kinds) tend to be more cautious which is going to disproportionately impact startups.
And then finally you need money to invest, and in times of scarcity high risk ventures like VC investments are one of the first places to cut.
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Whatever happened to "buy low sell high"? A "tech slump" is a great time for the rich to go on a buying spree.
Only if you have the funds to invest. It appears this downturn is primarily caused by the lack of easy money which led to such excessive funding in the recent past. $30 billion in funding in one quarter is what you get when the wealthy have more money than they know what to do with. $2 billion in funding is what you get when the wealthy are being discerning with how they invest limited funds.
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There's still plenty of money on the investment side. Just take a look around the places where money gets "parked" if there isn't anything to invest in.
People would LOVE to invest that money sensibly instead of parking it in real estate. The market is overblown and hardly profitable, but there simply isn't anything to invest in. You cannot SELL anything anymore. People are fucking broke, they don't have money to consume, and without, who can open a business?
And without someone able to open a viable business
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A wealthier investor can hold on to cash or CD's during the boom years and wait for a slump to buy. For some reason too many don't, meaning they invest when investments are expensive. Poorer people have to ride the cycle, rich don't.
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These are startups, startups and venture capital is when you have too much money sitting around anyway, it's a high yield savings mechanism.
Right now, the money has inflated so quickly (we're getting close to 20% annually) that you need that capital to invest in your existing (operating) businesses or they'll go belly-up, so that money is no longer available as people are forced to choose less risky strategies to invest.
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Reality is that valuations are still way too high. Tech companies are still valued at numbers like 10x revenue when more realistic is something like Net assets + Net cash + 5-8x EBITDA. You see a ton of companies losing tens of millions of dollars per year still thinking they are valued at 500 million.
Bad news for the tech industry, maybe, but... (Score:3)
not so relevant to everybody else. Is the world pining for one more killer app, or one more business model disrupted? I think not.
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not so relevant to everybody else. Is the world pining for one more killer app, or one more business model disrupted? I think not.
I think a significant amount of the developed world is pining for one more killer app or one more business model disrupted (okay maybe not the killer app). Nearly every time this happens most people enjoy the results. I cannot wait for the next device which changes my life in the way that the modern smartphone has. I cannot wait for ubiquitous self driving cars. I cannot wait for ubiquitous cheap renewable energy. I cannot wait for Chat GPT 4.
Okay, I can wait, but I'd rather not. Arguably startup funding wi
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