Sam Ifergan mentioned in the Financial Post: Softbank’s Vision Fund is haunting for Unicorns, but Canada’s is not on their radar

A representative of one of the world’s largest tech investment vehicles was in Toronto Monday, but don’t expect SoftBank’s US$100 billion Vision Fund to start buying into Canadian firms anytime soon.

Yoshiaki Tanaka, a senior director at SoftBank Telecom America Corp., spoke about the Vision Fund at a Toronto Regional Board of Trade event titled “Finding Unicorns: Insights from SoftBank’s Global Tech Scout.”

In an interview with the Financial Post following his talk, Tanaka said such unicorns were hard to come by in Canada, where companies were for the most part too small to be of interest to the fund.

“This is my personal opinion: The biggest point is that Canadian people are living close to the border (with a) 36 million population. They are looking at the United States economy because the language, culture, geography, it is super easy,” he said.

“This is one of the challenges. Most of the Canadian companies are still struggling at Series A or Series B. After that, the United States companies acquire the (Canadian) companies, if they have good technology.”

There are currently no Canada-based firms among 82 companies in the fund’s holdings, which include Uber Technologies Inc., WeWork and Slack Technologies Inc. (which had headquarters in B.C. before moving to California).

The fund was started by SoftBank founder Masayoshi Son in 2017 to focus on late-stage venture capital investments. It invests a minimum of US$100 million, and sometimes much more. In Canada, only three disclosed venture capital deals last year were worth more than $100 million according the Canadian Venture Capital and Private Equity Association.

When the fund launched, its single largest investor was the Saudi Arabian government. Son has boasted that he secured US$45 billion from Crown Prince Mohammad bin Salman in a 45-minute meeting.

Some of its biggest bets, however, have not been performing well.

The fund put US$7.6 billion into Uber in 2018, and since the company IPO in May, shares have dropped nearly 30 per cent. Slack is down more than 35 per cent since going public earlier this year.

And then there’s WeWork, the office-space company that rents out co-working space in urban centres. SoftBank has poured nearly US$11 billion into the company in successive rounds of venture capital investment, raising the startup to a total valuation of US$47 billion.

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“SoftBank’s Vision Fund has had an impact on the global VC space, simply by its sheer size, given that the majority of VCs invest in smaller cheque sizes,” said Sam Ifergan, founder of Toronto-based iGan Partners, a venture capital fund focused on health tech.
“The concern is that the fund would end up raising investment valuations for early-stage companies. Unicorns whose business models are predicated on losing $1.50 for every $1 in revenue better retrench very quickly.”