Softbank Group, one of the world's best-known venture capital firms, is facing high-stress times that involve record financial losses amid continued executive departures.
At first glance, the challenges involve enterprise- and consumer-centric technology investments. But take a closer look, and Softbank's business challenges have intensified just as the venture capital giant was beginning to open its arms to the MSP software market, while also supporting cybersecurity companies that engage MSSPs.
Among the anecdotes to note:
- Staff Executive Turnover: Softbank has had at least 10 top level executive departures since March 2020, putting more responsibility on founder Masayoshi Son's shoulders just as the outlook for the Japanese conglomerate turns increasingly ominous, Bloomberg reported.
- Venture Capital Concerns: Softbank’s Vision Fund 2 could face losses that are “as severe as those of high-tech growth stocks,” The Wall Street Journal reported. The fund is leveraged and most of its investments are still private, the Journal noted.
The latest reality check arrived August 8, 2022, when SoftBank announced a record $23 billion quarterly net loss for its April-June quarter. Amid the losses, SoftBank CEO Masayoshi Son vowed to further tighten investment criteria and to preserve cash, Reuters reported.
Example Softbank Investments: Cloud and Cybersecurity Firms That Engage MSPs and MSSPs
Why should MSPs, MSSPs and channel partners care about Softbank's business challenges?
The short answer: Vision Fund 2 investments include Cybereason, OneTrust and Pax8, among dozens of other firms. Softbank's business challenges don't necessarily mean that the VC's investments are in trouble -- but there is pressure on valuations. Indeed, Vision Fund 2 owns stakes in 269 firms were worth $37.2 billion at end-June, compared with an acquisition cost of $48.2 billion, according to Reuters.
Some of Softbank's investments have taken proactive steps to cut costs and march toward potential profitability more rapidly. Examples include Cybereason layoffs and OneTrust staff cuts -- both of which surfaced in June 2022. Around the same time, some of Cybereason's channel- and MSSP-focused talent exited the business.
Pax8: Still Growing After Softbank Investment
Meanwhile, anecdotal evidence suggests Pax8 -- another Softbank investment -- remains in growth mode. The cloud marketplace provider for MSPs has 1,182 employees and 57 job openings listed on LinkedIn as of August 5, 2022.
Pax8 raised $185 million at a $1.7 billion valuation, led by Softbank, in April 2022. Around the same time, Pax8 hired IPO veteran Puneet Pamnani as CFO. More recently, the company acquired Microsoft cloud solutions provider Umrellar as part of a worldwide expansion plan.
Still, most investor attention is on Softbank and that record quarterly loss -- and ongoing valuation pressures across the Vision Fund 2 portfolio.
Story originally published August 5, 2022. Updated August 8 with actual SoftBank financial results.