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Vision Fund struggles to make money from unicorns

The Vision Fund has been characterized by backing private start-ups determined to bring innovation to various industries, with the hope of disrupting established players. Although these companies have huge potential, valuations might be exaggerated considering the lack of financial success that most of the selected firms have achieved to date. Therefore, the hype that surrounds these companies does not usually correspond with the profit that investors can currently expect. The write-downs that investors of the first Vision Fund have endured, caused by the difficulties to make profit from fund flagships such as WeWork and Uber, could influence negatively the ability of the Japanese conglomerate to raise investment for the second version of the tech fund.

Additionally, the inability that those companies have exhibited so far to get high valuations on the public market has increased worries about the sustainability of revenue growth.  Five of the six companies backed by the fund to have gone public are now trading below IPO value, which is the result of inflated valuations and the atypical organizational structure that these companies have in common. The unconventional management style that has driven tech firms to have received SoftBank backing have made them prone to scandals and regulatory investigations, causing share values to fall on the stock market. The most well-known case is WeWork, a company that was recently forced to shelve its IPO due to soft demand for the property company shares and regulatory difficulties related to the outsized role of the CEO in the company.

Ultimately, the level of scrutiny that comes along with unconventional management styles of unicorns is getting in the way of the vision detailed by Mayoshi Son. The low level of business structure that the SoftBank CEO has demanded from the companies the Vision Fund has backed is endangering the ecosystem of tech companies that is supposed to bring innovation across different industries. Decaying confidence in these companies delivering that revolution is making it difficult for SoftBank to win over investors for a second Vision Fund.