SoftBank's $100 billion mega-fund made it much harder for young tech startups to raise finance - here's why

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SoftBank's $100 billion mega-fund made it much harder for young tech startups to raise finance - here's why

donald trump masayoshi son

Brendan McDermid/Reuters

SoftBank CEO Masayoshi Son with US President Donald Trump.

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  • There's been a drop-off in global early-stage startup funding over the past year, according to a report from Delta Partners.
  • That's partly down to the rise of corporate venture funds, which are putting more money into "big bets" such as Uber and office sharing company WeWork.
  • SoftBank has been the biggest driver of this trend with its $100 billion Vision Fund.
  • Early-stage startups are finding it tougher to raise money as funders become more risk-averse.


When Business Insider recently asked one prominent European fund manager what he thought about SoftBank, he raised his eyebrows and said: "It's a spaceship."

The Japanese telecoms giant, and specifically its $100 billion (£71 billion) Vision Fund, has rewritten the rules of venture capital over the past 12 months, and investors and startups are still adjusting.

The Vision Fund is essentially a gigantic corporate venture fund that drops huge amounts of money into both well-established tech firms and promising startups. The amount of money it has at its disposal is unprecedented, and has shifted the dynamics of venture funding around the world.

SoftBank has taken an 17.5% stake in Uber, and dropped $502 million into Improbable, a UK gaming software firm. It's also active in Asia, with a stake in Indian Uber rival Ola.

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According to a new report from tech consultancy Delta Partners, seen by Business Insider, SoftBank kickstarted a trend last year of funding mega-rounds - which benefited late-stage companies but put a serious squeeze on seed-stage financing.

In other words, it became a lot harder for early startups to raise funding.

Here's a chart - you can see the global number of deals in 2017 was down, with particular impact on the seed stage. That means early-stage startups found it tougher to raise venture funding.

Delta Partners

Delta Partners

And here's another set of charts showing that growth-stage companies are getting a bigger piece of the funding pie:

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Delta Partners

Delta Partners

The data reflects real-world worries around early-stage funding.

Young startups are a naturally risky place to put your money - they're not making much revenue, and maybe haven't worked out whether there's even much demand for whatever they are building. Unsurprisingly, investors are averse to that risk, so it falls to specialist early-stage funds and individual angel investors to get these firms going.

One British seed investor told Business Insider this week that, with the UK's economy lagging, there's anecdotal evidence to suggest angels are putting their money somewhere other than startups. And the crash in early-stage funding clearly isn't just limited to the UK, as shown by Delta Partners' data and other reports.

SoftBank, and the rise of big corporate funds, points to a trend of more money going into dominant players, such as Uber and office-sharing company WeWork, who might "win" their entire market. They represent a safer bet - if anything in tech can be considered safe.

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Delta Partners

Delta Partners

Delta Partners predicted in its report that early stage funding will recover, and that Asia and Europe will have a role to play here. But it looks like the megafunds and their megarounds are here to stay.

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