SoftBank woes give tech funding rivals more space

• SoftBank put $7.6bn into ride-hailing firm Uber Technologies and about $11bn into office sublessor WeWork.
• Blackstone is one of few investors that could write a $500 million check.

SAN FRANCISCO: SoftBank's  halo in Silicon Valley is slipping. Masayoshi Son's firm and its $100 billion Vision Fund have poured billions into startups, sometimes deploying sharp elbows. Trouble at holdings like WeWork may slow it down. That makes more room for rival investors like Sequoia Capital. It's also good timing for Blackstone's new growth fund.

SoftBank has changed the game in many ways by investing such large sums. It put about $7.6 billion into ride-hailing firm Uber Technologies and about $11 billion into office sublessor WeWork. Even its smaller investments are still sizable by startup standards, including the $450 million it doled out to real estate firm Compass in 2017.

The money - far more than traditional venture-capital firms were used to providing until Son came along - allows its beneficiaries to spend rapidly to ramp up top-line growth, sometimes sweeping away rivals. Yet there's a negative side, too. SoftBank has told at least three startups that if they didn't take its capital it would invest in their competitors, according to people familiar with the discussions.

Now, though, some of SoftBank's high-profile investments are stumbling. Most notably, WeWork's planned initial public offering failed to get off the ground, and co-founder Adam Neumann agreed on Tuesday to resign as chief executive. Writedowns or a loss of confidence could end Son's momentum.

VC firms like Sequoia, Accel Partners and others are in a position to benefit. The Vision Fund's largesse has inflated valuations and crowded out longer-established players. Now their capital may become more sought-after again.

Newcomer Blackstone is one of few investors that could write a $500 million check, and its broad portfolio and expertise mean it could offer a mix of capital options from equity to debt. Steve Schwarzman's firm is also the world largest real-estate owner and could offer startups advantages in that realm, among others. Blackstone's new tech effort is run by Jon Korngold, poached from General Atlantic.

Other private equity firms like Advent International are also getting into tech while some, like TPG, have had a growth fund for years. SoftBank is still a potent factor, but clouds over its portfolio have silver linings for its rivals.

CONTEXT NEWS

- SoftBank plans to open a New York City office for its $100 billion Vision Fund, said Lydia Jett, a partner at the fund, at a conference on Sept. 18. One of its New York-based investments is office sublessor WeWork's parent, The We Company. We said on Sept. 16 that it still plans to have an initial public offering this year, delaying its expected IPO this month. On Sept. 24, co-founder and Chief Executive Adam Neumann agreed to step aside and give up majority voting control at the company.

- Separately, private-equity giant Blackstone has been hiring for its new growth equity fund, which will provide capital to companies that are in the stage between venture capital and traditional buyouts. In August, Ram Jagannath was hired to lead healthcare investments. He came from Navab Capital Partners and also worked at Carlyle. Blackstone's tech push is headed by Jon Korngold, a veteran from General Atlantic.