This article was updated Sept. 29 to reflect news of layoffs at SoftBank’s Vision Fund.
For years, SoftBank has been losing leaders.
Nikesh Arora, a former Google executive and heir apparent to SoftBank CEO Masayoshi Son, left in 2016 and went on to lead Palo Alto Networks. Shigenobu Nagamori, CEO of Nidec, stepped down from the board in 2017. Two years later, Tadashi Yanai, the founder of Uniqlo parent Fast Retailing, ceded his board position after an 18-year tenure.
But following the collapse of SoftBank-backed WeWork‘s IPO in late 2019, the pace of high-level departures accelerated and grew in scale.
For more than two years, this executive turnover has played out in a steady drumbeat of company announcements and headlines. Collectively, the exodus of top executives amounts to a significant erosion of the top talent surrounding Son—including some of the key architects behind the firm’s tech-focused Vision Fund unit and SoftBank’s freewheeling bets that have famously shaken up the global venture capital ecosystem in recent years.
A PitchBook analysis of the departures reveals that, since 2020, around half of the Vision Fund’s leaders and managing directors have left the firm. And during that period, SoftBank’s board lost 11 of 15 board directors, three of whom had been with the firm for more than a decade.
These departures come at a critical juncture for Son, known familiarly as Masa. As the value of his firm’s holdings declines, the CEO is offloading major assets like chipmaker Arm and Fortress Investment Group, reshaping SoftBank without the benefit of key advisers and investment professionals who helped guide the company through past ups and downs.
One of Son's most trusted lieutenants for the past few years has been Rajeev Misra, head of SoftBank's $100 billion Vision Fund 1. But now Misra is reportedly raising a more than $6 billion fund with Abu Dhabi state funds, including Vision Fund backer Mubadala. Two Vision Fund managing directors, Munish Varma and Yanni Pipilis, have left SoftBank and are said to be joining Misra's new venture. Misra remains the head of Vision Fund 1, but that vehicle has finished making new investments and he recently stepped back from other duties.
Vision Fund's US team has lost the majority of its managing partners: Deep Nishar is now at General Catalyst and Ervin Tu jumped to Prosus and Naspers. Other key figures for SoftBank in Silicon Valley, like Jeff Housenbold and Michael Ronen, now are leading companies.
Earlier this year, Marcelo Claure stepped down as SoftBank's COO after leading several turnaround efforts and spearheading the firm's aggressive Latin America strategy.
"[Claure] was a kind of 'man Friday' for SoftBank and [Son]," said Atul Goyal, a managing director of equity research at Jefferies. "Every time there was a problem, he was sent to fix it, whether it was Sprint, whether it was WeWork."
The Latin America team that Claure built has similarly been scattered. Managing partners Shu Nyatta and Paulo Passoni left in April, and that unit's early-stage team formed a new firm, Upload Ventures, with backing from SoftBank.
Now, SoftBank is shedding more staff. In late September, the company initiated cuts of around 150 people, or 30% of its staff, according to a source familiar with the decision. The layoffs follow large losses at the firm and a slowing pace of investment.
"There are no sacred areas," Son said in an August earnings call. "We have to review everything."
Vision Fund's US team has lost the majority of its managing partners: Deep Nishar is now at General Catalyst and Ervin Tu jumped to Prosus and Naspers. Other key figures for SoftBank in Silicon Valley, like Jeff Housenbold and Michael Ronen, now are leading companies.
Earlier this year, Marcelo Claure stepped down as SoftBank's COO after leading several turnaround efforts and spearheading the firm's aggressive Latin America strategy.
"[Claure] was a kind of 'man Friday' for SoftBank and [Son]," said Atul Goyal, a managing director of equity research at Jefferies. "Every time there was a problem, he was sent to fix it, whether it was Sprint, whether it was WeWork."
The Latin America team that Claure built has similarly been scattered. Managing partners Shu Nyatta and Paulo Passoni left in April, and that unit's early-stage team formed a new firm, Upload Ventures, with backing from SoftBank.
Now, SoftBank is shedding more staff. In late September, the company initiated cuts of around 150 people, or 30% of its staff, according to a source familiar with the decision. The layoffs follow large losses at the firm and a slowing pace of investment.
"There are no sacred areas," Son said in an August earnings call. "We have to review everything."
Masa's show
When it launched in 2017, the mammoth Vision Fund 1 set out to capture a revolution powered by AI and data. Since then, the fund has become central to SoftBank's business, representing 41% of the Japanese conglomerate's assets as of June 30.That vision now faces an uncertain outlook following the loss of key people who have provided something of a check on Son and guided SoftBank's investments and fundraising efforts. Some were even plausible candidates to take over one day for Son, who turned 65 last month.
Yuko Kawamoto, a former outside member of the board, wrote an open letter last year that described Son as an inspiring leader, but one who would benefit from stronger oversight. She underscored the importance of surrounding the CEO with people who disagree with him when necessary. A representative for SoftBank declined to comment for this article.
Japanese firms, long criticized for their hide-bound system of corporate governance, have become targets for activist investors. Starting in 2020, activist investor Elliott Management reportedly bought $2.5 billion in SoftBank shares as part of a push for changes at the Japanese company that included increased transparency, changes to the board and stock buybacks. Elliott sold its remaining stake in SoftBank last month, the Financial Times reported.
Many of SoftBank's recently departed senior leaders had longstanding relationships with Son and were therefore in a position to influence him. Their exodus raises questions about how decisions will be made on high-stakes issues, like the possible sale or IPO of SoftBank-owned chipmaker Arm.
In addition to the shrinking sphere of influence surrounding Son, the departures represent a loss of the investment mindshare that has powered Vision Fund. Those who have recently departed or stepped back from Vision Fund had ties to some of its most successful investments: Misra to Uber, Nishar to Slack, and Housenbold to DoorDash.
Longer term, Son's ambition for SoftBank—he has conceived of it as a company that will grow for 300 years—requires a clear line of succession.
When the topic of SoftBank's succession planning has come up in the past, there was typically an heir apparent, but not anymore. Arora, Misra and Claure all had the pedigree to be the next CEO—even if not officially acknowledged by SoftBank. Another candidate was Katsunori Sago, a chief strategy officer who left last year.
Son once said he had considered retiring at 60. When the issue of succession came up in an earnings call in February, Son signaled that finding someone to take over remains a high priority.
"I still believe that it's a very important agenda for me to find a successor of mine,” he said. "But right now, having said that, I myself am very much motivated in the Vision Fund and Arm. Every day is so exciting. I'm having so much fun."
Hunting for funds
Another way the loss of senior people may affect SoftBank is by making it more difficult to raise outside capital.In a 2016 paper, Harvard researchers Victoria Ivashina and Josh Lerner found that firms that lost partners were less successful at raising future funding. Consistent leadership is important for LPs, which often require "key man" provisions in commitment agreements that prevent a fund from making investments if a leader is absent from the firm.
But with no new capital commitments and a frozen IPO market, the Vision Fund segment has little room to maneuver. Vision Fund 2 has deployed more than 85% of its $56 billion in committed capital, and the Latin America Fund has invested almost 95% of its $7.6 billion pool as of June 30.
"Vision Fund 2 is kind of in a holding pattern because they don't have capital to make new investments at the same pace they were, and they can't get exits either," said PitchBook senior analyst Kyle Stanford.
Without new sources of capital, the Vision Fund must rely on recycling profits from past investments. While much of its startup bets currently sit at an unrealized loss, SoftBank has been selling off other assets to build up its cash holdings, which sat at more than $42 billion as of June 30.
Now SoftBank plans to raise yet another Vision Fund, its third, Bloomberg reported, despite poor performance in the segment. In the two most recent quarters, the Vision Funds recorded consecutive losses totaling more than 5.9 trillion yen (about $41.3 billion).
Comeback kid
Taken together, the departures of key leaders along with market headwinds are threatening to put Son in a difficult, though not unfamiliar, position.SoftBank invested heavily into the late-1990s dot-com bubble. Its stock crashed 98%, leading Wired magazine to brand Son a "venture capital washout." But the firm rebounded on the heels of wise bets in the telecom sector and a stake in Alibaba that would rank among the best VC investments of all time.
Today SoftBank's losses are primarily unrealized, and it has shown an ability to bounce back quickly in the past with the help of market momentum. But as Son recently acknowledged, private company valuations are higher than their public counterparts and are likely to decline further, leading to more potential losses.
As the CEO himself put it, "The winter for unlisted companies may be longer than the winter for listed companies."
Featured image by Chloe Ladwig/PitchBook News
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