Bloomberg Businessweek - USA (2019-11-25)

Investorsarequestioninghowgoodthe

world’smostprominentventurecapi-

talfundisatpickingwinners.Doubts

abouttheVisionFund,theflagship

investmentvehicleforMasayoshiSon’s

SoftBankGroupCorp.,intensifiedafter

thecollapseoftheplanned$20billion

WeWorkCos.initialpublicoffering,but

they’dbeenfloatingaroundfora while.

SoftBank’sbadyearbeganinMay

withUber TechnologiesInc.’sdisap-

pointingIPOandcontinuedwhenSlack

Technologies Inc.’s June directlist-

ingontheNewYorkStockExchangefailedtoimpress.

BySeptemberthefundwasup$11.4billionon$76.3bil-

lionininvestmentsdeployedovertwoyears,accordingto

itsNov.8 investorbriefing.Buta bigchunkofthatcame

fromjusttwodeals:theAugust 2018 saleofFlipkartOnline

ServicesPvtLtd.toWalmartInc.andsomewell-timed

tradesinchipmakerNvidiaCorp.,whichit exitedinJanuary.

$57b

64

ILLUSTRATION

BY

GEORGE

WYLESOL

● RUNNINGSCARED

ThatwouldbebadforSoftBank,

whichinvested$4billionin 2017

ata $56billionvaluation,the

Informationreportedin October.

● GETTINGSPOOKED

China’s ride-hailingunicornDiDi

Chuxing Inc.is valuedat$57billion,

but someinvestorshavetriedtosell

shares ata lowervaluation.

Asfortherestofthefund’sinvest-

ments,onlyconsumerstocks,which

accountfor20%ofitsportfolio,have

reporteddecentgains.Fiftypercent

ofthe VisionFund’sholdingsarein

transportationlogisticsandrealestate,

makingit a poorhedgeagainstmarket

volatility.Aftertakingwritedownson

UberandWeWork,it’salreadyinthe

redforbothsectors.

Here’sa provocativequestion:What

if hedgefunds—passivebutnimbleinves-

tors—arebetteratidentifyingunicorns

thanventurecapitalis?UnlikeSon,whohasa habitof

writingmultimillion-dollarchecksafteronly 10 minutes

ofgetting-to-know-you time, hedge fund managers are all

about due diligence. Tiger Global Management’s assets, for

example, have swelled 80% since May 2015, including big

gains in the past 12 months from Juul Labs Inc.’s $12.8 bil-

lion deal with Altria Group Inc. and the market debut of

Peloton Interactive Inc., which Tiger has backed since 2014.

Son has survived tricky times before. During the dot-

com bust, SoftBank’s shares tumbled 99%. But the company

stayed around because one of its investments—in Alibaba

Group Holding Ltd.—paid off spectacularly. Perhaps Son

will hit the jackpot again. But a few standout deals don’t

make him a great startup picker. In fact, retail investors

would do better not to follow his lead. Based on his past

success rate, most of the unicorns the Vision Fund brings

to market will be flops. <BW> �Ren is a markets columnist for

Bloomberg Opinion

By Shuli Ren

Don’t Follow the Pied Piper

Of Unicorns

◼ LAST THING

With Bloomberg Opinion

Bloomberg Businessweek (USPS 080 900) November 25, 2019 (ISSN 0007-7135) E Issue no. 4638 Published weekly, except one week in January, February, March, May, July, August, September, October,November

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