Message from SoftBank Vision Funds Management—SoftBank Group Report 2024

We have been an early and long-time champion of AI and have continued to execute a disciplined global investment strategy in 2023—a year characterized by persistent uncertainty in private and public markets. Geopolitical tensions persevered and, in some cases, escalated during the year, including between the U.S. and China, in Ukraine, and across the Middle East. Inflation continued to weigh on growth, and central banks across the globe held interest rates at multiyear high levels.

The higher-rate environment impacted the world of venture capital. Higher rates translated to higher cost of capital for cash-intensive start-ups looking to expand. These effects were compounded through a more challenging funding environment in 2023, with the December quarter marking the slowest quarter for new private venture capital funding rounds, both in number of rounds and volume of capital invested, in more than six years.^*1

Despite these challenges, there were a few bright spots in the public markets. The highest-performing stocks—referred to as the “Magnificent Seven”—continued their strong performance in 2023, driven by excitement about AI’s endless possibilities. Amid mixed performance for the rest of the market, these top stocks helped drive up the S&P 500 by more than 20% for the year.

We have invested in the AI megatrend for years and are true believers in the power of AI to unlock growth and efficiencies and make the world a better place. Recent and significant developments in AI vindicate our belief that we are on the cusp of a new dawn of technology—all driven by AI.

Just as the Internet did in the 1990s, we believe AI will redefine the world as we know it. We have waited a long time to get to this moment, and we are looking forward to witnessing the true power of AI.

Against a changing macroeconomic backdrop, we continued to strike a careful balance between maintaining strict financial discipline and remaining nimble when compelling investment opportunities arose. In fiscal 2023, we invested in a handful of companies that we believe have compelling long-term value creation potential, such as Tractable, Cato Networks, and TravelPerk. We also participated in 32 follow-on rounds in existing portfolio companies, demonstrating our conviction in the long-term growth of the portfolio.

The hard work behind the scenes in helping portfolio companies weather sustained volatility continues to yield results. We saw performance stabilize across the funds, with a combined investment gain of $4.8 billion^*2 for fiscal 2023. Our investment and operating teams continue to work closely with our portfolio companies to encourage capital-efficient growth. Specifically, we are focused on helping them solidify their market positions and grow revenues in a sustainable way. With the cost of capital at elevated levels, we have worked constructively with our portfolio management teams to maintain strong cash positions. We are encouraged by our portfolio companies’ ability to manage this environment, a sign of their enduring resilience.

Continued progress was also made in monetizing assets at constructive prices. During fiscal 2023, we monetized more than $22 billion^*3 from investments. Total gross proceeds now stand at more than $68 billion since inception,^*4 at a gross MOIC of 1.71x. This is a strong achievement against a choppy market backdrop, in part realized by successfully exiting SoftBank Vision Fund 1’s position in Arm,^*5 which completed its IPO in September 2023.

Notwithstanding, the broader market for new listings remained tepid and is expected to stay that way for much of 2024. Our Equity Capital Markets teams continue to closely monitor market conditions, while our operational teams work with portfolio companies to ensure they are best positioned to enter the public markets at the right time. Our late-stage portfolio constitutes a combined fair value of $32 billion^*4 in companies that are ready to list when the time is right. We know the IPO window will reopen, and when it does, we believe we’ll be in a position to take full advantage.

History has taught us that market cycles come and go, but our strategy remains the same: Identify and invest in the nascent megatrends that will shape the future. This conviction is underpinned by our commitment to financial discipline. We are encouraged by early signs that the tide is beginning to turn, strengthening our confidence in our investment principles and in our portfolio company founders, who appreciate our long-term partnership. We are committed to generating sustainable returns, and, looking forward to fiscal 2024, we are optimistic for what is to come.