What happens if there’s no Vision Fund II?

While I’d like to recommend panicking as a general response to the world, a smaller or fully neutered Vision Fund II won’t crash everything in the sphere of giant private companies.

Recent headlines describe a world that might never see a Vision Fund II. The Wall Street Journal reported over the weekend, for example, that “SoftBank Faces Challenges Raising Latest $100 Billion Fund.” The Washington Post this morning noted that SoftBank’sMasa Finds Not Everyone Shares His Vision.” And so on.

What matters for tech shops, startups and unicorns alike is that instead of their being an eventual Brady Bunch of Vision Funds, vision-ing around the world like buzzy, cash-laden drones, the franchise might halt after its first installment.

The $100 billion-ish vehicle has caused disturbances of all sorts in the fabric of the private capital markets, deploying cash with hurricane speed. Checks into companies of all sorts have come from the epic capital pool, sourced in large part from theocratic monarchies. (As we learned from SoFi last week, this is de rigueur.)

But as the Vision Fund’s aggression has kept the media enthralled, and founders’ hopes alive, troubles have circled. According to the Journal, raising money from Vision Fund I backers has proved tough:

But several of these [prior] investors plan to make limited or no contributions, people familiar with the matter said. They include Canada Pension Plan Investment Board and Saudi Arabia’s Public Investment Fund, whose $45 billion check made it the largest backer of SoftBank’s first tech fund, known as the Vision Fund.

You can read this two ways. First, that quite a lot of private capital is going to sit out the late-stage market. Or, second, that that same capital is instead going to put itself to work. The Journal continues:

Many of the biggest funds already have established programs to invest directly in late-stage startups and aren’t interested in paying fees to another party, people close to them said.

This is why it’s bad news of sorts for founders that the second Vision Fund might never exist, or might be born small. But only bad news to a degree, as it seems a decent percentage of the money that might have gone into the second Vision Fund will still be invested, albeit by folks likely a bit more conservative than SoftBank’s Masayoshi Son.

The Vision Fund era overvalued Uberfunded its competitors, fired too much money into Wag (whose growth has been called into question) and more. Whether that fund is going to pay itself back and provide a sufficient return to make the entire project worthwhile is unclear. It might. But that may not be a good enough reason for investors to promise another $100 billion.

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