SoftBank, which invests in startups across the world, desires its employees to buy stakes in its second Vision Fund worth $108 billion. To make this happen, it is offering to loan $20 billion to its 400 employees. Of this, Masayoshi Son, CEO, SoftBank, may alone account for more than 50 per cent. The fund worth $108 billion, is reportedly all set to raise the money from Apple, Microsoft, Foxconn Technology Group, Kazakhstan’s sovereign wealth fund, and some Japanese financial institutions in addition to the contribution from its employees.
What is unusual is that, SoftBank will invest $38 billion into the Fund. This means, along with the employees, it will have contributed to more than half of the Fund.
The loan which will carry an interest of 5 per cent, can be returned by the staff if the startup from the Fund grows and goes public. However, SoftBank may incur a loss on these loans if the startup fails to meet expectations, as was witnessed in the case of Uber, which performed very badly in its IPO.
In the past, SoftBank had given a loan to its employees for its $100-billion first Vision Fund, which now has about $8 billion of employee money.
It is common for investment funds to share their profits with their staff. This ensures higher accountability among the workforce as there is a possibility of the fund investments being cancelled if an executive quits or is found to have acted recklessly.
From the first fund, SoftBank has till date invested about $66.3 billion in 81 companies. And all have grown in value to $82.2 billion. While at least five companies are set to go public next year, the first fund earned 62 per cent returns.