Years before the current global pandemic
SoftBanks Vision Fund, not only disrupted the future of venture capital and startup investing it has changed it forever. Although the results in the short term have been less than desirable the long term results of the fund are relatively unknown.
This revolutionary mega fund arrived on the scene investing a $100 million or even billions in growth stage companies.
This is creating a new paradigm the super haves giving Companies with 100s of millions in the bank an impossible advantage. The ability to not only survive but thrive by acquiring the talent and IP of cash starved companies during the global pandemic .
Since the Vision fund many Megafunds of various sizes have been raised .
One way to look at These megafunds is Captial as a service .
Softbank reportedly has a 300-year plan for the future the largest Captial deployment experiment in the history of venture Capital. So what does this mean and what are the unintended consequences for family offices, Micro and midsize venture capitalists, top accelerators and even the startups themselves?
While a select few startups will have access to deep pockets, such as SoftBanks’s VisionFund and other mega funds raised by the likes of Sequoia, the majority of startups will not , causing many early stage companies
To fight for capital as LP and Venture dollars move toward the growth stage.
SoftBank Has created a lot of tension between founders and their earlier investors. The media has reported this quote “take our giant wad of money or we will give it to your competition,’”
Obviously this has left companies and venture firms alike scrambling for a solution . This brings back memories as a child reading “He who holds the gold makes the rules “ or something like that .
Early-stage activity, which is vital to the VC ecosystem’s health, has been forced to adapt. To stay in the game, traditional VCs have raised bigger funds, started investing Angel size checks in order to gain access to growth rounds of the winners and even have become LPs in emerging funds .
All this excess capital in the hands of a few big players temporarily pushed valuations higher and higher in a game of musical chairs until a liquidity event occurs . The recent pandemic is starting to serve as a rude awakening to many investors and founders alike .
Making matters worse there are now more startups than ever diluting talent , capital and other resources . The venture community will completely bifurcate into this world of “super haves” and “have nots” most companies and even venture funds will have to struggle to raise money while a select few are able to raise enormous amounts of money. Regulation crowdfunding is another option that will be widely explored by many startups that are unable to attain Vc funding at various stages allowing them an alternative opportunity
To build their business at various levels of scale .
The new mega funds is difficult if not impossible to measure. Without a doubt this is keeping companies from tapping the IPO market. The SoftBank effect has caused a number of funds in Silicon Valley to attempt fundraises of this magnitude or even higher, prompted, in part, by the pressure to have larger pools of capital to deploy to defend against SoftBank’s $100 billion Vision Fund. This unprecedented amount of capital has created massive valuations but also massive failures in tandem.
Accelerators have already started to adapt with the invent of Series A batches and continuity funds . The micro and midsize venture capital firms that cannot compete with the mega funds have one alternative to adapt or shutdown .
The Popup Vc is the next generation of in the evolution of startup funding .
Family office leaders have an unprecedented opportunity to Dominate the startup echo system as a result of Softbanks capital as a service model. The global pandemic has now opened the doors for venture debt with warrants, registration rights and other terms previously unthinkable in Silicon Valley culture.
Family offices have the resources to:
- Take a company across the entire spectrum from inception to exit and everywhere in between.
- The ability to IPO in 3-7 years
- Acquisition via SPAC or stay private forever
- Offer a wide variety of flexibility.
How do family offices get started?
Sight, Selection and Service of outstanding companies and founders. By networking, negotiating, spotting trends, understanding psychology, maintaining conviction in the face of opposition, providing advice, analyzing markets, supporting founders and partners wherever needed.
“The good investors work for the founders, the bad investors think the founders work for them .” Using the principles of a Forbes’s top 50 angel investor, family offices can get access to top silicon valley deal flow by partnering with the right network of individuals.
The Popup Vc is an elite syndicate where family offices, High net worth individuals and even micro and midsize venture firms come together on a per deal basis to fund companies from seed and beyond. As the check sizes get bigger and reputation grows, the network of the Popup Vc syndicate lead grows in proportion.
Money is not the only thing that the syndicate offers; the privilege of joining the “family” this is were the term family office is “apropos”.
Once the Syndicate has invested in 100s of companies. They will create an ecosystem where they will be each other’s customers, leverage the groups network and achieve massive scale that rivals the mega funds and top tier accelerators of Silicon Valley.
The so called SoftBank effect has opened the doors for family offices to play a major role not only participating but shaping the startup and venture capital echo-system.
This is the perfect storm for the rise of the Family Office in the venture capital ecosystem. it’s time to see what happens when the disruptors get disrupted. This change is the opportunity that the family offices and ultra high net worth individuals have been waiting for.
These uncertain times provides family offices the opportunity to form unconstrained funds and launch the next phase of investing in a post Covid world!
About the author
As an entrepreneur, author, and Forbes top 50 Angel investor, James Sowers is a pioneer in developing one of the first private opportunity PopUp VC syndicates for investors within the family office and High net worth community.
He frequently speaks about exponential technologies and startup investing at elite conferences most recently Private Wealth comference by Marcus Events. He has been featured online by the Huffington post , Forbes, Entrepreneur, fuel for startups and Equites Magazine. His writings have been published in ICO Crowd magazine and various crypto currency and blockchain publications.
He is a mentor at Stanford for CS359B decentralized applications for the blockchain and a at the top tier Alchemist accelerator in Silicon Valley.
This this article is for informational purposes only and does not constitute investment advice. Any one considering an investment in cryptocurrencies should consult their own financial advisor.