SoftBank To Turn Its Fund For Underrepresented Founders Into Evergreen Vehicle

After it finished deploying the first $100 million from a fund to back underrepresented founders launched the week following George Floyd’s murder, SoftBank announced on Monday that the fund is here to stay in a format similar to its mammoth Vision Fund.

SoftBank’s Opportunity Fund will now take an evergreen approach with no limit on the amount of capital it will deploy, the firm told Forbes. Like SoftBank’s second Vision Fund, which is also uncapped and currently has a fund size of $40 billion, the Opportunity Fund will increase its capital deployment as it sees fit, says managing partner Shu Nyatta. He would not say how much it planned to invest in a year, but Nyatta says that “the intention is to do more than we have done” in the first fund in terms of capital deployment.

SoftBank announced the Opportunity Fund in June 2020, a week after the murder of George Floyd sent reverberations on diversity issues across the tech industry. At the time more than 80% of venture firms did not have any Black investors, and only 1% of startups founders were Black, according to the nonprofit organization BLCK VC. The first Opportunity Fund invested across funding stages in 70 U.S.-based companies with founders who are Black, Latinx or Native American. “The Vision Fund had invested in some founders of color, but not that many frankly,” Nyatta says. “We were as awful as the rest of the industry in focusing in any kind of explicit way on underrepresented founders. We sucked at it.”

The fund will now reorient as more of an early stage practice and make about 20 to 30 investments per year. Investments will largely fall in the range of $300,000 to $700,000 for the initial financing, with follow-ons of $1 million to $5 million, Nyatta says. “That feels right because then you have time to really be thoughtful,” Nyatta says. That comes in sharp contrast to the growth stage-oriented Vision Fund, which on average writes multiple $100 million-plus checks in one week. Vision Fund II, the successor to its industry-record $100 billion Vision Fund, has been self-funded by SoftBank after volatility in its first fund led to lukewarm investor interest; the company added $20 billion to the Vision Fund last year. “The Opportunity Fund's capital deployment per year is always going to be a fraction of the Vision Fund's capital deployment,” Nyatta says. “The point is to get companies to the stage where the Vision Fund and funds like it will take the baton.”

That pipeline into the Vision Fund has not yet commenced, though the Opportunity Fund has made co-investments in Vision Fund unicorns Cityblock, a health provider for underserved populations, and Esusu, a credit-building service for immigrants and minority groups. Other investments in the first fund which are approaching the growth stage include smart mattress maker Eight Sleep ($388 million valuation, according to PitchBook), blockchain infrastructure provider QuickNode ($250 million) and Lendtable ($168 million), which gives cash advances to help employees match their 401(k)’s. 55% of investments to date include a Black founder, 40% include a Latinx founder and the remainder include founders of both backgrounds; Nyatta admits that his team is “trying to figure out how to more effectively address and access the Native American community,” but that no such investments have been made yet.

Investment decisions are made via a committee vote by Nyatta, former TaskRabbit CEO Stacy Brown-Philpot and Panoramic Ventures partner Paul Judge, all of whom are Black. The trio will now also be joined by Vision Fund partners Catherine Lenson and Brett Rochkind. The committee previously also included the brainchild of the fund itself, SoftBank COO Marcelo Claure, who departed in January amid reported disagreements over compensation. Nyatta maintains that despite Claure’s exit, the fund’s operations have remained unchanged. While he and Claure spearheaded the fund’s creation and early decisions, Nyatta says it has become a “self-perpetuating machine,” so that Nyatta no longer has many day-to-day leadership responsibilities himself.

“Marcelo was an incredible generator of momentum and an incredible rainmaker when it came to closing a certain deal or getting access to someone or launching these big initiatives,” Nyatta says, referring in the latter case to examples like the Opportunity Fund and SoftBank’s $100 million commitment to investing in Miami-based startups. “We’ll miss those across the board, but in the daily work of keeping the machine running, there’s enough momentum that it just keeps going perfectly fine.”