SoftBank, active insurtech investor, creates unease in venture community

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(Bloomberg) -- The venture capital community has been fretting about the impact SoftBank Group Corp.’s giant tech fund has on deal prices. The Japanese company says be grateful.

"It’s good for investors if valuations go up as they can exit at those prices," said Rajeev Misra, head of the Vision Fund, citing deals with Didi Chuxing, Uber Technologies Inc. and WeWork Cos. where early investors exited by selling stakes to SoftBank.

The industry is upset that SoftBank is muscling in on deals and has voiced concerns that it’s ladling out more money than startups need or can absorb, pushing valuations too high.

SoftBank has been aggressive in targeting the insurance industry, investing $120 million in the home and renters' insurtech Lemonade in late 2017. Bloomberg reported earlier this year that SoftBank was in talks to buy as much of a third of the reinsurer Swiss Re in a transaction that could be valued at more than $10 billion. The reinsurer at the time confirmed the talks and said they were at a very early stage.

The Vision Fund spent 2017 funding some of the world’s largest startups, including leading a $9 billion investment in Uber and a $4.4 billion stake in WeWork. This year the fund revealed plans to invest 460 million euros ($560 million) in Auto1 Group GmbH, valuing the German used-car sales portal at about 2.9 billion euros.

The Vision Fund, which is targeting $100 billion in committed capital, is also looking for more deals in Europe. Misra said he hopes the fund’s wide range of investments, from dog-walking apps to fintech startups, can work together.

"There can definitely be joint ventures in the portfolio, such as Auto1 selling used cars to Uber drivers, and an insurance company like Lemonade selling insurance to Uber drivers," he said in an interview at the Mobile World Congress in Barcelona.

The hope for joint ventures encompass the Vision Fund’s numerous ride-sharing investments, including Ola in India and Grab in Southeast Asia, with research and development eventually being shared between the companies.

The desire for companies to work together may only go so far. SoftBank is keen for Uber to withdraw from certain Asian markets, according to people familiar with the matter. An Uber retreat would save money for both startups, and would improve the U.S. company’s profitability ahead of a planned initial public offering in 2019. Uber has already begun talks with Grab and Ola about potential deals, Bloomberg has previously reported.

While the Vision Fund has invested heavily in the U.S., India and Asia, Europe remains something of a blank spot. Aside from the Auto1 deal, last year SoftBank led a $502 million investment in a London-based virtual reality startup called Improbable Worlds.

"Our desire would be to see more deals in Europe," Misra said.

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Insurtech Lemonade Swiss Re