Many readers will likely be
familiar with Softbank, the Japanese conglomerate holding company that also
manages a $100 billion startup portfolio through its Vision Fund, soon to have
a sequel called Vision 2. This referenced article
appears in SpendMatters and provides an interesting perspective around the
recent large Softbank funding rounds for a couple of supply chain finance
fintechs. This includes $200 million in C2FO and a total of $1.5 billion
(rounded) in UK-based Greensill.
‘According to Financial News, Greensill deployed Softbank’s first $800 million investment in the following manner: $300 million went to pay off investors, $439 million to beef up capital in the bank, and the rest ($61 million) for working capital. Lex Greensill at the time cited concerns he and his board had of a bearish economy and hence wanted to beef up capital to be used as a warehouse to hedge against trade credit demand.’
The author goes on to ask the question
of why this level of investment at a time when many question whether the 10+
year post-great recession cycle still has legs. Doubt enters the picture
as well on the heels of the recent meltdown in WeWork’s IPO, costing the Vision
Fund a pretty penny. The reasons postulated for such funding include the
AR opportunity (which we recently covered in a member
report), general SME funding gaps and perhaps most insightful, the
permanent QE mode that now exist in developed economies, whereby structured 7%
returns for fund participants are great motivators. Bottom line is that
it’s all sort of a bet on the space in general, and perhaps a reasonable one.
A good summary and worth the few minutes to read.
‘Could supply chain finance returns be part of the future answer? Perhaps. Especially if the Vision Fund can’t meet future coupon obligations due to their portfolio underperforming. When there is no transparency, there is only guesswork. But $1.65 billion invested in supply chain finance is certainly a strong bet on this space. What few people seem to understand is that there are many flavors of supply chain finance, meaning there are many bespoke solutions each running their own sausage factory, and as usual, the devil is in the detail.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group