Masayoshi Son should try angel investing

The reputation of Masayoshi Son, the world’s most prolific unicorn breeder, came crashing down last year with the collapse of WeWork. An 80% writedown on The We Co., and a 970 billion yen ($8.8 billion) loss at the SoftBank Vision Fund delivered some cold hard truths about his vulnerability.
You might think that Son would have learned his lesson. Instead, he’s doubling down, with plans to start a $108 billion fund that’s even bigger than the first. To win back investors’ confidence, though, the chairman of SoftBank Group Corp. might want to consider a different tack: becoming an angel.
That’s not just a euphemism. Angel investing would take Son back to basics. Compared with the SoftBank Vision Fund, a SoftBank Angel Fund should be: Much smaller: $50 billion max, write lighter checks: Nothing larger than $10 million and invest earlier: No later than Series A.
This concept of smaller, lighter, earlier ought to become a mantra. But it takes guts — Son would have to rein in the swagger that comes with writing fat paychecks. Not that his habit of throwing billions at Southeast Asian startups isn’t bold; but when that business already has a product, traction, brand awareness and market leadership, then you can’t exactly call it brave — especially when it’s other people’s money.
Angel investors take a punt on new companies at the earliest stages, often before a product has been fully developed or any revenue acquired. In the past, they were generally rich individuals who knew the founders and were parting with a relatively modest amount of cash to give young entrepreneurs a leg up. The average angel and seed deal size in the fourth quarter was $1.8 million, according to Crunchbase News. When Son entered the venture capital scene in 2016 with a $97 billion checkbook, this old-school model of investing — based on the careful assessment of a startup’s revenue, return and growth — was thrown out the window. Son’s Vision Fund tends to invest much later, in rounds such as Series E, F or even H.
Son also wielded his giant fund to pick winners, and by extension nominate losers, in ways that defied logic. He offered WeWork founder Adam Neumann just 12 minutes to make his pitch, and then told him that his company wasn’t being crazy enough, New York Magazine reported last year. Neumann should aim to make WeWork ten times bigger than originally planned, the founder of the co-working space operator was told.
Masayoshi Son’s reputation is built upon decades of courageous bets that netted him, his investors, and his founders billions of dollars. The most famous being Jack Ma and a little e-commerce company that became Alibaba Group Holding Ltd. But the past few years suggest he’s forgotten those roots as a supporter of scrappy young upstarts.
Shifting to angel investing wouldn’t be entirely altruistic. This segment is the hottest sector of funding right now, according to data compiled by Crunchbase News. Whereas late-stage investing — the type the SoftBank Vision Fund specialises in — has declined over the past year, angel and early-stage investing is on the rise.
Son prides himself on being a visionary, with a 100-year time horizon. That makes for good headlines and big numbers. But if he wants to secure his legacy, there’s nothing more honorable than being an angel.

—Bloomberg