Masa is either signaling peace, or talking about dual-class shares. Photo by VCG/VCG via Getty Images.
SoftBank Vision Fund is now regularly employing a dual-class stock structure on its investments in big U.S. tech startups, in order to reduce the prospect of national security reviews by the Committee on Foreign Investment in the United States (CFIUS).
Why it matters: SoftBank Vision has always been subject to CFIUS scrutiny, most notably on its Uber investment, but there are new concerns that it could increase substantially if Senate Republicans successfully impose sanctions on Saudi Arabia, which committed around $45 billion of Vision Fund's $100 billion.
Here is how The Information's Alfred Lee described the process, in a piece published just prior to the murder of Jamal Khashoggi:
"SoftBank has split some recent venture capital deals into two parts: an initial component to acquire a voting stake just under the 10% threshold that normally would trigger a regulatory review, and a second component that involves the acquisition of non-voting shares, which tend not to be closely scrutinized by regulators."
Once CFIUS either chooses not to review the deal or does review and grant approval, SoftBank then has the option to convert some or all of its non-voting shares into voting shares, thus giving it the control it really wanted in the first place.
Lee identified this structure being used in Vision Fund deals for Cohesity ($250m), Getaround ($300m) and Light ($121m).
Axios, with the help of Lagniappe Labs, has also found it being used in a similarly-sized deal for robotics software company Automation Anywhere ($300m) and also in a much larger transaction: The $1.1 billion investment in smart windows company View.
• Speaking of SoftBank: We simply do not yet know if the Saudi situation has negatively impacted Vision Fund's ability to do deals. Most of the recently-announced transactions were negotiated prior to the recent controversy, as Vision Fund deals are known to have a pretty long gestation period (in part because Masa usually needs to meet face-to-face with the CEOs).
So we might not really have a quantitative answer until we see (or don't see) announced deal activity early next year.
• Recommended reading: The Washington Post recently published a devastating piece on elder neglect and other violations at a nursing home chain owned until this past summer by The Carlyle Group. Here's the lede:
"To the state inspectors visiting the HCR ManorCare nursing home [in Pottsville, Penn] last year, the signs of neglect were conspicuous. A disabled man who had long, dirty fingernails told them he was tended to “once in a blue moon.” The bedside “call buttons” were so poorly staffed that some residents regularly soiled themselves while waiting for help to the bathroom. A woman dying of uterine cancer was left on a bedpan for so long that she bruised."
HCR ManorCare went bankrupt back in March, and is now owned by a nonprofit.
🎧 Podcast: We discuss why the White House dismissed its own massive report on climate change, which warned of catastrophic economic consequences. Listen here.
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• Deputy, an Australia-based provider of workforce management software, raised US$81 million in Series B funding. IVP led, and was joined by Square Peg Capital, EVP and OpenView Venture Partners. http://axios.link/TD4S
• Aras, an Andover, Mass.-based provider of product lifecycle management for enterprises, raised $70 million in Series D funding. Goldman Sachs led, and was joined by Silver Lake Kraftwerk. www.aras.com
• Asana, a San Francisco-based work management platform, raised $50 million in Series E funding at a $1.5 billion valuation. Generation Investment Management led, and was joined by Lead Edge Capital, World Innovation Lab and return backers 8VC, Benchmark Capital and Founders Fund. http://axios.link/UF8d
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• Blue J Legal, a Toronto-based provider of tax law research tools, raised US$7 million in Series A funding. Relay Ventures led, and was joined by LDV Partners and return backers Mistral Venture Partners and BDC Capital. www.bluejlegal.com
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