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Written by Alex Wilhelm

What happens if there’s no Vision Fund II?

While I’d like to recommend panicking as a general response to the world, a smaller or fully neutered Vision Fund II won’t crash everything in the sphere of giant private companies.

Recent headlines describe a world that might never see a Vision Fund II. The Wall Street Journal reported over the weekend, for example, that “SoftBank Faces Challenges Raising Latest $100 Billion Fund.” The Washington Post this morning noted that SoftBank’sMasa Finds Not Everyone Shares His Vision.” And so on.

What matters for tech shops, startups and unicorns alike is that instead of their being an eventual Brady Bunch of Vision Funds, vision-ing around the world like buzzy, cash-laden drones, the franchise might halt after its first installment.

The $100 billion-ish vehicle has caused disturbances of all sorts in the fabric of the private capital markets, deploying cash with hurricane speed. Checks into companies of all sorts have come from the epic capital pool, sourced in large part from theocratic monarchies. (As we learned from SoFi last week, this is de rigueur.)

But as the Vision Fund’s aggression has kept the media enthralled, and founders’ hopes alive, troubles have circled. According to the Journal, raising money from Vision Fund I backers has proved tough:

But several of these [prior] investors plan to make limited or no contributions, people familiar with the matter said. They include Canada Pension Plan Investment Board and Saudi Arabia’s Public Investment Fund, whose $45 billion check made it the largest backer of SoftBank’s first tech fund, known as the Vision Fund.

You can read this two ways. First, that quite a lot of private capital is going to sit out the late-stage market. Or, second, that that same capital is instead going to put itself to work. The Journal continues:

Many of the biggest funds already have established programs to invest directly in late-stage startups and aren’t interested in paying fees to another party, people close to them said.

This is why it’s bad news of sorts for founders that the second Vision Fund might never exist, or might be born small. But only bad news to a degree, as it seems a decent percentage of the money that might have gone into the second Vision Fund will still be invested, albeit by folks likely a bit more conservative than SoftBank’s Masayoshi Son.

The Vision Fund era overvalued Uberfunded its competitors, fired too much money into Wag (whose growth has been called into question) and more. Whether that fund is going to pay itself back and provide a sufficient return to make the entire project worthwhile is unclear. It might. But that may not be a good enough reason for investors to promise another $100 billion.

What happens if there’s no Vision Fund II?

While I’d like to recommend panicking as a general response to the world, a smaller or fully neutered Vision Fund II won’t crash everything in the sphere of giant private companies.

Recent headlines describe a world that might never see a Vision Fund II. The Wall Street Journal reported over the weekend, for example, that “SoftBank Faces Challenges Raising Latest $100 Billion Fund.” The Washington Post this morning noted that SoftBank’sMasa Finds Not Everyone Shares His Vision.” And so on.

What matters for tech shops, startups and unicorns alike is that instead of their being an eventual Brady Bunch of Vision Funds, vision-ing around the world like buzzy, cash-laden drones, the franchise might halt after its first installment.

The $100 billion-ish vehicle has caused disturbances of all sorts in the fabric of the private capital markets, deploying cash with hurricane speed. Checks into companies of all sorts have come from the epic capital pool, sourced in large part from theocratic monarchies. (As we learned from SoFi last week, this is de rigueur.)

But as the Vision Fund’s aggression has kept the media enthralled, and founders’ hopes alive, troubles have circled. According to the Journal, raising money from Vision Fund I backers has proved tough:

But several of these [prior] investors plan to make limited or no contributions, people familiar with the matter said. They include Canada Pension Plan Investment Board and Saudi Arabia’s Public Investment Fund, whose $45 billion check made it the largest backer of SoftBank’s first tech fund, known as the Vision Fund.

You can read this two ways. First, that quite a lot of private capital is going to sit out the late-stage market. Or, second, that that same capital is instead going to put itself to work. The Journal continues:

Many of the biggest funds already have established programs to invest directly in late-stage startups and aren’t interested in paying fees to another party, people close to them said.

This is why it’s bad news of sorts for founders that the second Vision Fund might never exist, or might be born small. But only bad news to a degree, as it seems a decent percentage of the money that might have gone into the second Vision Fund will still be invested, albeit by folks likely a bit more conservative than SoftBank’s Masayoshi Son.

The Vision Fund era overvalued Uberfunded its competitors, fired too much money into Wag (whose growth has been called into question) and more. Whether that fund is going to pay itself back and provide a sufficient return to make the entire project worthwhile is unclear. It might. But that may not be a good enough reason for investors to promise another $100 billion.

Where are all the biotech startups raising?

Where are all the biotechnology companies raising these days? We crunched some numbers to arrive at an answer.

Using funding rounds data from Crunchbase, we plotted the count of venture capital funding rounds raised by companies in the fairly expansive biotechnology category in Crunchbase. Click the chart below and you can hover over individual data points to see the number of venture rounds raised in a given metro area between the start of 2018 and late May 2019 (as of publication). Although there are biotechnology companies located throughout the world, we focused here on just the U.S.

USA_Biotech_2018-May2019

Unlike in the software-funding business, where New York City (and its surrounding area) ranks second in overall deal volume, the greater Boston metro area outranks the Big Apple in biotech venture deal volume. The SF Bay Area (which includes both San Francisco and the towns in Silicon Valley north and west of San Jose) outranks Boston in biotech deal volume, but, then again, it’s also a much larger geographic area with a higher density of startups overall.

The bio business model breeds big deals

Crunchbase News recently covered a $120 million round raised by immunotherapy upstart AlloVir. In the software business, a raise that large would be notable; however, in the business of biology, not so much.

Just for reference, the average Series B round raised by U.S. enterprise software startups between 2018 and May 2019 was about $22.7 million. The average Series B for biotech companies from that same time period: just about $40 million on the dot.

Spinning up a cluster of cells at a lab bench is costlier, harder to do and the outcomes of experiments are less certain than the results of implementing a new software framework. Add to that the tremendous cost of performing clinical trials and clearing regulatory hurdles — all before costly sales and marketing campaigns to get treatments in front of doctors and end users — and it’s easy to understand why many biotechnology companies need to raise so much money in the early stages of the startup cycle.