SoftBank turns fund for diverse entrepreneurs into an ‘evergreen’ opportunity

SoftBank, a Japanese conglomerate, announced today that it has an uncapped, evergreen fund made explicitly to back Black, Latinx and Native American entrepreneurs within the United States. The commitment is a continuation of SoftBank’s $100 million Opportunity Growth Fund for underrepresented founders, which first launched in June 2020 in the “wake of increased racial justice.”

The effort, which the firm says took 24 hours to spin up, has now been invested in its entirety across 70 companies. About 55% of the initial portfolio companies are Black-founded, 40% Latinx-founded and 5% Black and Latinx-founded. Still, the portfolio weighs heavily toward men: only 13% of companies in the SoftBank Opportunity portfolio are founded by women of color, which is higher than national rates but still far from equal.

The Opportunity fund has also had four companies valued over $1 billion, as well as two exits; half the portfolio has raised or is raising another round of funding post-initial investment. The momentum could be part of the reason why SoftBank is continuing its efforts. In other (unsurprising) words, it’s working.

The question remains as to why SoftBank is turning its commitment into an evergreen fund, versus dedicating a clear bucket of money, and ergo heavy signal, to back historically overlooked entrepreneurs. It doesn’t have a fear of numbers: just four months ago, SoftBank committed $3 billion more in capital to Latin American companies.

Evergreen funds have an open-ended structure with no termination date. The strategy can allow firms to recycle capital from realized returns without constraints, and invest cross-stage and perhaps even different ownership stakes. In this case, SoftBank is planning to recommit to the early-stage startup scene, similar to Tiger Global in recent weeks.

There’s no fixed amount of capital that SoftBank has committed to the cohort, which makes it tougher to understand how much of an impact the commitment will have. SoftBank told Forbes that the team plans to deploy more capital than it did in the debut fund. In an e-mail to TechCrunch, the firm said that it will make 20 to 30 investments per year with check sizes between $300,000 to $700,000, and follow-on funding between $1 million and $5 million.

Marcelo Claure, former COO of SoftBank, was the person who originally conceptualized and launched the Opportunity fund — alongside managing partner Shu Nyatta, with Paul Judge, the founder of TechSquare and chairman of Pindrop, and Stacy Brown-Philpot, CEO of TaskRabbit. Claure left SoftBank early this year over a tense dispute with the company over his compensation. Nyatta now leads the Opportunity fund’s efforts, and appointed managing partners Catherine Lenson and Brett Rochkind to join the investment committee as well.

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