Masayoshi Son’s venture capital firm is famous for making outsize bets on tech startups. It has also been described as an environment of sycophancy and harassment.

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Every six weeks or so, the SoftBank Vision Fund, the biggest source of investment money flowing to Silicon Valley, convenes a multihour video conference call for 75 people on three continents to catch up on its startups. Masayoshi Son, the Japanese billionaire and founder of the fund’s parent company, SoftBank Group Corp., usually dials in from Tokyo. Masa, as Son is universally known, can be charming and effusively complimentary on the calls, according to three regular participants. Or he can be enraged, berating presenters and demanding a perpetually shifting yet unfailingly detailed set of metrics. Or he can be both. No one ever quite knows where he’ll land on the charm-rage axis.

On one call in 2018, the three participants say, a Vision Fund managing partner named Kentaro Matsui was presenting charts showing steady but slow progress from the Chinese shipping startup Full Truck Alliance. Son flipped into rage mode, criticizing Matsui for being too conservative and demanding that he accelerate projections for revenue and valuation growth. “You’re too much like a banker!” he snapped at Matsui, who’s in fact a former banker. Others on the call cringed. It seemed as if Son was demanding that Matsui should find a way to supercharge the startup’s trajectory—a potentially dangerous push. “If you don’t change, I’ll find a way to change your role!” Son said.

Featured in Bloomberg Businessweek, Dec. 23, 2019. Subscribe now Photographer: Jamie Chung for Bloomberg Businessweek. Prop stylist: Amy Henry. Pyrotechnic: Mike Meyers

That’s the thing about Son: Whichever approach he chooses, the point is always to go big or go home. This attitude has been a differentiating feature of his Vision Fund since it landed in Silicon Valley three years ago. It identifies a startup to invest in, pushes its founders to expand aggressively, and profits from ballooning valuations. The method seemed to be working—at least until earlier this year, when the fund’s most prominent investment, the office-sharing startup WeWork, operatically self-destructed.

Another feature that sets the Vision Fund apart is where the biggest chunk of its money comes from: Saudi Arabia. Son raised $45 billion from the Saudis despite international scrutiny of their human-rights record. Crown Prince Mohammed bin Salman backed the Vision Fund in 2016, not long before he detained hundreds of the kingdom’s leading businessmen and government officials at the Ritz-Carlton Riyadh. According to media reports, detainees were tortured; one, a Saudi general, died in captivity. The following year, bin Salman was implicated by the CIA and the United Nations in the assassination and dismemberment of a U.S.-based journalist for the Washington Post, Jamal Khashoggi. (Bin Salman has denied the accusations.)

Son ignored the controversy, other than an acknowledgment at the start of his November 2018 earnings presentation. In his other public appearances, he stuck to his usual shtick, which is to make grandiose prognoses. He’s a big proponent of the singularity, the mythological crossover event when artificial intelligence overtakes human intelligence. “Every industry that mankind created will be redefined,” he proclaimed in a 2017 speech. Few in Silicon Valley take Futurist Masa seriously. (A PowerPoint presentation for his company’s 300-year plan included a robot passing a cartoon heart to a human with the words “Information Revolution - Happiness for everyone.”) And yet everyone, it seems, has been happy to take SoftBank’s money.

In 2017 the Vision Fund made more than $21.2 billion in investments in 19 companies, including committing $4.4 billion to We Co., the parent of WeWork. Outsiders were skeptical of Son’s outsize capital. “The only other time we saw that kind of money come into the tech industry was 1999, 2000, and that ended badly,” says Steven Kaplan, co-founder of the entrepreneurship program at the University of Chicago Booth School of Business.

The strategy that Son and his all-male phalanx of managing partners followed seemed less about any specific technology than about placing large bets on the buzziest startups: WeWork ($10.7 billion), Uber ($7.7 billion), on-demand pizza maker Zume ($375 million), and dog-walking app Wag ($300 million). They invested in a few hardcore artificial intelligence companies, too. Portfolio companies expanded quickly, often haphazardly, leading to a collection that included high-profile disappointments and the conspicuous disaster at WeWork. SoftBank’s starry-eyed investors convinced themselves that WeWork’s outrageous operating losses and the erratic behavior of co-founder Adam Neumann didn’t matter—until potential public-market investors reminded them that, actually, they did.

And the Vision Fund’s problems don’t stop with some bad bets. Current and former employees of the fund and SoftBank describe an environment of sycophancy toward Son, internecine political rivalries, harassment, compliance issues, and an abnormally high tolerance for risk—all wrapped in a casing of general weirdness.

No one “wants to pick a fight with a crazy guy”

Raised in Japan by a middle-class Korean family, Son made a fortune investing in technology in the 1990s. He briefly surpassed Bill Gates as the world’s wealthiest person, lost almost everything in the dot-com crash, then won it all back. In 2000 he invested $20 million in the Chinese e-commerce company Alibaba Group Holding Ltd.; his stake is now worth more than $130 billion. His mostly successful track record led him to announce the $100 billion Vision Fund in 2016.

Son likes to say that the fund reflects his belief that startup clusters can pattern themselves after gun-senryaku, the Japanese term describing the cooperative behavior of migrating birds. Several portfolio companies, including Mapbox (digital mapping) and Fungible (data services), describe partnerships with another company, ARM (chipmaking), that would have taken much longer to forge without SoftBank’s nudging. DoorDash is deploying technology from GM Cruise (autonomous vehicles) as it tests self-driving cars for food delivery. Fanatics (sports apparel) is working with South Korea’s Coupang (e-commerce) as it expands into that country. Katerra (modular construction) recently struck a deal to build a headquarters for India’s Paytm (payments).

But the real strategy behind the Vision Fund seems to involve another Masa principle: Big money means big strategic advantages. The idea is that festooning entrepreneurs with hundreds of millions of dollars and urging them to spend at an exorbitant pace will scare off competitors and allow the Vision Fund to mint behemoths. No one “wants to pick a fight with a crazy guy,” he told Bloomberg Businessweek last year.

Son at a press conference in Tokyo on Feb. 6. Photographer: Kiyoshi Ota/Bloomberg

Many SoftBank-backed founders have Masa stories. These often begin with a summons to the 26th floor of SoftBank’s green-tinted glass headquarters in Tokyo or to Son’s home in Woodside, Calif., a 74-acre compound whose massive main residence features a foyer with a large marble statue of a horse and chariot. The entrepreneur might then sit across a table from Son, answer a few questions, hear that their idea is even more promising than they thought, and, by the end of the conversation, be anointed “the next Jack Ma.”

“You feel enabled, you feel euphoric,” says a chief executive officer in Asia. “You’ve been told no a hundred times, and then he says he believes in you. Every entrepreneur dreams of having that kind of backing.”

One Silicon Valley CEO recalls an early pitch meeting with Son over video chat. Unbeknownst to the CEO, the feed to Tokyo fell a minute behind the audio, so he was narrating slides SoftBank’s top brass weren’t yet seeing. “They were all superpolite and nodding their heads,” said a person with knowledge of the meeting, who wasn’t authorized to discuss it. “I didn’t find out until after that none of it made any sense.” The fund ultimately invested in the late-stage startup.

Vision Fund portfolio companies sometimes seem to suffer from an overabundance of vision. Until Dave Grannan, co-founder and CEO of Light Labs Inc., a camera startup in Redwood City, met with Son in Tokyo and then again in Woodside in early 2018, he hadn’t considered developing his imaging technology into a new way for autonomous vehicles to navigate. “That idea came directly from Masa,” he said in an interview last year. The concept helped Light get $121 million in funding in July 2018, with SoftBank leading the way. As was customary with many of its investments, the capital would come in tranches, with subsequent funds dependent on meeting sales and growth targets. Light pivoted to the autonomous car market, as Son had advised. About half of Light’s employees were laid off in July, when the company eliminated its original smartphone-camera technology to help stem losses.

After Vision Fund invested $375 million in Zume Pizza Inc., whose mission to use robots to automate pizza making had shades of Silicon Valley frivolity, CEO Alex Garden expanded his mission to include rethinking the entirety of U.S. food production. Employees were unnerved. “Are we the next Theranos?” went one anonymously submitted question at an all-hands meeting over the summer. Afterward, Zume banned anonymous questions at the meetings. (A spokesman says the company has always “strived for transparency” and has a different way for employees to submit anonymous questions.) Three months later, Zume has yet to revolutionize food production or to be profitable.

Valuation of Startups Backed by the Vision Fund Data: Crunchbase, Bloomberg, SoftBank

The Vision Fund’s nearly 500 employees operate from traditional office towers around the world, but most of its executives work from a townhouse in London that was once home to the Ladies Empire Club, a defunct women’s organization. Son hasn’t visited the headquarters in two years, according to several people close to the firm.

To lead the fund’s unicorn hunt, Son brought in Rajeev Misra, a veteran Wall Streeter who once ran the Deutsche Bank subprime team immortalized in The Big Short. At the office, Misra favors dark designer sport coats with pocket squares and bare feet or furry Gucci slippers, and he often vapes at business meetings. He filled his investing team with fellow bankers from Deutsche Bank AG and Goldman Sachs Group Inc. While it was placing its startup bets, SoftBank Group also executed complex investments in public companies, including taking a roughly $3.7 billion stake in Charter Communications Inc. in early 2018 and offloading it a year later after the share price rose by more than a third. A giant, convoluted bet on U.S. chip designer Nvidia Corp. brought in a $2.8 billion gain.

During all that adroit dealmaking, the fund’s workplace culture was steeped in vintage Wall Street macho belligerence. In early 2017 the Vision Fund’s Zambia-born chief financial officer, Navneet Govil, told a Mormon employee to “go back to Utah to get more wives,” according to two people who heard the comment. The employee left the company. Via a spokesman, Govil denies making such a statement. At a work lunch a few months later with several colleagues, Govil remarked that “Chinese people sound stupid,” according to a person who heard the comment and another who overheard a human resources representative discussing the matter. Via a spokesman, Govil denies making such a statement. In 2017, Govil also berated an accountant in front of a group, according to a person who was present and saw her crying afterward. SoftBank says that Govil never berated her and that she left when her short-term contract expired.

In Silicon Valley, much of the whispering about SoftBank’s peculiarity and spotty investment record concerns managing partner Jeff Housenbold, who collects cars, including a blue Ferrari, and claims to own a 20,000-bottle wine cellar, although he doesn’t drink himself. Acquaintances describe him as smart and arrogant and almost entirely lacking in self-awareness. They say he believes himself the epitome of New York City straightforwardness, which doesn’t necessarily play well in passive-aggressive California.

He’s also gotten away with some questionable behavior. In a discussion about whether to invest in the stationary bike startup Peloton Interactive Inc. in 2017, according to two people who were in the meeting, Housenbold opined that its exercise equipment appealed in part to men who masturbated to its workout videos. SoftBank said Mr. Housenbold never made such a comment, and the Vision Fund ultimately did not invest in Peloton. Housenbold is also notorious for sparking an internal compliance review this April by selling personal shares in Guardant Health, a cancer-detection company in which SoftBank is the largest shareholder. Although he was cleared of any wrongdoing and the compliance process was reconfigured so trading in restricted companies is now escalated for human review, some Vision Fund executives were shocked that Housenbold didn’t face any repercussions.

Misra Photographer: Mathew Scott for Bloomberg Businessweek

Housenbold’s investments include several promising portfolio companies, including storage company Clutter and Colombian delivery company Rappi, but at least two high-profile bets have struggled. Wag, which has floundered because of a scarcity of pet owners willing to stick with the dogwalking app, shed CEO Hilary Schneider and bought back SoftBank’s stake earlier this month. Housenbold also pushed Tina Sharkey, co-founder of online retailer Brandless Inc., to build a warehouse and distribution network, then forced her to resign and withheld a second tranche of funding when sales disappointed, according to two people familiar with the matter. SoftBank and Brandless say that Sharkey voluntarily resigned.

At a portfolio meeting in October, Housenbold defended his performance by arguing he’d been trying to back female CEOs. Then he seemed to blame the #MeToo movement for limiting his ability to maneuver, bewildering at least one attendee. A SoftBank spokesperson denied he made such a comment.

Brian Wheeler, general counsel at SoftBank Investment Advisers, says “The employees involved categorically denied these alleged events ever took place” and that SoftBank has “zero tolerance for any form of harassment or discrimination—it simply has no place in our organization.”

Misra, for his part, calls Housenbold “a valued teammate and one of my top performers.” More broadly he acknowledges the company has made some bad bets and suffered growing pains. But he notes that in two and a half years, the Vision Fund has invested $76.3 billion in capital and hired hundreds of investment professionals and support staff. “We are very proud of what we have achieved,” he says. “Did we make mistakes? Yes. And we continue to learn from them.”

“He didn’t listen to the people who were pushing back”

If the company is, in fact, learning from its mistakes, it will soon have a doctorate in WeWork. That fiasco can’t be attributed to internal chaos or cultural issues at SoftBank. It was all Son’s doing.

He was bewitched by Neumann, just as he’d once been by Alibaba’s Ma and Yahoo’s Jerry Yang. He ignored his advisers, who argued that rival office-sharing companies were offering far better investment terms, and instead followed his usual pattern, showering WeWork with money, demanding frantic growth, and driving valuations higher. Son’s first investment was in 2017, at a $20 billion valuation. Then, during a funding round earlier this year, he pushed WeWork’s value as high as $47 billion, more than doubling the worth of a money-losing company whose CEO bonded with employees and prospective partners by drinking tequila shots and smoking marijuana.

By the fall, when Wall Street roundly rejected WeWork’s planned initial public offering, SoftBank Group and the Vision Fund owned 29% of the company. SoftBank was forced to buy a majority stake in it via a lifeline of cash, equity, and debt refinancing and install one of its own top executives, former Sprint Corp. CEO Marcelo Claure, as executive chairman. “Masa picked the wrong company,” says a person close to Son. “He didn’t listen to the people who were pushing back. He knows he made a mistake.”

Son has been uncharacteristically humble about the disaster. “There was a problem with my own judgment. That’s something I have to reflect on,” he said at a recent press conference in Tokyo. An investor present at a Vision Fund gathering in Pasadena, Calif., says Son was careful to emphasize such phrases as “corporate governance” and “a road map to cash flow” as he showed abstract slides of rough seas alongside charts that vaguely illustrated WeWork’s path to profitability. “Masa wasn’t like this before,” the investor says.

For investors and analysts who cover SoftBank, a public company listed on the Tokyo stock exchange, the question is whether the hit Vision Fund took from WeWork, combined with its other mistakes and operating structure, have left it vulnerable. The one-third decline in Uber Technologies Inc.’s value since its IPO in May, for example, has observers worried about SoftBank’s large stakes in ride-sharing competitors such as Didi Chuxing in China, Grab Holdings in Southeast Asia, and Ola Cabs in India. And about $40 billion of the Vision Fund consists of preferred stock that pays outside investors 7% in guaranteed interest annually on their committed capital, leaving SoftBank on the hook if the fund’s bets don’t pan out. SoftBank’s own $28 billion commitment is entirely equity, giving it both more potential upside and more potential downside. “The fund was designed for more profit if everything goes well, but if things go south it’s horrible,” says a former executive who left after growing wary of the company’s position.

Another source of concern is Oravel Stays Pvt. Ltd., better known as Oyo, an Indian startup founded six years ago by Ritesh Agarwal, then 19, to bring order to the country’s anarchic lodgings industry. Oyo offered small, regional hoteliers standardized furniture, bedding, and guaranteed room bookings for a 25% cut of sales. The Vision Fund invested $250 million in 2017 and an additional $1 billion infusion in 2018, pushing Oyo’s valuation to $5 billion. True to form, Son pushed Agarwal to expand, moving into China and the U.S., which have entrenched and less-fragmented hospitality industries. Oyo even bought a few properties outright, including the Hooters Casino Hotel in Las Vegas, hanging its red signs in a market where they were entirely unfamiliar to potential guests.

SoftBank’s investment in Oyo also demonstrates an accounting practice that worries investors. When the fund takes a stake in a startup, then invests again at a higher valuation, it often books a profit on its original holding. This is legal, even though no actual cash has flowed into its coffers. Much of the Vision Fund’s profit in the second quarter of 2019, for example, was on paper, the result of valuation spikes for Oyo, DoorDash, and communications appmaker Slack Technologies. “It may pass the accounting standards test, but it doesn’t pass the common sense test,” says Aswath Damodaran, a professor of finance at the New York University Stern School of Business and author of four books on valuing businesses.

In October, Agarwal and the Vision Fund plowed an additional $1.5 billion into Oyo, doubling the company’s valuation, to $10 billion, in the span of a single year. Agarwal, now 26, financed his purchase by borrowing money from financial institutions including Japan’s Mizuho Bank, and Son personally guaranteed the loans, according to people familiar with the deal. Neither the loans nor the guarantee were disclosed to SoftBank shareholders. Two other SoftBank companies, Grab and Didi, had also invested in Oyo. In other words, SoftBank companies and founders were investing in other SoftBank companies, at times with debt backed by SoftBank. Govil, the CFO, notes that SoftBank didn’t mark a profit from WeWork’s valuation commensurate with its $47 billion valuation, and similarly didn’t book a profit on Oyo to match its valuation rising to $10 billion. Eric Schiffer, CEO of Patriarch Organization, a private equity fund in Los Angeles, derides these financial maneuvers as “unicorn porn.”

SoftBank executives say they have a rigorous process for setting valuations and that the values are determined in conjunction with other sophisticated, independent investors, including Sequoia Capital and Toyota Motor Corp., and vetted by auditors such as Deloitte & Touche. Govil says, “Our valuations have been validated by more than 120 sophisticated investors who have invested alongside and after us. More broadly, our investing has helped create thousands of jobs and spur global growth.”

Masa has been convening his top people to discuss the company’s missteps. One such meeting, at Son’s Woodside compound, featured a tasting session with lettuce and kale from Plenty, a SoftBank-backed vertical farming startup. The produce was judged on “flavor notes and mouthfeel and finish,” says one managing partner who attended.

Misra seems more than ready for the fund to move on. At SoftBank’s offices in San Carlos, Calif., he talks up the $9.9 billion the Vision Fund has already returned to its investors, as well as the billions of dollars of public stock on its books. He points out that in two years, the Vision Fund has had eight IPOs and two acquisitions of its portfolio companies, and says it has $11.4 billion in cumulative investment gains. And it’s not as if its deep-pocketed investors—the Saudis, Apple, Foxconn, SoftBank itself—need their funds repaid anytime soon. “All great news for a fund that’s only 2½ years old,” Misra says between vapes.

There will be even better opportunities to invest in the coming year, he predicts, what with the oceanic opportunities for disruption being ushered in by AI. That’s why his team is assembling Vision Fund 2. They hope the Saudis are in again, along with the Mubadala Investment Co. of Abu Dhabi. None of Son’s people will say exactly how big 2 will be, but they’ve hinted it could be every bit as big as 1. —With Ian King

( Corrects 19th paragraph to clarify sequence of events, adds details for sourcing, removes accountant’s age description, and updates SoftBank comment. Updates 22nd paragraph to include sourcing and SoftBank comment. A previous update added additional context for Son in the fifth paragraph, Housenbold denial in the 21st paragraph section, and a longer SoftBank statement in the 24th paragraph. )