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The Saudis are limited partners in the fund, so they don't really have any control over the investments. Investment decisions are left up to the general partner

The Saudis are limited partners in the fund, so they don't really have any control over the investments. Investment decisions are left up to the general partner, Softbank. Once the fund reaches maturity and the profits are distributed, the Saudis would get paid (they would get close to 45% of the fund earnings) in cash or shares in the portfolio companies.

mbesto 8y ago
^ This Good graphic on this page that explains it nicely: https://www.quora.com/What-is-the-difference-between-limited-partners-LPs-and-general-partners-GPs-in-the-venture-capital-business https://www.quora.com/What-is-the-difference-between-limited... Given that the fund is so highly concentrated by one LP, there is a (chilling) hypothetical situation that they (KSA wealth fund) could overstep the traditional bounds of a LP and taking more controlling interests of portfolio companies. This is a new territory where little precedence has been set because (1) we're dealing with international money (2) the size of the fund (3) the funding concentration.
- jacquesm 8y ago
  Only if the fund itself already has a controlling interest in the portfolio companies. Otherwise you can just tell them to take a hike.
  - mbesto 8y ago
    Which is precisely the speculation of the Vision Fund: http://fortune.com/2018/10/10/softbank-visionfund-wework-majority-stake/ http://fortune.com/2018/10/10/softbank-visionfund-wework-maj... (and why I mentioned it)
    - jacquesm 8y ago
      Interesting. 51% of 51% would allow you to control a company where another party holds 49%, even if you invested much less.
Alex3917 8y ago
> Investment decisions are left up to the general partner, Softbank. Not necessarily, it depends on the LP agreement. It wouldn't be unusual to have an LP agreement where investments that are more than a certain percentage of the fund require sign off from the key LPs.
- jacquesm 8y ago
  Not sure why you are downvoted, you are 100% correct.
  - Alex3917 8y ago
    > Not sure why you are downvoted, you are 100% correct. Haha that's like half of my HN comments. I'm guessing that the first thing that comes up in Google from Wikipedia, Stack Overflow, or Quora says something different.
- ScottBurson 8y ago
  But when a fund is doing as well as SoftBank is, it would be very odd for an LP to veto an investment.
  - Alex3917 8y ago
    > it would be very odd for an LP to veto an investment. Yeah but you usually want to give them the option to soft veto stuff (even if it's not required) by letting them say things like, "I'm skeptical that this is a good idea, but go for it if you think it makes sense." Otherwise at the end of the fund, even if you've posted good returns you don't have any way to show your LPs that you're managing their money differently than how they would have managed it themselves. Managing money is one of those jobs that everyone thinks they can do a good job at themselves (like how everyone wants to be head of product), so no one is willing to pay a premium for it unless you create opportunities to memorialize how you're doing it differently than what they would have done themselves.
onetimemanytime 8y ago
OK, technically. Maybe. In reality Softbank worries about their reputation as managers of other people's money. PLUS, Softbank wants to raise more funds in a year or two. So Saudis do have a lot of say, IMO.

mbesto 8y ago

^ This Good graphic on this page that explains it nicely: https://www.quora.com/What-is-the-difference-between-limited-partners-LPs-and-general-partners-GPs-in-the-venture-capital-business https://www.quora.com/What-is-the-difference-between-limited... Given that the fund is so highly concentrated by one LP, there is a (chilling) hypothetical situation that they (KSA wealth fund) could overstep the traditional bounds of a LP and taking more controlling interests of portfolio companies. This is a new territory where little precedence has been set because (1) we're dealing with international money (2) the size of the fund (3) the funding concentration.

jacquesm 8y ago
Only if the fund itself already has a controlling interest in the portfolio companies. Otherwise you can just tell them to take a hike.
- mbesto 8y ago
  Which is precisely the speculation of the Vision Fund: http://fortune.com/2018/10/10/softbank-visionfund-wework-majority-stake/ http://fortune.com/2018/10/10/softbank-visionfund-wework-maj... (and why I mentioned it)
  - jacquesm 8y ago
    Interesting. 51% of 51% would allow you to control a company where another party holds 49%, even if you invested much less.

Alex3917 8y ago

> Investment decisions are left up to the general partner, Softbank. Not necessarily, it depends on the LP agreement. It wouldn't be unusual to have an LP agreement where investments that are more than a certain percentage of the fund require sign off from the key LPs.

jacquesm 8y ago
Not sure why you are downvoted, you are 100% correct.
- Alex3917 8y ago
  > Not sure why you are downvoted, you are 100% correct. Haha that's like half of my HN comments. I'm guessing that the first thing that comes up in Google from Wikipedia, Stack Overflow, or Quora says something different.
ScottBurson 8y ago
But when a fund is doing as well as SoftBank is, it would be very odd for an LP to veto an investment.
- Alex3917 8y ago
  > it would be very odd for an LP to veto an investment. Yeah but you usually want to give them the option to soft veto stuff (even if it's not required) by letting them say things like, "I'm skeptical that this is a good idea, but go for it if you think it makes sense." Otherwise at the end of the fund, even if you've posted good returns you don't have any way to show your LPs that you're managing their money differently than how they would have managed it themselves. Managing money is one of those jobs that everyone thinks they can do a good job at themselves (like how everyone wants to be head of product), so no one is willing to pay a premium for it unless you create opportunities to memorialize how you're doing it differently than what they would have done themselves.

onetimemanytime 8y ago

OK, technically. Maybe. In reality Softbank worries about their reputation as managers of other people's money. PLUS, Softbank wants to raise more funds in a year or two. So Saudis do have a lot of say, IMO.