SoftBank’s Latin America Fund suffers key departures

This week, SoftBank is set to promote the LatAm fund’s third managing partner, Alex Szapiro, who currently holds an operating role, to a more senior position, a person familiar with the matter said. Juan Franck, a fund investor in Mexico City, will also get promoted, the person said. The firm is also weighing investing a substantial further sum in the fund, perhaps as much as $2 billion, the person said.

Still, the departures leave the fund in a challenging place. Latin American investments have proven a bright spot in SoftBank’s overall portfolio and the company will need to work hard to hold the confidence of late-stage startup entrepreneurs, who had held the firm in high regard.

The departures come three months after SoftBank chief operating officer Marcelo Claure left the firm following clashes with founder Masayoshi Son over compensation and responsibilities. Claure created and oversaw the LatAm fund, among other duties, and had advocated for its spinoff.“We’re firmly committed to playing a leadership role in Latin America,” said Rajeev Misra, the London-based chief executive officer of the Vision Fund. “There is tremendous opportunity and I’m confident our teams across the region are well placed to help us back the next generation of extraordinary entrepreneurs.”

Due in part to Claure’s advocacy, the fund had operated with considerable autonomy since launching in 2019, particularly compared to the much larger Vision Fund, based in London. Partners in that group must run investments by Son, whereas partners in the LatAm fund have the latitude to make their own decisions without vetting by other parts of SoftBank.The LatAm Fund also had a different compensation structure compared to the Vision Fund. The LatAm Fund’s compensation was more in line with other growth-equity funds, where compensation for each managing partner might be around 15% or 20% of the pool of profits divided among the investing team. That changed after Claure left, Passoni said, when a new compensation structure was announced with no binding commitments around the share of the profits.

After Claure left, the managing partners reported directly to Misra and a possible next step was to sweep the LatAm fund into the Vision Fund. Michel Combes, CEO of SoftBank Group International, is also involved with the running of the LatAm fund and sits on its investment committee.

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Alongside his role at the LatAm fund, Nyatta, based in Miami, launched and ran SoftBank’s $100 million Opportunity Fund targeting startups by founders of underrepresented racial minorities. He worked at JPMorgan Chase & Co. before joining SoftBank in 2015 and was also a singer and songwriter, releasing an album in 2005.

Passoni, based in New York, formerly worked at hedge fund Third Point LLC. He joined SoftBank Group in 2019.

“Paulo and I are incredibly excited to be entrepreneurs,” Nyatta said. “We’re launching our own fund to keep investing in the most special companies in the region.” He also acknowledged SoftBank’s role in his career, citing the trust that Son and others had in him to deploy significant amounts of capital. “I can’t wait to start helping entrepreneurs again in Latin America,” Passoni said. “I’m beyond excited to be starting something new with Shu.” He also said he was grateful to Son and SoftBank for his learning experience there.

The LatAm fund is on track to invest about $2 billion this year out of its second fund. The first LatAm fund was originally slated to invest $2 billion, and grew to $5 billion. Portfolio companies include Rappi, Kavak, NuBank, and Creditas.

While smaller than other divisions, the LatAm fund has been performing well. In the results for the nine months ended Dec. 31, 2021, its investments showed a gain of 9%, as the Vision Fund and others chalked up substantial losses.

In that period, investments in Latin America gained 136.7 billion yen ($1.1 billion), as Vision Fund investments lost 767.7 billion yen. At the end of 2021, it had 84 companies in its two funds’ portfolios, compared to 208 for Vision Fund 2 and 83 for Vision Fund 1.

Last week, SoftBank announced a spinout of the LatAm fund’s early stage investments into an autonomous business, Upload Ventures.