Softbank and The Vision Fund

Softbank is probably the most famous investment group in the world. It hit the news in 2016 when it announced a 'Vision Fund', in which it collaborated with several other Sovereign Wealth Funds and like-minded investors to create a 100 Billion $ Capital Investment Fund, with a focus primarily on Tech-related startups that offered the potential for High Growth, their business model notwithstanding.

In order to flood the market with an undisputed lead in Capital, the Softbank Group, led by Japanese Billionaire Masayoshi Son, onboarded a few market leaders to form the 'Vision Fund', which is the largest technology-focused venture capital fund in the world. The Fund breakup between the different players is as follows, as per Bloomberg.

Website: SoftBank Vision Fund | Shared Vision, Amplified Ambition

The above is the representation for Softbank Vision Fund - 1 (SVF-1). Recently in late 2020, Softbank has also announced an SVF-2, initially projected at 10 Billion USD, but later revised to 20 Billion USD and finally disclosing it as a 30 Billion USD fund. Given the adverse business environment, Softbank chose to go alone and commit the entire 30 Billion USD from its kitty.

WHAT IS SOFTBANK?

Softbank is what can be described in Japan as An Internet Keiretsu or a ' conglomeration of businesses linked together by cross-shareholdings to form a robust corporate structure.' Softbank had always bet big on Tech companies, as they offered very high growth and suited the investment cycle and quick gains that any Investor eyes for.

Masayoshi Son is famous for his aggressive funding strategy, wherein he invests all his bets on near-IPO-ready companies and startups, even if they do not require the extra funding for their companies. Son was the richest person in the world in 2001, before the Dot Com bubble burst and he nearly lost all his wealth. It was his bet on Alibaba in China that finally brought Softbank back as a group. In 2006, he acquired Vodafone Japan, and from then on, he has been making aggressive bets, including betting big on the iPhone in early 2005, when the project was still a secret. Calculated bets have ensured that Softbank has since gone from strength to strength and become a world leader in Venture Capital.

IMPACT OF COVID IN 2020:

Son believes that the only way to win a market is to swamp it with so much money, that other investors do not see a point in competing. With Softbank betting big on investments like WeWork, Zume, and Uber, which had a major fall in sales owing to the Pandemic, Softbank had suffered a huge loss for the first time to the tune of 17.7 Billion USD. There were also headwinds from a political crisis with the US and Saudi Arabia that had dampened the investment spirits in Silicon Valley in 2018. However, the recent returns announced by SoftBank in 2021 show their highest profits ever, owing to the successful IPO of Korean E-Commerce Platform Coupang on NYSE.

SOFTBANK IN INDIA:

Softbank had entered India in 2011 aggressively, prior to the Vision Fund, and had begun its investment spree with InMobi, a Mobile Ad network provider. Since 2014, Son has invested to the tune of 10 Billion USD in India, with a target of 10Billion USD by 2024, which is great news for many of the startups in India.

The total portfolio of the Softbank Vision Fund is exhaustive in India, with most of the companies listed below

Among these companies, the Pandemic had struck many as their business model revolved around sharing spaces in the transport industry/hospitality industry and so on.

The biggest underperformer has been Oyo, which has been trying to operate in the unregularized Hospitality Industry of India and facing pushbacks from Hotel owners for want of unsettled dues, low demand due to the pandemic, and other business environment reasons.

However, Softbank has been aggressive yet again and has been acquiring platforms like Meesho, a marketplace for local sellers, in 2021. It has 45 Million Subscribers.

Another sector that Softbank is interested in is On-Demand Food Delivery. It is in advance talks with Bangalore-based Swiggy, as part of its SVF-2, given that Zomato will be filing for an IPO this year.

An analysis of the valuations for some of the major companies that Softbank has invested in is below.

CONCLUSION:

A major investment philosophy of Softbank has been that it does not believe all the companies under its investment portfolio will succeed. It expects a few startups to fail, a few to get through to their targets, and a few to really hit the deck running. Also, the second philosophy of Softbank has been to flood the market with so much money, that any business idea that has the potential to succeed should naturally fall under its portfolio and then succeed. Similarly, it serves the dual purpose of other investors leaving the marketplace, as they cannot compete with Softbank on the endless cash supply. A major preference for Softbank has been eCommerce startups like Alibaba and Flipkart, Ridesharing apps like Uber and Ola, and food delivery platforms like DoorDash and Swiggy. There is also an increase in investments in AI-based startups in India like Automation Anywhere and Petuum. Given the talent pool available in India, and the sheer potential to reach a large audience group, Investment Groups like Softbank have their eyes peeled for the next big idea that can revolutionize the startup ecosystem in India.

-BasuDeo Dubey