Softbank’s CEO Masayoshi Son, is making a personal strategic shift from managing telecoms to investing in technology firms.
In a Reuter’s article, in June of this year, by journalist Sam Nussey, Son remarked, “I have spent 97 percent of my time on managing the telecoms business and only 3 percent on investing,” Son said. Reversing that balance will allow SoftBank to grow faster, he said.
According to Nussey’s article, Son’s comments fit with a transformation underway at SoftBank from a domestic telecoms firm to “unicorn hunter” – as Son termed it – focusing on late-stage startups around the world.
Three of the top 10 companies listed on the Prime Unicorn Index, Uber Technologies (Uber), WeWork Companies (WeWork) and Social Finance (SoFi). have benefited from direct investments by Softbank’s investment vehicle Vision Fund, which raised over $93 billion last year. Other companies on the Index that received investment monies from Softbank include Urban Compass (Compass), DoorDash (DoorDash) and OpenDoor Labs (OpenDoor).
But, in the rough and tumble world of global investment, conflicts of interest are often pitted against the broader goals of return on investment. Fine lines sometimes become obscured when real-life events present stormy seas to navigate. And, with so much money at stake, Son appears to be walking some fine lines indeed.
In recent news reports, Son has stated that he defends the contributions of Saudi money to the company’s Vision Fund, in spite of the controversy surrounding the killing of journalist Jamal Khashoggi.
Additional comments this week by Son have taken on a more cautious tone. According to an article on CNBC, by News Assistant Ryan Brown, Son said via a translator at an investor briefing following the release of the company’s second-quarter results Monday, “We don’t yet know the clear understanding of the case so we would like to be careful watching the outcome.”
Saudi Arabia’s Public Investment Fund (PIF), is the largest investor in SoftBank’s $100 billion Vision Fund, which is transforming Silicon Valley’s start-up economy. The PIF committed $45 billion to SoftBank’s inaugural fund and said earlier this month that it plans to put about the same amount into a second fund.
In a recent article, Technology Reporter for CNBC.com, Alex Sherman, states, “The harder part for Tokyo-based SoftBank is what to do if Son decides to no longer invest Saudi money or if companies start rejecting Vision Fund financing because of its backers.”
One such option listed by Sherman is outlined below:
“The Vision Fund could use that same template to continue investing without the taint of Saudi money. The fund had invested $23.5 billion of about $92 billion in committed capital as of June 30. That number, which does not include more than $20 billion in ride-sharing investments, will jump to about $40 billion when SoftBank next reports earnings on Nov. 5, according to people with knowledge of the company.
There’s about $35 billion to $40 billion left to invest out of Vision Fund 1. Excluding Saudi money, that number would be around $20 billion to $25 billion.
The remaining $15 billion to $20 billion could actually be held back as unspent money in the fund. This is common practice for large private equity and VC funds, which typically hold back about 15 percent of a fund’s coffers in case some of its portfolio companies need capital. That would be a simpler way of dealing with the funds rather than returning the money to the Saudis, which could get legally messy.”
What implications could this might have for Uber Technologies (Uber), WeWork Companies (WeWork) and other companies on the Index is anybody’s guess at this point, but the Japanese conglomerate, founded by Son in 1981, is poised to continue to raise the stakes for unicorns worldwide by targeting a wide array of technology investments including, telecommunications, financial-technology, solar energy, ride-booking services and the Pepper companion robot.
With its tech-heavy group of companies, the Prime Unicorn Index is uniquely positioned to grant institutional investors a seat at the “unicorn investment table” with access to a new alternative investment vehicle focusing on private companies with a valuation of $500M or more.
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