SoftBank is launching aggressive expansion plans. The company has taken huge investment bets throughout its existence, the success nurturing its incredible growth. Lately, some risks haven’t played out as planned, such as the current situation with WeWork. But even with recent poor reports from backed companies like Slack and Uber, these two companies are massively integrated in global workings – these are not failing entities. SoftBank has an undeniable knack for reading the potential of startups, and invests big amounts to get them off the ground. The company’s investment portfolio is as robust as any on the globe.
What’s the future look like for SoftBank? It appears the company is gearing up for a new phase in its business model, and it includes more risk and a presence in a rapidly growing market, Latin America. To get a feel for what the future of LatAm and SoftBank might look like, an examination of the company’s history sheds insight.
A Tech Start-Up Before Tech Start-Ups Existed
In 1981, SoftBank CEO Masayoshi Son launched a software corporation. Today, this is somewhat normal in the world of tech startups, but in 1981, this was highly unusual. Son, born in Japan but of Korean descent, completed high school in the United States and went on to the University of California, Berkeley, just outside today’s Silicon Valley startup hub. While in school, Son already built several businesses, among them inventing a pocket language translation device, the patent of which he sold to Sharp Corporation for $1 million USD. Cash in hand and a business understanding in mind, he returned to Japan and began Softbank.
When SoftBank (Bank of Software) launched, Son had two part-time employees, but he already had big goals, anticipating to sell $75 million in just five years. The two employees thought he was crazy. Eventually, they left. In 1982, SoftBank launched PC oriented magazines that featured computers and software. The company grew. A year and a half after it launched, Softbank supplied 200 dealer outlets.
The premise behind SoftBank wasn’t to make and market their own software, rather, Son wanted to be the seller of other people’s software. He felt this was a better, more long-term idea. He was right. Becoming a middle man, Son was able to cultivate relationships as he made big bets on small business, fostering an impeccable eye for business potential. It began in the 1990’s.
Growth and Acquisition: How SoftBank Became a Tech Investor
Son’s vision was always to expand, and that’s exactly what his company has done. SoftBank’s major investments deal with telecommunications, technology, transportation, robotics, and is now the major player in the venture capital space. By 1992, SoftBank supplied 15,000 outlets, and Son had 570 employees, with sales around $350 million. It was at this point, the same year SoftVenture Capital was created, that SoftBank became an early investor in internet corporations, and began to acquire companies like Ziff Communications.
Most notable of SoftBank’s investments was both its 1996 controlling stake purchase of Yahoo! Japan (in Japan today it’s the biggest internet browser), and its major $20 million funding of a tiny little company called Alibaba in 2000. The company bought Vodafone Japan in 2006, getting new access in the mobile market. In 2016, SoftBank purchased ARM Holdings, a British chip designer. The deal was worth $31 billion and is currently the largest European tech acquisition.
Like other high-powered technology leaders, Son wants to make SoftBank the biggest company in the world. To do that, Son takes big risks. Some pay out and some don’t, but the ones that do, tend to explode. In the aughts, SoftBank became powerful, first feeding off the energy from the quick rise in late 1990’s Silicon Valley explosion, and then again in the e-commerce and app tech markets. Son’s always been one step ahead of the curve when it comes to computational technology, or today’s “tech.” The question is, what’s next.
Investment and SoftBank Vision Fund, Preparing for SoftBank’s Global Presence
Heavy investment success inspired a new SoftBank sub-organization, Vision Fund, which launched in 2016. The concept behind the subsidiary is that it will invest at least $100 million USD individually to emerging companies. Corporations targeted toward this investment mimic SoftBank and its previous investments: tech, software, cloud-based concepts, and apps.
Today, SoftBank Vision Fund is effectively what SoftBank Group is about. Vision Fund has invested in companies like Kabbage, DoorDash, Opendoor, and LanzaTech, which are just some of the Vision Fund companies that made CNBC’s 2019 Disruptor 50 List. According to CNBC, Vision Fund’s massive investments has changed the VC sector in tech. Who can compete? In just three and a half years, the company has invested in 82 companies around the world.
The idea behind Vision Fund is to take money out of the equation when building a business. With a group of VF investors, a company, which will receive this massive funding, has their business plan effectively re-written and managed by the VF investment team, which will align with the emerging company until it’s functioning on its own.
The future, however, looks a little different. This year, Vision Fund 2 was announced. This fund is targeted toward AI as well as tech startups, and already has about $2 billion USD in secure pledges, according to Bloomberg. This round of funding will include more SoftBank control of companies, but no further details have been released.
SoftBank Group Targets Latin America in its Expansion
Latin America’s rising sectors, such as fintechs, are high on SoftBank’s investment radar. A recent report in Reuters indicates SoftBank is looking to invest “hundreds of millions of dollars in their funds,” up to potentially $5 billion USD. The report indicates that the SoftBank interests voiced so far are the powerful Colombian delivery service Rappi, Creditas, Gympass, and Clip. They’re collaborating with local VCs, like Valor Capital Group, to go in on funding.
According to Managing Partner for SoftBank Group International, Andre Maciel as reported to Bloomberg, there are 300 tech targets for SoftBank investments, and 200 are in Brazil. “We already feel that the opportunity in the region is bigger than what we originally thought, there’s a lot outside of Brazil we still haven’t gotten around to even looking at,” Marciel says in the article.
Indeed, already this fall QuintoAndar and MadeiraMadeira have been backed by SoftBank Brazil. The investment giant is calling this round of backing the largest tech fund for the Latin American market. A new SoftBank LatAm “Tech Hub Incubator,” will be a resource for ventures in the region. The Hub will align with SoftBank invested companies so they can expand their presence to Latin America. The idea is to create 50 joint ventures over the next five years.
This move indicates a strong desire to invest in the Latin American market, and a trigger that the region is a global target for new business opportunities. How will SoftBank and Vision Fund 2 fair in this hot market? We expect it’ll be the catalyst for major economic change.
