Softbank’s $100b mega tech fund’s final close late this year, to deploy funds by 2023

SoftBank's Son
Softbank Corp CEO Masayoshi Son speaks during a news conference in Tokyo February 12, 2014. SoftBank Corp, which runs Japan's third-largest mobile carrier by subscriber numbers, reported a dip in third-quarter net profit after a string of acquisitions incurred steep integration costs. REUTERS/Yuya Shino

SoftBank Group will start investing from its giant $100-billion SoftBank Vision Fund starting next year with an aim to deploy capital within five years.

“We have $93 billion in committed capital and we are targeting a final close within six months with a total of $100 billion of committed capital. The investment period is five years after final close,” a SoftBank spokesperson told DEALSTREETASIA recently.

The fund is expected to be active across technology sector in areas such as the Internet of Things (IoT), artificial intelligence (AI), robotics, mobile applications and computing, communications infrastructure and telecoms, consumer internet and fintech.

SoftBank chairman Masayoshi Son is expecting to make similar returns on the fund as his company that has achieved over 40 per cent annual returns for many past years. Among the firm’s most profitable investments are China’s ecommerce giant Alibaba and internet company Yahoo! Japan.

“We are not tied to any particular geography. The SoftBank Vision Fund’s strategy is to make long-term investments in large-scale growth opportunities within the global technology sector,” the SoftBank spokesperson said when asked of a region that may have caught the firm’s attention for deploying the funds.

Among prominent backers of the fund are Saudi Arabia’s Public Investment Fund that pooled $45 billion in equity and debt and Abu Dhabi’s Mubadala which invested $15 billion. Tech biggies such as Apple, Qualcomm, Foxconn and Sharp have also made contributions.

Strategy to dominate

Softbank has earlier invested in ride hailing firms like Didi in China, Lyft in US, Ola in India (where it also burnt fingers with losses) and Grab in Southeast Asia. Another thing common to these firms is that they are all Uber rivals and funding these firms with big ticket investments may also mean creating a dominant position in the sector.

“For a fund of that size, they are going to have a different strategy… They would take a strategy where they would try to dominate certain sectors,” an industry player who manages a large fund told this portal but did not wish to be named.

The technology company invested a whopping $5 billion in Didi Chuxing, a funding round that will aid its global expansion and investment in emerging areas like artificial intelligence where it aims to bring more advanced systems to its transportation service.

“It is an interesting strategy and the fund has very senior investors who have earlier made such investments,” said the fund manager. Among the top rung is Rajeev Misra who is the chief executive of the Vision Fund. Last week, the firm made additions to the team, hiring Colin Fan as the Managing Director of the fund.

Unicorn churner

While the fresh flow of capital through the fund may help keep some technology firms afloat, it may also churn out the next set of tech unicorns. In fact, the investments could be made in companies that have no to uncertain cash flow and would still be valued at a level over a billion dollar, a common sight in the present climate.

“We created this fund based on our strongly held belief that the next stage of the Information Revolution is underway, and building the businesses that will make this possible will require unprecedented large scale long-term investment,” said the SoftBank spokesperson.

The fund, he said will target meaningful, long-term investments in companies and foundational platforms that seek to enable the next age of innovation and seek to acquire minority and majority interests in both private and public companies, from emerging technology businesses to established, multi-billion dollar companies requiring substantial growth funding.

The Fund’s portfolio companies are expected to significantly benefit from SoftBank’s global scale and operational expertise, as well as its ecosystem of group portfolio companies.

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