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Asia

Meet the man behind $126 billion worth of deals

SoftBank founder Masayoshi Son is not just the wealthiest man in Japan. He’s not just a tech titan boasting billions of dollars worth of investments in some of the most important companies of our age.

Son is his country’s lone mold-breaking entrepreneur.

Decision-makers in Japan are usually fiscally conservative, whereas under Son, SoftBank appears to be making regular multi-million dollar, or in some cases multi-billion dollar, investments into various companies — some of which are not directly related to SoftBank’s core money-making businesses.

“He’s doing something that is incredibly unique from the Japanese perspective,” said Jesper Koll, head of Japan at WisdomTree. “It’s sad to watch that he’s the only Japanese entrepreneur who is creating the new frontier (in tech).”

While new technological advances have become a constant source of disruption for established corporations, smart companies are keeping up by either plowing money into research and development or into investments and acquisitions. SoftBank, with Son at the helm, is doing both.

SoftBank’s core businesses are telecommunications — within Japan and through its controlling stake in Sprint — but it also draws in revenue from other technology businesses.

The Japanese tech giant has made a number of prominent investments recently, including last year’s acquisition of U.K.-based chip maker ARM for $32 billion, a $4 billion stake in U.S. chip maker Nvidia this year, and a newly announced $2.5 billion boost to Indian e-commerce player Flipkart.

That last stake comes from the massive SoftBank-led Vision Fund while existing investments in Nvidia and ARM are expected to also be offered to the fund.

The Vision Fund includes capital from SoftBank, Saudi Arabia’s sovereign wealth fund and tech firms Apple, Foxconn, Qualcomm and Sharp. In May, the fund announced it had closed $93 billion in capital and that it hopes to raise $100 billion by the end of the year.

Even beyond that, SoftBank also has many investments separate from the Vision Fund. For example, it acquired a controlling stake in U.S. telecommunications firm Sprint for about $36 billion between 2012 and 2013. Son was also an early investor in Yahoo and Alibaba, when the latter’s valuation was below $100 million according to investors.

Between 2012 and 2017, these were SoftBank’s top investments:

Dealogic data, which includes investments by the Vision Fund, showed that between 2012 and August of this year SoftBank announced 383 deals worth approximately $125.76 billion.

All those deals fall into one of two categories: cutting-edge technologies or tech companies that are already number one or number two in their category.

“They know if they consistently invest in capital leaders in a disruptive category, the upside is humongous,” Hans Tung, managing partner at GGV Capital, told CNBC. He explained, “They’re good at investing in ideas that’re proven in a developed market, but they want to invest in local competitors that are number one in emerging markets.”

For example, in the ride-hailing market, SoftBank is already invested in southeast Asia’s top player, Grab, and India’s leading local player, Ola. Recently, SoftBank said it would be interested in putting money into either Uber or Lyft, the leading ride-hailing players in the U.S.

Occasionally SoftBank invests in the number two company in a specific industry and then aims for a merger with the top player, said Tung. That was the case in China’s leading ride-hailing player Didi Chuxing. The company formed from a merger between Didi Dache and SoftBank-backed Kuaidi Dache.

While telecommunications — both domestic and the Sprint business in the U.S. — constitutes a sizable portion of SoftBank’s revenue, analysts say the company doesn’t see itself as a telecom business.

“SoftBank does not consider themselves to be a telecom business but they like the cash flow and see it as a tool to advance their tech ambitions,” Kirk Boodry, a Singapore-based analyst at New Street Research, told CNBC. He added that if SoftBank thinks wireless values are high, it might even sell the Sprint business.

“We think SoftBank wants to be represented across the value chain,” said Boodry.

Son, who founded SoftBank in the 1980s, has grand visions of what technological advancements the future holds. And he prefers to chart his course with mid-to-long term plans to achieve certain targets. At 19, the story goes, he created a 50-year life plan for his entrepreneurial ambition, setting himself targets for each decade to build up SoftBank into the tech giant that it is today. He also created a 300-year plan for it to continue growing as a corporation.

In 2010, Son presented a 30-year plan for the company, where the key theme was “Information Revolution” and the emphasis was on using new technologies to push the boundaries of science in areas like telepathic communications and increasing life expectancy to 200 years.

While those goals may still be far off from being realized, SoftBank’s subsidiaries, as well as companies in which it’s invested, are pushing the frontiers of technology in areas such as the “Internet of Things,” artificial intelligence and deep learning.

For example, SoftBank Robotics created Pepper — a robot capable of reading emotions and interacting with human beings — and teamed up with Alibaba and Foxconn to bring it to global markets.

In July, SoftBank was part of a group of companies that invested $159 million into U.S. car technology start-up Nauto. The Palo Alto, California-based company makes cameras that can track driver behavior in real time and know if they are distracted.

Meanwhile, SoftBank also holds a stake in Chinese ride-hailing company Didi Chuxing, which is looking at artificial intelligence in security and intelligent driving technologies in a new research lab in Silicon Valley.

Given how rapidly technology is shaking up the industry, no one knows what the next business model is going to be — something, Son is trying to discover, Koll said.

That said, Son’s ambition nearly came to an abrupt end during the dotcom bust in the early 2000s. A CNN report said he lost $70 billion in one day and admitted that 99 percent of his net worth was wiped out in 2000.

The massive Vision Fund, which was first announced in 2016, in part aims to realize Son’s vision of the future. It makes long-term investments in companies operating in technology such as the “Internet of Things,” artificial intelligence, robotics, mobile applications, consumer internet businesses and more. SoftBank has committed to invest $28 billion into the fund through a combination of equity in ARM and cash on hand.

“Creation of the Vision Fund should be positive for SoftBank shareholders. It separates some of the risk from the investment program into a separate non-recourse entity,” said Boodry.

But some investors have questioned whether SoftBank might be fueling a new valuation bubble in tech.

“In general, Son-san has a good investing track record so he should be do well,” said Boodry.

Source: cnbc china
Meet the man behind 6 billion worth of deals

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