Masayoshi Son had a dream of creating a SoftBank ecosystem where its portfolio companies support and further grow the other companies which have SoftBank investments. In simple words, Son dreams of a portfolio network supporting each other, and the plan has been under works for a while with the group.
A Financial Times report said that founder and chief executives of SoftBank’s portfolio will convene in Los Angeles next month. This meeting is a part of Son’s ambition to create an “ecosystem” of companies that can collaborate to accelerate growth and its own returns.
The event is being organised by Vision Fund’s operating group led by Gerry Lopez. The 30-member team working from SoftBank offices around the world advises its portfolio companies on areas such as growth and international expansion.
Lopez reportedly said that “they make the right introduction to the right person at the right level in the company to his or her counterpart in another company.” However, the potential collaborations are at a conceptual or discussion stage.
The collaboration idea is also something SoftBank Vision fund’s investors haven’t yet been fully utilised. At a recent earnings presentation, Masayoshi Son noted the wide gap between the value of its equity holdings — at ¥21 Tn ($198 Bn) minus its net debt — and its current market capitalisation at ¥10.5 Tn. “Our image remains a telecommunications company with a lot of debt. But we’re no longer that,” Son said. “Can you please take another look at our company?”
However, the fact is — collaboration with SoftBank as well as its portfolio companies has worked out well till now for the initiators. For example, SoftBank takes credit for the exponential international growth of OYO, in which it has invested billions. The companies have even signed joint venture to expand in Japan. “Once the Vision Fund invests in a company, that company is poised to become a market leader if it isn’t one already,” said Navneet Govil, the Vision Fund’s chief financial officer.
At the same time, Vijay Shekhar Sharma-led Paytm had tied up with SoftBank and Yahoo Japan to launch its payments services in Japan. The combined unit— PayPay— has grown 8x in 10 months. A growth fueled by cash burn through cashbacks etc, but a growth indeed. “If there is a commercial deal that will happen between two portfolio companies, it will be faster and easier than a non-portfolio company,” Sharma said.
The Catch In SoftBank’s Plan
However, it would be interesting to see how SoftBank drives through collaborations among the competitors of its portfolio. For example, Uber and Ola are both cab hailing companies and backed by SoftBank. How do you get them together?
Lopez says “competitive overlaps are a trade-off of SoftBank’s less controlling model. In my view, if that is a cost we pay for freedom and entrepreneurs operating in an environment that is more valuable and open to them, that’s not a huge cost to pay.”
Launched in 2017 by SoftBank, Vision Fund is a $100 Bn investment fund, and has a portfolio of 81 investments, as at the end of Q1 2019. The gain on investments at SoftBank Vision Fund and Delta Fund was $3.92 Bn (¥414.4 Bn), a 67.6% Y-o-Y growth in the quarter. SoftBank has witnessed an 80% Y-o-Y growth in its operating income for FY 2019.
The company had attributed this growth to an unrealised gain of about $12.5 Bn from its investments in Uber, OYO and other portfolio companies. At present, SoftBank is raising $108 Bn Vision Fund II.