May 22, 2017
SoftBank has announced its first major close with $93 billion of committed capital, and the promise to hit $100 billion within six months.
While it has been circulating the news for some time now, it should be worth noting this is largest private equity fund ever raised, let alone one which is solely focused on the telco and tech space. Along the way, Softbank has managed to gain the support of some of the industry’s heavy hitters including Apple, Sharp Electronics, Foxconn, Qualcomm and Sharp. It’s a nice list of supporters, and quite an achievement for the Japanese group.
“Technology has the potential to address the biggest challenges and risks facing humanity today,” said Masayoshi Son, CEO of SoftBank Group. “The businesses working to solve these problems will require patient long-term capital and visionary strategic investment partners with the resources to nurture their success.
“SoftBank has long made bold investments in transformative technologies and supported disruptive entrepreneurs. The SoftBank Vision Fund is consistent with this strategy and will help build and grow businesses creating the foundational platforms of the next stage of the Information Revolution.”
The idea itself is actually a very clever one from SoftBank. By effectively being one of the managing parties of the fund, it offers the team the opportunity to dip into emerging technology areas, while keeping the potential pitfalls at arms’ length from the Softbank core business and spreading the financial risk across more investors. Son knows what he’s doing; he didn’t become Japan’s richest man by accident.
The removal of such risk is evident in its ARM investment. SoftBank’s commitment to invest $28 billion in the fund will be partly done through the in-kind contribution of approximately 24.99% of the shares in ARM, roughly valued at $8.2 billion. SoftBank will retain 100% of the voting rights of ARM, there will be no change to the board, governance structure or operations as a result of the transfer and investors in the dund will not gain any special commercial benefits from ARM’s operating business. Clever, ey?
It is also an announcement which we have been waiting for while on, but apparently the complications can be pinned down to another one of the more influential parties… According to Axios, Saudi Arabia’s Public Investment Fund has been the right to sit out from deals of over a certain size, but will retain a right to sit in on deal meetings, despite not having a vote. Negotiating this position delaying the initial close.
In terms of the long-term strategy, the fund will focus on taking majority and minority positions in companies which it deems critical to the progression of the ‘Information Revolution’. It’s a wide berth allowing investments in emerging technology businesses to established, multi-billion dollar organizations.
The list of priority areas is a long-one but includes IoT, artificial intelligence, robotics, mobile applications and computing, communications infrastructure and telecoms, computational biology and other data-driven business models, cloud technologies and software, consumer internet businesses and financial technology.
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