Japan-based telecommunications and internet group SoftBank continued to pursue a strategy shifting away from early-stage investments to fewer, larger deals in 2016 and is preparing to make a big splash with its Vision Fund next year.
SoftBank was a relatively early entrant into the corporate venturing space in the internet age, forming a subsidiary called SoftBank Capital in 1995 and hitting paydirt with early investments in the likes of Yahoo and Alibaba that carved it a place among the top echelon of corporate venture capital.
In 2015 company president Nikesh Arora revealed the firm had elected to wind down SoftBank Capital and move away from early-stage deals in order to make fewer but larger investments, following a raft of late-stage deals involving Asia-based internet startups.
Akora left SoftBank in June due to founder and CEO Masayoshi Son’s decision to delay retirement for up to 10 years, despite hiring and grooming Akora as his successor. His departure came amid speculation that shareholders were unhappy with the performance of some of SoftBank’s investments, particularly in India where the e-commerce market ran into difficulties during 2016.
However, Akora left as SoftBank recorded three significant exits – partial or whole – selling $8.9bn of Alibaba stock, offloading its 73% stake in Finland-based mobile game developer Supercell to internet group Tencent for upwards of $7bn and divesting a 23.5% share of another game producer, GungHo Entertainment, for $685m.
The other big exit SoftBank posted in 2016 was from China-based app store Wandoujia, which was acquired by Alibaba for $200m in July. SoftBank had invested in both Wandoujia’s funding rounds, the first of which being an $8m series A in 2011.
On the other side, SoftBank continued to make large investments, with three areas a particular focus. The first was the Asian consumer internet space, the pick of those deals being its contribution to the $4.5bn equity portion of the $7.3bn round closed by China-based ride hailing platform Didi Chuxing in June, though it also co-led a $119m series C round for mobile commerce platform Chuchujie in May.
SoftBank invested $62m in hotel room booking platform Oyo Rooms in August, leading a $90m round that valued the company at $400m, and took part in a $175 series D round for another India-based company, instant messaging platform Hike, the same month, and latterly led a $750m round for Singapore-based ride ordering platform Grab.
Another substantial area was more technical internet technology, with SoftBank most recently investing $1bn to lead a $1.2bn round for OneWeb, a US-based company planning to establish a network of satellites that will hypothetically be able to supply fast, affordable internet around the world. It had already taken part in a $64m round for UK-based cybersecurity company Darktrace.
The third destination for the company’s larger investments was biotechnology. It took part in a $55m series C round for genomics platform 10x Genomics in March before leading biological product developer Zymergen’s $130m series B in October.
SoftBank is continuing to make early-stage moves, they have just been sharply reduced from two or three years back. Its long-term intent can be seen in its plans for SoftBank Vision Fund, an investment vehicle in which it plans to invest $25bn as part of a $100bn capital base.
Apple is in talks to invest $1bn in Vision Fund, which will take over SoftBank’s late-stage investments, and Son revealed earlier this month he expects the fund, amazingly, to be oversubscribed. Saudi Arabia’s Public Investment Fund is reportedly set to put up $45bn while the Abu Dhabi-owned Mubadala Development Company could also invest.
The sheer size of the fund inevitably raises questions as to whether SoftBank will carry on investing in its current areas of interest or whether it will diversify into new areas. If nothing else the size of the fund will dwarf that of any yet established by any VC investor, so 2017 could be very interesting indeed for an onlooker.