There is a saying that you can tell the type of audience at a conference by the temperature in the room – if it is relatively cold it is an event for investors wearing jackets, and if it is warmer then it is for entrepreneurs and developers wearing T-shirts.
The official photo of India-born Rajeev Misra, CEO of Japan-based conglomerate SoftBank’s planned $100bn technology fund, shows an interesting mix of the well-heeled Mayfair, London-working financier in a blue cotton shirt without a tie, mechanical watch (probably Rolex judging by the logo on the strap), Mont Blanc cufflinks, religious red string ribbon for protection, and beads, or mala in sanskrit.
The Gordon Gecko-styled slicked-back hair indicates a financier who emerged in the 1980s with a well-developed sense of the power of money to influence business and society. If his sense is right he has arrived at the right place, as SoftBank said the Vision Fund was a “new fund created by the Masayoshi Son-led SoftBank Group as a result of its strongly held belief that the next stage of the information revolution is imminent, and unprecedented large scale long-term investment is required”.
Misra grew up in India before moving to the US to study at University of Pennsylvania where he gained engineering bachelor’s and master’s degrees, three years later returning to education to gain an MBA from Sloan MIT.
Misra’s professional life started in the 1980s designing satellites at the Los Alamos National Laboratory, then a technology startup. But it was upon leaving Sloan MIT when he joined Merrill Lynch that saw the start of a career in the financial sector defined by bold investment decisions and a rapid rise to management roles.
At Merrill Lynch, Misra joined the derivatives trading desk and was promoted to managing director in a record five years, before joining Deutsche Bank in 1996. Misra spent the next decade leading a team that built one of the world’s biggest and most powerful investment banks from scratch.
Greg Lippmann, who worked under Misra, made headlines when he famously shorted the sub-prime market making Deutsche Bank about $1.5bn in profit while every other bank was losing money as the financial crisis loomed.
Leaving Deutsche Bank in 2008, Misra joined UBS in 2009 and was responsible for rejuvenating the business as head of the fixed-income operation for four years.
Misra, now in his mid-50s, joined SoftBank as head of strategic finance more than two years ago after leaving global investment management firm Fortress Investments Group, where he had worked for less than a year. He now effectively owns his former employer as, in March, SoftBank agreed to buy Fortress for $3.3bn and could probably buy UBS or Deutsche Bank too.
In a 2014 interview published on SoftBank’s website and identified by news provider VC Circle, he said he had joined the Japanese company “because it is very stimulating and educational to work in a different industry”, adding: “We are playing a role in the latest industrial revolution on our planet.”
SoftBank has operations in broadband, fixed-line telecoms, e-commerce, internet, technology services, finance, media and marketing, semiconductor design and other businesses, including robotics and a baseball team.
The Fortress acquisition was announced just five months after SoftBank completed its purchase of UK-listed chip designer ARM, paying $31.4bn, which is just a bit more than it paid when it bought 80% of US phone operator Sprint in mid-2013.
Misra has a reputation inside the company for unconventional and visionary approaches. At SoftBank Group he was responsible for the decision to raise money based on the future value of Alibaba shares, rather than simply selling them, in order to fund the takeover of ARM Holdings. Misra was also behind the idea of Sprint issuing cheaper bonds that were secured by the company’s access to spectrum airwaves, which led to a much lower interest rate than the company had paid previously.
Misra has known Masayoshi Son, founder, chairman and CEO of SoftBank Group since Deutsche Bank worked with SoftBank in 2002, and has been tasked with implementing Son’s vision for the fund. The fund’s strategy involves making long-term investments in the foundational platform businesses that will enable the next age of innovation by being active across a wide range of technology sectors from artificial intelligence to robotics and cloud technologies.
SoftBank could be seen as building a capability to see and understand full public and private dealflow while securing the financial tools to capitalise on insights gathered from trends identified in its operational businesses, such as Sprint or ARM.
The vision is effectively corporate venturing on steroids, involving the application of corporate strengths in operational performance and technology roadmaps paired with financial execution and an ability to make money as the cycle shifts up and down.
In this respect SoftBank may be considered more of a Google, Tencent, Alibaba or Baidu rather than a private equity-style conglomerate, such as Blackstone Group or Berkshire Hathaway.
As Global Corporate Venturing news editor Robert Lavine noted in a newsletter, by buying Fortress, SoftBank gains a stake in Lyft, the ride-hailing platform valued at $5.5bn as of late 2015, a few months after Fortress contributed to its series E round.
SoftBank already holds a portion of ride-hailing peers Ola, Grab and Didi Chuxing, and the Lyft stake means SoftBank is backing all Uber’s main competitors worldwide. That is a classic venture-based approach to a large new market under development.
SoftBank has explored the changing transportation market through its existing businesses. Most recently, in September last year, after it completed its acquisition of ARM, the chip designer announced that its new processor design would be used in autonomous cars, a market that most ride-sharing services want to understand or utilise.
Before that, in July, SoftBank partnered carmaker Honda to bring artificial intelligence to connected cars. SoftBank has already built a humanoid robot called Pepper, which can converse with people and recognise their moods, while Honda has its own mobile robot, Asimo.
And prior to that, in January last year, Sprint customers learned of Ride-Fi, a technology launched by mobile phone manufacturer Alcatel Onetouch, which enables users to transform their cars into mobile hotspots and connect up to eight devices to 4G long-term evolution wifi.
Subsequently, in December, SoftBank agreed to invest $1bn in satellite operator OneWeb as part of a $1.2bn round, before then engineering the latter’s merger with one of its founding investors, Nasdaq-listed Luxembourg-based peer Intelsat, in an all-stock deal worth about $13bn of equity and debt.
SoftBank is investing $1.7bn to acquire a 39.9% stake in the combined company, paying about $5 a share for common stock. Wifi by satellite avoids the need for cable and is suitable for large geographies and car travel.
As these examples illustrate, given the range and reach of its businesses, SoftBank is in a unique position to see all the major industries that are being disrupted. And SoftBank has the funds to merge or pull assets into different areas to capitalise fully on technological change.
Add the payments, blockchain and media content being developed by SoftBank-affiliated portfolio assets to the hypothetical car-centred computing platform it is building, and the scope of the company’s potential becomes almost beyond comprehension – and, what is more, here we are considering SoftBank’s competitive advantage in just one technology area.
If you look regionally, such as India, a similar pattern has been forming. SoftBank is to lead a $250m funding round for India-based short-term accommodation provider Oyo Rooms, the Economic Times reported last month, citing sources. It will supply $225m of the funding through the $100bn Vision Fund.
The size of the round is half the $500m figure cited by reports in February this year, but it will increase SoftBank’s stake in the company from 27% to 42%. The reduction was reportedly due to existing backers objecting to the dilution of their stakes in a round that would have given SoftBank a majority share of Oyo. SoftBank led a $100m round for Oyo in August 2015 and invested $62m a year later at a reported $460m valuation.
SoftBank’s other Indian deals could be a merger of e-commerce marketplace and portfolio company Snapdeal and its biggest domestic competitor, Flipkart. SoftBank holds a 35% share of Snapdeal and two board seats, and is attempting to broker the deal, after which it intends to provide roughly $1bn for the merged company.
SoftBank could also invest between $1.2bn and $1.5bn in One97 Communications, the e-commerce firm that also owns mobile financial services and payment platform Paytm, in return for a 20% stake. It reportedly invested $250m in on-demand ride platform Ola in February this year as part of a $330m round that boosted its stake to 22.5%.
The strategy would give SoftBank sizeable stakes in the market leaders in India for consumer goods, ride-hailing and financial services as well as accommodation booking, and would also hypothetically give the companies a common link to each other. As Lavine noted, it would require only a unifying platform – a messaging, social media, e-commerce or search engine app, if not an operating system – to unify those through a common entry point.
It would effectively replace the position SoftBank holds in China with its significant minority stake in Alibaba. In June last year, SoftBank said it would sell at least $7.9bn of shares in Alibaba in the first sale of shares in the Chinese e-commerce giant by its largest shareholder.
SoftBank began backing Alibaba in 2000, when its initial investment was $20m for a 36.7% stake, and the share sale reduced its holding to about 28% from 32.2%, diluted by Alibaba’s initial public offering. The two companies said they would maintain a strategic partnership, with Son remaining a director.
Misra’s elevation to head the Jersey-domiciled SoftBank Vision Fund, with its main office in London and others in New York and Tokyo, came just under four months after SoftBank’s India-born former president and chief operating officer Nikesh Arora quit the Japanese telecoms and investment company after a group of anonymous shareholders accused him of leading SoftBank into making poor investment decisions as well as of conflict of interest. Arora quit soon after even as an internal probe cleared him of any wrongdoing, but he had reportedly pushed for the sale of part of the Alibaba stake and also its holding in Finland-based games maker Supercell, which Tencent snapped up.
Arora’s departure and Misra’s promotion could be seen as a supercharging of its investment efforts headlined by Son’s purchase of this original Alibaba stake during the first dot.com bubble, although its initial corporate venturing efforts started 25 years ago with the launch of SoftVenture Capital Company (currently SBI Holdings, according to the group’s website history).
A quarter of a century on and SoftBank’s strategy is still being marked out by Son and his senior executives, including Ron Fisher, and newer hires, such as Misra, Alok Sama, and Jonathan Bullock.
The Vision Fund will have $25bn from SoftBank and $45bn from Saudi Arabian sovereign wealth vehicle Public Investment Fund, with sizeable commitments from other governments in the Middle East, such as Abu Dhabi’s Mubadala Development Company and Qatar Investment Authority, as well as corporate limited partners, including reportedly $1bn each from Qualcomm, Apple and Foxconn, and money from the family office of Larry Ellison, co-founder of computing technology provider Oracle.
In March, Foxconn, a Taiwan-based electronics contract manufacturer, paid $600m for a 54.5% stake in investment fund SoftBank Asia Capital.
Misra, who is also an independent director on the board of Eros International, the holding company of Indian movie production and distribution company Eros International Media, has a master’s in computer science from the University of Pennsylvania and an MBA from Massachusetts Institute of Technology’s Sloan School of Management.
According to his Facebook profile, seen by VC Circle, he also holds a BTech in mechanical engineering from the Indian Institute of Technology Delhi and did his schooling at Delhi Public School.
His name could probably now be added to the highly-regarded fee-paying school’s Wikipedia list of successful alumni in business.
In a career spanning derivatives, global markets and technology investments and dealmaking – as the New York Times noted, Misra has “the rare ability to reinvent himself”. As CEO of the SoftBank Vision Fund, the company summed up the expectations now on him: “We eagerly await his next success.”
