The Massive Fund🤯
What would you do if you were given $100 billion? For me, I’m not quite sure. For Masayoshi son, the CEO of SoftBank and the visionary behind the biggest corporate venture capital fund ever, he’s betting big on the singularity – I’ll touch more on this later.
With a fund larger than the GDP of a small country (greater than 15 countries to be exact), the SoftBank Vision Fund towers over all major private equity funds and venture capital funds that have come before it. To bolster the fund’s influence even more, the fund was valued at $98 billion in November 2017 and is backed by tech behemoths like Apple and Qualcomm. This $98 billion price tag is one that even the infographic below doesn’t take into account.
Mind-Blowing Fact: Per CB Insights, the SoftBank Vision Fund’s $98 billion is almost the same amount that all VC-backed companies received in 2016 ($100.8 billion across 8,372 deals)
The Man Behind the Vision 👓
Before diving into the singularity-thesis that serves as the foundation for the Vision Fund, we need to understand the man behind the vision. Masayoshi Son is the CEO of SoftBank, a telecommunications company that now touches every single industry from the internet and semiconductors to finance and robotics.
Masayoshi is no stranger to the high stakes world of the technology markets. It’s reported that at the height of the dot-com bubble in the late 90’s that SoftBank was worth $180 billion, which effectively valued Masayoshi’s net worth at $78 billion. According to him, Masayoshi’s wealth grew at a rate of $10 billion a week at its peak. For three days, he was the wealthiest person on earth. When the dot-com bubble burst, SoftBank’s stocks plummeted and Masayoshi’s net worth fell by more than $70 billion. This is reported to be the single largest financial loss by any one person ever. Unlike Pets.com, the dot-com bubble did not mark the end of SoftBank, Masayoshi, and his big bets.
Despite having had many big bets fail, in 2000, he invested $20 million in an early-stage company headed by an unproven entrepreneur in China. That stake in Alibaba is worth approximately $130 billion (a 6500x return) today. Since then, SoftBank and Masayoshi have recovered and emerged as a force to be reckoned with in the greater technology community, leveraging its checkbook as a means to best position itself for the upcoming singularity.
The Singularity in Practice 🤖
So why did SoftBank raise a $100 billion fund? Because Masayoshi Son believes in the singularity, a theory that hypothesizes that due to the rapidly accelerating rate of technological innovation, machine/robot intelligence will inevitably surpass that of humans. In other words, the thesis posits that intelligent machines, with artificial general intelligence (which we don’t have yet), will enter a rapidly accelerating self-improvement loop where each new iteration of itself is more intelligent. Eventually, as Masayoshi believes, machine intelligence will eventually surpass the limits of human intelligence.
This forecasted event not only has massive implications on how we will work, but how we will fundamentally live. As a result, no industry will be left untouched by this revolution. Put quite eloquently, Masayoshi says
“Every industry that mankind ever defined and created, even agriculture, will be redefined. Because the tools that we created were inferior to mankind’s brain in the past. Now the tools become smarter than mankind ourselves.”
The scale of the singularity’s impact is reflected in the fact that Vision Fund investments have been industry-agnostic. With investments ranging from biotech to transportation, the fundamental commonality among all of them is that they collect data that will serve as the foundation for the tools and machines of the future. Whether its location data, health data, or agricultural data, these insights are and will continue to be instrumental in creating and improving the transformative technologies that change how we live and work.
Markets Flooded with Cash 💰
With a checkbook rivaled by none, SoftBank has been investing massive amounts of capital into startups at a rate that is unparalleled. Intuitively, this can be good or bad depending on the situation. For financial markets, technology IPOs have been pushed further down the line due to the influx of capital into private markets. This phenomenon is accelerated further by SoftBank who has the appetite and resources to give later-stage companies like Uber and WeWork the capital they need. Though SoftBank prolongs the eventual exit for companies, whether its an IPO or M&A, they do have the ability to give liquidity to early-stage investors and early employees like they did with Uber.
Softbank’s massive check sizes comes with increased control over the strategic direction of its portfolio companies. Through its most recent investment in Uber, SoftBank has effectively become the most dominant player in the ride-hailing space since it has also invested in Ola (India), Grab (Singapore), Didi Chuxing (China), and 99 (Brazil, but now a part of Didi). Quiet obviously, it seems as if there’s a competitive conflict of interest among its portfolio companies. It’ll be interesting to see how the strategies and specific target markets for these organizations change as a result of the guiding hand of SoftBank.
An interesting perspective in the VC community is that due to SoftBank’s size and appetite, they are pushing up the value of already overvalued companies into unsustainable territories. Another belief is that investors may be forced to have bigger funds or be pushed out of investing altogether. Only time will tell what happens. Whether exits are pushed further down the pipeline, the singularity happens, or Masayoshi’s big bets pay off, it’s clear SoftBank will be a massive player in the technology world for the future. Ultimately, VCs, SoftBank portfolio companies, and portfolio company competitors will feel the effects of the SoftBank titan that’ll be able to move markets with a single investment decision.