SoftBank reportedly plans to lend employees as much as $20 billion to invest in its VC fund – gpgmail


SoftBank has a plant to loan up to $20 billion to its employees, including CEO Masayoshi Son, for the purposes of having that capital re-invested in SoftBank’s own Vision venture fund, according to a new report from the Wall Street Journal. That’s a highly unusual move that could be risky in terms of how much exposure SoftBank Group has on the whole in terms of its startup bets, but the upside is that it can potentially fill out as much as a fifth of its newly announced second Vision Fund’s total target raise of $108 billion from a highly aligned investor pool.

SoftBank revealed its plans for its second Vision Fund last month, including $38 billion from SoftBank itself, as well as commitments from Apple, Microsoft and more. The company also took a similar approach to its original Vision Fund, WSJ reports, with stakes from employees provided with loans totalling $8 billion of that $100 billion commitment.

The potential pay-off is big, provided the fund has some solid winners that achieve liquidation events that provide big returns that employees can then use to pay off the original loans, walking away with profit. That’s definitely a risk, however, especially in the current global economic client. As WSJ notes, the Uber shares that Vision Fund I acquired are now worth less than what SoftBank originally paid for them according to sources, and SoftBank bet WeWork looks poised to be another company whose IPO might not make that much, if any, money for later stage investors.


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SoftBank pumps $2B into Indonesia through Grab investment, putting it head to head with Gojek – gpgmail


Grab — the on-demand transportation app worth $14 billion that is the Uber of Southeast Asia — today announced how it would be using some of the $7 billion or so that it has raised to date: $2 billion provided by SoftBank is being earmarked Grab’s operations in Indonesia — the biggest economy in Southeast Asia — over the next five years, to help it go head-to-head with local rival Gojek.

Specifically, Grab said it and SoftBank met with Indonesian government officials and have agreed to use the money to help modernise the country’s transportation infrastructure and economy with the development of an electronic vehicle “ecosystem”, new geo-mapping solutions, and the establishment of a second headquarters for Grab in Jakarta focused on R&D for Indonesia and the wider region, to sit alongside its existing HQ in Singapore.

Grab has confirmed that this investment news does not affect the company’s valuation as it’s not fresh funding — although it looks like it might lead to another, new SoftBank injection in Grab, too.

“I’d like to invest more… We would invest (in) Grab more, and also encourage to invest more in other companies,” SoftBank CEO Masayoshi Son said in a press conference earlier today. “We will create a second headquarters of Grab in Indonesia, and become 5th unicorn and also invest $2b through Grab. On top of that, we will invest more.”

Grab last raised money just four weeks ago, $300 million from Invesco as part of a larger, ongoing Series H that it wants to use in part for acquisitions. That round is already at around $4.5 billion, with SoftBank having already put in just under $1.5 billion. This $2 billion is on top of that previous round, the company said today.

The company’s last reported valuation from a couple of months ago was around $14 billion, a figure that we have been able to confirm remains the same today.

“With our presence in 224 cities, Indonesia is our largest market and we are committed to long-term sustainable development of the country,” said Anthony Tan, CEO of Grab, in a statement. “We are delighted to facilitate this SoftBank investment, as we believe by investing in digitizing critical services and infrastructure, we hope to accelerate Indonesia’s ambition to become the largest digital economy in the region and improve the livelihoods of millions in the country.” Indonesia accounts for the lion’s share of Grab’s business in terms of total footprint: its in 338 countries overall, meaning this country accounts for two-thirds of the whole list.

The news puts Grab head to head with another big on-demand transportation startup Gojek: the two were already rivals in the region, but GoJek is based out of Jakarta and has been the dominant player in that specific market up to now.

Indeed, the deal is notable not just for the amount, but for how it casts both Grab and SoftBank as allies of the government, not just accepted as businesses but endorsed as key players in helping improve the Indonesian economy and how the country is able to deliver critical services like healthcare and transportation, as well as give more services to drive the growth of “micro-entrepreneurs” by way of Grab-Kudo, the payments startup in the country that Grab acquired in 2017 for less than $100 million.

Given the track record that companies like Uber have had in locking horns with regulators, this puts Grab immediately into a strong position in terms of introducing and running with new services in the future. Its restaurant delivery business, GrabFood, is already the largest in the region, it claimed today.

Grab said the financial commitment was the result of a meeting between Indonesia’s President Joko Widodo, Masayoshi Son, Chairman & CEO of SoftBank Group, Anthony Tan, CEO of Grab and Ridzki Kramadibrata, President of Grab Indonesia, at the Merdeka Palace in Jakarta.

“Indonesia’s technology sector has huge potential,” said Son in a statement. “I’m very happy to be investing $2 billion into the future of Indonesia through Grab.”

Indonesia’s Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan also had words supporting the deal: “Supported by the growing economy, Indonesia has a good investment climate where we are working together to boost the ease of investment in Indonesia,” he said. “This investment is evidence that Indonesia has been on the radar of investors, especially in the technology sector. We look forward to working with Grab, the fifth unicorn in Indonesia, and SoftBank to empower SMEs, accelerate tourism, and improving health services.”

This deal is a win on a couple of levels for Grab.

Most obviously, it’s giving the company a huge injection of capital to continue expanding its business aggressively in what is the biggest economy in Southeast Asia, with GDP of around $1 trillion annually.

A well-worn strategy by on-demand transportation companies — typified by others like Uber, Lyft and Didi — is to go big and go fast in order to establish a market presence among drivers and passengers, which can be used as a foothold to expand into other areas like food or package delivery and to then increase prices to improve margins.

Given that Indonesia is Gojek’s home country, and given that Indonesia is one of the biggest markets in the region, this makes it one of the most important territories for Grab to — err — grab.

“Grab is an Indonesia-focused company,” said Ridzki Kramadibrata, president of Grab Indonesia, in a statement today. “Having our second headquarters in Jakarta will allow us to better serve the needs of all Indonesians and those from emerging economies in the region. As a technology decacorn, Grab very well understands the needs and challenges we have here. We are also well positioned to support more high tech industries and infrastructure companies originating from Indonesia.”

On another front, this is an important strategy for the company on the regulatory and government front.

In a climate where it’s not unusual to see companies banned from operating in markets where they have run afoul of officials and the public, Grab is essentially buying its way into working with the state, and actually taking a commercial role in building its infrastructure. This — offering help with building infrastructure and simply passing on some of its experience and learnings — is a route that Didi has also been taking to make its way into new markets.

Grab said that it has invested $1 billion to date in Indonesia before now, and it said that its contribution to the economy in 2018 was $3.5 billion (48.9 trillion Indonesian rupiahs).

Updated to clarify that this is NOT a new infusion of capital, but a specification of how existing investments will be used. Meanwhile, Grab is still raising money and SoftBank said it wants to invest more.


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Microsoft and the second SoftBank Vision Fund as another play for corporate cloud dominance – gpgmail


It looks like the return of SoftBank’s Vision Fund may be less reliant on murder money and more reliant on Microsoft’s money-making machine for its backing.

The rumored involvement of Microsoft in financing SoftBank Vision Fund II (electric boogaloo?) is interesting for what it may indicate about how the relationship between venture investors, startups and the large corporations that dominate the tech industry are changing.

If the name of the game is platform and services, then corporate behemoths like Microsoft, Alphabet, Amazon and Apple are in interesting positions to invest in startups as a flywheel for growth in some of their most profitable and strategic business units.

To some extent this has always been true, but it’s becoming more important now as web services become larger slices of the corporate balance sheet at these three companies (particularly — although IBM is also playing in this game). Basically, like corporate accelerators and venture arms, investing in SoftBank is another service that’s being potentially offered to lock in startups to corporate cloud ecosystems.

While there are no guarantees that a nudge from an investor to use one tech platform for web services over another would make any difference, it’s clear that big tech companies like Amazon, Alphabet and Microsoft are all over startups to use one web stack over another.

Amazon has tied itself ever more tightly to the Techstars ecosystem of incubators for new tech companies, Microsoft has its own corporate accelerator programs and investment arm and Alphabet does the same.

As technology continues to advance, the big companies have more services they can offer to tech companies that will be increasingly more compelling and drive increasing revenue.

All three big companies mentioned above (and even IBM, bless its big blue non-existent heart) have machine learning tools that they’d love to provide as a service to startups as well. And even as IBM sunsets Watson as a balance sheet item (an event that was an elementary conclusion to anyone who has tracked its long, slow spiral), machine learning services are going to become a larger slice of revenue for the providers who can effectively tie startups into those services.

Most entrepreneurs pay lip service to the fact that enhanced algorithms are going to become table stakes in new product offerings so observers can watch that become another engine of growth for the big companies that can get it right.

Also, startups are going to increasingly become a sales channel for big tech, even as big tech has traditionally been a sales channel for startups.

Software as a service businesses using a freemium business model have an easier time getting into a corporate environment than Microsoft or Google . And even as the productivity suites from these companies battle it out (Verizon, FWIW, is team Google for now), some of the money flowing to a SaaS company’s coffers from a big corporate entity will ultimately wind up in either Microsoft, Amazon or Alphabet’s returns.

This model also helps venture investors, who now have more assurance that there will be late-stage capital to bolster their businesses (including really, really bad ones), although most traditional firms have a love-hate relationship with Masayoshi Son’s gargantuan investment vehicle.

Finally, there’s the simple fact that divorcing SoftBank from Saudi Arabia’s journalist-killing murder money is a good thing for the firm and the larger technology industry, which has enough moral conundrums to consider without adding to the mix another problematic geopolitical relationship.


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