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What’s the SoftBank Style of Investment?

Value Creation

About the SoftBank

SoftBank Group Corporation is a Japanese multinational Conglomerate ( Group of multiple business entities) founded by Masayoshi Son. It started with the business of packaged software distribution as Softbank Corp., turned to become a telecom giant and now SoftBank corporation is a group of multinational giants working in different sectors like  E-commerce, IT, Telecom, Banking and finance to transportation.

What’s the philosophy it follows?

SoftBank group works with a philosophy of information revolution for the benefit of society. And believes that if tech transformation brought the right way, it adds happiness to humanity. Following this philosophy, SoftBank is investing in innovative tech ventures and startups, helps them to grow, invests further to increase the value of the business. And makes a profit from the venture’s increased valuation.

From where the Investment money comes?

It invests money directly or through its billion-dollar vision funds created along with funding from other corporate investors like Apple, Microsoft and some Japanese Banks.

The Success story of Its investment

SoftBank is a major shareholder in Chinese E-comm. Giant Alibaba. In the year 2000, it invested   $20 million in Alibaba. The value of its’ this investment increased to around $ 60 billion in the year 2014 when Alibaba went public. With that, received a return of 300,000%.

In India

  1. SoftBank has also invested in India’s leading digital payment service provider Paytm through its holding company One97 Communications. So, if Paytm goes for IPO, SoftBank will get a good return
  2. It also invested in Flipkart and sold its stake to Walmart for $4 billion, getting a return of around 60% on its investment.

Creating Unicorns

Many Indian tech ventures like  InMobi, Snapdeal, Firstcry, Grofers, and Ola Cabs, Oyo Rooms, LensKart also received SoftBank funding  With its million or billion-dollar investment, SoftBank helps these ventures to grow and increase their business valuation, leading to the creation of Unicorns( Techstartups reaching $ 1 billion market valuations).

And what about the Real business profits.?

Many of the above-mentioned companies like Paytm or Ola Cabs or Oyo Rooms or First Cry, none of them are making profits. In fact, they are running with crores of rupees losses. But due to market valuation are part of the Unicorn club.

Way of Investment – Risk-Return Trade-Off

SoftBank following its philosophy invests in transforming tech ventures. It is like of the 10 investments it makes, 2-3 ventures are real profit-making like Alibaba. While for the remaining ventures, it’s an only valuation on paper without real business profits! Companies like WeWork, whose overhyped IPO couldn’t come because of financial irregularities. India’s Oyo Rooms is also facing such a problem.

So, What’s the crux?

The Starterr View:

As an entrepreneur, the first target should be the service to society, which will naturally increase the revenue and thereby business profits. Because what people remember is the service.

Now, SoftBank vision fund II may also change its strategy and will select the companies having a clearer pathway to profitability and a public offering. 

Share your opinion

 

What do you think?

The Starterr

Written by The Starterr

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