Bill Gates co-founder of the Bill and Melinda Gates Foundation, Indra Nooyi, chairman and CEO of PepsiCo and Masayoshi Son, chairman and CEO of SoftBank Group Corp take part in the Bloomberg Global Business Forum in New York City. -AFP
Japan-based SoftBank is sending tremors through the tech world with a massive new venture capital fund for investing in startups that's expected to dominate the industry so thoroughly it's playfully referred to as a "gorilla." The Vision Fund's $100 billion coffers nearly equals the total amount pumped into venture capital-backed companies last year, according to market intelligence firm CB Insights, and some say it may be a game-changer for Silicon Valley.
"SoftBank shows a remarkable amount of bravery, confidence and optimism to look to apply this much money in technology," said Bill Maris, who started Google Ventures nearly a decade ago and runs his own California-based investment firm Section 32. "I can't say it's a wrong bet, if you think the trends in tech will continue in the future. I would be much more worried if SoftBank was saying tech is dead."
Last year, VC-backed firms received $100.8 billion across 8,372 deals around the world, according to CB Insights data. The huge amount of cash could accelerate the trend where fast-growing startups remain private -- without the scrutiny and transparency of a stock market debut.
Some investors worry that the Vision Fund will buy into startups at high prices, overinflating the market, while crowding out other investors and prolonging the time it takes for young companies to go public. SoftBank has outlined plans to focus on late-stage investments when startups are more established, and on investments of at least $100 million.
The SoftBank fund is widely expected to pump some $10 billion into ride-sharing giant Uber, which has a whopping valuation near $70 billion. Such a deal would boost the profile of the Japanese group in Silicon Valley. Maris predicted the venture capital market would adapt to the Vision Fund, and in the end there would be more money available for entrepreneurs. "I always think more dollars available to innovators and inventors is a good thing," Maris said. "If it does shake up the market, maybe things do need to be shaken up a little bit."
SoftBank chief executive Masayoshi Son has demonstrated a strategic appreciation for bringing together startups with the potential to benefit one another, according to analyst Patrick Moorhead of Moor Insights & Strategy. Moorhead added that he was expecting either spectacular wins or failures from the Vision Fund, nothing in between. "It is looking for mega-investments," he said.
SoftBank's early, lucrative, investment in Alibaba was part of a strategy focused on booming e-commerce in China, according to GGV Capital managing partner Hans Tung.
-AFP, San Francisco
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