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Business deals

SoftBank Vision Fund leads $1.2bn funding for US logistics

$100bn tech fund expands investment to legacy businesses

Flexport said revenue doubled to $500 million in 2018 (photo courtesy of Flexport)

TOKYO -- SoftBank Group's giant technology fund is leading a consortium that is investing $1.2 billion in two U.S. logistics startups, increasing its bets in traditional industries.

The SoftBank Vision Fund led a $1 billion investment in freight forwarding startup Flexport on Thursday. The deal comes a day after it led a $200 million funding round for on-demand storage startup Clutter.

Existing investors in both companies participated in the fundraising. The deals reportedly valued Flexport at $3.2 billion and Clutter at $600 million.

The Vision Fund has mainly invested in high-tech companies that are trying to disrupt traditional industries, such as ride-hailing group Uber Technologies and DoorDash, an on-demand food delivery service. The latest investments signal SoftBank Chairman and CEO Masayoshi Son's confidence that even businesses requiring physical space, such shipping and storage, will be transformed by artificial intelligence.

SoftBank sees an opportunity to create a network of modern logistics companies at a time when Amazon, the world's most valuable e-commerce company, is keeping most of its logistics know-how private.

"We should be able to, outside the Amazon ecosystem, get goods delivered to us much quicker and at lower cost," Vision Fund managing partner Michael Ronen told Forbes.

Some observers remain cautious, however. "Companies dealing with cross-border shipping need to work with administrations that have different formats and rules, so a lot of processes are still labor-intensive," said Ryoichi Kakui, CEO of e-logit, a logistics consultancy in Japan. 

Clutter provides an on-demand storage service for individuals. Through a smartphone app, users can request a delivery person to pick up items from their home for storage at the company's warehouses, and bring them back when needed. The company said it has tens of thousands of customers.

Clutter manages a fleet of drivers that pick up the user's goods and delivers them to its warehouses (photo courtesy of Clutter)

Founded in 2013, Flexport is a full-service air and ocean freight forwarder. The company says it uses advanced software to optimize routes and track deliveries. It has 11 offices and five warehouses, including in China, and said its revenue doubled to nearly $500 million in 2018. Its clients include U.S. speaker maker Sonos.

The deals come as Son works to shore up confidence in the Vision Fund, which skeptics say pays too much for privately held companies.

Son launched the $100 billion Vision Fund in 2016 to make big investments in technology companies that have not gone public. It has spent an average of $1 billion on 49 companies through December. While SoftBank says the Vision Fund has made a profit after selling its stakes in two companies, it has yet to do so for its portfolio companies that went public.

"It is hard to be convinced about what the long-term value is because we don't know what the performance is going to be," said Dan Baker, an analyst at Morningstar. "The Vision Fund is now almost the group's only business which is not already public."

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