August 23, 2017 9:34 am JST

100 days into his $100bn fund: Masa dreams of veggies

Son's targets range from cleaning robots to satellites, but AI is at the core of each

TAKASHI SUGIMOTO, Nikkei staff writer

TOKYO -- Masayoshi Son, the charismatic leader of Japanese tech giant SoftBank Group, wakes up these days wondering which country he's in. More often than not, it's the U.S., in Silicon Valley, where he has a house.

His private jet, in which he zigzags above the globe, has flown to the U.S. West Coast over and over in the almost 100 days since May 20, when SoftBank and its partners, including Saudi Arabia, launched the $100 billion SoftBank Vision Fund.

Gradually, Son's ambitions for the fund are becoming clearer.

"The gold rush in artificial intelligence is coming for real," Son says. California's original gold rush came in the mid-19th century, drawing hundreds of thousands of prospectors from across the country.

Now Son is discovering and investing in some of the major players hoping to mine the AI rush.

The fund has not announced the dollar figures for its investments, but sources say each is in the billions.

300 years down the road

The investments are not related to SoftBank's core telecommunications business. Guardant Health, for example, is a medical care startup that analyzes DNA to detect early-stage cancer.

Another startup, Plenty, is an agriculture company that turns walls of urban buildings into vegetable fields. It also specializes in efficient indoor farming, which could boost food production near big cities.

Brain Corp. produces autonomous commercial robots that can assist in cleaning and sorting.

At first glance, SoftBank seems to be investing in a hodgepodge of companies through the $100 billion fund.

Think of it as casting a wide net.

Son has often said, "AI will redefine all industries in the future." Each SoftBank Vision Fund investment has been in a startup that uses AI to challenge the current definition of one industry or another.

The entrepreneur-cum-venture capitalist has always had out-sized ambitions.

"We have no intention of being merely an investor. This is not a money game," he said. "The Vision Fund is the linchpin of our 'swarm strategy.'"

His aim? "We will create a company that can grow, 300 years down the road."

Son believes that no technology or business model lasts forever. So SoftBank will need to perpetually evolve its technologies and businesses -- or be left in the dust of tomorrow.

So Son is mobilizing his full network of personal connections and reaching into his decades of experience on technology's cutting edge to find and invest in startups that could become major players in the years ahead.

But investment does not mean taking majority stakes or making the recipients subsidiaries of SoftBank. Son usually limits SoftBank's investments in promising startups to acquiring stakes of 20% to 40%.

The telco-led group is pursuing a loose coalition of companies. Within that coalition, Son believes he can find game changers.

It is not just technology that Son is on the lookout for. Equally important is the business acumen of a startup's founder. Famously, it took him five minutes of chatting up Jack Ma to decide to buy into the Alibaba Group.

That $20 million investment came 17 years ago. Three years ago, when Alibaba listed in New York, Son's stake was worth $50 billion.

Double-edged sword

Here is a more recent example of the sage's personal style. Last October, Yuki Saji, president and CEO of SB Drive, a Japanese self-driving bus startup and SoftBank subsidiary, was giving a presentation to two powerful entrepreneurs.

At the luxurious Conrad Hotel in Tokyo's Shiodome district, next door to SoftBank headquarters, Saji faced Masayoshi Son and Jensen Huang, the Taiwan-born American entrepreneur and founder of semiconductor company Nvidia. Nvidia boasts advanced image-processing technology and has drawn global attention as a key supplier to the fledgling self-driving car industry.

Saji was trying to secure a technological alliance with Nvidia. As soon as Saji ended his presentation, Son asked Huang an entirely unrelated question.

"The earth will become one computer in due course," Son began. "What will you do then?" The two charismatic business managers had a close conversation; Saji was left out in the cold.

"Yes! I totally agree with you," Son was soon saying in an excited voice. "Let's think about a bigger deal than just a technological alliance."

Son later decided to acquire a 4.9% stake in Nvidia for about 400 billion yen, making the U.S. company a new coalition partner. Son describes Huang as a "like-minded friend."

But there is no guarantee the SoftBank Vision Fund will be able to continue to invest as Son wants.

The $100 billion fund moved toward realization after Son directly won over the current Saudi crown prince when the latter visited Japan in September 2016. They reached a a basic agreement in October, but it took more than six months after that for the fund to take off.

The launch was delayed due to tough negotiations between SoftBank and Saudi Arabia. Under their agreement, investment projects proposed by SoftBank are put before the fund's investment coordination committee, which has the power to veto them.

If the committee actually vetoes any specific projects, SoftBank will have no choice but to invest in them single-handedly, not through the fund.

There are potential political risks as well. The truth is that Son first floated the fund idea to Qatar. Even after SoftBank reached an agreement with Saudi Arabia, Qatar expressed its desire to participate.

But Saudi government officials never agreed to Qatar's participation and Saudi Arabia later joined a group of countries severing diplomatic relations with Qatar.

So far, Son's investments have been ultralong-term. Returns have come in at an average of 13 and a half years.

The Vision Fund's partners cannot wait this long, though, as they expect much earlier returns.

SoftBank's consolidated financial results covered the $100 billion fund for the first time in the April-June quarter. The project got off to a smooth start, posting an operating profit of 105.2 billion yen for the quarter.

Son struck a bullish tone. "If the fund goes smoothly, it will help boost SoftBank's earnings by several hundred billion yen annually."

But the scale of the SoftBank Vision Fund is so massive that it runs the risk of incurring a huge loss, depending on its performance.

Son turned 60 on Aug. 11. He has said his successor will take over his businesses while he is in his 60s. The next "sage" will be seated within the next 10 years.

Until then, Son will be taking sole responsibility for a colossal double-edged sword greater than anyone has ever owned.

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