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SoftBank preparing sequels to $100bn Vision Fund

Japanese tech giant wants to invest in 1,000 companies in 10 years

SoftBank Group Chairman and CEO Masayoshi Son unveiled plans to set up a series of massive tech investment funds in an interview with The Nikkei.

TOKYO -- SoftBank Group Chairman and CEO Masayoshi Son on Thursday revealed his intention to create another technology investment fund, just months after establishing a roughly $100 billion fund.

The Vision Fund was created to invest mainly in the fields of artificial intelligence and the internet of things, with the promotion of  the information revolution in mind. The second fund, which could be rolled out in the next two to three years, is also expected to invest in up-and-coming AI and IoT companies.

Scaling up

"The Vision Fund was just the first step, 10 trillion yen ($88 billion) is simply not enough," Son told The Nikkei. "We will briskly expand the scale. Vision Funds 2, 3 and 4 will be established every two to three years."

Since its creation in May, the Vision Fund is believed to have already committed a total of 3 trillion yen in investment. Given that pace, the SoftBank founder admitted that the fund "will probably run dry in about two years."

"We are creating a mechanism to increase our funding ability from 10 trillion yen to 20 trillion yen to 100 trillion yen," he noted. All told, the funds "will probably have invested in at least 1,000 companies within 10 years," Son added.

Vision Funds are expected to chiefly target "unicorns" -- unlisted startups with an estimated valuation above $1 billion. Unlike venture capital firms that invest several million dollars in newly established enterprises, the funds will pick companies with sufficiently large operations. The average scale of investment will likely reach about $888 million.

The original Vision Fund lured such major partners as the government of Saudi Arabia and 10 or so companies including Apple. Although Son avoided identifying the new investors, he is likely working out a secret plan -- just as he persuaded Saudi royalty to make a massive investment in the first fund.

Herd mindset

Son's appetite for investment is rooted in his "herd" strategy. Since no technology or business model lasts forever, he explained, SoftBank will build a loose network of companies that evolve, rather than simply expand, connecting entrepreneurs with different strengths and characteristics who motivate each other and share ideas.

But should SoftBank create its 1,000-company herd, even a leader like Son will not be able to keep watch on all of them. The potential for lax corporate governance is a risk that is hard to ignore.

With the first Vision Fund alone boasting a war chest of roughly $100 billion, SoftBank's enormous investment could also warp the environment around emerging companies. The total investment by venture capital firms worldwide stood at $107.7 billion in 2016, according to U.S. research firm CB Insights.

The tech giant rarely invests small amounts and often becomes a top shareholder, meaning that there will be fewer opportunities for entrepreneurs to go public and stand up to the scrutiny of a large number of shareholders.

(Nikkei)

 

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