HONG KONG/TOKYO -- Two years after the onset of the Asian financial crisis in 1997, a group of foreign investors set their sights on Korea First Bank, a teetering institution that had been nationalized. Among the risk-hungry investors was the Asian arm of Texas Pacific Group, the private equity firm. Another was SoftBank Group founder Masayoshi Son.
When Korea First was sold five years later for about $3.4 billion, it was a huge payday for TPG and a career-making deal for Shan Weijian, the economist-turned-investor who was in charge of it. But Son missed out, having sold his stake to New York-based Cerberus Capital Management three years earlier. His impatience cost him, according to people familiar with the sale.
For much of Son's remarkable career, he has been called impulsive and impatient by some of the investors and entrepreneurs who have done business with him. Yet others say he is nothing short of a visionary -- an image he has worked hard to cultivate. "It is easier to see 30 years ahead than three years ahead," he likes to say.
Visionary or no, there is little doubt that Son has become a disruptive force in the world of technology investment. In the past two years, SoftBank's investment holding company has drawn comparisons to Warren Buffett's Berkshire Hathaway, with $217 billion under management, according to data from McKinsey & Co. He has used this war chest to go on an investment spree, buying multibillion-dollar stakes in young companies from Uber Technologies to WeWork. Rivals in Silicon Valley and Asia are feeling anxious.
His commanding position has prompted a debate. Is Masayoshi Son the best thing that ever happened to technology startups? Or is he playing with fire?
Son says he is investing to take advantage of "the greatest paradigm shift in human history," which requires big, bold bets. He frequently speaks of his ambition "to create a new lifestyle for mankind" and says he wishes to build the biggest information highways in the world. "Singularity" -- the point when artificial intelligence exceeds that of the human brain -- "is the biggest gold rush," he intones.
To his admirers, he is the man who sees the future. "He is dis-intermediating every vertical," says Ming Maa, the president of the Singapore ride-sharing app Grab and a former SoftBank executive, using tech-speak for the way Son is disrupting industries both new and old.
The founders of Grab and Indian peer Ola say Son is the least conflicted, most supportive, most patient investor on the planet. "He is inspiring and aggressive and a visionary. He is making history," says Ola's co-founder, Bhavish Aggarwal. "He is a great dealmaker and risk taker."
Yet his critics say he is an inveterate gambler, adds little value, has a short attention span, no sense of fiduciary obligations and a dangerous addiction to using leverage. For skeptics of Son's investment skills, the terms of the April 29 announcement of a merger between Sprint -- which SoftBank acquired for $20 billion in 2013 -- and T-Mobile are a case in point. SoftBank will end up with a 27% stake in the carrier if regulators approve the $59 billion all-stock transaction, lower than if Son had not thwarted earlier talks by insisting on control. Sprint's shares fell 15% on the Monday after the deal was announced.
"We have never seen anything like SoftBank," says the head of investment in Beijing for one major tech company. "It is not like the culture of venture capital. Son makes every decision. With a lot of money at low cost and a long horizon, he has totally disrupted the VC industry. SoftBank gives out 10 times more [money] and lots of companies don't know how to spend those amounts. The outcome is not always optimal."
Most conventional private equity and venture capital investors represent the other extreme. They impose far stricter conditions on the companies they invest in. They have little tolerance for burning through cash for years on end and often try to list companies before they are ready, entrepreneurs say.
Son's investments span the globe. They embrace the $31 billion acquisition of semiconductor maker ARM Holding in the U.K., and ride-sharing apps across Asia. These holdings include a $5.5 billion stake in Didi Chuxing in China, $1.1 billion in Ola and $2.5 billion in Grab -- and that was before his $7 billion investment in Uber a few months ago, which led to the subsequent withdrawal of Uber from Southeast Asia.
He claims to have stakes in five of the 10 biggest internet companies in the world and is well on his way to fulfilling his ambition of "creating a virtual Silicon Valley in SoftBank," as he describes it. He is also using his money to create monopolies, as he is doing with ride-sharing, across the world. "You can't play in only one geography; he plays the world while investing in local champions," says Ola's Aggarwal.
There is a darker side to that as well. "Son-san is the market -- you buy the whole industry and you become the whole market," says another Indian entrepreneur with SoftBank money, explaining his strategy.
Having more money than anyone else -- and giving young companies far more money than anyone else would be willing to invest in them -- has made Son's formula look unassailable. But there are vulnerabilities that a rising market has so far obscured -- at least most of the time.
To some, Son's recent investment frenzy looks eerily familiar. He lost tens of billions on a string of investments on internet companies during the dotcom bubble years. Asked in a March 2017 interview with Nikkei if he regrets those investment decisions, Son paused before talking not about the losses, but about his failure to spend even more.
"Just after the dotcom bubble burst, SoftBank's share price fell to a hundredth of what it was, but I said at the time, 'Now is the biggest opportunity to invest in internet companies,'" Son replied.
Instead of going bargain-hunting in the dotcom wreckage, he challenged Nippon Telegraph and Telephone, Japan's marquee telecom group, in a race to bring broadband to the Japanese market. Those broadband operations, which required massive infrastructure investments, turned into financial sinkholes that caused SoftBank to log four straight years of losses. Ultimately, however, those investments led to lower prices, boosting the fortunes of Japanese internet companies.
Although Son takes pride in that achievement, he still regrets missing out on the chance to buy stakes in Amazon.com, Google and Baidu, China's leading search engine, in the early 2000s. "I've thought a lot about what would have happened if I didn't do broadband at the time and instead used all the money left over to invest in internet companies," he admitted. "I believe I could've come into possession of a global tech giant if I had done that."
But he can still claim a major victory from that period: the stake in Alibaba Group Holding he purchased in 2000. Son has said that he decided to invest only five minutes into his first meeting with Executive Chairman Jack Ma Yun. "I saw charisma in his eyes," Son said in the interview last year.
His gut feeling was correct. The $20 million investment he made in Alibaba in 2000 was worth at least $70 billion when the Chinese e-commerce company listed in 2014.
A billion a minute
Such prescience must have been on the mind of Prince Mohammad bin Salman of Saudi Arabia in Tokyo in September, 2016. It was there that Son persuaded the now-crown prince "to invest $45 billion in 45 minutes," he told his envious interlocutor, co-founder of The Carlyle Group, David Rubenstein, in an interview for Bloomberg Television last fall.
That was the start of the Vision Fund, the largest single fund on the planet and a catalyst for the transformation of SoftBank as well as its founder. The Vision Fund is unique, given its relative lack of constraints and clear return targets, and its open-ended structure.
The Vision Fund came at a fortuitous time for Son. SoftBank has so much debt -- about $145 billion, though this will fall significantly if the tie-up between Sprint and T-Mobile is approved -- that he could never use his own balance sheet in the way Alibaba and Tencent Holdings use theirs.
"The SoftBank Group is becoming an investment company, and as it becomes an investment company, leverage is no longer an appropriate measure," said Yoshimitsu Goto, SoftBank's chief financial officer, in Hong Kong in late March. "By using the Vision Fund and the Delta Fund, we can use leverage without damaging our balance sheet."
Crucially, by using the Vision Fund, Son can also spend other people's money -- and spend it aggressively.
"I postpone profits for market share," he once explained to television interviewer Charlie Rose. "I am in a hurry to aggregate. I aggressively engage in price competition."
The Vision Fund has relatively little time pressure, which means that SoftBank does not have to worry about generating positive cash flow in the companies in which it takes a stake. The size of the fund, however, can be a curse as much as a blessing for both giver and recipient.
In order to "aggregate," Son offers the highest valuation when he finds himself bidding in competitive situations. As long as the market rises, propelled by ever larger amounts of money coming into tech, SoftBank appears invulnerable -- and Son appears to have turned himself into a sort of perpetual money-making machine. The danger, though, comes when the market stops rising.
"He has convinced himself the world will be different 20 years from now but that is dangerous," says one Hong Kong-based tech investor who has dealt with Son. "In tech, you can't look 30 years out -- at most you can look three to five years out."
"SoftBank makes the cost of capital so low for entrepreneurs [that it] gives rise to bad habits like cash burn and just going for market share," says a leading venture capitalist in India. "Capital efficiency goes out the window. Capital can crown the wrong winner."
High valuations can become a trap for entrepreneurs, too. Because few other investors believe in the values Son's investments give to young companies, they can only attract SoftBank money when they need a new round of funding -- or they must contemplate the prospect of a lower valuation.
"In hindsight, I would have done things differently," says one Indian entrepreneur with SoftBank money. "I would have kept more control in return for a lower valuation."
In recent months, "Son is the new IPO" has become the mantra among venture capitalists who try to convince him to buy the companies they have invested in because he will give them a higher valuation than the public market.
Consider Coupang, among the largest startups in the history of South Korea. Three years ago, the e-commerce company raised $1 billion from a group SoftBank led. But Coupang burns capital at an alarming rate, and has reported losses far bigger than the market has expected, according to people in the industry. If it were to raise money today it would likely be at a lower valuation.
Similarly, Paytm in India, in which SoftBank has a 20% stake, needs "continuous" capital, according to its founder, Vijay Shekhar Sharma. That translates into saying the company will not generate positive cash flow on its own for the conceivable future.
These are just short-term concerns for Son, who says he wants to create a group that will last for centuries. "What did Masayoshi Son invent?" he asked in a 2010 presentation, thinking of how he would be remembered. "If one were to bring up one thing, it would be neither a chip, a software nor a piece of hardware. I wish for future generations to say he created an organizational body that has grown for 300 years."
Like father, like son
Whatever the future holds, Son has always done things his own way, combining a strong sense of being an outsider with an equally strong belief in his own capabilities. In an interview with the Harvard Business Review back in 1992, Son described "the darkness in my mind because of my nationality. I think most Koreans who live in Japan have the same feeling. They use their Japanese last names and feel like they are hiding something."
Son's vision is inspired by his father, Mitsunori Son, who made bootleg liquor, ran pachinko parlors and engaged in consumer lending. Masayoshi Son says his idea about running SoftBank was formed by watching his father attempt to run a variety of businesses.
While he may have harbored doubts about his fundamental identity, Son has never had any doubt about his charm as a salesman. He approached his business hero, Steve Jobs, to ask for the exclusive right to market the iPhone in Japan even before he acquired Vodafone Japan in a $15 billion deal in 2006, he says.
Taking such risks has so far worked out. But that apparent success also reflects today's benign financial conditions, with low interest rates and ample liquidity. These conditions may soon turn. Interest rates have started to move up in the U.S. far more quickly than most analysts have expected, which means that investors may soon be forced to become less ebullient. If the tightening continues, Son may not look quite as successful tomorrow.
Of course, he has already been there. At the end of the dotcom bubble, he lost 99% of his own net worth, but he bounced back.
Could it happen again? Son does not rule it out. "I was so close to falling down from the cliff," he told Rubenstein with a laugh. "I don't know if I can do it again."