SoftBank and Saudi Arabia plan $100bn tech fund: VIDEO

SoftBank and Saudi Arabia plan $100bn tech fund

Partnership to be based in London will be investing over 5 years

© Bloomberg

YESTERDAY by: Leslie Hook in San Francisco and Kana Inagaki in Tokyo

SoftBank and Saudi Arabia’s sovereign wealth fund are preparing to launch a new tech fund that will manage as much as $100bn, in a move that will create one of the largest tech investment funds in the world.

The new fund, dubbed the SoftBank Vision Fund, will be based in London and seeded with $25bn from SoftBank and up to $45bn from Saudi Arabia’s Public Investment Fund over the next five years, according to a statement from the Japanese telecoms group.

The unusually large fund underscores investors’ enduring appetite for tech sector investments, even amid concerns in Silicon Valley about inflated valuations for late-stage start-ups such as Uber and Airbnb.

At $100bn, the new fund would be the same size as all funds raised by US venture capital firms over the past two and a half years, according to data from the National Venture Capital Association.

SoftBank said the fund would be investing over a five-year time horizon, which at $20bn a year would represent roughly a quarter of total annual investments in US-based venture-backed start-ups. It did not say whether it would focus on start-ups or later-stage tech companies.

Both SoftBank and the PIF have been stepping up their investments in the tech sector. Earlier this year SoftBank purchased UK chip designer Arm Holdings, in a £24bn deal that marked the biggest acquisition of a European tech company.

“SoftBank may be trying to expand its ecosystem by investing in areas that may help to strengthen Arm’s business,” said Toshihiro Uomoto, Nomura’s chief credit strategist. “It’s a natural move considering SoftBank has been shifting from its carrier business to the technology sector especially with the Arm acquisition.”

PIF, with around $157bn under management via stakes in Riyadh-listed petrochemicals, financial and technology firms, has been working to diversify its holdings with more tech investments, including a $3.5bn injection into Uber earlier this year.

The self-financing fund should be able meet its commitments of up to $45bn to the SoftBank fund from incremental use of internal resources, bankers say. Last year, the fund received $5.3bn in dividends. “SoftBank has a proven track record of investing in success,” said one Japanese financier based in the Gulf. “PIF will also be looking for investments that can help transform the kingdom domestically – that’s their modus operandi.”

The fund is on a mission to support Saudi Arabia’s new 2030 economic plan, which includes reducing reliance on fossil fuels and bolstering the private sector.

Mohammed bin Salman, Saudi Arabia’s powerful deputy crown prince, has been actively courting Japan and other Asian countries to help with the country’s transition. When he visited Tokyo last month, he met the Japanese prime minister, the emperor and top business executives including Masayoshi Son, SoftBank’s founder and chairman.

Mr Son said the SoftBank Vision Fund would be “the biggest investor in the technology sector” over the next decade. The fund will be led by Rajeev Misra, SoftBank’s head of strategic finance, and it may be joined by “a few large global investors”.

Previous SoftBank tech investments were largely steered by Nikesh Arora, who was handpicked to succeed Mr Son at the helm of SoftBank but instead left the company earlier this year.

Mr Son’s vast portfolio of investments has included US carrier Sprint, Chinese ecommerce group Alibaba and internet search engine Yahoo Japan. SoftBank has invested in budding technology companies, including ride-hailing app Grab, US bioengineering start-up Zymergen and online lending group SoFi.

https://www.ft.com/content/0370a5f4-9191-11e6-8df8-d3778b55a923

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