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What SoftBank's $100bn Vision Fund looks for in a company

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp. Photo: Kiyoshi Ota/Bloomberg via Getty Images

SoftBank’s Vision Fund has become one of the most sought-after tech investors in the world in its two years of existence.

Japanese telecom giant SoftBank launched the $100bn fund in 2017 to try to take advantage of what founder Masayoshi Son thought was an imminent technological revolution.

The sheer size of the fund — it is the biggest private venture fund ever — has made it an attractive investor, as well as the range of companies it has backed already: hot companies like Uber, WeWork, and Slack.

SoftBank’s Vision Fund has invested in 70 companies since launch, covering everything from healthcare to dog walking and spanning the globe. How exactly does it decide on which to back?

“We look for businesses that are addressing very significant pain points,” Munish Varma, a partner at SoftBank Investment Advisors, told the audience at the Innovate Finance Global Summit in London on Monday.

Varma appeared at the conference alongside Rishi Khosla, the CEO and founder of entrepreneur-focused bank OakNorth, which SoftBank has backed.

“It could be for consumers in everyday life or it could be for SMEs like OakNorth, where the constraints of capital are very real,” Varma said.

He said potential investments must tick three key boxes for SoftBank:

  1. Management team: Varma said the most important factor is that the people behind the business. SoftBank wants to know they have the “energy and stamina to execute an actually very bold and ambitious plan”

  2. Addressable market: Companies hoping for investment from SoftBank must operate in a big potential market that they can grow into, like OakNorth addressing small business loans.

  3. Ready to scale: SoftBank’s minimum investment from the Vision Fund is $500m so businesses need to be at the right stage to use that kind of money. Varma said companies should have a functioning business model that is ready to be extended into new markets, or deeper into existing markets.

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Varma added that how “tech-enabled” a business is was also an important consideration when it comes to investments.

Interestingly, however, SoftBank are not interested in a company being profitable when it comes to them.

“I don’t think it’s necessarily a good thing for companies that are scaling rapidly, can scale rapidly, to focus on having a short-term profit,” Varma said.

“As long as there’s a path to profitability,” he said, and the unit economics of a business work, SoftBank will be happy.

And how should companies that tick all the boxes get in touch with Varma?

“Email me,” he said.

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Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.

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