According to experts, the massive bets of Softbank have played a crucial role in driving innovation at scale for young companies which are usually devoid of capital in the early phase.
The startup innovation and the corresponding funding has been shifting rapidly over the years. Since the 2000s, when startup funding was focused mostly on cloud computing, social networking and mobile computing, many changes have taken place. Today, the money is pouring into things like artificial intelligence, blockchain, computational biology, and FinTech — all of which have been disrupting technology products.
Another major focus of tech funding is to create platforms on which developers build products, aiming to aggregate things including rental housing, cabs, jobs. The software industry has caused a wealth transfer from upper class to entrepreneurs by making it easy to raise millions and potentially billions of dollars, both in developed countries like the US as well as fast-developing markets like India and China.
But successful investing in startups isn't an easy task, because in the early stages, there are not many metrics and no historic background for the company to measure. There may be a few people who have come together and built something. They may have an MVP and a few paying customers, and their product may be in beta.
Fewer companies go public today due to regulatory complications as well as constant scrutiny from investors which can impede innovation. For these reasons, private equity is the way tech startups choose. Using private funds, startups have amassed a lot of wealth. One company which is leading the way is Softbank with its enormous chest of cash to fill the void of the public raising of capital. Over the past decade, it has aided numerous emerging tech startups, pouring in billions and billions of dollars as part of its Vision Fund — the world’s largest stash of cash for early-stage investing.
Eating Up The Market Share In Emerging Tech Startups
Among the ongoing startup wave, India alone raised $12 billion last year and the amount of capital attracted by early-stage tech startups was decent, third in the world behind US and China. Here too, Softbank led the way with massive investments in companies including:
PaytmGrofersDelhiveryPolicy BazaarOla ElectricSnapdealOYOFlipkart
While some analysts have been sceptical about Softbank’s model, stating it’s not sustainable, others are optimistic about it and urge to see a long term picture. Regardless, the company has become a venture capital behemoth, which is not just eating up market share in the emerging tech space but also making its investors decent returns over the years. On the other hand, the company has witnessed recent debacles for lack of growth like WeWork (which has seen a bailout worth $9 billion), and perhaps issues with potentially overvalued companies like Uber and India-based Oyo.
Analytics India Magazine got in touch with Siddarth Pai, Founding Partner of 3one4 Capital — one of India's largest early-stage tech funds to know what's happening with Softbank. "We live in an age where capital is used as a weapon. The first person to weaponise capital was Masayoshi Son from Softbank. Its vision statement doesn't much consider what is happening in the short term but has an outlook for the next 100 years and that’s how big companies will emerge out of it," said Pai.
Why Softbank's Risky Bets Are Driving Innovation At Scale
According to experts, the massive bets of Softbank have played a crucial role in driving innovation at scale for young companies which are usually devoid of capital in the early phase. Sure, some bets will fail but if we really look at the vision statement for bringing about the information revolution, the current debacles of Softbank may seem like small dents 100 years down the line.
"The goal is to get the fund to find the best startups and help them with more than enough capital to get them to succeed. Has that thesis worked? Some people say no and I would say it's still a work in progress," Pai added. Softbank’s vision aims to develop over the long-term by forming partnerships with the most superior companies at the time in the information industry, without adhering to particular technologies or business models. Here, Masayoshi Son's experimentation and diversification with new technologies and models may reap variable results, particularly given the ups and downs of the global economy.
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