SoftBank's Global Dominance
Masayoshi Son is a name that is well-known on Wall Street. Nicknamed Masa Son, he is the chairman and CEO of SoftBank, a Japanese multinational conglomerate holding company that has a wide range of stakes in several companies in the U.S. These companies include Uber, Sprint, Boston Dynamics, and WeWork. Due to SoftBank’s growth over the last two decades, Son is certainly one of the most influential deal makers of our time. SoftBank has invested $32 billion in chipmaker ARM, $9 billion in Uber, and $4.4 billion in WeWork.
Son is of Japanese descent and moved to the U.S. for high school after his role model Den Fujita, the founder of McDonald’s Japan, advised him to learn English. Upon completion of high school, Son enrolled at the University of California at Berkeley, where he studied Computer Science and Economics. In 2017, speaking on Bloomberg’s “The David Rubenstein Show,” Son stated that at UC Berkeley, he told one of his friends that he wanted to earn $10,000 a month. Ever since, he has made sure to set aside five minutes a day to brainstorm innovative ideas that will help him to achieve his financial goals. Son later invented the first multilingual translator, which he sold to Sharp for $1.7 million.
After finishing his degree at UC Berkeley, Son returned to Japan to grow his idea and vision for entrepreneurship. In 1981, SoftBank was formed; Son noticed that there was a lot of hardware but not enough software in Japan. Therefore, he started gathering various software from small software companies, which he would wholesale to PC stores. Son then won a contract with Japan’s largest PC retailer at the time, Justin Deng Kiko, making SoftBank its exclusive software partner. Within a year, SoftBank was selling over $2 million of software per month. In 1982, SoftBank then started publishing a monthly computer magazine, which took heavy losses in the early stages of business. However, for most of the ‘90s, SoftBank dominated the market for high-end tech magazines, which allowed the company to heavily promote its own products. Cross-promotion proved very valuable in reflecting its increasingly diverse portfolio.
In 1994, SoftBank went public and was valued at $3 billion, and in 1999, the company became a holding company. In 1996, SoftBank formed a joint venture with Yahoo! to form Yahoo Japan!. In 2000, SoftBank made one of its most successful investments, lending approximately $20 million to Chinese Internet venture Alibaba. When Alibaba went public in September 2014, the investment was worth approximately $90 billion, a return of about 4000 percent. During the Internet bubble of the early 2000s, Son personally lost $70 billion of net worth. At that time, SoftBank’s shares plunged 75 percent in two months and were 93 percent lower by the end of 2000. To bounce back from SoftBank’s turmoil, Son bought Vodafone’s mobile telephone business in Japan, as he believed that the mobile internet market would become prominent.
Currently, SoftBank is the world’s largest technology investor. In 2016, SoftBank established the $100 billion Vision Fund, with 82 companies now a part of its global portfolio. The Vision Fund’s biggest outside investor is Saudi Arabia’s sovereign wealth fund. In 2017, Son told David Rubenstein that he was able to convince the Crown Prince of Saudi Arabia, Mohamed bin Salman, better known as MBS, to invest $45 billion into the Vision Fund. Son jokingly stated that it only took him 45 minutes to convince MBS to get the $45 billion, “$1 billion dollar per minute.”
Around 60 percent of the money promised to the Vision Fund by investors other than SoftBank takes the form of debt, like securities that earn a seven percent fixed return annually. On top of that, the Vision Fund had approximately $5.6 billion in debt at the end of September 2018. In late 2018, Son told The Wall Street Journal that SoftBank was also planning to have the Vision Fund borrow an additional $9 billion to boost the fund’s returns further and make additional investments. Despite SoftBank’s success, some key investors such as Saudi Arabia’s Public Investment Fund (PIF) have complained about the high prices the tech-investment fund has paid for some tech companies. In January 2019, SoftBank cut a planned investment in WeWork to $2 billion from as much at $16 billion after push back from Saudi Arabia and Abu Dhabi.
Overall, Son and SoftBank are heavily investing in start-ups and will continue to grow and make more investments across Silicon Valley. According to CNBC, SoftBank is already planning to launch another $100 billion fund, called Vision Fund II.
Bloomberg Markets and Finance. (2017). The David Rubenstein Show: Masayoshi Son. [Video file]. Retrieved from https://www.youtube.com/watch?v=Sa2_VBu0d7k&list=WL&index=97
ColdFusion. (2018). How Big is SoftBank?. [Video file]. Retrieved from https://www.youtube.com/watch?v=TKT7M3YnSlg&list=WL&index=96&t=0s
Leon, R.d. (2019). How SoftBank and its $100 billion Vision Fund has become a global start-up machine. Retrieved from https://www.cnbc.com/2019/05/17/softbanks-100-billion-vision-fund-reshapes-world-of-venture-capital.html
Pfanner, E. (2014). SoftBank’s Alibaba Alchemy: How to Turn $20 Million Into $50 Billion. Retrieved from, https://blogs.wsj.com/digits/2014/09/19/softbanks-alibaba-alchemy-how-to-turn-20-million-into-50-billion/
Sherman, A. (2018). Masayoshi Son’s secret to running his $100 billion fund: Telling start-ups to treat each other like family. Retrieved from https://www.cnbc.com/2018/08/01/masayoshi-son-vision-fund-family-synergy.html
Startup Division. (2017). The Man Who Lost Billions - SoftBank Founder Masayoshi Son. [Video file]. Retrieved from https://www.youtube.com/watch?v=npSpye9ykd8
Steinberg, J., Jones, R., Dvorak, P., & Negishi, M. (2019). Key Investors Are Unhappy With SoftBank Tech-Investment Fund. Retrieved from https://www.wsj.com/articles/key-investors-are-unhappy-with-softbank-tech-investment-fund-11550509200
Warren, K. (2019). Meet Masayoshi Son, the billionaire founder of SoftBank and one of the richest men in Japan, who has a $16.3 billion fortune and owns a $117.5 million Silicon Valley estate. Retrieved from, https://www.businessinsider.com/masayoshi-son-softbank-net-worth-lifestyle-silicon-valley-estate-photos-2019-6