
The impact of Masayoshi Son’s $100B fund will be profound - waqasaday
https://www.economist.com/news/briefing/21741969-it-giving-new-opportunities-entrepreneurs-and-forcing-silicon-valleys-best-stay
======
chrischen
> The dotcom crash of 2001 wiped out 99% of SoftBank’s market value.

> But one investment—$20m sunk into Alibaba—is regarded as one of the best in
> history. The Chinese internet titan went public in 2014 in the world’s
> biggest IPO. SoftBank’s 28% stake in the firm is now worth $140bn.

Kind of mind-boggling who the real titan is here: Alibaba. Both Softbank and
the late Yahoo (USA)'s core value were derived solely on Alibaba's market cap,
able to prop up whole other companies.

I've always assumed that Softbank was getting its money from Softbank, but
surprising to learn they derived most of their value from Alibaba stock just
like Yahoo. If you've ever seen their Pepper robots, it's pretty indicative of
how dysfunctional their main offerings are. The robot is somehow everywhere in
Japan, but 100% useless as well.

~~~
adventured
The only investment of a VC style I've seen in the last few decades that
surpasses Softbank's return on Alibaba, is Naspers with Tencent. Until their
recent $10b sale of some shares, they owned 1/3 of Tencent.

"The stake Naspers bought for just $32 million in 2001 -- when Tencent was an
obscure Web firm in a nation where few people used the Internet -- is now
worth $175 billion."

"While the investment has made Naspers the most valuable company in Africa,
its market capitalization of about $122 billion lags well behind the value of
the Tencent holding, suggesting investors assign no value to its other
businesses."

[https://www.bloomberg.com/news/articles/2018-03-22/naspers-s...](https://www.bloomberg.com/news/articles/2018-03-22/naspers-
sells-10-6-billion-of-tencent-to-fund-investments)

There have been a few massive percentage returns that have been similarly
outsized over the years, not equal to the top line scale however. Peter
Thiel's investment into Facebook produced something like a 5,000 fold return.

The parents of Jeff Bezos put $50,000 into Amazon in its initial $1m round,
which has produced something around a $2b to $3b fortune for them (a ~40,000+
fold return).

There have also been some infamous misses that would have produced comparably
extreme returns. Paul Allen owned 25% of AOL right before it become a giant;
he sold his position for a few hundred million dollars in a fit, because they
wouldn't allow him to buy a larger position in it; that stake would have
solidly been worth $40 billion at the peak. [1]

Larry Ellison wanted to buy a very large position in Apple, in the process of
returning Jobs to the CEO role. Jobs talked him out of it on a moral high
ground basis. [2] It's hard to speculate what that might be worth today or if
Ellison would have screwed everything up instead, could have been a couple
hundred billion dollar miss.

[1]
[https://www.forbes.com/forbes/1999/1115/6412186a.html](https://www.forbes.com/forbes/1999/1115/6412186a.html)

[2] [https://www.cultofmac.com/428587/larry-ellison-steve-jobs-
sh...](https://www.cultofmac.com/428587/larry-ellison-steve-jobs-shot-down-my-
apple-takeover-plans/)

~~~
onetimemanytime
Ellison is probably (most likely) not the type that likes to _not_ meddle in
things, so Apple might not have been worth anything similar to what it is now.

Excite had the chance to buy Google way back, IIRC, for $800K by Larry and
Sergey. Probably the tech would have died down there, but the founders hired
the right people, chased money instead of ethics and Google is worth 3/4 of a
TRILLION.

------
l5870uoo9y
> Putting $4.4bn into WeWork, a provider of shared workspaces, valuing it at
> $20bn, is another risky bet. The firm leases office space, redesigns it to
> create a hip vibe and sublets it to startups, freelancers and some big
> firms. The worry is that WeWork is little more than a commercial-property
> company that is unjustifiably trading on a tech valuation and will soon be
> rumbled.

I was impressed by how fast WeWork expands. In Berlin it now has 7 co-working
spaces all fairly close located. They recently bought meetup.com.

~~~
nikanj
It’s easy to expand fast, when you expand by burn, not by customer
acquisition. Want to have 10x empty offices in 10x cities? Just burn 100x more
money.

------
cylinder
It's these kinds of larger than life personalities who carry humanity forward,
or at least make the big leaps possible. Not the conservative ivy league money
manilupulators now pretending to be tech visionaries at VC firms in exchange
for a quick skim off the top.

~~~
collyw
Tim Berners Lee never came across as large than life personality. I would say
he had quite a profound impact on things. More than "larger than life" type
Steve Jobs IMHO.

~~~
nickpeterson
You're speaking of real history, not the watered down version that gets taught
to school children.

Unfortunately, without concerted effort, the public will willfully reject an
alternate history if it's more nuanced. Exhibit A, who invented the telephone?

~~~
purple-again
That is a really bad example to use as there is no general agreement on the
issue. The Italian government obviously has a biased opinion in wanting to
credit one of their citizens(I’m actually confused if he was Italian or
American because it said his invention was in New York).

I don’t know what skin in the game Canada has when they passed a resolution
recognizing Bell Graham as the inventor.

Honestly to me it looks like there is not a clear answer. You can pick either
of them you want, draw an abitrary line in the sand about what a ‘telephone’
really is and use that line to defend your choice.

Any rational argument on the topic will have to start with both parties
agreeing on what a telephone is first and then looking at the two parties to
see which invented their agreed definition.

------
ajmurmann
If anyone is interested to get a good understanding of Softbank's history and
the Vision fund, I can strongly recommend a recent, lengthy episode the great
Acquired podcast did on it:
[http://www.acquired.fm/episodes/2018/3/22/season-2-episode-4...](http://www.acquired.fm/episodes/2018/3/22/season-2-episode-4softbank-
fortress-and-the-vision-fund)

------
TeMPOraL
SoftBank seems to be all over HN this year; I see it mentioned in comments all
the time, as some very well known and important player. But I swear I didn't
even know that name when this year started. So what's going on? Is it me just
not paying attention? Or did something change, and suddenly made this company
interesting?

~~~
caligarn
They’ve been around for a long time but the Valley historically doesn’t pay
attention to non-Valley players until they reach Valley shores. Softbank,
after all, was one of the only very early investors in Alibaba. Alibaba wasn’t
even on the Valley’s radar until they IPO’ed. Californian tech folks can’t
help but see only within a 100-mile radius.

~~~
seanmcdirmid
For a company that had little non Asian presence, not knowing what soft bank
is very reasonable.

It’s like knowing about ICBC, the largest bank in the world but most people
have never seen a branch of it.

Couple that with them being like an investment firm outside of Japan. They
could be as obscure as Berkshire, a big player, but one most consumers don’t
come into contact with.

------
maym86
At this point can SoftBank make winners in silicon valley by pouring money on
companies and having the other companies they have invested in support each
other by using each others products?

Is this good/bad for the silicon valley ecosystem? Is there a point at which
massive investment groups get treated as monoplies and regulated?

Uber and Grab (both SoftBank investments) merged into one in the Philippines:
[https://www.bloomberg.com/news/articles/2018-03-26/grab-
vanq...](https://www.bloomberg.com/news/articles/2018-03-26/grab-vanquishes-
uber-with-local-strategy-billions-from-softbank)

------
lingzb
$100B will completely change landscape given the total amount of VC investment
per year has only been around $100B to date. Exact figure depends on what
source you look at but here's one:
[https://www.statista.com/statistics/277501/venture-
capital-a...](https://www.statista.com/statistics/277501/venture-capital-
amount-invested-in-the-united-states-since-1995/)

------
telltruth
SoftBank had been good news and bad news both at the same time for tech. The
good news is that they have so much money that they don’t know what to do with
it. On the top of this, they have moronic non-technical people who were only
“technical” like a decade ago to do the evaluations. So if you have a startup
and mild ability to hype up to these folks, you come out laughing with
millions in your hand almost instantly.

The bad news is that they are absolutely incompetent VCs. Just look at their
recent investments in things like impossible io. Whenever I think who the hell
in their right mind will invest in this completely bogus and fraudulent
company, SoftBank comes around and buys them up with billion dollars. They
have no differentiation between betting on risky startup vs betting on bogus
startup. They are currently biggest party responsible for hyping up lots of
startups for absolutely no apparent reason.

------
petra
So $33B has been invested. What has been done with this money, besides mergers
and financial stuff? What has been built that wouldn't have been built with
regular sums of money ?

~~~
charlesdm
The fund isn't about building stuff. It's about trying to acquire key
components of the digital and internet based economy. So mergers and financial
stuff is the intent -- it's essentially a digital infrastructure fund.

To be fair, if he gets one or two homeruns (like with Alibaba) the returns for
the fund will be positive. Quite remarkable actually, 90% of these investments
could go to zero, and he might still end up making a boatload.

~~~
aaavl2821
I think it will be much much more difficult to get a market beating return
with a $100B fund than the $1.7B SoftBank invested back in the 1990s. The
denominator is a huge issue -- to get a 3x on a $100B fund, which most VCs
target and what is roughly needed to beat the market over the ~10 year life of
a fund you need your investments to generate $200B of value. That's 25% of
Alphabets value for reference. So if 90% go to zero, he'd not only need to
catch the next Google but also would need to own 25% of it when it's worth
$800B

Even if he did alibaba again, unlikely bc it was one of the best investments
ever, the current stake is only worth $140B. If that's your only winner you'd
be better off buying mutual funds

His strategy probably isn't just to get a financial return like typical VCs,
he probable has more of a financial engineering / corporate raider / empire
building strategy

~~~
petra
Can you please explain your last sentence ?

~~~
aaavl2821
I think the vision fund will probably act less like a typical VC fund and more
like a private equity / leveraged buyout fund. Rather than invest in really
early but promising companies, invest in companies that are more mature and
are leaders in industries with high growth potential. And then use your huge
wallet as a weapon to move and shape those industries as you see fit

The ride sharing market is an example. He's invested in several ride sharing
cos with leadership in different geographies. If a company doesn't want his
money, he can threaten to give $5B to a competitor. That's an almost
predatory, and certainly not founder friendly move. not quite as aggressive as
Carl Icahn for ex, but certainly not something most VCs would do (maybe I'm
giving VCs too much credit).

Once he invests in a company I imagine he will use each company as a chess
piece in reshaping industries. If there's a battle between two ride sharing
companies over leadership of a new market, he'll probably be in a position to
influence how that plays out.

So maybe the fund is less about investing in innovation and more about staking
claims to pieces of the digital economy and playing a game of chess against
the rest of the global tech industry

~~~
charlesdm
> but certainly not something most VCs would do

They certainly would, but they don't have enough cash to do that.

I even read somewhere he already wants to raise a second Vision fund.

------
jgalt212
Who runs purchasing at Improbable? That person can put my kids and their
cousins through college.

------
RichardHeart
If you mash the escape button before the paywall loads, it doesn't load.

~~~
sah2ed
Shhh. Don't give their development team ideas ;)

------
meuk
This is paywalled, and the web link does not work.

~~~
Rainymood
[https://web.archive.org/web/20180513073120/https://www.econo...](https://web.archive.org/web/20180513073120/https://www.economist.com/news/briefing/21741969-it-
giving-new-opportunities-entrepreneurs-and-forcing-silicon-valleys-best-stay)

~~~
meuk
Thanks (I didn't think of using wayback machine), but it doesn't work either.

~~~
JoachimSchipper
The original link works for me, for what that is worth...

------
visarga
I don't appreciate articles from paywalled newspapers. I can't read them and
don't want to do any tricks to gain access. The net is large and full of well
written articles that are accessible to read. Let's ignore the paywalled bunch
and focus on the open and free.

~~~
mxschumacher
the economist publishes articles of extraordinary quality and offers quite a
few of them for free. This is not the financial times

~~~
thankthunk
> the economist publishes articles of extraordinary quality

No they don't. They offer fluff. This article is just fluff and years old
news. Maybe because I work in the tech industry, but this article didn't offer
anything of value. It doesn't take a genius to figure out that $100 billion
dollar fund dedicated to tech investing ( especially in developing nations )
is going to have an impact.

~~~
mxschumacher
the paper has been in circulation for close to a 175 years and is ranked as
the most trusted journalistic publication (
[https://www.rjionline.org/reporthtml.html](https://www.rjionline.org/reporthtml.html)
) - do yourself a favor, get the print edition convince yourself. I've been a
reader for years and highly recommend it.

~~~
thankthunk
> the paper has been in circulation for close to a 175 years

The NY Post has been in circulation for over 200 years. Not sure what your
point is.

> is ranked as the most trusted journalistic publication

That isn't a good thing. Think about it.

> do yourself a favor, get the print edition convince yourself. I've been a
> reader for years and highly recommend it.

Does it seem like I've never read the economist to you? It's information
pollution. You are dumber and more misinformed for having read it. The
economist along with every other media publication should come with a warning
like cigarettes.

