
SoftBank Plans a New $200B Fund - jkuria
https://www.wsj.com/articles/japans-softbank-plans-a-second-giant-technology-fund-1508502097?mg=prod/accounts-wsj
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goseeastarwar
There's already been lots written about this, but it's astounding how much
these SoftBank funds will effect the startup ecosystem for years to come.

After years of VC's talking about how too much money is floating around
creating over-priced unicorns, Masayoshi Son is going to end up injecting a
_trillion_ more dollars into the private market.

Employees need to start demanding that their employers create regular
buyback/secondary programs to make up for the restrictions on their illiquid
stock. It should be a straight forward part of the performance review process:
"Here's some more stock, here's some more salary, how much of your existing
stock (eg. up to 10%) would you like to sell in the next buyback?"

Companies like Slack are never going to go public in this sort of environment
and its the employees that suffer the most. The public not being able to
participate in startup gains is a legitimate issue, but they're not the ones
creating the value in these companies.

~~~
adventured
> Companies like Slack are never going to go public in this sort of
> environment and its the employees that suffer the most.

I agree with your premise. The solution is for the private companies to do
what all other long-term sustainable private companies have done throughout
history: actually earn a profit. In doing so, they can pay dividends and or
profit sharing to employees, buy back employee stock (optionally eg if someone
wants to leave), and so on. Will that happen? Most of these companies will
probably just keep riding the private capital train with things as they are
for as long as they can.

They should be following the example of the SAS Institute, which has been
private for 41 years and implemented employee profit sharing after their first
year in business.

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crabasa
Long term sustainable? You should look at the turnover in the S&P 500 the last
couple of decades. Some of the most valuable companies in the world (Google,
FB, Amazon) explicitly eschewed short term profitability in order to maximize
growth and share. Your cheap Uber rides speak to this phenomenon today.

If you're waiting for ambitious tech companies to prioritize turning a profit
in order to provide some liquidity to their workers, good luck.

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samfisher83
Don't put goog and FB in the same category as amzn. FB and Goog have generated
a ton of profits. Goog retained earnings is 105B, FB is 22B. Amzn is 5B.

~~~
rattray
Wow, that's stark – I hadn't realized that.

I was not familiar with the term "Retained Earnings" – it seems equivalent to
"Shareholder Equity" (minus dividends), which is what I had learned in school.

Essentially, GOOG has accumulated $105bn of profit in its lifetime which that
has yet to be dispersed to shareholders or invested.

You'd have to think them quite bearish on most currently available
opportunities, or quite bullish on not-yet-investable opportunities, or
otherwise incapable of effectively deploying capital (eg; due to insufficient
human capital). Unless there's something I'm missing.

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xchaotic
Yeah, you're missing the US tax code, which means that if there were trying to
withdraw or reinvest the profits from overseas, they becompe taxable at
corporate tax rate. Much cheaper to borrow more money by issuing bonds etc.

~~~
rattray
Interesting. Why is AMZN's retained earnings so low then? Do they not make
much revenue overseas? Do they struggle to raise bonds at low rates? Are they
simply able to deploy tax strategies unavailable to GOOG/FB?

~~~
Ant5do
Amazon's operating expenses are significantly larger than Google/FB.

THis means they've never earned a significant amount of cash net of operating
expenses

They've also dumped a ton of money into capex, even still I don't think Amazon
has ever gotten close to the retained earnings of any of the other four
companies.

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noddy1
Great, so now the frozen IPO market means that all the growth from tech
unicorns gets captured by saudi oil sheiks. thanks SEC/SV!

~~~
JonFish85
Alternatively: the bubble is inflated with wealthy oil sheiks’ money, and
transferred to upper middle class workers.

Edit: a word

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probe
I heard that a16z did something similar when they started - they were willing
to pay a significant premium because 1) they had more conviction in their bets
and 2) to win deals/access when starting off.

Softbank is just doing this on steroids, and we'll see what happens. Though I
am glad that this much capital is at least being directed to high growth tech
companies creating things (rather than being used for financial engineering
like MBS/CDOs)

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0xbear
Middle East oil money for people who are reluctant to take money from the
Middle East investors directly.

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JumpCrisscross
This is getting downvoted, but it’s a big piece of the puzzle. 60% of the
Vision Fund is Saudi and Emirati money [1]. Political risk is real. The line
between “Saudi backed” and “venture backed” can be night and day for some
companies.

[1] [http://money.cnn.com/2017/05/21/technology/saudi-softbank-
te...](http://money.cnn.com/2017/05/21/technology/saudi-softbank-tech-fund-
target/index.html)

~~~
adventured
Imagine how people would react today to a start-up like Facebook (circa 2009)
taking the Russian VC money that they did (Digital Sky, Yuri Milner, Alisher
Usmanov). It would be unfeasible for Facebook to do so, politically the
firestorm would threaten to burn their company down, as Congress would go
ballistic over the perceived implications.

~~~
dontreact
Of course! They invaded Crimea so we’ve imposed economic sanctions. Also seems
to be evidence of them influencing the election. These things weren’t clear at
the time.

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0xbear
There is so far no evidence of them influencing the election in any way.

~~~
danenania
There's plenty of evidence that they conducted a massive, highly sophisticated
propaganda/cyber warfare campaign. It's impossible to prove that it did or
didn't tilt the election, but it clearly could have given the extremely thin
margins in key states. I'd say that counts as influence.

~~~
0xbear
Present some then. Thus far the best that I’ve seen is $100k in FB ads to
peddle the divisive topics typically peddled by the democratic establishment.

~~~
danenania
[https://www.c-span.org/video/?c4664750/excerpt-clinton-
watts...](https://www.c-span.org/video/?c4664750/excerpt-clinton-watts-
testimony-senate-intelligence-committee-hearing)

[https://www.washingtonpost.com/apps/g/page/politics/the-
inte...](https://www.washingtonpost.com/apps/g/page/politics/the-intelligence-
community-report-on-russian-activities-in-the-2016-election/2153/)

[http://www.independent.co.uk/news/world/americas/us-
politics...](http://www.independent.co.uk/news/world/americas/us-
politics/russian-trolls-hilary-clinton-fake-news-election-democrat-mark-
warner-intelligence-committee-a7657641.html?amp)

That's like 1/1000th of the publicly reported evidence you can find by
googling.

~~~
0xbear
This is not what I’d call hard evidence. This is testimony, by people whose
careers depend on saying there was interference. Fact of the matter is, around
this time last year the same outlets you link here (except cspan) we’re
projecting that Trump had a 7% chance of winning the election. In the presence
of “interference”, the odds would probably be different. It’s only when the
anointed heir to the throne didn’t win that anyone started talking about
“interference”.

~~~
danenania
Right, so what you actually mean is there's no evidence that fits your
worldview. Got it.

~~~
0xbear
No, I mean documented, actual evidence either presented as-is, or at least
reviewed first hand by a neutral, trusted third party. Not some kooky WaPo
bullshit.

~~~
dontreact
What counts as a neutral, trusted third party. With respect to this issue,
does the US intelligence community count? If so, then does the second link, a
link to the report meet your standards of evidence?

If not, then I'm not sure what kind of third party you are imagining. What
would be the intelligence community's reason to coordinate and issue false
statements on this?

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lquist
Was talking to a friend of mine that’s at SoftBank. FWIW he mentioned that
internally Son is targeting $880Bn for the three Vision Funds!

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Eridrus
Is there any info on what sort of returns Softbank is getting? Or on what
basis investors think that sinking so much money into this fund is a good
idea?

~~~
agibsonccc
I can't talk about too much, but we do quite a bit with softbank[1], and I
live in Japan working with HQ.

The bets they are making are actually pretty predictable, they are all more
"sure" wins. Many of these companies will not exit for a long time.

They are making some (in my opinion) questionable bets on more early stage
companies though. If the bets are < 100 million, some of these are more
traditional R&D bets that might not give proper returns.

Of note here is that "softbank" is actually a massive investment fund though.
There are multiple sources of money, not just 1 "vision" fund. Even the way
the decision making is done is pretty fragmented.

Edit: wrong press release link

[1][https://www.forbes.com/sites/aarontilley/2017/09/18/skymind-...](https://www.forbes.com/sites/aarontilley/2017/09/18/skymind-
deep-learning-tool-robots/) [2]:
[https://skymind.ai/press/softbank](https://skymind.ai/press/softbank)

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jakelarkin
zombie unicorns for years

~~~
rhizome
Prepare to see some new sites get very popular then get "our incredible
journey"'ed.

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Blackthorn
At this point, why would anyone ever join a startup? Even the lottery tickets
are gone.

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mathattack
Enough easy money is pouring in that cash comp is equal to what you'd get at a
large non-Big Tech (Google/Amazon/Fbook/Msoft/etc) company. The lottery ticket
is just an add-on.

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azureel
Non paywalled archive link: [http://archive.is/RGmKe](http://archive.is/RGmKe)

