SoftBank explains why it backs companies not “too focused” on profits

By: |
May 06, 2019 8:19 PM

SoftBank has a penchant for backing startups where profit isn't the top thing in the founders' minds. SoftBank's notable investments include Uber, Slack, WeWork, Didi and India's OYO, Paytm, PolicyBazaar, Delhivery etc.

Launched in October 2016, Softbank’s $100-billion Vision Fund has invested around $65-70 billion so far.

SoftBank’s transition from being known as a telecom company based in Japan to the biggest investor of internet and technology businesses worldwide is well documented now particularly for its investments in world’s most valuable startups right from Uber, Slack, WeWork, Didi to India’s OYO, Paytm, PolicyBazaar, Delhivery etc.

In other words, SoftBank has a penchant to back startups where profit isn’t the top thing in the founders’ minds. Masayoshi Son-led SoftBank too hasn’t refrained from admitting that in the past that profits are secondary.

At a fintech trade show recently in London, SoftBank’s Managing Partner for EMEA and Asia region Munish Varma said that the fund looks at businesses addressing “pain points.”

“We look for businesses that are addressing very significant pain points,” that are “addressing markets that are massive, with a product that clearly satisfies their needs,” CNBC reported citing Varma.

Varma said that SoftBank picks companies based on “whether the business makes sense” and that is “not too focused on when a company makes a profit,” — the thought being that scale and size is important than profitability that can be achieved any time by increasing prices however it might not mean long-term success.

Varma further highlighted SoftBank backing growth-stage businesses that don’t wish to go public in the near future.

Masayoshi Son also seemed to be happy about his portfolio companies, despite making losses, including the Southeast Asian ride-hailing firm Grab in which its $1.46 billion investment was announced in March this year.

“But they are growing so quickly. There (Grab) take rate is 20 per cent or more. So it is actually a very reasonable business,” Son had told CNBC earlier. Take rate is the fees or commissions charged by online retailers from its third-party sellers and drivers in the case of ride-hailing companies.

Launched in October 2016, Softbank’s $100-billion Vision Fund has invested around $65-70 billion so far, Son said.

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