Author(s): Tony Worthington
This week's announcement by SoftBank that it has raised $93 billion of its planned $100 billion Vision Fund is breathtaking, but also unsurprising.
When SoftBank announced in October 2016 that it was to raise an investment fund equivalent to the size of the GDP of Ecuador, eyebrows were raised throughout the financial and technology worlds. However, the company has a track record of pulling off highly ambitious deals. The acquisitions of Vodafone Japan and Sprint Cellular were, at the time, verging on audacious.
Unsurprisingly, when the Vision Fund hits its target of $100 billion of capital commitments, it will be easily the world's largest venture capital fund. Its scope is a dealmaker's dream. Its areas of focus will take in the Internet of things, communications infrastructure and networks, cloud technology, mobile applications, broadband businesses, financial technology and robotics.
The Vision Fund has been described by its sponsor as "patient capital". This should be interpreted as investing over the medium to long term — eight years and longer — for investment returns to be realised. Deploying a fund this size will take several years, so annual returns in excess of $15 billion will clearly take some time to deliver.
Investors in the Vision Fund are the bluest of blue chip. Anchor investors are the sovereign wealth funds of the United Arab Emirates and Saudi Arabia, as well as technology giants Apple and Foxconn. Very deep pockets are needed to participate.
Intriguingly, as part of its investment in the Vision Fund, SoftBank has committed a 25 percent equity stake in ARM Holdings, the UK-headquartered chip designer that it acquired in 2016. ARM's technology is in so many connected devices that this is a sensible move. Stakes in SoftBank's other telecom and technology assets, such as Sprint and Yahoo Japan, logically may follow.
Carrying out the strategy of the Vision Fund will be the tricky part. There will be a considerable queue of companies offering investment opportunities from all over the globe, and prioritising investments will be critical. Unusually for a venture capital fund, many investments are likely to be be undertaken in partnership with governments and supranational organisations. Bureaucracy may slow down some of these investments.
The scale of the Vision Fund is unprecedented. If it pulls off its strategy, SoftBank will contribute to a greatly accelerated pace of technology evolution. But, to get there, stable global macroeconomic and technology investment environments will be needed. A dot-com crash at some point over the next few years could see the Vision Fund disappoint. Let's hope it succeeds.