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SoftBank Group

04.13.20 telecommunications

SoftBank expects $24 billion in losses from Vision Fund, WeWork and OneWeb investments

The Japanese technology conglomerate SoftBank Group said it would lose a staggering $24 billion on investments made through its Vision Fund and bets on the co-working real estate company WeWork and satellite telecommunications company OneWeb.

Ultimately, the company expects the losses to help generate a $7 billion total loss for the technology giant for the year as its ambitious bets on early-stage companies come up short.

Over the past two years SoftBank and its founder Masayoshi Son have staked billions of (other people’s) dollars and its own fortunes on a vision that investments in machine learning technologies, robotics and next-generation telecommunications would reap hundreds of billions in financial rewards.

While that was the vision that Son and his team sold, the reality was multiple billions of dollars invested into real estate investment plays like WeWork, OpenDoor and Compass, and companies with direct-to-consumer merchandising plays like Brandless, pet supply businesses like Wag and the food delivery business DoorDash. Add the hotel chain Oyo to the mix and the investment selection from the Vision Fund looks even less visionary.

Over the past year, several of its investments ran aground. Though none of them imploded as spectacularly as WeWork — whose valuation was slashed from more than $40 billion to around $8 billion — many have struggled.

Brandless went bust earlier this year, and real estate investments in Compass along with investments in travel and tourism-related businesses like Oyo have suffered in the wake of the COVID-19 outbreak, which has shuttered economies around the world.

While many SoftBank and SoftBank Vision Fund bets were made into companies that have failed, seem to be on that path or perhaps may struggle in the economic downturn, not every wager is a clunker. The Vision Fund put lots of capital into Slack before it went public, and the company has caught a huge tailwind in the remote-work boom that we’re currently seeing in light of COVID-19.

Perhaps the most visionary of the SoftBank investments (and one not included in the Vision Fund), OneWeb, too, collapsed under the weight of its own capital-intensive vision for a network of satellites providing high-speed global telecommunications services. Zume, SoftBank’s robotic pizza delivery business, also folded.

The only reason all of these gambles haven’t completely destroyed SoftBank is that the company still has a cash cow in its Alibaba stake and a relatively strong core business in telecommunications and semiconductor holdings.

“The difference in income before income tax is, in addition to the above, mainly due to the expected recording of non-operating loss totaling approximately JPY 800 billion for fiscal 2019 on investments held outside of SoftBank Vision Fund, including The We Company (WeWork) and WorldVu Satellites Limited (OneWeb),” the company said in a statement. “This will be partially offset by the gain relating to the settlement of variable prepaid forward contract using Alibaba shares recorded in the first quarter of fiscal 2019 and the dilution gain from changes in equity interest in Alibaba recorded in the third quarter of fiscal 2019, as well as an expected year-on-year increase in income on equity method investments related to Alibaba.”

Ultimately, it seems that Son was too enamored of the mythology he’d created around himself as a maverick and a visionary. To the detriment of his company’s outside shareholders and investors.

As Bloomberg noted in an op-ed earlier today:

Son’s insistence that startups grow faster than their founders planned, and strong-arm them into taking more money than they might have wanted, has turned into a burden. And that’s become a huge liability to investors in the Vision Fund and SoftBank, too.

By throwing cash around, dozens of startups became addicted to spending instead of building fiscal discipline into their business models. For years, it seemed like a sound strategy. By having more money than rivals, SoftBank-backed companies could win market share by offering bigger incentives, taking out more ads and luring the best talent.

Today, SoftBank has a major stake in sector leaders like Uber Technologies Inc., WeWork, Grab Holdings Inc. and Oyo. But climbing to number one doesn’t mean being profitable.

Read more: https://techcrunch.com/2020/04/13/softbank-expects-24-billion-in-losses-from-vision-fund-wework-and-oneweb-investments/

07.11.19 Credit Cards

Fintech in Latin America continues to draw big dollars as Softbank invests $231 million in Creditas

As investors continue to move more aggressively into Latin America’s startup scene, there’s one industry that seems to be drawing more attention than any others — financial services.

As wealth across the region continues to rise, access to adequate financial services — specifically debt — has become a pain-point for an upwardly mobile middle class that wants to be more entrepreneurial and have more financial tools than straight cash at their disposal.

That’s what’s driven companies like Nubank, the Brazilian consumer credit card behemoth, to valuations of roughly $4 billion; and it’s also what contributed to Creditas, a provider of secured loans, raking in $231 million in new financing from the SoftBank Vision Fund and SoftBank Group. Previous investors Vostok Emerging Finance, Santander InnoVentures and Amadeus Capital also participated in the round. 

Nubank is now worth $4 billion after Tencent’s $180 million investment

Founded by Sergio Furio in 2012, the company started as an originator of loans to Brazilian customers who were willing to offer up collateral in exchange for lower interest rates on their debt. Back in 2017, the company became more of a fully integrated lender for the entire process.

Thanks to investments from local and international investment firms including Kaszek Ventures, Quona’s Accion Frontier Fund, Redpoint eVentures, QED Investors, Naspers Fintech, International Finance Corporation and Endeavor’s Catalyst fund, the company became one of Brazil’s largest new financial services startups.

Brazilian startup Creditas is revolutionizing credit in the world’s third largest lending market

Expect the company to use the new cash to expand its product portfolio and try to offer new lines of credit that it would issue itself — perhaps by trying to enter new businesses like unsecured consumer lending and credit cards.

If it does make its way into unsecured side of the lending market, that would put the company squarely in competition with Nubank (which was reportedly in discussions with Creditas’ lead investor, SoftBank, about an investment earlier this year).

“At Creditas we relentlessly focus on creating an amazing experience that provides efficiency and lower prices to democratize the access to low-cost lending in Brazil. With these investments, we plan to accelerate this process and expand our business model in order to improve the lives of the Brazilian population,” said Sergio Furio, Founder and CEO of Creditas, in a statement.

As a result of the investment, representatives from the SoftBank Vision Fund and SoftBank Latin America Fund will join Creditas’ Board of Directors.

Read more: https://techcrunch.com/2019/07/10/fintech-in-latin-america-continues-to-draw-big-dollars-as-softbank-invests-231-million-in-creditas/

04.26.19 telecommunications

Internet connectivity projects unite as Alphabet spinout Loon grabs $125M from SoftBanks HAPSMobile

Two futuristic projects are coming together to help increase global internet access after Loon, the Google spinout that uses a collection of floating balloons to bring connectivity to remote areas, announced it has raised money from a SoftBank initiative.

HAPSMobile, a SoftBank project that is also focused on increasing global connectivity, is investing $125 million into Loon, according to an announcement from SoftBank made this morning. The agreement includes an option for Loon to make a reciprocal $125 million investment in HAPSMobile and it includes co-operation plans, details of which are below.

HAPSMobile is a one-year-old joint venture between SoftBank and U.S. company AeroVironment . The company has developed a solar-powered drone that’s designed to deliver 5G connectivity in the same way Facebook has tried in the past. The social network canceled its Aquila drone last year, although it is reported to have teamed up with Airbus for new trials in Australia.

Where Facebook has stumbled, HAPSMobile has made promising progress. The company said that its HAWK 30 drone — pictured below in an impression — has completed its initial development and the first trials are reportedly set to begin this year.

Loon, meanwhile, was one of the first projects to go after the idea of air-based connectivity with a launch in 2013. The business was spun out of X, the “moonshot” division of Alphabet, last year and, though it is still a work in progress, it has certainly developed from an initial crazy idea conceived within Google.

Loon played a role in connecting those affected by flooding in Peru in 2017 and it assisted those devastated by Hurricane Maria in Puerto Rico last year. Loon claims its balloons have flown more than 30 million kms and provided internet access for “hundreds of thousands” of people across the world.

In addition to the capital investment, the two companies have announced a set of initiatives that will help them leverage their collective work and technology.

For starters, they say they will make their crafts/balloons open to use for the other — so HAPSMobile can tap Loon balloons for connectivity and vice-versa — while, connected to that, they will jointly develop a communication payload across both services. They also plan to develop a common ground station that could work with each side’s tech and develop shared connectivity that their airborne hardware can tap.

Loon has already developed fleet management technology because of the nature of its service, which is delivered by a collection of balloons, and that will be optimized for HAPSMobile.

The premise of HAPSMobile is very much like Loon

Outside of tech, the duo said they will create an alliance “to promote the use of high altitude communications solution with regulators and officials worldwide.”

The investment is another signal that shows SoftBank’s appetite in tech investing is not limited to up-and-coming startups via its Vision Fund; more established ventures are indeed also in play. Just yesterday, the Vision Fund announced plans to invest $1 billion in German payment firm Wirecard and its past investments include ARM and Nvidia, although SoftBank has sold its stake in the latter.

Read more: https://techcrunch.com/2019/04/24/alphabet-spinout-loon-grabs-125m-from-softbank/

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