Article Highlights:
In less than six months, we’ll ring in a new year and a new decade.
Goodbye 2010s, hello 2020s!
As I reflect on the past decade, I’ve been thinking about some advances in technology that are rapidly disrupting the world around us.
Smartphones allow us to summon a taxi service on demand, order groceries to be shipped to our homes and share artificially aged selfies.
CRISPR gene-editing technology allows researchers to easily alter DNA sequences and modify gene function, which can correct genetic defects and prevent the spread of diseases.
And diners can now order plant-based burgers that look and taste just like their bovine alternatives.
At the beginning of the decade, none of these advancements even existed.
To bring these world-changing ideas to life, entrepreneurs needed money. Lots of it.
For the last five years, U.S. venture capital investments have averaged $80 billion a year. That’s double the amount of the first five years of the decade.
But these numbers are a tiny ripple compared to the tidal wave of capital that’s headed toward startups over the next few years.
And there’s a little-known kingmaker in the center of it all who’s bankrolling the next wave of Silicon Valley startups and driving up valuations throughout the entire tech space.
And if you follow his road map, you’re likely to make a lot of money from the biggest tech winners of the next decade.
The Most Powerful Investor in Our World
Last year, the SoftBank Vision Fund, led by Japanese billionaire Masayoshi Son, raised institutional investors’ eyebrows when it announced a massive capital raise of $100 billion.
That’s enough to create a whole new herd of Silicon Valley unicorns (billion-dollar startups) and put the Vision Fund on an entirely different plane than everyone else. The Vision Fund is now four times larger than its closest rival.
SoftBank’s $100 billion haul was more than the entire annual U.S. venture capital total. Famed venture investor Bill Gurley has labeled it: “The most powerful investor in our world.”
But SoftBank’s founder, Masayoshi Son, didn’t arrive in the tech world overnight. He’s taken big bets on tech for decades.
In 1981, he founded SoftBank to distribute PC software in Tokyo. He started with two part-time employees and later grew the tiny firm to sell 80% of software in Japan.
That growth allowed SoftBank to take financial stakes in hundreds of web firms, such as Yahoo, shortly before the dot-com mania.
For a brief period of time, Son’s paper wealth surpassed even that of Microsoft co-founder Bill Gates, until the dot-com crash wiped out almost all of his wealth.
But not all was lost. SoftBank invested $20 million in Chinese internet giant Alibaba for a 28% stake.
Alibaba went public in 2014 in the world’s biggest initial public offering (IPO), and SoftBank’s stake is now worth over $125 billion. This was the greatest venture bet in history.
Son parlayed that Alibaba bet into a round of large tech investments, including $2.5 billion into Indian e-commerce site Flipkart, which he sold to Walmart for $4 billion.
In 2016, SoftBank bought British chip firm Arm Holdings for $31.9 billion. And in 2017, Son invested more than $7 billion in Uber, earning him $3.8 billion at post-IPO prices.
SoftBank’s investments fall into three categories:
- “Frontier” bets. These are revolutionary technologies in robotics, the Internet of Things, artificial intelligence and genomics. The proliferation of the Internet of Things was Son’s rationale for purchasing Arm, which makes the chips to power what Son believes will be 1 trillion connected devices in the next decade. SoftBank also owns a big stake in Nvidia, which will provide processors for artificial intelligence services. And it rounded out these investments with a large stake in a U.S. 5G network to connect all these devices.
- Bringing new ideas to old industries. This category includes startups that are disrupting old-world companies in industries such as property, transport and logistics. This includes SoftBank’s investment into ride-hailing apps such as Uber and Ola Cabs, as well as their backing of WeWork, which is disrupting commercial real estate.
- Technology, media and telecoms. Bets here include online sports-merchandise retailer Fanatics and on-demand dog-walking service Wag.
SoftBank’s giant cash pile means it gets a look at every potentially lucrative startup.
And it’s quite selective. Through the first quarter of 2019, it considered 2,257 opportunities but only invested in about 70 of them, or around 3%.
Money isn’t the only thing. Masayoshi Son’s Softbank startup investments have access to its ecosystem of other startups, allowing them to be each other’s customers and help each other grow.
The Bottom Line
SoftBank’s $100 billion Vision Fund is driving tech valuations higher around the globe.
And if $100 billion isn’t enough, just as we were going to press, SoftBank announced Vision Fund 2, with pledges totaling $108 billion. The new fund will include investments from tech giants Microsoft and Apple.
That should quell any worries that the tech sector was running out of capital.
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