From Towering Achievements to Inexplicable Ambiguity: SoftBank's Journey So Far
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Entrepreneur Explains traces the journey of SoftBank which is known for its towering achievements. The last few months, however, saw the Japanese conglomerate battle some rough times. All eyes are now on how founder and CEO, Masayoshi Son.
While studying at University of California, Berkley in California, US, Masayoshi Son developed an electric dictionary that helped people translate languages.
He sold the product to Sharp Corp. for $1.7 million while studying at the university. He worked on another project that gave him $1.5 million. Together with a total of $3.2 million, Son founded Softbank in 1981. It started off as a company that distributed software—a company that provided a bank of software, thus the name SoftBank.
Expansion & Some Stumbling Blocks
SoftBank may have started as a software distributor but it expanded rapidly. It entered into sectors such as telecomm, energy, Internet and robotics, among others.
The year 1999 proved to be a tough one for Son. He almost went bankrupt when the SoftBank stocks went down by 99 per cent when the dotcom bubble burst. He lost a staggering $70 billion, the largest loss an individual has ever recorded in history.
“Somehow I survived,” he told during his show with Rubenstein. But Son worked his way back up to rebuild his business by pursuing Vodafone Japan and turning it into an extremely profitable endeavour.
The Vision Fund
Softbank’s investment journey started way before Vision Fund. One of its biggest investments was made in a London-based semi-conductor design company ARM. A staggering $34 billion was pumped.
Son also invested in Yahoo! and Alibaba. In 2017, Softbank launched the popular $100-billion technology-focused Vision Fund.
The fund comprised of contributions from Apple, Qualcomm, Foxconn, Sharp Corp., Saudi Arabia Public Investment Fund and Abu Dhabi’s Mubadala Investment Company. Son convinced Saudi Arabia’s Crown Prince Mohammed bin Salman to invest $45 billion in the Vision Fund.
The Vision Fund made SoftBank the star investor of the Silicon Valley and the world start-up ecosystem. It made investments in iconic companies of the world including WeWork, Uber, Didi Chuxing and Flipkart, among others.
Chink in the Armor
Son’s vision, which was considered that of a genius, started getting questioned after a series of incidents.
The most iconic companies of the Silicon Valley and SoftBank, WeWork and Uber, failed in their IPOs. While Uber failed to put a convincing show as its stocks slipped immediately after listing and is trading below issue price even today, WeWork cancelled the IPO a week before its scheduled launch.
Overcapitalisation is being touted one of the reasons for their failure. Experts started questioning the Japanese conglomerate’s strategy of pumping more capital than what the companies required.The stock market did not accept the Japanese conglomerate’s “growth-only” and “less profitability” strategy.
The Looming Uncertainty
Son has been trying to do a lot of damage control ever since. It came up with a rescue package of $9.5 billion for proptech start-up WeWork. According to reports, it has also been telling its portfolio companies to now focus on profitability before thinking and planning IPOs. The newly launched Vision Fund II’s future remains uncertain as many of SoftBank’s investors are hesitant to make further investments. Moreover, SoftBank recorded a loss of 704 billion yen ($6.5 billion) in the July-September quarter.
All eyes are now on how Son sets the path right.