Business

Inside SoftBank’s Big Bets – Fortune

Few in the investment world today have made moves as large and aggressive as SoftBank. It has poured billions into some of business’ biggest deals—Uber, ARM Holdings, Nvidia, WeWork, DoorDash, GM Cruise, Katerra, and more. Check out the interview with Lydia Jet below.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 hedge fund letters, conference, scoops etc

Inside SoftBank Lydia Jet
Image source: YouTube Video Screenshot

Brainstorm Tech 2018: Lydia Jet - Inside SoftBank's Big Bets

Transcript

Jeff, Lydia Jet, thank you so much for coming here. It's interesting to have the two of you because everybody talks so much about vision fun. Lydia Jet you join Softbank before vision fund was kind of a gleam in Moscow's eye. Jeff you joined about a year ago. So let me start with this I guess which is vision fund is the investment firm that Silicon Valley VCs love to bitch about a lot. I don't know if they do it to your face but certainly behind it I don't think so little me right after we mark up their portfolio. Exactly. Or make their portfolio companies think they're worth more than they are. So let me start with what do you think is the main thing that other investors in the Valley get wrong about not you personally but yeah. Fund serapes. It's interesting. I am a fan and professional investing rule for north of 15 years now and two different platforms before Softbank. And this platform is fundamentally different from what I experienced elsewhere and I was talking to someone yesterday who said Softbank just writes up assets at extreme valuations with huge pockets of capital and I sitting in my vantage point having been a SoftBank for the past three years I think that really misunderstands what I see from my seat. I think we think really broadly and aggressively about what these assets can be and a unique period of time where these assets can be something significantly bigger than they happened before. I think we think much more globally than other investors do particularly in the volume.

And I do think and I personally really believe as I've watched this I think we can add a lot of value in working with companies. And so I can talk about a bunch of different ways and I've seen that work but you know will we have the biggest enterprise sales force in Japan. We can distribute products and services for people. We can operate J.B is like we're operating that JD for. We work in Japan I think and in my own personal portfolio of ecommerce assets you talk about having deep portfolios of concentrated assets and being able to really add value through those concentrations. And so I sit here and I think we don't and actually fight with the highest valuation when we look at companies we often don't have the biggest cheque book while we have the best of the biggest we. We often don't write the biggest checks. We're not going to win a war of capital. But I think we're going to win a war because we're going to go help these companies become better companies than someone else can. Well so on that. So I mean I keep talking perception a little bit so tell me if this is right around that that if we went back a couple of years kind of the general venture capital playbook of the later stage venture capital playbook was growth at all costs or if not at all costs growth primarily worry about the bottom line later. There is a perception that that is generally soft banks point of view host investment fair not fair. Yeah we disagree.

I think what Lydia Jet said is one of the fun parts of the job is we get to sit down with the CEO and the management team and say if we remove capital as a constraint what would you do differently next 3 5 7 and 10 years and what would be the resulting value of the franchise. So if you remove those constraints instead of being forced to get profitable in the next six quarters. What if that was 12 quarters from now. And we have those discussions and we essentially rewrite their business plan with them and we underwrite that investment. And so we may delay profitability. We're always keen to understand what the unit economics are. So we have a phrase that says now it can scale it. So we're not just allowing them to spend money without an end goal or anything. You remove capital constraint I mean if you remove them from me I'm living in Aspen. Yeah I mean that's great but there at some point have to pay that off. I'm at Monaco but yeah fair enough yeah. And so that's exactly right. But if if if if you're investing in the size of the franchise is much bigger and you understand the union economics and the path to profitability you could delay the near term to have a much bigger outcome. And so it's not that we go and say hey just do whatever you want. In fact we're actually fairly hands on board members because many of us have experience as operators and we help the companies think differently think bigger. But would it focus towards building profitability. Also I think we're reinvesting in late stage assets these are proven teams proven operators.

And I think you know we we try really hard to identify what are the best teams the best operators that can scale well beyond what other assets can do and how do we help them actually expand product expand geography in a way that no other management teams might not be as capable of. So it does lead to a world where we can put more capital to work in ways that we don't think is irresponsible because if the big opportunity ahead of us. How hands on you Jeff. You mentioned the words Hands-On and if you go to Softbank history in kind of one of the reasons you guys the company grew. Was the fact that Masad early on with his investment Alibaba which I mean compared to a vision wouldn't even qualify as a vision fund investment at this point but he was and has continued to be very very involved in the ability to be very involved. Vision intentionally never takes control stake or at least hasn't. Correct. How do you view your involvement and kind of why not take control stakes from times given that that would seem to help get to where you want to go and you clearly have the capital ability to do it.

Like Us On Facebook - For Business And General News: ValueWalk - For Tech And Science News: ValueWalk Tech - For Tech Insights, Technical Questions and Queries: Follow Our COO, Sheeraz Raza.