SoftBank’s Vision Fund Will Keep Tech Unicorns Happy
SoftBank buying into Didi at this stage isn’t a particularly innovative move—outlining the difficulty of managing a $100 billion fund
SoftBank is flexing its muscles as the technology industry’s 800-pound gorilla in the room.
The Japanese conglomerate, which controls U.S. carrier Sprint, has approached Didi Chuxing, China’s ride-hailing giant, to invest around $6 billion, according to The Wall Street Journal. The investment will likely come from the soon-to-be-launched $100 billion SoftBank Vision Fund, which counts Saudi Arabia, Apple and Qualcomm among its investors.
Investing in Didi Chuxing is a not a tough decision for SoftBank, which is already an investor in the private company, valued at $36 billion as of August. It is precisely access to deals like this that attracted the fund’s core Saudi backers. Didi is the anointed winner in China’s ride-hailing market—among its investors are China’s sovereign-wealth fund and state-owned China Life Insurance. The three biggest internet giants in China—Alibaba, Tencent and Baidu—as well as Apple, are all investors. Uber, once Didi’s biggest rival, capitulated last year and sold its China’s business to Didi.
But buying into Didi at this stage is also not a particularly innovative move—outlining the difficulty of managing a $100 billion fund. Total global venture capital investment was merely $127.4 billion last year, according to KPMG. That means SoftBank would likely have to put a significant chunk of the fund in consensus ideas like Didi or WeWork, the New York-bases shared office company that has $300 million of SoftBank money with another $3 billion likely on its way. The $6 billion investment would have been enough to buy all of Didi two years ago, around the time SoftBank made its investment into the company.
This is good news for these “unicorns,” which likely could enjoy higher valuations and delay tapping the public market for a further while. But for investors who are expecting SoftBank to pull off another masterstroke like its investment in Alibaba, which has turned $20 million into $80 billion, the deal could be disappointing.