London’s start-up scene has received a huge boost in the form of news that Softbank are to launch a tech fund: the Softbank Vision Fund, set to be managed from London, which could attract enough investment to pump $100 billion into tech start-ups.
The fund, which will be the largest ever raised, if successful, beating the $21.7bn fund raised by the Blackstone Group in 2006, is the brainchild of SoftBank Chairman and CEO Masayoshi Son who has commented “over the next decade, the SoftBank Vision fund will be the biggest investor in the technology sector.”
Son has built SoftBank into a $68 billion technology and communications start-up having begun life as a start-up with just $50,000 of investment.
The Public Investment Fund of Saudi Arabia (PIF) is set to be the fund’s lead investment partner and could invest as much as $45 billion over the next five years, with SoftBank itself planning to invest at least $25 billion alongside.
Advanced talks are being held with other investors which could bring the total figure available for investment to north of $100 billion. The fund will be the responsibility of Softbank’s Head of Strategic Finance Rajeev Misra.
The PIF was founded in 1971 to finance domestic development projects and its role has become increasingly prominent as Deputy Crown Prince Mohammed bin Salman looks to find alternatives to Saudi Arabia’s largely oil based economy so that the country will continue to prosper when the supply of oil eventually runs out.
The Crown Prince has said that he expects to increase the fund from its current size of $160bn to around $2 trillion, making it the world’s largest Sovereign Wealth Fund, and making a $45 billion investment into tech seem like mere pocket change.
However Saudi Arabia is pinning some of its hopes on tech start-ups, having made an investment of $3.5 billion into Uber earlier this year, creating new sources of revenue and of employment for its people, the majority of whom currently work for the Saudi government.
In one fell swoop Son appears to have become the saviour of post-Brexit British tech – a sector many feared would suffer, having also acquired ARM, the chip producer, for $32 billion in July.
Son’s SoftBank also acquired US payments firm Swift for $21.6 billion in 2013 and are also heavily invested in Alibaba, which was valued at over $157 billion last year.
Rumour has it the company are beginning to behave more as an investment fund as Masayoshi makes a play for control of the much trumpeted arrival of the Internet of Things sector; IoT style devices are expected to be present in more than 50 billion devices by 2020.
The firm made huge profits from selling their stake in Alibaba but on the downside the company carries more than $100 billion of debt which has been rated junk.
The news that the fund will be headquartered in London will doubtless put London’s tech start-up community on red alert; the community has been upset at the prospect of foreign entrepreneurs being refused the right to start companies in the UK post-brexit, with jobs apparently being set aside for British workers – hopefully the government will see sense as it seems the sector is in rude health as evidenced by a firm such as Softbank, backed by a Saudi Arabian sovereign wealth fund, betting such a vast amount on the future of tech globally, and the UK’s influential role in it.
Here’s a thought – could the new fund’s first major acquisition be Twitter?