There are a lot of investment funds being spinned out left and right. However, when Softbank and Saudi Arabia join forces and set out to do something together, you can be sure that the scale is going to be on a different level altogether. In a move that will likely create the largest fund of its kind in the world, Saudi Arabia’s sovereign wealth fund and Softbank are preparing to launch a new tech fund that will manage as much as $100 billion.
The new fund will be used to make strategic investments in tech based ventures. According to Softbank, the new fund will be called the SoftBank Vision Fund, and will be based in London. The company is planning to kick-start the fund with with $25 Billion in monies while Saudi Arabia’s Public Investment Fund will be putting in $45 Billion over the next five years.
As per Softbank,
SoftBank Group Corp. (“SBG”) announces that it will form a private fund (the “Fund”) for making investments in the technology sector globally, which is tentatively to be named “Softbank Vision Fund.”
$100 Billion is a huge amount, even for a sector like tech investments, where money flows quite freely. To put things into perspective, National Venture Capital Association says that the amount would roughly equal all the funds raised by US venture capital firms over the past two and a half year.
Both Softbank and the Public Investment fund are veterans in the investment sector, with multiple, successful billion dollar deals under their belt. Notable injections made by these companies lately include PIF’s $3.5 Billion inoculation to Uber and Softbank’s $27 billion ARM Holdings acquisition. Setting up this fund denotes a level of aggressiveness previously unseen in the niche.
The partnership is certainly very interesting. While Softbank is well known for backing companies that go on to become successes, being a public entity, PIF usually backs ventures that can prove to be pivotal in bringing desirable changes to the Saudi Arabian kingdom.
In India, Softbank has stakes in a number of forward looking companies such as, Ola, Snapdeal and Housing. Some of its larger, global investments include US carrier and telecoms company Sprint, Chinese e-commerce group Alibaba and internet search engine Yahoo Japan.
Meanwhile, Softbank and the Saudi Public Investment fund are not the only firms putting in money into the venture. Softbank said that it was in talks with various other global investors as well, and with their contribution, the total size of this fund could go up to $100 Billion.
A few large global investors are in active dialogue to join SBG and PIF to participate in this Fund. The overall potential size of the Fund can go up to USD 100 billion (approximately JPY 10 trillion).
It will be interesting to see who else decides to come one board. Judging by the size of the fund, any VC able to secure a seat would likely have a large global presence. While that narrows down the field significantly, it still leaves a couple of handfuls of firms.
Speaking about the fund, SoftBank Chairman Masayoshi Son said,
Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector.
While Softbank and Saudi PIF both refused to go into details of the kind of companies that would be likely to receive funding from the newly formed Vision Fund, sources state that PIF may be looking to leverage its presence to achieve some points in Saudi Arabia’s new 2030 economic plan. Since the plan includes pointers like ending reliance on fossil fuels and bolstering the private sector, it would be fair to expect startups operating in energy and new age technologies forming at least a part of its portfolio.
PIF is also going through an phase of expansion. The fund is led by Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman and recently came out of its shell of low risk investments, after it backed Uber. Saudi Arabia is also planning to expand the PIF to almost $2 Trillion, which would make it the world’s largest sovereign fund.
However, we have no word upon whether the fund will limit itself to companies with a particular size or funding round. With all these billions under its belt though, it can go from seed to later rounds for almost any company out there.