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SoftBank Plans a New $200B Fund
- 0xbear 9y agoMiddle East oil money for people who are reluctant to take money from the Middle East investors directly.
- JumpCrisscross 9y agoThis is getting downvoted, but it’s a big piece of the puzzle. 60% of the Vision Fund is Saudi and Emirati money [1]. Political risk is real. The line between “Saudi backed” and “venture backed” can be night and day for some companies. [1] http://money.cnn.com/2017/05/21/technology/saudi-softbank-tech-fund-target/index.html http://money.cnn.com/2017/05/21/technology/saudi-softbank-te...
- adventured 9y agoImagine how people would react today to a start-up like Facebook (circa 2009) taking the Russian VC money that they did (Digital Sky, Yuri Milner, Alisher Usmanov). It would be unfeasible for Facebook to do so, politically the firestorm would threaten to burn their company down, as Congress would go ballistic over the perceived implications.
- charlesdm 9y agoPerhaps I'm underestimating the significance of this, but honestly, does anyone really care in a hyperconnected global world? To me, as long as the parties you are raising money from act as good shareholders, I don't really see a massive problem. There are too many conspiracy stories going around..
- 0xbear 9y agoYou are underestimating the significance of this. The economic security of the US rests to a significant extent on the fact that there's far more fundamental innovation going on here than anywhere else in the world. Whoever pays for it, ends up owning it, which is not a problem if the innovation in question is just some inconsequential bullshit like a business model. It becomes a problem when it's something that is a force multiplier: AI, hardware, big data, etc. You don't want to let the Middle Eastern hereditary theocratic dictatorships to play with any of this stuff, or own large chunks of the US innovation sector. You also don't want Communist China to play with it either, but I guess it's too late for that now.
- majani 9y agoMeh, it's the natural way. Power cycles around, no empire remains forever.
- 0xbear 9y agoSure. Empires rarely survive past the 250 year mark. It’s remarkably consistent. The US will be 250 years old in 2026, though it hasn’t been an empire for the entire duration. Make of it what you will. Interesting essay on the topic: http://people.uncw.edu/kozloffm/glubb.pdf http://people.uncw.edu/kozloffm/glubb.pdf
- dontreact 9y agoOf course! They invaded Crimea so we’ve imposed economic sanctions. Also seems to be evidence of them influencing the election. These things weren’t clear at the time.
- 0xbear 9y agoThere is so far no evidence of them influencing the election in any way.
- danenania 9y agoThere's plenty of evidence that they conducted a massive, highly sophisticated propaganda/cyber warfare campaign. It's impossible to prove that it did or didn't tilt the election, but it clearly could have given the extremely thin margins in key states. I'd say that counts as influence.
- 0xbear 9y agoPresent some then. Thus far the best that I’ve seen is $100k in FB ads to peddle the divisive topics typically peddled by the democratic establishment.
- danenania 9y agohttps://www.c-span.org/video/?c4664750/excerpt-clinton-watts-testimony-senate-intelligence-committee-hearing https://www.c-span.org/video/?c4664750/excerpt-clinton-watts... https://www.washingtonpost.com/apps/g/page/politics/the-intelligence-community-report-on-russian-activities-in-the-2016-election/2153/ https://www.washingtonpost.com/apps/g/page/politics/the-inte... http://www.independent.co.uk/news/world/americas/us-politics/russian-trolls-hilary-clinton-fake-news-election-democrat-mark-warner-intelligence-committee-a7657641.html?amp http://www.independent.co.uk/news/world/americas/us-politics... That's like 1/1000th of the publicly reported evidence you can find by googling.
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- bflesch 9y agoCan you elaborate how big the effective political risk is? I always thought LP commitments are pretty binding - are there many ways out of the fund for Saudi/Emirati money that aren't available to other very big fish?
- JumpCrisscross 9y ago> Can you elaborate how big the effective political risk is? I always thought LP commitments are pretty binding The risk isn’t the Saudis pull out. It’s that their investment brings adverse attention from the President, the Congress, aspiring Senators and advocacy groups. A foreign state investor is scarier to most Americans than a foreign private entity.
- HaloZero 9y agoI'm not sure what happens in the case where say sanctions against Iran or Saudi Arabia could freeze assets as well.
- jopsen 9y agoWouldn't the sanctioned investors in the fund just be unable withdraw their money?
- JumpCrisscross 9y agoYes. Though now I'm curious if a fund manager is allowed to continue collecting their management fee from the sanctioned investors' funds...
- noddy1 9y agoGreat, so now the frozen IPO market means that all the growth from tech unicorns gets captured by saudi oil sheiks. thanks SEC/SV!
- JonFish85 9y agoAlternatively: the bubble is inflated with wealthy oil sheiks’ money, and transferred to upper middle class workers. Edit: a word
- elsewhen 9y agonot so sure i would call this frozen: https://www.aranca.com/assets/uploads/articles/images/01_Number-of-IPOs-in-the-US-Market_Article_The-US-IPO-Market.jpg https://www.aranca.com/assets/uploads/articles/images/01_Num... note, the 2017 figure is the first half compared to full years.
- pcnonpc 9y agoUS pension funds together are worth $22 trillion. This is 61% of global pension funds and much much larger than the Saudi funds. They should invest a small part into Vision Funds and other VCs!
- goseeastarwar 9y agoThere's already been lots written about this, but it's astounding how much these SoftBank funds will effect the startup ecosystem for years to come. After years of VC's talking about how too much money is floating around creating over-priced unicorns, Masayoshi Son is going to end up injecting a trillion more dollars into the private market. Employees need to start demanding that their employers create regular buyback/secondary programs to make up for the restrictions on their illiquid stock. It should be a straight forward part of the performance review process: "Here's some more stock, here's some more salary, how much of your existing stock (eg. up to 10%) would you like to sell in the next buyback?" Companies like Slack are never going to go public in this sort of environment and its the employees that suffer the most. The public not being able to participate in startup gains is a legitimate issue, but they're not the ones creating the value in these companies.
- adventured 9y ago> Companies like Slack are never going to go public in this sort of environment and its the employees that suffer the most. I agree with your premise. The solution is for the private companies to do what all other long-term sustainable private companies have done throughout history: actually earn a profit. In doing so, they can pay dividends and or profit sharing to employees, buy back employee stock (optionally eg if someone wants to leave), and so on. Will that happen? Most of these companies will probably just keep riding the private capital train with things as they are for as long as they can. They should be following the example of the SAS Institute, which has been private for 41 years and implemented employee profit sharing after their first year in business.
- crabasa 9y agoLong term sustainable? You should look at the turnover in the S&P 500 the last couple of decades. Some of the most valuable companies in the world (Google, FB, Amazon) explicitly eschewed short term profitability in order to maximize growth and share. Your cheap Uber rides speak to this phenomenon today. If you're waiting for ambitious tech companies to prioritize turning a profit in order to provide some liquidity to their workers, good luck.
- lquist 9y agoWas talking to a friend of mine that’s at SoftBank. FWIW he mentioned that internally Son is targeting $880Bn for the three Vision Funds!
- Eridrus 9y agoIs there any info on what sort of returns Softbank is getting? Or on what basis investors think that sinking so much money into this fund is a good idea?
- agibsonccc 9y agoI can't talk about too much, but we do quite a bit with softbank[1], and I live in Japan working with HQ. The bets they are making are actually pretty predictable, they are all more "sure" wins. Many of these companies will not exit for a long time. They are making some (in my opinion) questionable bets on more early stage companies though. If the bets are < 100 million, some of these are more traditional R&D bets that might not give proper returns. Of note here is that "softbank" is actually a massive investment fund though. There are multiple sources of money, not just 1 "vision" fund. Even the way the decision making is done is pretty fragmented. Edit: wrong press release link [1]https://www.forbes.com/sites/aarontilley/2017/09/18/skymind-deep-learning-tool-robots/ https://www.forbes.com/sites/aarontilley/2017/09/18/skymind-... [2]: https://skymind.ai/press/softbank https://skymind.ai/press/softbank
- mbesto 9y agoMy understanding is that they are 100-year theses (serious), so I don't think they operate under the same return trajectories you would see elsewhere.
- agibsonccc 9y agoThis was already public information? https://www.recode.net/2017/10/19/16506218/softbank-new-investment-vision-fund-masayoshi-son https://www.recode.net/2017/10/19/16506218/softbank-new-inve...
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- probe 9y agoI heard that a16z did something similar when they started - they were willing to pay a significant premium because 1) they had more conviction in their bets and 2) to win deals/access when starting off. Softbank is just doing this on steroids, and we'll see what happens. Though I am glad that this much capital is at least being directed to high growth tech companies creating things (rather than being used for financial engineering like MBS/CDOs)
- jakelarkin 9y agozombie unicorns for years
- rhizome 9y agoPrepare to see some new sites get very popular then get "our incredible journey"'ed.
- Blackthorn 9y agoAt this point, why would anyone ever join a startup? Even the lottery tickets are gone.
- mathattack 9y agoEnough easy money is pouring in that cash comp is equal to what you'd get at a large non-Big Tech (Google/Amazon/Fbook/Msoft/etc) company. The lottery ticket is just an add-on.
- linenumber 9y agoPaywall bypass? If not available then why post/upvote link to paid article when there are alternatives for free!
- azureel 9y agoNon paywalled archive link: http://archive.is/RGmKe http://archive.is/RGmKe