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Bengaluru: SoftBank Corp.’s decision to avoid early-stage firms will have limited impact on India’s start-up business, as the Japanese investor made it clear in private meetings with venture capital firms and start-ups that it would only do large deals in the country where it started investing in October.

After shutting its venture capital unit SoftBank Capital, the company will invest directly in late-stage start-ups. SoftBank is the biggest investor in two of India’s top three most valuable start-ups, online marketplace Snapdeal and cab-hailing service Ola. It has already invested more than $1 billion in these two start-ups and real estate portal Housing.com over the past nine months.

“As we build SoftBank 2.0, we increasingly believe that our future lies in a smaller universe of companies, which pioneer breakthrough innovation and have the potential to be market and category leaders," SoftBank president Nikesh Arora said in an emailed response to Mint.

“We want to work with them closely and guide and support them to success, as we have done with Snapdeal and Ola, and many others. We also think having a diversified portfolio including mature companies and in some cases, exceptional early-stage companies, is key to SoftBank’s long-term viability. We continue to be very excited by the possibilities that India offers," he said.

SoftBank, one of the top two investors in start-ups in India, will shut down its venture capital (VC) arm and avoid investing in early-stage firms, Re/code, the popular US technology news website, first reported on Thursday, citing an interview with Arora, who said the “large-check marketplace" was less crowded.

By shutting SoftBank Capital, the Japanese investor is moving away from the approach that yielded it record returns in China’s Alibaba Group, one of the world’s most valuable Internet companies. It was one of the first backers of Alibaba, investing in the company when it was just a year old. SoftBank owns roughly a third of Alibaba, which has a market value of $180 billion.

In October 2014, SoftBank chairman and founder Masayoshi Son pledged to invest at least $10 billion in Indian Internet and technology companies over the next decade. Last month, the Japanese firm said it was partnering Bharti Enterprises Ltd and Foxconn Technology Co. Ltd to invest at least $20 billion in solar energy projects in the country.

Since SoftBank’s entry, it met several start-ups, including online furniture store Urban Ladder and mobile wallet Paytm, according to two people familiar with the matter. However, the company only invested in Housing.com after Snapdeal and Ola. SoftBank is in talks with hotel booking site Oyo Rooms for a $100 million investment, The Times of India reported on 18 May.

According to the two people cited above, SoftBank will continue to be picky with its investments in India. Both spoke on the condition of anonymity.

“Their decision to avoid early-stage deals doesn’t come as much of a surprise in India. They only want to write large cheques and they had made that clear over the past few months. This is why proposed deals with Urban Ladder and some others didn’t work out (with the exception of Paytm, where there was a disagreement about a new initiative)," one of the two said.

“It hasn’t been an easy ride for them. Though Ola and Snapdeal are fine, Housing has clearly been a disaster. Apart from Housing, SoftBank thinks that valuations in India are out of whack so they’ve decided to become slightly less aggressive than what they were (when they entered India)," he said.

SoftBank’s Arora quit the boards of Snapdeal, Ola and Housing in April. Last month, Housing.com’s directors fired chief executive officer Rahul Yadav on account of his so-called objectionable behaviour towards investors and the media.

According to the two people cited above, SoftBank’s Jonathan Bullock, who replaced Arora on the Housing board, drove the decision.

SoftBank is one of the most deep-pocketed start-up investors in the world. It is also among the most prolific start-up investors, with a portfolio of anywhere between 1,300 and 1,500 companies, according to various media reports.

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