Money Startups

SoftBank to discontinue early-stage VC arm, will invest in more mature firms

17 Jul, 2015


Japanese internet and telecom conglomerate SoftBank Corp, which has backed Indian firms Ola, Snapdeal and, is winding down its venture capital division SoftBank Capital.

This means that the Tokyo-headquartered company will no longer make small bets in early-stage companies and instead focus on bigger investments in more mature businesses, according to a news report in re/code website quoting SoftBank's India-born president Nikesh Arora.

"As we look at the future for the next tens of years, we believe that the way to preserve the long-term sustainability of SoftBank is to be large minority shareholders of many assets," Arora told Re/code, which was the first to report the development, in an interview.

While SoftBank may occasionally invest in exceptional early- stage firms going forward, Arora said that would be "more of the exception than the rule."

In response to a query, a SoftBank spokesperson said: "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. 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."

Further, SoftBank believes that having a diversified portfolio that includes 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," the spokesperson said.

SoftBank Capital manages third party money besides capital committed by SoftBank to back US-based early stage ventures including pre-revenue startups as also growth-stage investments in both US and Asian companies. It has invested in firms like BuzzFeed, The Huffington Post and Zynga among others.

SoftBank Capital will transfer management and administration of its 2010 and 2014 early-stage funds to Lerer Hippeau Ventures, re/code added.

However, this does not entirely shut off SoftBank's startup investment. The Japanese giant has separately also been investing in ventures from its balance sheet. Indeed last year it had created a new unit to make a push towards internet and digital media investments globally under SoftBank Internet & Media Inc with Arora as its first CEO.

Through this unit it pumped in close to $1 billion in India, bulk of it in Snapdeal besides Ola and a smaller $70 million odd in, within six months.

This unit has recently been rechristened as SB Group US, Inc.

With Arora taking a larger role at SoftBank, the Japanese firm recently roped in former senior vice president of products and user experience at professional networking site LinkedIn Deep Nishar as managing director of SB Group US, Inc. He will be based in San Carlos and report to Arora.

In this role, he will work closely with Arora and the leadership team to direct the investments of the SoftBank Group internationally, and counsel and support companies in the SoftBank portfolio.

Last year, SoftBank said it will invest about $10 billion in India's internet and communications sector. The company is also scouting to build a full fledged team in India has already mandated a Mumbai-based headhunter firm for the same.

The move marks the first significant move after Arora took over a larger role at the firm. Arora, who was senior vice president and chief business officer of Google, had quit the tech giant before joining SoftBank in September 2014. He is now one of the four non-Japanese in the 14-member board of SoftBank.