On October 14th, 2016, SoftBank Group Corporation (SBG) announced plans to form a private fund for making investments in the technology sector globally, which is tentatively to be named “Softbank Vision Fund” (the Fund). SBG aims to invest in excess of $25 billion over the next five years. Previously, on October 12th, 2016, SBG had concluded an unbinding memorandum of understanding with the Public Investment Fund of the Kingdom of Saudi Arabia (PIF), under which PIF considers investing in the Fund and becoming the lead investment partner, with the potential investment size of up to $45 billion over the next five years. In addition, 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 may go up to $100 billion.
Talking about the recent partnership with Softbank, His Royal Highness, Deputy Crown Prince Mohammed Bin Salman, Chairman of PIF, commented: “The Public Investment Fund is focused on achieving attractive long-term financial returns from its investments at home and abroad, as well as supporting the Kingdom’s Vision 2030 strategy to develop a diversified economy. We are delighted to sign this MOU with SBG given the long history, established industry relationships and strong investment performance of SBG and Masayoshi Son.”
Speaking at the Centre for International Governance Innovation, Bruce Riedel, one of America’s leading experts on the Middle East, pointed out Saudi Arabia is currently in the midst of a complex leadership change, aiming to shift power to the younger generation. This political transition also reflects on the way the country conducts its business; if for the past 30 years it has moved more cautiously, in recent years it seems more progressive and looking towards the future, driving business a step further from oil and closer to innovative sectors.
The Saudi Arabian Public Investment Fund was established in 1971 to provide financing support for projects of strategic significance to the national economy, and its role has evolved to incorporate a number of different areas. These include holding and managing the government’s stakes in some of Saudi Arabia’s largest and most important blue chip companies. PIF has also set up and managed a number of companies to support innovation, diversification and development of other sectors than oil within the Kingdom.
Both Saudi Arabia and Softbank have stepped up their investments in the tech sector in recent months. The Saudi fund invested $3.5 billion in ride-sharing startup Uber in June, while Softbank bought British chip designer ARM Holdings for $32 billion in July.
Regarding the establishment of the Vision Fund, Masayoshi Son, Chairman & CEO of SoftBank Group Corporation, mentioned: “With the establishment of the SoftBank Vision Fund, we will be able to step up investments in technology companies globally. Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector. We will further accelerate the Information Revolution by contributing to its development.”
The Fund is to be managed in London, the United Kingdom, by a subsidiary of SBG and deploy capital from SBG and investment partners. Choosing London as the headquarters may come to reaffirm the city’s importance as a global financial centre, especially following the Brexit vote when some London-based Private Equity and Venture Capital firms may be weighing their options in regards to keeping their business in the British capital. While Theresa May’s government is preparing its exit strategy from the EU and deciding whether to stay in the single market, this news of an Asian and a Middle Eastern business partners aiming to establish one of the world’s largest investment funds in London may give an impulse of confidence to those who see a post-Brexit Britain outside the single market and support the idea Britain may survive and thrive on its own.
How may investment funds like Softbank Vision Fund influence the perspectives of tech start-ups in the UK?