Softbank’s New 108 Billion AI Fund is Like a New Country
The countries of the future aren’t places, they are corporate entities.
Softbank has been disrupting the future of venture capital with its Vision Fund and now there’s a new Chimera on the block.
SoftBank Group Corp founder and Chief Executive Masayoshi Son says that there is a dearth of investment opportunities in Japan, which he said is lagging in the race to develop artificial intelligence (AI).
Softbank itself will only contribute $38 billion into the new fund (35.2%). So who will donate the rest?
Prominent corporations that are expected to participate in Vision Fund 2 include Apple, Microsoft, iPhone assembler Foxconn, Standard Chartered Bank, and the Japanese financial giants Mizuho Bank, Sumitomo Mitsui Banking Corporation and MUFG Bank.
Other investors in the fund include the National Investment Corporation of the National Bank of Kazakhstan, Standard Chartered Bank and investors from Taiwan.
This could change the fate of AI in the world as we know it in the 2020s.
Softbank’s Vision Fund #1
Sadly, Softbank went with companies like Uber, WeWork and others. Not exactly leaders in the future of AI. So Vision Fund #2 has to do better. NVIDIA at least was on the right track, in my humble opinion.
As technology continues to advance, the big companies have more services they can offer to tech companies that will be increasingly more compelling and drive increasing revenue. It’s no secret the top Cloud companies also end up being the top AI companies.
Artificial Intelligence at the Center
The total expected contribution to SoftBank Vision Fund 2 from the Japanese conglomerate and other partners stands at about $108 billion, based on a series of memoranda of understanding. Softbank announced the idea that AI would be the center of the 2nd fund on July 26th, 2019.
SoftBank announced its second mega fund to invest into technology companies developing artificial intelligence technologies around the world.
“The objective of the fund is to facilitate the continued acceleration of the AI revolution through investment in market-leading, tech-enabled growth companies” — Softbank, July 2019 annoucement.
The first fund, which was backed by the sovereign wealth funds of Saudi Arabia and Abu Dhabi and prominent tech names, is known for investing billions of dollars into global technology and telecommunication companies.
I’m sort of glad to see Saudi Arabia not too involved in this 2nd Vision Fund. I felt the ethical conflict of interest there wasn’t a great feeling. The genius of Masayoshi Son is starting slowly to be better understood in the West.
SoftBank did not name Goldman Sachs as an investor. The Wall Street Journal said on Wednesday that the Wall Street investment bank would invest in the fund.
SoftBank Group has been accelerating investments with the fund, which was founded in 2017. Long live Softbank’s Vision Fund, Version 2.0, 2019–2023.
The Vision Fund has shaken up the investment business by writing huge checks to tech companies that have yet to go public, even if their business models are unproven. While it's nice to have skin in the game, I think it’s fairly clear Uber or WeWork might be epic failures in the coming years. These guys need to choose truly AI-centric companies for this scale of stuff to make any sense.
Like Vox suggests, the Japanese company has changed the landscape of venture capital, making it both a hero (to startups) and a villain (to other venture capitalists). Villain because Silicon Valley VC isn’t so great compared to Softbank or China. The tilt of innovation now favors Asia. As companies like Uber and WeWork go IPO, it’s a bit like the last hurrah wave for Western innovation.
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