SoftBank Disrupts These Public Companies

SoftBank is planning another $100 billion venture capital fund to match its existing Vision Fund. Reportedly, it already has an anchor tenant for this new investment vehicle in the form of the Saudi Arabian Public Investment Fund. Details on when this new fund might launch are still sketchy, but given the current frenzied environment in large VC investment rounds we’ll assume it’s just a matter of time.

We got to thinking about US Senator Everett Dirksen’s famous quote, “A billion here and a billion there, pretty soon you’re talking about real money.” Softbank certainly has the billion here (and there) to sprinkle around. And with a second fund, now we’re talking about real money. The big question now is “who/what is going to be disrupted even more quickly now that SoftBank will shortly have 2x the amount of capital to invest (and probably more over time)?”

To put a sharp point on this, we drafted up a list of public market losers that will feel even more heat when SoftBank launches its new fund:

#1. The global auto industry. SoftBank’s Vision Fund has picked its horse; it is GM’s Cruise division, which is developing autonomous vehicles and where the fund will invest $2.25 billion. Honda wisely chose to come along with its own investment there last week. And, of course, SoftBank is a major investor in Uber, Didi Chuxing, and Grab, all important regional ride hailing/transportation services around the world.

Implicit in all these bets: the notion that personal transportation will change dramatically in the coming decades. Individuals will stop owning cars outright and simply pay for transportation as needed. This will dramatically reduce the number of new vehicles needed around the world over time.

On top of Softbank’s involvement in the space, also consider that the global auto industry still faces dramatic overcapacity and does not have the internal cash flow to develop autonomous cars on their own. A few – GM and Honda stand out – have access to outside capital and may be able to cross this technological chasm. The rest do not.

#2. Commercial/office real estate. WeWork is one of SoftBank’s largest investments, and last month the office space rental company became New York’s largest landlord. WeWork is expanding globally as well, with a large European operation and an expanding presence in India.

The disruption here is clear enough if you’ve ever been to a WeWork space. Small businesses no longer have to sign multi-year leases or pay for IT related infrastructure. Just fill out a form, hand over a credit card, and get your security badge and desk assignment. While large companies will still sign long term leases, WeWork has taken a large slug of the addressable market away from traditional office landlords. It seems unlikely it will come back unless WeWork fails outright.

#3. Financial services. Even before Vision Fund came along, SoftBank led a billion dollar round in US consumer fintech company SoFi in 2015. More recently, in 2017 it also invested in Indian fintech company Paytm. Warren Buffett just chipped in $360 million into the same company, Berkshire’s first investment in India.

Summing up: as a $100 billion pool of VC money, SoftBank’s Vision Fund is an important source of disruptive capital. Doubling that capital base makes them far more influential and should meaningfully accelerate the disruption public companies feel in the very near future.