Forming the SoftBank Vision Fund (2017)

From an operating company to an investment company

The heart of this decision lies, more than in betting on the field of AI, in remaking SoftBank into one of the world’s largest investors by levering other people’s capital. A scale of $98.6 billion was one SoftBank’s own strength could never reach. Precisely because it gathered most of that sum from outside — with Saudi oil money as the mainstay — investments of several billion dollars in a single company became possible. This design, drawing in from outside roughly three times its own funds, could, when it turned well, capture enormous returns on a small share of the burden, and could stretch its scale without limit given only the power to find targets and raise money. The investor’s face that Son Masayoshi had sharpened since the ARM acquisition here reached one finished form.

That said, the leverage of other people’s capital bares its fangs the moment outside money stops coming in. When the outside providers pulled back from SVF2, SoftBank had to shoulder over 90% itself and was placed where the price movements of its investees swayed the group’s results directly. WeWork’s valuation loss was the first proof of that fragility. As a third face, following the founding-era software distribution and the 2000s telecom business, SoftBank moved toward being a company that entrusts its performance to the results of an investment fund. From a company that earns through operations to one that rises and falls on the skill of its investing — this single move in 2017 sits at that dividing line.