Many are still haven’t heard of SoftBank. According to Wikipedia it is a “Japanese multinational telecommunications and Internet corporation established on September 3, 1981.” But their investment arm has recently become the largest e-commerce investor worldwide - their most recent tech fund called “Vision Fund” has $100 billion under management. And while it invests in many different tech sectors, e-commerce has been one of the major focus points.
SoftBank announced the fund last October, saying that it would be made up of $45 billion from Saudi Arabia’s Public Investment Fund, $25 billion of SoftBank’s own capital, and $35 billion from other “global investors.” Which were later revealed to include $15 billion from Abu Dhabi’s Mubadala Investment Company, $1 billion each from Apple and Sharp, etc.
Flipkart, the leading Indian e-commerce company has received a $2.5 billion investment from SoftBank last week, according to Economic Times of India:
“SoftBank has bought a fifth of India’s most valuable startup - Flipkart - for a mammoth $2.5 billion, in a deal that marks the biggest private investment in the country’s consumer technology sector.”
The most important thing about this investment is that it has increased Flipkart’s cash reserves to over $4 billion. This is crucial for what is going to be a decade long battle for the Indian online retail market. It compares to the $5 billion Amazon has already committed to investing in India - “Amazon will invest $3 billion more in India. This is in addition to the $2 billion announced in 2014,” Bezos said at the annual gala of U.S. India Business Council (USIBC) a year ago.
This is not the only SoftBank’s play in India, though. Earlier this year SoftBank has invested $1.4 billion into Paytm (also backed by Alibaba), a digital payments and commerce firm which runs the Paytm Mall marketplace. And it still owns 35 percent of Snapdeal, competing marketplace with Flipkart which has been pushed to merge with it, but attempts have failed earlier this month.
This makes SoftBank a co-owner of three of the top 4 players in India’s online retail market. Amazon being the one exception.
We said in the past that India Is the Most Important E-Commerce Battleground to Watch, and SoftBank’s investments are only making it more interesting. The battle of Amazon versus 3 other players funded by SoftBank and other players - eBay, Microsoft, Alibaba, etc. - is going to be exciting for years. Before the entry of SoftBank it looked like Amazon will be able to outlast other players using their own capital, but now they are facing an even bigger pool of capital.
SoftBank has also made investments into various tech companies (like when they bough the chip design company ARM last year for $32 billion all-cash), many smaller online retailers, and in multiple countries. In 2015 SoftBank invested $1 billion in Korean e-commerce marketplace Coupang, which has now become the leading online retail destination in the country, and is rumored to go public this year. And all the way back in 2000 they invested just $20 million in Alibaba, which is now worth over $100 billion according to Bloomberg.
Few companies have been able to pose any serious threat to Amazon. Alibaba is one of them, but they do not compete face-to-face in any market. SoftBank is now one too. Often when eBay, or Walmart, or any other domestic retailer makes a chance there are questions asked if that is going to challenge Amazon. Those questions always end up being headline grabbers, small improvements insignificant to the market. But one thing which is majorly significant, and undeniable is capital.
Jeff Bezos has famously said “Your margin is my opportunity”, which is only true because of the capital available.
SoftBank will challenge this.