How would you invest $100bn? This week we dive into one of the largest investment funds and its quest to buy all AI, all the time.
The story of Masayoshi Son, CEO of Softbank, and his Vision Fund only gets crazier.
In 2016, Son had this idea to start the biggest technology investment fund of all time, at $30bn. The fund would invest in a whole range of tech companies, from startups to private and public companies. Essentially, this fund would make Son one of the most influential people in technology and allow him to make enormous bets on the future of tech.
But that wasn’t enough.
According to a Bloomberg article this past weekend, as Son was flying to the middle east to pitch the fund, Son was looking at the slides to be presented and erased the $30bn amount and put $100bn, simply stating to his stunned colleagues “Life’s too short to think small.” When Son got up to present, the potential investors initially laughed at the figure.
They were the only ones laughing
Son secured a $45bn investment from the Saudi Arabia Investment Fund, then went on to secure funding from the largest publicly traded company, Apple.
No matter which way you slice it, $100bn is a lot of money. Considering $84.2 billion of venture capital was raised in the United States in 2017, Son essentially can buy out the entire venture industry. But since the fund launched, Softbank has made seemingly random investments in technology, investing in companies like Uber, Nvidia and WeWork. Two months ago, Son made his strategy clearer, telling investors:
“It may look like there is no rhyme or reason and I’m just making unrelated investments,” Son said. “But there is a unifying reason. It’s AI. AI is coming like a Big Bang. Every industry will be redefined. I have shifted entirely so that I am devoting 97 per cent of my time and brain on AI.”
One more thing
In that same Bloomberg article, Son dropped a small fact about how he is planning on raising subsequent Vision Funds, of the same size, every two to three years. Ideally, he would be deploying $50bn of capital every year.
So, a man who is planning to deploy $250bn in capital over the next six years, is spending 97% of his time thinking about AI. Now to be fair, Son employs lots of people to help him in the investment process and not all of that money will go to AI. But even if 20% of the money gets invested in the AI space, it’s still a significant figure.
Son is getting in just as the market is exploding. While the number of deals looked like it leveled off in 2017, the amount of capital raised by AI startups increased 43%, with the average deal size increasing by around 37%. But then again, a man who has $250bn to deploy, doesn’t really care that average deal size for startups went up from $4.5mn to $6mn.
Son also has some competition from big corporate players. While many companies have venture capital arms, several companies have announced AI specific or funds. Google announced a fund in 2017, then a week later Toyota announced a fund, as did Samsung, and Amazon has announced two $100mn ‘Alexa’ Funds, where startups for voice/AI related technologies. These funds have been busy. While Google plans to make 10 to 15 deals per year, Amazon has been making 5-10 deals a month for the past two years.
These tech companies have already created headaches for other venture funds who invest in the AI space. Several weeks ago, I was talking with someone who works for a corporate venture fund and this person said they have been completely priced out of investing in these companies because of the tech giants. Being realistic, Son is not going to price out the Google/Amazon funds of the world, but they certainly have competition coming their way.
Of course, if you are an AI startup, your payday is here.