It’s getting increasingly difficult to call SoftBank a Japanese telecom company. While that description reflects its core business, the company has a multitude of large investments outside of its home turf, and across a range of different verticals, predominantly commerce.
I’ve written about SoftBank’s efforts to rival Uber with three funding deals across Asia — Ola in India, GrabTaxi in Southeast Asia, and Didi Dache in China — but its massive $1 billion investment in Korea e-commerce leader Coupang this week illustrates that it is building a wider portfolio of online commerce champions across Asia.
The investment in Coupang, which is now valued at $5 billion following the deal, is its biggest by far, and particularly fascinating.
“The deal is a wake-up call,” Eric Kim, co-founder of US-based Goodwater Capital and an early investor in Coupang and Korea’s Kakao, told TechCrunch in an interview. “It’s the largest deal of the year so far, and a sign that times have changed and innovation is truly global in nature.”
It’s easy to assume at face value that a company operating in the capital-intensive e-commerce space and raising $1 billion is burning through some serious cash. However, Coupang CEO and co-founder Bom Kim told TechCrunch in an interview that the company still has considerable amounts in the bank, after raising $400 million last year from investments by Sequoia and then Blackrock last year.
Long-Term Investments
The reason it is raising nine figures — the deal is due to be completed over the coming month — is to plan for the future. Kim told us that — even thought mobile represents 75 percent of revenue, Coupang has 25 million downloads, and it has offered same-day/three-hour delivery since early 2014 — there is more progress to be made.
While he declined to be specific about plans, he said the company will invest across the board in developing its logistics and fulfillment network (which it owns), developing its mobile apps, and pouring more resources into its four global R&D centers — which are located in Seoul, Shanghai, Seattle and San Francisco. The overseas centers are strictly for hiring talent and observing market trends, not preludes to expansions, Kim explained.
“We have a chance to build a next-generation company, one of the great companies,” Coupang CEO Kim said. “In many ways, we lead the world in terms of trends — others can learn a lot about problems we solved. We solved mobile before people even realize the future was mobile, and can accelerate the disruption here in Korea better than any other environment.”
That’s a common theme among companies that have raised money from SoftBank this past year or so. Every company in the world that raises money does so for future plans, of course, but SoftBank’s funding rounds seem targeted four or five moves ahead, much like a game of chess.
It seems crazy, but without the intense scrutiny of media SoftBank has fairly quietly spent an estimated $2 billion or so establishing its portfolio. And there’s no doubt more to come.
Recent SoftBank Investments in Asia
- Lead $210M round for Ola (India)
- Lead $627M round for Snapdeal (India)
- Lead $100M round for Tokopedia (Indonesia)
- Invested $250M in GrabTaxi (Southeast Asia)
- Lead $600M round for Kuaidi Dache (China)
- Invested $90M in Housing.com (India)
- (Also bought out other investor shares in Supercell, a company that does very well in Asia)
- Invested $1B in Coupang (Korea)
International Potential
Despite grand visions for the future and one billion in fresh funding, Coupang is focusing on Korea only for now.
It isn’t clear exactly what the company has planned in terms of international expansion. A full-on move into the U.S., which is particularly mature, isn’t likely. A more practical move might be to expand into parts of Asia, where e-commerce is nascent, once the regional conditions are conducive to Coupang’s mobile-first focus approach (which has worked so well in Korea), and once the company has developed its technology to enable high quality e-commerce in markets with more challenging internet quality.
Southeast Asia, for example, could be a target in the next year or so. While it doesn’t match Korea for zippy wireless internet or high adoption of expensive devices, mobile is the key internet driver for different reasons. If Coupang can adapt its business model to suit, then it could rapidly expand into new markets — and help/take help from fellow SoftBank portfolio companies too.
The SoftBank investment is certainly about more than Korea and, for a cool billion dollars, it is the centerpiece of SoftBank’s investment strategy in Asia to date. Those who write it off as an Amazon rival reloading its rapidly burning coffers, are seriously misjudging SoftBank’s nous as an investor, and the potential of markets outside of the U.S..
“SoftBank one of the most sophisticated investors in tech,” Eric Kim added. “They’d probably agree that software is eating the world but there will be regional champions [which they are seeking out and investing in].