A leading Japanese telecom, SoftBank is also one of Asia’s most prolific tech investors and known for taking big stakes in growth-stage companies. In an onstage interview at Disrupt today, SoftBank president and chief operating officer Nikesh Arora told TechCrunch’s Jon Russell that the secret to successful investments is keeping portfolios streamlined, but striking close friendships with founders.
Arora spent 10 years as an executive at Google before joining SoftBank last year and is widely expected to succeed founder Masayoshi Son as its chief executive officer.
SoftBank is probably best known to Americans as the majority owner of Sprint and an early investor in Yahoo and Alibaba. It recently retooled its approach to investment, shutting down its venture capital arm SoftBank Capital.
“The venture capital market is already very efficient, especially in Silicon Valley, with lots of people, so we decided that’s not the space we want to play in,” said Arora. “We shut down SoftBank Capital to use the resources out there. We want to see other companies and how we can help them scale.”
Instead of putting small amounts in early-stage companies, Arora says SoftBank searches for startups with proven business models and puts in significant capital (checks start at about $100 million) to speed up their growth. Then SoftBank holds onto its stake through thick and thin.
“We first invested in Alibaba 15 years ago and haven’t sold a single share. We don’t have the same pressure as an LP or VC. We want to work with founders. We do not want to scale to work with 50 founders. We are looking for 10 to 15 people who will run billion-dollar companies in the future,” said Arora.
“I only invest in founders who are willing to be my friends, hang out with me and build large companies,” he added.
For example, SoftBank recently invested $1 billion in South Korean e-commerce business Coupang and $627 million in Snapdeal, one of India’s largest marketplaces.
Another industry SoftBank has homed in on is transportation, with investments in Ola, GrabTaxi, and Didi Kuaidi, three of Uber’s main rivals in Asia. But Arora insists that SoftBank is not trying to build an anti-Uber alliance.
“It’s possibly not a winner-takes-all market. There might be two players that dominate and hopefully the companies that we invest in will be one of those players,” said Arora.
Though SoftBank is known for being one of the biggest backers of Asian tech companies, the U.S. is also on its radar, despite “robust valuations,” as Arora put it. SoftBank recently put $100 million in events analytics company Banjo and will continue making significant bets in the U.S. over the next five years.
I only invest in founders who are willing to be my friends, hang out with me and build large companies.
Arora says SoftBank’s ultimate goal is to avoid the plateau that many other mature tech companies hit. In August, he made a personal commitment by buying $483 million in SoftBank shares.
“I came to the U.S. 25 years ago with $200 borrowed from my father. Now I no longer worry about having a place to live or being able to eat. I figured that if I was going to transition to SoftBank from Google, I would also increase my risk profile, because as we become bigger we get more complacent and take less risks,” said Arora.
“I decided if I took the same risk as entrepreneurs, no one can challenge if I believe in SoftBank or not.”[gallery columns="5" ids="1213948,1213935,1213932,1213931,1213929"]