Masayoshi Son gives thumbs up to Indian startup ecosystem, SoftBank to invest $10 B in 5-10 years

1st Jun 2016
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Masayoshi Son, CEO of Japanese telecom and internet giant SoftBank, said that their investments to the Indian startup ecosystem will top $10 billion in the next 5-10 years. This despite the issues faced by SoftBank's Indian portfolio companies like Housing and Snapdeal.

Masayoshi Son added that they plan to further invest $350 million in India’s solar energy projects. Finance Minister Arun Jaitley had met Masayoshi Son as part of his Japan visit.

Masayoshi Son, Founder & CEO, Softbank
Masayoshi Son, Founder and CEO, Softbank

Further, in June 2015, SoftBank announced its joint venture with Foxconn Technology, based in Taiwan, and Bharti Enterprises, as SBG Cleantech, intending to invest in renewable energy in India.

Not everything that shines is gold

In the past, SoftBank's Indian portfolio firms have attracted a lot of publicity for all the wrong reasons in recent months, but that hasn’t deterred SoftBank from taking risks in its investment portfolio.

Housing

In January, SoftBank gave a lifeline to real estate portal Housing.com by investing an additional Rs 100 crore and giving them a boost. In October 2015, Housing’s valuation fell all the way from $250 million (in November 2014) to $50 million. Before this SoftBank’s investment in Housing stacked up to $90 million.

Last month, three more of Housing.com’s co-founders decided to quit the company, with only three remaining out of the initial 12. With four co-founders leaving the company this year alone, Chief Product Officer Snehil Buxy, Head of Data Operations Jaspreet Saluja and Head of Digital Marketing Amrit Raj are the only co-founders left in the firm.

Snapdeal

Snapdeal has grabbed the maximum share of SoftBank’s investments in India - $702 million.   

If its rival Flipkart is undergoing massive valuation markdowns from Morgan Stanley, things don’t seem to be all hunky dory for its Gurgaon-based rival. First it was reported that the online marketplace, at its current valuation of $6.5 billion, was struggling to raise capital.

Further, reports suggested that Snapdeal did close a $50 million round in February (2016) from venture capital firm Iron Pillar, which is a tenth of its target of at least $500 million.

But the biggest blow came when Amazon saw its market share (in terms of shipments) gallop to 21 percent from 14 percent, overthrowing Snapdeal from the second position. As of March 2016, Flipkart holds 37 percent of the market share, while Snapdeal is left with 14-15 percent of the market share (dropping from 19 percent market share).

InMobi

SoftBank has blessed InMobi with $205 million funding until now. However, InMobi has also been under fire for senior level resignations. In the past six months, close to 12 mid-and-senior-level executives have quit the company.

According to report by The Economic Times, InMobi is struggling to raise funds. Questions are also being raised on its business model. The same report states InMobi, which was estimated to be valued at $1 billion, now generates around $300 million in annual revenue. InMobi has not registered profits since its founding in 2007.

In India, SoftBank has also invested in Grofers ($120 million granted as capital), Ola ($210 million) and OYO Rooms ($100 million). These, especially Ola, seem to be on a strong wicket for now.

Nikesh Arora, COO & President, Softbank
Nikesh Arora, COO & President, Softbank

Nikesh Arora – in the eye of the storm 

In April, Nikesh Arora, COO of SoftBank, faced a sharply critical, 11-page letter from a group of SoftBank investors. The letter raised three broad concerns regarding Nikesh - conflict of interest, while being a senior advisor to private equity firm Silver Lake; poor performance in making investments and SoftBank’s excessive compensation without sufficient disclosure.

However, SoftBank denied any wrongdoings by Nikesh and termed the allegations unsubstantiated.

Further, according to recent reports, Nikeshreceived a pay package of about $73 million (Rs 500 crore) for the fiscal year ended March 31, making him one of the top paid executives worldwide for the second year in a row.

However, none of these issues have darkened Masayoshi Son's views on India. He has said in the past:

We have already invested $2 billion and we are interested in investing more. India has a great future. We are interested in investing in Internet companies and also in solar energy. We would make strong commitments.
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