Why SoftBank Vision Fund invests in unprofitable technology companies like Uber

The Japanese company SoftBank has grown from being a telecom giant to a worldwide reputation as a driver of technology investments. And his bets on well-known brands, from Uber to WeWork, made headlines, especially because of the companies' difficulties in making a profit.

A $ 100 billion Vision Fund executive on Monday explained how the technology-focused fund decides which companies it invests in – and why making money is not necessarily a cause for annoyance .

"We are looking for companies that are tackling some very important issues," Munish Varma, managing partner of the EMEA and Asia fund, said Monday at a fintech or financial technology fair in London. This means that companies "go to huge markets, with a product that clearly meets their needs".

For contextual reasons, Varma spoke with Rishi Khosla, co-founder and CEO of the online lender OakNorth, in which the SoftBank fund invested earlier this year. OakNorth – unlike many technology companies that have not yet made a profit – has been profitable since 2017.

Varma then explained that the fund "is not too focused on the profits of a company", but on "the good business sense" – the idea being that the short-term profits do not are not necessarily an indicator of long-term value and success.

SoftBank has become an almost ubiquitous force in the technology sector in recent years as the company has invested billions of dollars in companies like Uber, WeWork and Slack. The group's stake in Uber is expected to be around $ 10 billion when the global advertising giant is announced in May, according to a regulatory report.

Explaining in more detail the reason behind the Vision Fund's investments, Mr. Varma pointed out that he focused mainly on growth companies and that they were not in a hurry to quickly seek a quote. in stock exchange.

"In recent years, companies have remained private much longer, but that does not mean that capital requirements have decreased," he said.

Khosla – formerly an investor in companies such as PayPal – echoed this sentiment, saying that it was not "imperative" at the moment, for his digital lender, to launch an initial public offering. In an interview with CNBC on Monday, he said the titan of investment in technology provides "patient capital that does not necessarily take quarterly results into account."

A recent IPO in the technology sector – namely Lyft & # 39; s – has seen a sharp decline since its debut in the market due to concerns about its ability to generate profits.