How SoftBank ate the world

OOn the morning of July 20, 2017, at the luxurious Prince Park Tower Hotel in Tokyo, Masayoshi Son appeared on stage in front of a crowded conference room, his tiny figure being backlit by bright white lights. His, the CEO of the Japanese group SoftBank in the areas of the internet, energy and finance, was dressed simply, as usual, with a gray suit and a striped shirt. He smiled and introduced himself in Japanese.

His is known for his fanciful badogies and his long speeches. In 2010, his speech on his "300-year plan for the future" began with a reflection on the nature of grief, while His rhetorically asked, "What is the saddest thing in life? What gives you the greatest happiness? In 2016, he likened the Internet of Things (IoT) to the explosion of life in the Cambrian era, comparing the evolutionary advantage conferred to early species to the combination of sensors. and AI made possible by the IoT.

Addressing hundreds of technologists and entrepreneurs, he compared SoftBank to the nobility of the industrial revolution, a privileged clbad investing in technology and science serving the common good. Two months ago, SoftBank launched a $ 100 billion investment fund, the Vision Fund – the largest technology fund in history. In Son's metaphor, the Vision Fund was the backbone of the information revolution. "I really do not want to sleep," he says. "I do not want to waste time. These are very exciting moments. "

That day, many of the CEOs present were the beneficiaries of the fund's investment. Without exception, they had all met Son privately, either in his office in Shiodome, Tokyo, or in his $ 117.5 million mansion in Woodside, California. Most describe the legendary investor – known as Masa – as a man with a modest voice and foresight of the future: a reputation underpinned by his achievements.

In the 1970s, his emigrated to America to study. At the time, he had only a rudimentary knowledge of English and earned his first million by importing Japanese arcade games such as Space Invaders. It's Son who, in 1996, proposed to Jerry Yang, budding entrepreneur, then CEO of a struggling start-up called Yahoo!, A $ 100 million investment. His insight paid off. In 2000, Yahoo! had become the leading web search engine in the pre-crash era of the internet.

It was the year his son met a young Chinese teacher and founder of an e-commerce company called Alibaba. He told Jack Ma to accept a $ 20 million investment, with the promise that he would turn Ma's company into the next Yahoo! platform. Today, when his is making a new investment, he sometimes tells the founders that they too can be as big as Alibaba, as big as any of the largest companies in the world. "In 2000, he already knew that China was going to become a big market and he just decided to invest," said Eugene Izhikevich, CEO of the AI ​​startup, Brain ,. "After the collapse of the Internet bubble, he was investing in China. You had to drive on a dirt road between Hong Kong and Shenzhen. He has the gift of seeing things before they become reality. What is obvious to him becomes, ten years later, for everyone. "

At the event in Tokyo, Son then introduced the CEOs to the scene. He first welcomed the founder of the Boston Dynamics robotics company, Marc Raibert, a man who wants to change the world by building robots with biomechanical capabilities superior to those of man. (SoftBank bought the company from Alphabet for an undisclosed amount.) Raibert brought with him Spot Mini, a four-foot robot who quickly began demonstrating his locomotive skills. "Masa, I think you may have to back off because you're on the way," Raibert warned. "We have not detected it yet." Raibert concluded by saying that "the robots will be bigger than the Internet" and thanked SoftBank for seconding it. His thanks in turn and said, "We will change the world together. We will put a lot of AI in robots. "

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Then Greg Wyler, founder of OneWeb, pointed out that, despite all the talk of a hyperconnected future, the reality is that 54% of the planet does not have access to the Internet. He detailed his plan to deploy 900 non-geostationary satellites that would provide Internet access to the world's most remote regions by 2027. When he finished, Wyler thanked SoftBank for its support. "We are going to change the world, we are going to connect everyone to this Internet," responded Son by accompanying him off the stage.

Artificial intelligence – and its accessory components – ubiquitous data, broadband connections and autonomous robots – was the common denominator of the speakers: Helmy Eltoukhy, chief executive of Guardant Health, wanted to defeat cancer with data; Matt Barnard, founder of the Plenty indoor growing platform, used machine learning to grow plants in an optimized environment. and Bill Huang, startup entrepreneur Cloud Minds, wanted to build the world's first cloud-based robot. "Suddenly, we could help guide a blind person with sensors," he proclaimed. "We can replace guide dogs!"

Before the last interviews, Son took over the scene and remembered: "When I was 17, the very first time I saw a picture of a microprocessor m? made him cry. I was overwhelmed. He then introduced Simon Segars, CEO of UK chip design company Arm Holdings. "Our first processors were the size of a shirt button," began Segars. "We can now provide thousands of times more processing power with a pin-sized chip." Armed microprocessors were used in robotics operations, autonomous vehicles, and robotics. smart cameras, but the future of AI would be unrealistic – too greedy in energy and power. by delay – if all this data had to be sent to the cloud for processing and then return. "If every Android user supports three minutes of speech recognition per day, Google will have to double its data centers," said Segars. The next generation of microprocessors should integrate the AI ​​and process the data on the sensor itself. "We can not do it ourselves," he told the audience. "We need to work together, in partnership with other companies, to deploy these technologies."

At the end of the conversation, Son shook hands with Segars. He stated that Arm is indispensable not only to SoftBank, but to all of humanity. "And now they are part of our family," continued Son, turning to the crowd. "If we can join forces, we can be the nobility of this new generation, which will make the future better, where it will live." and left the stage.

Benedict Evans

SWe've always been trying to make SoftBank the largest company in the world since the day it was founded in 1981, as a software distributor for computers (SoftBank stands for Bank of Software) – the day he, a 24-year-old entrepreneur, cashier in front of his two employees and promised with enthusiasm that one day they would be the best in the world. These employees left their jobs a few days later, but Son, 61, has relentlessly pursued his ambition, his "300-year vision": a technological revolution that will ultimately lead to singularity, a point in history where human intelligence replaces human intelligence and redefines every single industry in the global economy.

In this version of the future, SoftBank will not be the next Google, the next Apple or the next Microsoft – Its does not believe that a brand or business model can ever be able to provide the singularity. What His will do then is what His calls the "cluster of number one" strategy: an ecosystem of computer companies run by SoftBank, which covers all sectors, from health care to transportation, to stimulus Robotics, a diversity that underpins the Vision Fund's investment portfolio. .

"We want to form a coalition of like-minded fellow entrepreneurs," said Son to the audience at the 2017 conference. "A revolution can never be achieved with the power of one." And at the center of this ecosystem is the company that designs the small, low power processors found in 95% of smartphones, not to mention most trackers, drones and TVs: Arm Holdings.

His acquaintance with Segars in 2006, when he met for the first time the CEO of Arm, Warren East, and Segars was one of the first employees of the company. At the time, Arm was already dominant in the nascent mobile phone market. This fact alone impressed His. He knew that mobile phones would soon outperform personal computers and that as a result, the center of gravity of the Internet would move from desktops to the smartphone. It was envisioned that the architecture of Arm microchips with low power and high intensity of processing is the center of the future digital economy.

This is what led to the acquisition of Vodafone Japan by SoftBank, a struggling mobile operator struggling with connectivity issues and old-fashioned handsets, weeks before meeting with Arm's executives. SoftBank's board of directors was skeptical about the acquisition, but Son was adamant. In addition, he had a strategic advantage. Prior to the acquisition, Son had traveled to California to meet Steve Jobs. He brought with him a hand drawn sketch of a smartphone and showed it to the CEO of Apple. ("It sounded like a toad whose battery was stuck," said Son in an interview with the Nikkei in 2016.) Jobs hated the ugly design, but he told Son that his intuition was right. Jobs had developed the first prototypes of the iPhone. His son left the meeting with a commitment that, in case the acquisition of Vodafone would come true, he would benefit from an exclusive agreement for the distribution of the iPhone in Japan.

Segars and Son stayed in touch and met several times in 2006, then again in 2014 and in 2015. When Segars replaced East in 2013, Arm – just as his son had predicted – had consolidated his market share in the chip sector, sell its licenses to Apple, Samsung, Nvidia and Qualcomm. And, as Son wished, Vodafone Japan (now SoftBank Mobile) has become one of the leading mobile phone companies in Japan, thanks to its exclusive agreement with the Apple iPhone.

In June 2016, Segars met Son for dinner at his mansion in California. Segars will describe it later as the most important job interview of his life. He did not know it at the time. During this meeting, Segars explained to Son the dilemma he faced Arm – but pointed out that he also presented huge opportunities. With the smartphone market saturated and growth margins reduced, Arm is expected to drastically reduce its profit margins in order to make long-term investments in areas such as AI, sensors, 5G and autonomous vehicles. "We had to have difficult conversations with our stakeholders," says Segars. "I remember being asked about the reasons for the decline in our margins and explained that we are investing in long-term opportunities. I always remember very well the shocked look on a guy's face. "

A few days after their meeting, Son called Segars: "I must speak to your president as soon as possible." "I'm sorry, that will not happen," replied Segars. Arm's Chairman Stuart Chambers was on vacation on a yacht in the Mediterranean. But Son insisted, "No, no, no. You must get there. I will take you by plane. Go back to the nearest port, I'll fly you there and I'll fly – and we'll have this meeting. "

They met at The Pineapple, a seafood restaurant in Marmaris Marina on the Turkish Riviera. His son had reserved all the tables – at the arrival of the Segars and Chambers, there was no one inside, other than the waiters. When Son arrived, he sat down and told the British leaders that he wanted to buy Arm and made them a series of promises: the company would remain an independent subsidiary of Softbank; he will not interfere in the daily management of Arm; and the company would be allowed to invest all profits in research and development.

"I was trying to play as cool as possible," Segars recalls. "We listened and you do what you are supposed to do, which is not in agreement with anything, say as little as possible".

The Segars and Chambers returned to Cambridge and forwarded the offer to the Board of Directors of Arm. In a week, a price has been agreed; the due diligence was completed in just two weeks; the whole process took ten weeks. "Acquiring a FTSE 100 company in such a short time was breathtaking," says Ian Houghton, vice president of investor relations at Arm. Rene Haas, president of Arm's intellectual property group, agrees: "These processes can last for years, but it was fast. They said to themselves, "Let's go, let's go, let's go." Move this thing. 'It literally went at the speed of light. I do not think physics would have allowed it to go faster in terms of regulation laws. He came down about as fast as possible. "

One Sunday, Arm's executive committee, which until then had not been aware of the ongoing negotiations, received an SMS from Ségar who had called a meeting that evening. "I did what Simon told me not to do and I texted another executive member who was expected at the meeting," says Haas. "We were all like" Simon is resigning? We had no idea. That evening, Arm's leaders gathered in the boardroom of the company. In addition to beer and chips, the Segars were a revelation. "The cat is out of the bag," he tells them. "Tomorrow, it will be officially announced that SoftBank has bought Arm."

For many people present in the room, the announcement made no sense. Why would SoftBank, a Japanese telecom company, buy Arm, an IP chip license company? "I thought, who is this Masa?" Recalls Haas. "What is he talking about? Does he really understand what we are doing? I went home and searched on Google SoftBank and Masa.

On Monday, July 18, 2016, Son began the day with a meeting with the then British Chancellor of the Exchequer, George Osborne. After the Brexit referendum the previous month, the government feared foreign takeover of what was the most valuable technology company in the UK. His son accepted a post-offer commitment – a series of legally binding promises to the UK takeover panel that over the next five years SoftBank would double the headcount and maintain head office in Cambridge.

That morning, the announcement of the acquisition was announced: SoftBank had bought Arm at a price of £ 17 per share, for a total of £ 24 billion. Hermann Hauser, who was involved in Arm's debut and is considered one of the UK's most influential entrepreneurs, told the BBC that it was a "sad day" for British technology.

In the afternoon, Son traveled to Cambridge to meet the members of Arm's Executive Committee. "He was radiant like a kid who just got a new toy," recalls Haas. He said, "This is the most exciting day of my life. I have been monitoring this business for 30 years. I am so impressed by all that society has done. "

A month later, Arm's management team traveled to San Carlos, California, to meet with his counterparts at SoftBank International. The British kicked off the meeting with a presentation of revenue plans and forecasts for the next four quarters. "He could not be less interested," says Haas. "He was playing on his iPad." However, when they started talking about the vision of the company, Son became enthusiastic and shared his own vision of 300 years. By 2035, there will be a billion connected devices, he said – a vast Internet of things, including autonomous vehicles, intelligent robots and artificially intelligent sensors, and Arm would be the company behind all these devices. "He was literally showing income tables and numbers until 2035," said Haas. "I remember thinking the very first time:" Is it theatrical? But now I realize that he really thinks very importantly. And you start to think that if you can possibly remove all that, it's really crazy.

Xu trunk

TThe acquisition of Arm is the largest technology contract ever concluded in Europe. It also marked the moment when many people in Britain, including business and technology insiders, had heard of SoftBank. The fact that this relatively unknown Japanese telecommunications company is in fact a global heavyweight investor has been a revelation for most companies, despite its significant purchases. In 2013, SoftBank acquired the US telecommunications company Sprint for $ 22.2 billion and the Finnish game developer Supercell for $ 1.5 billion. In 2014, she launched an investment office in California – a forerunner of the Vision fund called SoftBank International, which had previously invested in companies such as carpool startups, DiDi in China and Ola Cabs in India, and Tokopedia, a Indonesian society. trading company which currently has 80 million users. "We were a little late," says David Thévenon, a SoftBank partner. "People have always been confused with the name SoftBank. "Are you a bank? Are you a mobile operator? "We had to continue to explain that we have been making international investments for years."

And once SoftBank became a recognizable name, a new complication was needed: more money was needed to keep investing. Finding a solution to this problem was entrusted to Rajeev Misra, a former Deutsche Bank bond trader.

Misra grew up in New Delhi. In 1981, he enrolled at the University of Pennsylvania to study mechanical engineering and computer science. He then worked at Los Alamos in satellite design and software simulation at Reality Technologies, a Philadelphia-based startup, before returning to the Business School. Misra met with Son in 2002 while he was Global Head of Credit, Emerging Markets at Deutsche Bank. He loaned money to SoftBank, then helped structure the complex takeover of Vodafone Japan. They reconnected eight years later at a wedding in the summer of 2014. Alibaba – the company in which Son had invested $ 20 million in 2010 – had recently completed the largest IPO of the year. # 39; history. The manna allowed SoftBank to grow globally and it was his wish that Misra work again for him. "I did not know exactly what I was going to do, but it did look exciting," Misra recalls.

To buy the British company, SoftBank was forced to sell shares of Alibaba and Supercell; the whole brought the debt of the Japanese company to 105 billion dollars. "We wanted to invest in the AI ​​revolution that was announcing and in all these companies, which would disrupt all sectors of the planet," Misra said. "Financial services, cars, hotels, offices, residential brokerage, etc. We felt restricted because we spend a lot of money. We said, let's raise money. Let's become the largest investment fund on the planet. Masa called it the Vision Fund.

The investment badumption behind the Vision Fund is scale-based: a win-win strategy. They have targeted companies holding between 50 and 80% of the market and have oversold to enable them to grow rapidly and globally. "It's something I learned from Masa," says Misra. "Is it more important to grow quickly or to be effective? Effective means that your costs and benefits are correct. It's not about counting the number of dollars you spend on stationery, it's important, and gradually building in the United States or India. In our opinion, companies must first evolve. Once you have evolved, you will get everything good. Global barriers are disappearing, so if you do not become global quickly, someone else will do it. "

And for that, of course, they would need capital – and a lot. Initially, the fund would start with $ 30 billion – a huge amount, but not unknown among global funds. That was until Masa decided that $ 100 billion would be better.

Jake Chesum

Misra and Son have prepared a presentation highlighting the fund's history of investing. At the time, his portfolio already included Arm, Sprint, SoftBank Mobile, Alibaba and Yahoo! Japan – and refined their sales pitch. In 2016, between September and December, they traveled the world to meet US companies, pension funds and sovereign wealth funds in Asia and the Middle East. Although politely received, their proposal has mostly caused disbelief, $ 100 billion for a single investment fund being considered a totally unrealistic amount to try to raise, regardless of ambition.

However, despite the largely skeptical reception, some were intrigued by SoftBank's proposal. Mohammed bin Salman, Crown Prince of Saudi Arabia, is one of them.

A Saudi delegation of 500 people visited Tokyo in May 2017. Before meeting with Bin Salman, Son and Misra presented for the first time the idea of ​​the Vision Fund to the prince's closest advisers, presented by two former colleagues from Misra to Deutsche Bank. A few days later, they received the Crown Prince in the lavish guesthouse of Geihinkan State, in central Tokyo. According to an interview that Son gave to financier David Rubenstein later that year, Son told Bin Salman, "I want to give you a gift Masa, the Tokyo gift, a $ 1 trillion gift." Bin Salman replied, "OK, now it's interesting. His son replied, "Here's how I can give you a $ 1 trillion donation: you invest $ 100 billion in my fund, I give you a trillion dollars." His left the meeting with a non-binding commitment of $ 45 billion over five years.

Six weeks later, the two men ended up in Riyadh, the Saudi capital. His son visited Aramco, the state oil company, and spent time with the Saudi sovereign wealth fund. At that time, Apple, Qualcomm, Foxconn, Sharp and Mubadala of Abu Dhabi had also committed an additional $ 20 billion, and SoftBank added $ 28 billion from its own balance sheet. A signing ceremony in Riyadh took place in May 2017 to coincide with Donald Trump's first trip abroad as President of the United States – and the $ 100 Billion Vision Fund was officially launched.

SoftBank, which has never managed third-party money on this scale and has never launched a regulated fund, is now the owner of the largest investment fund in history, equivalent to all the money collected by the companies. venture capitalists in the last 30 months. The fund's CEO, Rajeev Misra, was under pressure. "We now had a fiduciary responsibility to all these companies, our partners, the Saudi people. And did we receive the first call from someone looking for capital two years ago? Recalls Misra. "No."

F. Scott Schafer

OOn the afternoon of December 2018, Misra hosted Wired at the Vision Fund headquarters in a four-story Edwardian building in Mayfair, London. He was barefoot and had rolled up the sleeves of his shirt, letting a Shamballa bracelet appear on a wrist. During the conversation, his mood changed between enthusiastic and thoughtful, when he stopped and blew with an electronic cigarette.

Misra's Vision Fund currently has a portfolio of more than 60 companies. This includes an estimated US $ 7 billion stake in the US manufacturer of Nvidia graphics processors; a $ 502 million investment in UK startup Improbable, which is developing large-scale virtual reality worlds for gaming and training; and a $ 250 million stake in the Slack productivity platform. A consortium led by SoftBank also invested about $ 8 billion in Uber.

Misra leads a team of general managers – seven of them based at the fund's outpost, two in Japan and two in London – who examine dozens of companies every week looking for investment opportunities. They meet regularly to collectively review the spread of offers submitted by individual partners.

These ideas are then peer reviewed, with an independent team conducting a due diligence audit that can take months to complete. Subsequently, the trades are submitted to the SoftBank Investment Advisers Committee, which includes Son and Misra. If there is a consensus on an idea, the entrepreneur is then invited to sit down with Son, who meets each founder before reaching an agreement.

"When I first met her in early 2017, I explained how my company had become a major hotel company in India," said Ritesh Agarwal, chief executive officer of Oyo Rooms, the largest Indian hotel network. "I did not think it was a good time to expand in China. He said I should definitely expand in China and consider spending a lot of time there. In November, we set up our first hotel in Shenzhen. We are now among the five largest hotel chains in China. His ability to think far is unprecedented. "

The lower limit of an investment in the Vision Fund is $ 100 million, but most is between $ 500 million and a few billion dollars, usually for 20 to 40 percent of the company. "It changed the game to invest dramatically," said Michael Marks, CEO of the US construction startup Katerra. "Technology companies are becoming billions of dollars worth of businesses. I think SoftBank was the first to see that it could deploy a lot more capital and generate big profits. Il investit trop pour oindre les gagnants. Il se peut qu’il s’agisse d’un risque colossal et que cela ne fonctionne pas, mais je pense que ce sera le cas. C’est une expérience fascinante », dit Marks.

Bien sûr, les investissements seuls et l'abondance de capital ne révèlent pas la véritable nature de la force sous-jacente de SoftBank: la stratégie de "grappes d'unités numériques" de Son, le réseau complexe de sociétés affiliées et de sociétés de portefeuille dont l'ensemble est théoriquement supérieur à la somme de ses parties. – une valeur ajoutée issue des partenariats et des opportunités commerciales qui font partie de la famille SoftBank.

Il s’agit d’un réseau mondial regroupant Apple, Qualcomm, Sharp, Alibaba, Sprint (quatrième transporteur en importance aux États-Unis), Yahoo! Le Japon (qui, contrairement à sa société mère américaine, reste le site Web le plus populaire dans son pays) et SoftBank Mobile, dont l’introduction en bourse de 23,5 milliards de dollars en décembre dernier était la deuxième plus grande cotation de marché de tous les temps. Le Vision Fund est également l'un des plus grands investisseurs étrangers en Inde, en Chine et en Europe. Il est présent à Mumbai, à Singapour, à Riyad et à Abou Dhabi. «Quand on pense à l’investissement, quand on regarde la plupart des entreprises américaines, elles ne font pas de commerce international, très peu d’entre elles font de véritables choses internationales», déclare Thévenon. "SoftBank, cependant, est partout."

Les entreprises ont l'autonomie nécessaire pour poursuivre ces partenariats, mais ce sont souvent des synergies gagnant-gagnant qui peuvent accélérer la croissance au niveau mondial. Prenons l'exemple de Ping An Good Doctor, un fournisseur de services de soins de santé de première ligne spécialisé dans l'IA, qui a signé un accord avec la société de covoiturage Grab, société de covoiturage en Asie du Sud-Est. En Chine, un rendez-vous chez le médecin ne peut durer trois heures que 90 secondes de consultation. Ping souhaite donc utiliser les plates-formes de géolocalisation de Grab pour accélérer le processus de triage et de dépistage initial des patients.

Oyo Rooms a réussi, grâce au déploiement d'une plate-forme d'apprentissage automatique, à standardiser son expérience hôtelière dans le monde entier, des vérifications basées sur la technologie à la gestion interne. Il a mené une campagne de partenariat avec DiDi en Chine en utilisant le slogan suivant: «Roulez confortablement avec DiDi et restez confortablement avec Oyo."

Paytm, une start-up de portefeuille mobile indienne qui traite 450 millions de transactions par mois, a récemment lancé PayPay au Japon avec Yahoo! Japon.

Et puis, bien sûr, il y a le bras. En collaboration avec Mapbox, la société de conception de puces de Segars a déjà mis au point un logiciel permettant aux appareils compatibles avec Arm de clbader automatiquement les limites de la route, le marquage des voies, les bordures, les pbadages à niveau et les panneaux de signalisation. Boston Dynamics déploie également des processeurs Arm dans le contrôle moteur de ses derniers robots.

C’est le type de partenariats que SoftBank a favorisés et qui permettront à Arm de rester au centre de la vision de la singularité de Son, permettant ainsi à un avenir peuplé de robots, de drones, de véhicules autonomes et d’un billion d’appareils connectés.

«Je pense qu'un autre thème très commun à tous nos investissements concerne les données», déclare Jeffrey Housenbold, badocié directeur du Vision Fund. «Il s’agit vraiment de données et de la fusion de l’homme et de la machine dans cette notion de singularité et d’intelligence artificielle. Comment traitons-nous ces données afin de créer un monde meilleur – pour rendre les gens plus heureux, pour enrichir leur vie, pour offrir de meilleurs produits et services? Peu importe que ce soit en utilisant des données pour permettre la découverte de médicaments ou en essayant de rendre la distribution de nourriture plus efficace. Les données circulent dans presque toutes nos sociétés. "

C’est la vision de Masayoshi Son: un avenir dans lequel chaque fois que nous utiliserons notre smartphone, appelons un taxi, commandons un repas, restons à l’hôtel, effectuons un paiement ou recevons un traitement médical, nous le ferons sous forme de données. transaction avec une entreprise appartenant à la famille SoftBank. Et, comme le dit volontiers Son: "Celui qui contrôle les données contrôle le monde".

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