Explain SoftBank's close ties with Saudi Arabia

The controversy over the disappearance of journalist Jamal Khashoggi has prompted business leaders to stand out from Saudi Arabia. US Treasury Secretary Steven Mnuchin, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Dara Khosrowshahi of Uber Technologies Inc. have all left the investment conference in Riyadh scheduled for October 23rd. founder Masayoshi Son is among the few who do not have it. Here is an overview of Son and SoftBank's links with Saudi Arabia – and their potential risks.

1. What is the SoftBank-Saudi relationship?

A relative. SoftBank's empire encompasses wireless business in Japan, solar power in India and a stake in Sprint Corp. However, in recent years, Son has focused more and more on investing in technology companies via a $ 100 billion fund called the Vision Fund. Saudi Arabia is the main investment partner of the fund. Its sovereign fund, the Public Investment Fund, or FIP, has committed $ 45 billion and plans to pay the same amount into a second fund. SoftBank also announced support for the $ 200 billion PIF solar project in Saudi Arabia.

2. How did the relationship start?

It's really a personal relationship. The latest transactions began when Crown Prince Mohammed bin Salman met with Son in Tokyo in September 2016. The Japanese billionaire has proposed to create the largest investment fund in history to fund technology startups. His son has since claimed to have convinced the man turned de facto the leader of Saudi Arabia in 45 minutes: "A billion dollars a minute". Prince Mohammed controls the FIP, which is at the center of the 33-year-old crown Prince's efforts to modernize the kingdom's economy and diversify away from oil.

3. Does Saudi money depend on the prince?

Not entirely. The FIP has already been used for about half of the $ 45 billion announced and it has a contractual obligation to the Vision Fund to provide the rest of the money, according to someone familiar with the matter. Like most venture capital funds, the Vision Fund does not collect all of the money raised from sponsors; instead, he calls investors to hand over money because he finds investment. The Vision Fund has drawn money as its investments, including Uber, WeWork Cos. And Slack Technologies Inc. SoftBank plans to withdraw more money from its sponsoring partners as it moves into new markets.

4. What about prospects for the second fund?

They are closely related to Prince Mohammed. In an interview in September, Son announced that he plans to create a new $ 100 billion fund every two or three years, and that he would likely accept the Prince's offer that more money would be available through the Saudis. "We are the creators of SoftBank Vision Fund," said Crown Prince during an interview this month. "Without the FIP, there will be no SoftBank Vision fund." But if the prince is involved in the disappearance of Khashoggi, it is not certain that the Saudis will continue to support. Without the support of Saudi Arabia, it would probably take longer for Son to raise additional Vision funds.

5. What did Son say about the controversy?

He did not comment publicly. Son is a member of the Advisory Board of Saudi Arabia's Future Investment Initiative, a conference to which Mnuchin and other personalities withdrew. The Saudi authorities have indicated that a first investigation would have shown that Khashoggi had been killed inside the consulate of the Kingdom of Istanbul and that 18 people had been arrested. the Crown Prince had no knowledge of the incident. This explanation failed to allay the controversy. President Donald Trump said it was a concern that Saudi officials have not indicated where Khashoggi's body was and he would not be "satisfied until we find the answer" to what happened. Bloomberg has also pulled out of the Saudi event as a media partner.

6. What does this mean for the Vision Fund?

This is not clear. The Vision Fund "will undoubtedly find itself in a harder environment to convince startups to take their money," said Amir Anvarzadeh, senior strategist at Asymmetric Advisors in Singapore. Herman Narula, CEO of startup Improbable Worlds Ltd., said he would not attend the conference in Riyadh. Improbably raised $ 502 million of investors at the head of which SoftBank had taken part last year. Those who choose to accept money from the Vision Fund may be negatively impacted by their employees. Earlier this year, Google employees at Alphabet Inc. managed to convince management not to renew its Maven AI contract with the US military and to withdraw from the Pentagon's JEDI cloud computing $ 10 billion.

6. What does this mean for His personally?

His son, who turned 61 in August, announced his intention to give up day-to-day control before his 70th birthday. But before that, he wants to ensure that SoftBank is able to survive the successive waves of technological change of the next 300 years, starting with the imminent impact of artificial intelligence. The Vision Fund is the cornerstone of what His calls the cluster of No. 1 strategy – the idea of ​​taking non-controlling stakes in leading companies in the sector and encouraging them to cooperate. He recently said that SoftBank's companies had a common mission: "Information Revolution – Everyone's Happiness". This story may be more difficult to maintain if it is close to an ostracized Saudi Arabia.

(An earlier version of this story corrected the age of Masayoshi Son in the last paragraph.)

– With the help of Grant Clark.