SoftBank CEO plays matchmaker to boost portfolio firms
Chief exec likes to keep business in family, such as Yahoo Japan renting from WeWork
When SoftBank Group Corp. invested in WeWork Cos. last year, the U.S. office-rental company got more than $4.4 billion in cash. It also got a chance to win business from hundreds of companies in which SoftBank has a stake.
Today, more than a quarter of WeWork desks in Tokyo are occupied by SoftBank portfolio companies, including teams from Yahoo Japan Corp., of which SoftBank owns 43%. Ride-hailing company Uber Technologies Inc., in which SoftBank holds a 15% stake, is moving into one of WeWork’s priciest Tokyo spaces. SoftBank is also considering moving its headquarters to WeWork.
Making such connections has become an integral part of strategy at SoftBank, the world’s biggest technology investor and operator of the $92 billion SoftBank Vision Fund. SoftBank’s chief executive, Masayoshi Son, has long studied Japan’s prewar corporate “zaibatsu,” conglomerates with names like Mitsui and Sumitomo that extended their tentacles across the entire economy and still survive today in looser form.
The 60-year-old Mr. Son, who talks of a 300-year plan for SoftBank, is urging the members of his team to work together, often playing matchmaker for executives. Recently, he set up an internal group with the job of assessing possible partnerships and synergies, said a SoftBank executive. The group is led by Marcelo Claure, former chief executive of Sprint Corp., which is controlled by SoftBank but plans to combine with T-Mobile US Inc.
The portfolio companies “are helping each other and stimulating each other,” with SoftBank facilitating, Mr. Son said at The Wall Street Journal’s CEO Council Asia event in May. But there is a potential downside, too, if companies get pushed into inferior alliances just because Mr. Son wants it.
“The question is how heavyhanded SoftBank is with their ‘recommendations,’” said Waverly Deutsch, professor of entrepreneurship at the University of Chicago Booth School of Business. “Are these partnerships best for the portfolio companies or best for SoftBank?”
At the annual SoftBank World event in Tokyo in July, Mr. Son looked into the audience and saw two executives from SoftBank investees sitting next to each other—one from Indian mobile app Paytm, which allows people to transfer money digitally, and another from a Chinese company that sells property insurance online.
He had an idea: What if the two were to tie up? With 350 million customers and eight million affiliated merchants in India, Paytm knew people who needed insurance, and the Chinese company, ZhongAn Online P&C Insurance, knew about insurance pricing.
“Imagine how low costs can be to provide dynamic, real-time pricing for each merchant,” Mr. Son told the crowd. “I get excited just thinking about what wonderful, revolutionary products we will see when the AI of both of these companies comes together.”
It wasn’t just empty musing. One97 Communications Ltd.’s Paytm is in talks about tie-ups with ZhongAn and other Chinese companies with which SoftBank is connected, said a Paytm executive.
In Japan, meanwhile, Paytm said in late July that it was teaming up with Yahoo Japan and SoftBank’s local mobile- phone operator to introduce smartphone payment services.
Mr. Son’s push for cooperation echoes to some degree the longstanding practice of leading venture capitalists in Silicon Valley, who often use their connections to help the startups in which they invest.
What is different about SoftBank is not only its size—the Vision Fund is 10 or more times the size of leading U.S. funds— but also its attention to the horizontal relationships between its portfolio companies, which Mr. Son sees as critical to helping companies like Paytm grow quickly.
In contrast to the U.S. focus of many Silicon Valley venture capitalists, SoftBank group collaboration more often involves expanding in the big Asian markets of Japan, India and China where it is strongest.
Oravel Stays Private Ltd.’s OYO, an Indian site for booking budget hotels, wants to target China’s growing middle class. It is talking to Chinese ride-hailing company Didi Chuxing Technology Co. about partnerships, including joint ad campaigns, to draw customers in big cities like Shenzhen and Guangdong where millions use Didi, said Ritesh Agarwal, the 24-year-old founder of OYO. He said the connection between OYO and Didi came from Mr. Son, who has stakes in both.
In July, OYO had over 50,000 rooms in China, up from 42 in November, Mr. Son said. He credited the company’s ability to process data to predict demand and adjust prices millions of times a day.
“SoftBank has been a source of constant support,” Mr. Agarwal said, adding that Mr. Son “is someone I am very inspired by.”
In May, Mr. Son said he introduced Auto1 Group, the German online car dealer, to Indian officials and to the Indian ridehailing company Ola, to discuss a potential partnership to help the car dealer expand outside Europe. An Auto1 spokeswoman said the company has had “exchanges” with Ola and other SoftBank family members but declined to elaborate. An Ola spokeswoman declined to comment.
Mr. Son makes a point of not appearing to force ideas on younger executives. At a dinner for companies with SoftBank ties in July, he reeled off ideas for partnerships, but made a point of saying they were just suggestions, said Mohit Aron of data-storage startup Cohesity Inc., one of the executives present.
Still, coming from Mr. Son— who made billions of dollars with an early investment in China’s Alibaba Group Holding Ltd.—a suggestion can be hard to ignore.
But Mr. Son’s strategy could weigh down successors with ties that are hard to sever, said Atsushi Osanai, a professor at Waseda Business School in Japan. Mr. Osanai said that even Mr. Son took years to extract himself from the Sprint investment after it fell short of expectations.
Mr. Son says he has learned to take minority stakes that are less painful to divest as companies mature to keep up with technological shifts.
“I want to create a group that is made up of only No.1 companies with outstanding growth,” Mr. Son told shareholders in June.
There’s a potential downside if companies get pushed into inferior alliances just because the CEO wants it