SoftBank seeks ‘unicorns’ among AI and machine learning ventures

A partner at SoftBank’s Vision Fund said the “core focus” of the world’s biggest venture capital fund is artificial intelligence and machine learning when it comes to identifying start-ups with the potential of being valued at $1 billion (Dh3.67bn) or more – dubbed “unicorns” in Silicon Valley-speak.

The Vision Fund is primarily focused on “companies that have access to large amounts of data and processing power available at a faster speed and at a cheaper cost”, said Faisal Rehman, who is also head of the Middle East region for the fund.

“When you look at businesses able to utilise AI or machine learning and make superior business decisions and are able to scale, that to our minds is the making of a unicorn.”

He said this “information revolution” is not confined to a single industry such as health care or financial services. Processing vast quantities of data to make business decisions “is a model that can be globalised”.

The comments were made during a panel at FinTech Abu Dhabi’s Investor Forum, the opening event to a threeday summit arranged by Abu Dhabi Global Market and Hub71.

For SoftBank, marquee investments of the telecom giant’s $100bn Vision Fund have faltered this year.

The Vision Fund is a majority shareholder in the struggling We Company, parent to WeWork, with about $7.5bn invested directly.

This month, WeWork forced out co-founder Adam Neumann after the co-working office space company’s plans to go public were withdrawn following intense criticism over its massive costs and Mr Neumann’s near-total decision-making power.

We Company’s value has plunged from a peak of $47 billion at the start of the year.

SoftBank has reportedly pulled together a financing package that would give it control of WeWork.

Meanwhile, Uber, which took $7.6bn from the Vision Fund early last year, has struggled on Wall Street, with its share price trading below its initial public offering price.

Amid trouble with these two high-profile companies, SoftBank’s shares have plunged 29 per cent since reaching a peak in late April.

The scrutiny on We Company and Uber, neither of which has ever made a profit, has caused some soul-searching among the venture capital community and SoftBank itself.

Without naming WeWork, Mr Rehman said “there has been a lot of focus of late, a lot of press” on the topic of the profitability of start-ups.

“There is a question of time horizon over when profitability should be achieved,” Mr Rehman

said. “Either the company has to be profitable or there has to be a very clear path to profitability that we [SoftBank] can see.

“But there is that change in sentiment. What that means is that companies may have to stay private for longer. They may have to have investors who have patient capital, who believe in growth, and who have a longer time horizon,” he said.

The Vision Fund, Mr Rehman said, is “patient capital”, echoing statements made by SoftBank chief executive and founder Masayoshi Son earlier this month.

“Companies like WeWork and Uber are criticised for being in the red, but in 10 years they’ll be making substantial profits,” Mr Son said, according to Reuters.

A second Vision Fund, announced in July, is aiming to raise $108bn. SoftBank said it plans to commit $38bn of its own capital in the new fund. Apple, Goldman Sachs, Microsoft, Foxconn and the sovereign wealth fund of Kazakhstan are expected to invest, and seven Japanese financial institutions have signed preliminary agreements to participate.

Abu Dhabi’s strategic investment company Mubadala and Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, which both participated in the first Vision Fund, are reportedly not taking part in the second fund.