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From: Sam5/23/2017 1:53:22 PM
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SoftBank's Son Chases Boyhood Dreams With $100 Billion Fund
by Peter Elstrom and Pavel Alpeyev
May 21, 2017, 12:01 PM EDT May 22, 2017, 1:55 AM EDT

  • Apple, Qualcomm and Saudis are backing new tech fund
  • Son’s spending spree may inflate valuations, crimp returns

When Masayoshi Son was a boy growing up on Japan’s southern island of Kyushu, he kept a notebook to scribble down new inventions he hoped to create one day. Today, the SoftBank founder has almost $100 billion to invest on making the next big thing a reality.

Son’s SoftBank Group Corp. closed the first round of a planned $100 billion investment fund, with money raised from Saudi Arabia, Abu Dhabi, as well as Apple Inc. and Qualcomm Inc. The Vision Fund gives the 59-year-old access to a pool of capital unparalleled in the worlds of private equity or venture capital -- the equivalent of four Silver Lakes or 15 Sequoia Capitals.

Son isn’t one for understatement. He has said, without irony, that he has a 300-year plan for SoftBank and aims to build the world’s most valuable company. With the Vision Fund, Son vows to become the biggest investor in tech over the next decade, as he bets on the future of artificial intelligence, connected devices, satellites and the integration of computers and humans. Indeed in April, he led the $5.5 billion investment in China’s Didi Chuxing, the largest venture funding on record.

“We saw a big bang in PCs, we saw a big bang in the internet,” Son said in February on a call with shareholders. “I believe the next big bang is going to be even bigger. To be ready for that, we need to set the foundation and that foundation is SoftBank Vision Fund.”

Son has some enthusiastic supporters, with very deep pockets. Saudi Deputy Crown Prince Mohammed bin Salman agreed to make his country the cornerstone investor with a $45 billion check after a meeting with Son. Besides Apple and Qualcomm, Foxconn Technology Group and Sharp Corp. are also putting in capital. SoftBank said Saturday the fund has $93 billion in committedcapital and aims to reach $100 billion with a final close within six months.

Forget Retirement. SoftBank CEO Aims to Be Biggest Tech Investor

Son’s mega-fund will unleash an unprecedented amount of money into sectors already seen as overcapitalized. Private equity returns have plummeted in recent years because there’s too much money chasing too few deals. Venture capital faces similar issues.

“A $100 billion fund is mind boggling,” says Steven Kaplan, a professor at University of Chicago’s Booth School of Business who co-founded its entrepreneurship program. “There’s too much capital now so bringing in more capital doesn’t make any sense.”

Kaplan struggled to think of a precedent for what Son is attempting. He said the closest parallel may be the late 1990s when money poured into U.S. internet companies, fueling sky-high valuations -- right until the market crashed.

Private equity firms are sitting on record piles of cash. The amount of unspent money hit $820 billion at the end of 2016, up from $755 billion a year earlier, according to the research firm Preqin. The venture total hit $142 billion, compared with $127 billion at the end of 2015.

“There is already a tremendous amount of dry powder out there,” says Felice Egidio, the firm’s head of venture capital products. “Investment opportunities are getting harder and harder to come by.”

In other words, Son may be more than the most powerful investor in tech -- he may be the most dangerous too. A flood of capital into artificial intelligence or driver-less cars, can inflate valuations and spawn too many competitors, leaving everyone struggling to make money.

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