Preparing for the Mobility Revolution

SoftBank: Building a Global Mobility Juggernaut
May 2019

SoftBank is deploying a grand scheme for the future of mobility thanks to its $100B Vision Fund. The Japanese tech, media, and telecom conglomerate founded 40 years ago by visionary and (now) billionaire Masayoshi Son, launched the fund in 2017, although the company started to invest in mobility in 2014. SoftBank has built significant momentum with massive positions in companies related to shared mobility, autonomous driving and supporting tech, e.g., over $11B in Didi. SoftBank is an active investor which leverages its significant stakes to steer portfolio companies towards an integrated web of global autonomous mobility solutions.

 

 

Investments in Complementary and Competing Companies

SoftBank’s Vision Fund has invested in 77 companies so far, of which 17 are dedicated to transportation and logistics. It has committed about $30B in the future of mobility, with a focus on autonomous driving and ride-hailing, according to McKinsey. SoftBank has assembled a portfolio of companies that are geographically or technically complementary, but also sometimes direct competitors — which is very unusual in the venture capital world — as is the case in ride-hailing.

 

> Shared mobility

SoftBank started to invest in this space in 2014, first putting money in Ola (India) and Grab (Southeast Asia). The company has since participated in multiple rounds which have led to very strong positions in the leading ride-hailing players. Overtime, SoftBank has invested $11B in Didi (20% stake), $8B in Uber (15%), $3B in Grab (25%), $2B Ola (26%) according to Reuters (see diagram). SoftBank also invested $200M in Brazil’s 99, before it was acquired by Didi. The various ride-hailing-related rounds in which SoftBank has participated between 2014 and 2018 are listed here. SoftBank also extended its reach to US-based peer-to-peer carsharing platform Getaround, in which it led a $300M round in 2018.

It must be noted that is very unusual for a VC to invest in competing companies, let alone five of them! In SoftBank’s case, the fund has seats on the boards of Didi, Uber, Ola and Grab, which it uses to be an active investor — more on this later.

 

> Autonomous Mobility as a Service

Back in 2016, SoftBank partnered with Japan’s Advanced Smart Mobility to create SB Drive, a JV aimed at commercializing mobility services that utilize self-driving technologies. The entity has since announced its plans to deploy several of Baidu’s Apollong autonomous shuttles in Japan.

 

Last year, SoftBank became very ambitious in the autonomous vehicle space. The Vision Fund committed to investing $2.25B ($900M upfront, then the balance once operations start) for a 20% stake in Cruise, which GM bought for about $700M in early 2016. The fund doubled down with a follow-on investment as part of the $1.15B round led by T. Rowe Price in May 2019, which values Cruise at $19B.

3. Cruise.jpeg

> Mobility-related services

Mobility services require a complete ecosystem, including the sharing platform, the autonomous vehicle tech and a series of adjacent services. SoftBank is bringing into its portfolio a number of companies to do just that.

 

The fund’s largest bet so far in this space is the $1.5B it invested last February in Chehaoduo, a Chinese used car trading platform — the local used car market is booming. Last year, the fund put money in a similar business in Europe, spending 460M€ to acquire 20% of Auto1 Group, a German used car platform. In the US, the fund invested $385M in Fair, which offers short term lease on used vehicles. These three portfolio companies offer the potential to reduce friction between ride-hailing platforms, drivers and their vehicles, this delivering synergies.

 

The fund also injected a reported $800M in US-based parking booking platform ParkJockey, with the plan to acquire two parking operators in the US and Canada. This could be both a short term play, leveraging new booking services, and a long term play, for the future value real estate. Indeed, parking spaces in downtown areas will be less in demand with the drop in car ownership.

 

Driving data and telematics have gained a lot of attention lately, for their impact on safety as well as on operating and insurance costs. This explains SoftBank’s $500M investment in Cambridge Mobile Telematics, a US-based company offering mobile telematics targeting insurance and safety. In a similar vein, the fund led a $159M round in US-based driving safety-focused startup Nauto.

 

> Logistics

Transportation is heavily disrupted not just for passengers but also for goods, e.g., cargo space sharing, last mile delivery or autonomous cargo vehicles. Last year, SoftBank participated in a $1.9B round in Full Truck Alliance, a Chinese cargo brokerage company. This February, the fund invested $940M for a 30% stake in Nuro, a last mile delivery company that is designing, building and operating its own, small, automated delivery vehicle. SoftBank also led a $1B round in Flexport, a US-based freight forwarding platform, and a $413M round in Indian e-commerce focused logistics operator Dehlivery. In the food delivery business, the fund invested led a $535M round in US-based DoorDash

> Supporting tech

Three other SoftBank portfolio companies are relevant for the future of mobility. First up, ARM, the UK-based chip designer SoftBank acquired for $32B in 2016, is making significant efforts to boost its traction in the automotive space. Second, data sharing between vehicles and the rest of the ecosystem is going to grow many folds, creating a potentially significant market for 80%-owned US telco Sprint. Last, the fund led a $121M round in Light, which now is trying to gain traction in the autonomous driving space with its multi camera vision system. 

 

 

SoftBank the Rainmaker

With stakes seemingly in the 15-30% range, SoftBank is a position to play an active role in the direction its portfolio companies take, bringing about synergies or reducing competitive pressure in certain geographies. The conglomerate has the ability — and the apparent intention — to restructure the global competitive landscape. This is likely what happened when Uber sold its Southeast Asian operations to local ride-hailing leader Grab against a 27.5% stake in the Singapore-based platform, just a few months after SoftBank’s first investment in Uber

 

Another example of this directed consolidation is Didi’s acquisition of Brazil’s 99, both having received significant funds from SoftBank. This was shortly before the fund’s first bet on Uber, the local market leader. For memory, Uber had sold its Chinese operations to Didi in 2016 against a 15-20% stake in the Chinese company — which in turn invested $1B in the American platform.

 

SoftBank also drives synergies among portfolio companies. Fair acquired Uber’s own fleet of 30k vehicles in 2018, allowing each party to focus on their core businesses. As part of the deal, Fair became the ride-hailing platform’s exclusive leasing partner for US drivers looking for a car to drive. In a similar fashion, it was recently reported that Uber and Nuro are discussing the use of the latter’s autonomous vehicles to deliver Uber Eats meals.

 

 

Partnerships with incumbent Japanese mobility players

Even though SoftBank is investing around the globe, they have not forgotten their Japanese roots, collaborating with Toyota and Honda. Toyota first put money in Uber in 2016 — i.e., before SoftBank did — and just injected anther $1B in Uber ATG (the R&D division) jointly with SoftBank and auto supplier Denso. The OEM has also invested in Grab ($1B) and GetAround ($300M), like SoftBank.

 

The partnership with Toyota runs deeper. Last year, the two companies founded Monet Technologies, a 50.25% /49.75% JV focused on ride-sharing and self-driving car tech. The JV aims to launch mobility services using the OEM’s e-Palette vehicles by the second half of the 2020s. Honda and Hino recently joined the pair. Together, they will first collect mobility data.

 

Similarly, Honda invested in Grab shortly after SoftBank did in 2016, and committed $2.75B in Cruise, again shortly after the fund did.

 

 

Investors and Investments 

SoftBank’s Vision Fund was established two years ago with $100B, $45B of which provided by Saudi Arabia's Public Investment Fund. Other investors include: Abu Dhabi’s sovereign fund Mubadala ($15B), Apple, Foxconn, Daimler, Qualcomm and Sharp. Thanks to its deep pockets, the fund can sometimes pump more money into a company than its founders initially expected to raise — the minimum check size is apparently $100M per deal. The fund has been reported to have threatened startup execs to invest in a competitor if they don’t accept SoftBank’s  money and demanding conditions. Founders are pushed to pursue international expansion and growth at any cost.

 

It seems hard to resist to SoftBank’s money. However, this is just what Ola reportedly did, turning down $1.1B for fear that the largest investment may lead to a forced sale of the Indian platform to Uber. SoftBank is probably the most powerful and controversial tech investor. But it is designed to serve Masayoshi Son’s long term goal, "We will create a company that can grow, 300 years down the road.”

Marc Amblard

Managing Director, Orsay Consulting

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