Telecom and media conglomerate SoftBank’s venture capital arm, which had recently launched a $500-million fund, is scouting for early-stage investments in Asia, with India as a major focus, two people familiar with the matter said.
The South Korea-based SoftBank Ventures Asia will look to sign cheques worth $10-20 million in the consumer internet space, with a special interest in healthcare, fintech and artificial intelligence, said the first of the two persons cited above. Both of whom spoke under condition of anonymity.
SoftBank typically makes large late-stage investments in startups. It had pumped in $2.5 billion into e-commerce platform Flipkart through its Vision Fund. However, with SoftBank Ventures Asia, the focus is on early-stage investments, including Series B and beyond, which is a clear departure from SoftBank’s strategy.
“The fund was launched to make investments in early-stage deals," said the second person cited above. “This is how SoftBank’s ecosystem works—they have the Vision Fund for large investments and then they have some other funds focused on early-stage investments." To be sure, while India is a focus area, the fund hasn’t finalized any deal yet. It is also not clear whether it will hire anyone to pursue its investments in India.
A SoftBank spokesperson confirmed the launch of the fund, but declined to comment on the “scope or mandate of any particular venture to protect business confidentiality".
Though early-stage deals come with risks, several benefits are coupled with it. Investors Mint spoke with said that large funds are realising the upside to investing in early-stage companies, instead of pumping in large sums in 1-2 late-stage deals.
“It allows them to get a close view of how the sector is emerging," said Rutvik Doshi, managing director of early-stage VC firm Inventus Capital India. “Apart from getting a closer view of the sector, the early investor also gets preferential access to invest more money at a later stage and at a favourable valuation, which is why some of the large funds are trying to do this."
Take the case of Tiger Global Management. It was one of the early backers of Flipkart with an investment of $10 million in late-2009. Subsequently, across several follow-on rounds, it had infused around $1 billion into India’s e-commerce poster boy. When US’s retail giant Walmart acquired a 77% stake in Flipkart last year, Tiger Global made a blockbuster exit with $3.3 billion.
SoftBank is transitioning from a telecom behemoth to a tech investing giant. And, besides SoftBank Ventures Asia, the group has a few other funds looking at early-stage investments. For instance, RPS Ventures, which counts SoftBank Group Corp. as an anchor limited partner, has invested in social commerce platform Meesho. While SoftBank’s interest in the Indian ecosystem to make early-stage investments is a positive signal, VCs Mint spoke with said it may not necessarily translate into SoftBank’s Vision Fund backing these investments at a later stage.
“The two funds may have different mandates, different limited partners," said a venture capitalist at a top VC firm, requesting anonymity. “SoftBank’s Vision Fund is a global fund with different objectives. The early-stage fund is just one of their businesses in the larger scheme of things."
