SoftBank eyes five Indian start-ups; may invest up to $100 mn in each

SoftBank is in talks with about four to five Indian start-ups, with valuations ranging from $400 to $500 million, to invest and support them in their next stage of growth and eventually help them become unicorns. The areas the investment giant is looking at include the B2C space, enterprise, and media, said sources aware of the development.

The Masayoshi Son-led Japanese tech investor plans to put in $50-100 million in each of these companies. This is far lower than what the legendary investor has put in many of his companies in the country.    

SoftBank is also seeking opportunities in companies where existing investors want to exit through a secondary sale because the companies have postponed their IPO plans. If these deals come through, it is looking at investing over $100 million in each of these deals.  

No SoftBank spokesperson could be reached for a comment on this.    

In 2022, SoftBank’s India investments, which were mostly in software as a service (SaaS) companies, added up to only $500 million — a dramatic fall from the $3.2 billion it had invested in 2021. Currently, its total investment in Indian companies is pegged at $15 billion. It has also undertaken exits valued at $6-7 billion.

Sources aware of its strategy in the country say that the company could also end 2023 flat, with total investments below $500 million. But this could change if it is able to strike some of the secondary sale deals.

Analysts say that most of the high-growth companies where SoftBank is an investor, such as hotel aggregator OYO, and e-commerce platform Meesho, amongst others, have been drastically reducing cash burn, which could affect their earlier heady growth.

Besides, most late-stage growth companies have decided not to raise fresh funds at a lower valuation or even a similar valuation. Instead, they are waiting it out for the next six months. Hence, SoftBank has limited opportunities to invest in newer rounds in these companies, sources say. 

SoftBank and the Vision Funds have faced tough challenges globally due to the meltdown of tech, forcing them to slash their spending spree in tech start-ups. However, the company announced in its results recently that it will again push the pedal with a new focus — this time, on artificial intelligence (AI). That may not mean much for India, which has few start-ups in this area with even reasonable scale.  

India remains SoftBank’s third largest market after the US and China and this is reflected in the fact that the top management of the company were in the country in March this year. The team included Son, Greg Moon, who is the executive managing partner of SoftBank Investment Advisers, and Navneet Govil, executive managing partner and CFO. They had meetings with the top brass of their investee companies.

Most of the investments SoftBank made in India have done well. For instance, it entered Ola Electric at a valuation of $1 billion, but once the latest round of fundraising gets cleared, the company will be valued at $6 billion. Similarly, while the company invested in Meesho at a valuation of $1.2 billion, the start-up’s last fundraise was at a valuation of $4.9 billion.  

Strategy shift

• SoftBank also looking at secondary-sale opportunities in growth firms that have postponed their IPO plans
• Global focus on investing in AI start-ups, but such opportunities could be limited in India
• In 2022, SoftBank’s India investments, which were mostly in SaaS firms, added up to only $500 million
• The company could end 2023 flat, with total investments below $500 million