Softbank to Invest Up to $5 Billion in Web Startups (Update3)
By Jane Baird
Softbank to Invest Up to $5 Billion in Web Startups (Update3)
(Adds worldwide investment plan to first paragraph, adds
company executive quote in fourth paragraph.)
London, March 8 (Bloomberg) -- Softbank Corp., Japan's
largest Internet investor, said it plans to invest as much as $5
billion in Internet ventures worldwide in the 16 months and will
join with partners to put more than $1 billion in Europe.
Softbank UK Ventures, backed Softbank, Rupert Murdoch's News
Corp. and other investors, will funnel $450 million into Internet
and wireless ventures in the U.K. Softbank Europe Ventures, with
backing from Softbank, Vivendi SA of France and other partners,
will invest about $550 million in continental Europe.
Tokyo-based Softbank over the past five years has invested $2
billion to build itself into one of the world's biggest supporters
of Internet ventures, with stakes in companies such as in Yahoo!
Inc. and GeoCities. Its expanded investment program is scheduled
to unfold over the next 12 to 16 months.
``The Internet by definition is global, and the better
companies that are coming up will have a global vision,' said
Eric Hippeau, president of Softbank's international arm.
Softbank plans to invest as much as $2 billion in the U.S.,
at least $1 billion in Japan and about $2 billion in the rest of
the world, including Europe, Hippeau estimated. It has created
funds to cover the globe, including Latin America, Asian countries
and emerging markets worldwide.
Since 1995, the holding company has invested in more than 300
companies worldwide, he said. The market value of its 120 publicly
traded investments amounts to about $49 billion, almost 25 times
the initial investment. ``That's the tip of the iceberg' compared
with companies in its portfolio that remain private, Hippeau said.
Europe's Year?
In Europe, ``the quality of business plans and entrepreneurs
is extremely high; there are a lot of really great ideas,' he
said. The coming 12 months are ``going to be the year of Europe as
far as the Internet is concerned.'
The Bloomberg European Internet index of 76 companies with
market values of at least 100 million euros ($96 million) has
risen more than five times since the end of September. That
compares with a decline of 8 percent in the previous six months.
The index includes Tiscali Spa, an Italian telephone company
that offers free Internet services; its stock has risen more than
10-fold since it began trading in late October. Other members are
Baltimore Technologies, a U.K. Internet-security company that has
risen nearly 11-fold since September, and Intershop Communications
AG, a German Internet shopping software maker whose stock has
risen more than six-fold since September.
Softbank last July formed partnerships with Vivendi and News
Corp. to invest $150 million to help U.S. online companies start
operations overseas, including in Europe, India and Australia.
Buy List
These partnerships have announced 15 investments so far,
including joint ventures with U.S. Internet companies such as
Buy.com Inc., an online retailer; E-Loan Inc., an online mortgage
provider, and Interliant Inc., which runs Web sites and provides
services for other businesses.
The new Softbank UK Ventures fund will receive $275 million
from Softbank, $150 million from epartners, which was created by
News Corp. last June to invest in Internet companies, and $25
million from other limited partners.
Two epartners executives, Mark Booth and Bruce McWilliam,
will manage the London-based fund with 10 employees and will focus
on three types of companies: those seeking the first round of
outside funding; those in later stages of development before
selling shares publicly; and wireless companies, Booth said.
``This will make us the single biggest investors in the U.K.
for Internet companies,' Booth said.
Softbank will contribute $400 million to Softbank Europe,
Vivendi will put up $100 million and limited partners another $50
million. Hippeau will be acting general manager until a permanent
person is found. Softbank Europe will have offices in Paris and
Munich and may add Berlin, Stockholm, Madrid and Milan, he said.
Investment Strategy
Both funds will prefer to take stakes of 10 percent to 30
percent in ventures, leaving the entrepreneurs to run them, said
Hippeau. The limited partners will help locate opportunities. ``We
like to co-invest' and form an investment community, he said.
This week, Goldman Sachs Group Inc. cut its target price for
Softbank stock, citing a decline in the value of its Internet
portfolio in Japan after share prices fell for other Japanese
companies with similar venture capital operations. Softbank's
shares fell 3.7 percent to 130,000 yen today.
``Investors have became concerned over the feasibility of
Softbank's ability to carry out its business strategy,' said Kota
Nakako, an analyst at Warburg Dillon Read. Softbank share prices
are ``very sensitive to investor psychology.'
Softbank's shares have fallen 29 percent since Feb. 18.
Hippeau discounted the analyst ratings and stock slump.
``People will say we've gone too far, too fast, and every
time we've demonstrated that we can bring an enormous amount of
value,' he said.
The company also announced the creation of Softbank Global
Ventures, headed by Ron Fisher, to manage all of its investments
outside of Japan. Softbank Venture Capital will combine two U.S.
funds, and Softbank International Ventures, run by Hippeau, will
manage all other funds in markets outside of Japan.
``We are committed to bringing the advantages of the Internet
to markets all over the world and need a business structure that
helps us manage this enormous rate of growth efficiently,' said
Softbank Chief Executive Masayoshi Son in a statement. |
