The golden goose?

16 Pages·2015·1.78 MB·English

Asia’s Private Equity News Source avcj.com January 27 2015 Volume 28 Number 04
EDITOR’S VIEWPOINT
Singapore’s VC drive
continues unabated
Page 3
NEWS
Bain, Blackstone, Capital
Today, Creador, Darby,
Hosen, IFC, L Capital,
Saratoga, Temasek
Page 4
DEAL OF THE WEEK
Goldman backs Antuit in
big data expansion drive
Page 12
ClearVue finds an angle
in cross-border cosmetics
Page 13
FUNDS
Banyan races to a finish
on second China VC fund
The golden goose? Page 13
LP INTERVIEW
TRS Illinois on co-invest,
separate accounts
SoftBank brings its Midas touch to Asia’s leading technology start-ups Page 7 Page 15
FOCUS DEAL OF THE WEEK
A question of clarity Paying a premium
China set to remove uncertainty over VIEs Later-stage players bet big on Meituan
Page 11 Page 12
12th Annual Private Equity & Venture Forum
Australia &
2015
New Zealand
4-6 March • The Westin Sydney
REDISCOVERING THE OPPORTUNITIES IN PRIVATE MARKETS
Senior industry professionals confirmed to speak include: CL
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Investment Manager - Director, Private Equity n
Private Equity FUTURE FUND Fri
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HOSTPLUS a
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Natalie Meyenn Klaus Bjørn Rühne Ben Frewin
Head of Private Equity Partner Managing Director
MLC ATP PEP ARCHER CAPITAL
Tim Martin Jessica Archibald Clive Boyce
Partner Managing Director Investment Manager
CRESCENT CAPITAL TOP TIER CAPITAL PARTNERS FUNDS SA
PARTNERS
Benjamin C. Gray Simon C. Moore Michael Weaver
Managing Partner Managing Director Manager, Private Markets
TPG CAPITAL THE CARLYLE GROUP SUNSUPER PTY LTD
Padmanabh (Paddy) Sinha Robert Credaro Steve Martinez
Managing Partner, Head of Growth Assets Head of Asia-Pacific
Private Equity FIRST STATE SUPER Snr. Partner, Private Equity
TATA CAPITAL APOLLO MANAGEMENT, L.P.
For the latest programme and speaker line-up, visit avcjausnz.com
Registration: Carolyn Law T: [phone] E: [email protected]
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12th Annual Private Equity & Venture Forum
EDITOR’S VIEWPOINT
Australia &
2015 [email protected]
New Zealand
Start-up central
4-6 March • The Westin Sydney Managing Editor
Tim Burroughs (852) 3411 4909
Staff Writers
Andrew Woodman (852) 3411 4852
Winnie Liu (852) 3411 4907
Creative Director
Dicky Tang
Designers
Catherine Chau, Edith Leung,
Mansfield Hor, Tony Chow
Senior Research Manager
WHEN LOOKING FOR AN EXAMPLE OF for several start-ups in the tier below. Helen Lee
how Singapore start-ups previously struggled Despite this success, the various agencies Research Associates
Herbert Yum, Jason Chong,
to get funding, one of the founders of tenCube tasked with turning Singapore into a technology
REDISCOVERING THE OPPORTUNITIES IN PRIVATE MARKETS Kaho Mak
was happy to oblige. Bootstrapped into existence hub are not easing up. This week saw the official
in 2005, the mobile security solutions provider opening of an expanded JTC LaunchPad @ one- Senior Marketing Manager
Senior industry professionals confirmed to speak include: CL Sally Yip
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pir2 E the size tenCube was looking for. The company Infocomm Development Authority of Singapore Manager, Delegate Sales
Neil Stanford David Simons es 0 eventually received some informal seed funding (IDA) has also launched initiatives to help local Pauline Chen
Investment Manager - Director, Private Equity on 0 and then a formal seed round in 2010 from the start-ups enter Europe and the US. Director, Business Development
Private Equity FUTURE FUND Fri government-backed Spring Seeds initiative and Finally, the Singapore Exchange has teamed Darryl Mag
HOSTPLUS da India-based One 97 Communications. Later that up with Clearbridge Accelerator to create a
y Manager, Business Development
year it was sold to McAfee. capital-raising platform for small- and medium-
Anil Nathani, Samuel Lau
Natalie Meyenn Klaus Bjørn Rühne Ben Frewin Five years on from that exit, Cheung is sized enterprises (SMEs) in Asia. Full details have
Sales Coordinator
Head of Private Equity Partner Managing Director running Singapore-based property website yet to emerge but platform should present start-
Debbie Koo
MLC ATP PEP ARCHER CAPITAL 99.co, which received initial funding from several ups with another source of funding.
investors. He claims there is now too much seed A number of industry participants now argue Conference Managers
Jonathon Cohen, Sarah Doyle,
capital chasing start-ups in Singapore. that Singapore has reached critical mass: there
Tim Martin Jessica Archibald Clive Boyce Conference Administrator
Twelve months ago the concern was that is sufficient momentum in the market that the Amelie Poon
Partner Managing Director Investment Manager
there were insufficient Series A investors to ecosystem can be self-sustaining. This suggests Conference Coordinator
CRESCENT CAPITAL TOP TIER CAPITAL PARTNERS FUNDS SA
take these start-ups from revenue generative to the government no longer needs to play such a Fiona Keung, Jovial Chung
PARTNERS
profitable. In this area, too, Cheung sees progress. forthright role as initiator, but the reality is more Publishing Director
Benjamin C. Gray Simon C. Moore Michael Weaver He estimates there is $150-200 million available nuanced. Rather than throw money directly at an Allen Lee
Managing Partner Managing Director Manager, Private Markets for Series A investments, with most companies issue, there are calls for capital to be directed at
TPG CAPITAL THE CARLYLE GROUP SUNSUPER PTY LTD worth backing now able to get VC support. the infrastructure surrounding it. Some programs
The momentum Singapore has achieved is are already focused on this; in other areas more
the result of government initiatives and private can be done. Incisive Media
Padmanabh (Paddy) Sinha Robert Credaro Steve Martinez sector participation. Lacking a decent pipeline It is not just about providing affordable Unit 1401 Devon House, Taikoo Place
Managing Partner, Head of Growth Assets Head of Asia-Pacific of start-ups in which VCs could invest, the premises, but also reasonable immigration 979 King’Hs oRnoga dK,o Qnugarry Bay,
Private Equity FIRST STATE SUPER Snr. Partner, Private Equity Technology Incubation Scheme (TIS) was put legislation (so that talent can come into T. (852) 3411-4900
TATA CAPITAL APOLLO MANAGEMENT, L.P. F. (852) 3411-4999
in place to support early-stage investors. Other Singapore), better access to international E. [email protected]
URL. avcj.com
For the latest programme and speaker line-up, visit avcjausnz.com programs were also introduced, while at the networks (so that ideas can get out and
same time angel investors and private sector achieve scale), and a deeper appreciation of the Beijing Representative Office
Registration: Carolyn Law T: [phone] E: [email protected] incubators began to proliferate. Similarly, the economic contribution made by independent No.1-2-N(2o).-6B6- AN5a5n4s, h1astta Bnu,ilding,
Sponsorship: Darryl Mag T: [phone] E: [email protected] Enquiry Series A gap has been filled by a combination innovation (so that people are willing to do Chaoyang District, Beijing,
People’s Republic of China
of reconfigured existing programs – such as the it in the first place). While hard infrastructure T. (86) 10 5869 6203
Co-Sponsors Early Stage Venture Fund (ESVF) initiative – and can be built in a matter of months, it must be F. (86) 10 5869 6205
E. [email protected]
greater interest from overseas investors. complemented by less tangible qualities that can
Rakuten’s $200 million acquisition of take years to bed down.
Singapore-headquartered video-streaming site By making it easier for entrepreneurs to
The Publisher reserves all rights herein. Reproduction in whole or
Viki in 2013 and Seek’s purchase of Jobstreet do business more people will want to be in part is permitted only with the written consent of
for over $500 million in 2014 remain by some entrepreneurs. AVCJ Group Limited.
ISSN 1817-1648 Copyright © 2015
distance the biggest exits. However, GrabTaxi (a
taxi-booking platform founded in Malaysia but
Supporting Organisations Media Partners now headquartered in Singapore) and Razer (a
gaming peripherals business based in the US Tim Burroughs
but founded by a Singaporean) now command Managing Editor
valuations of $1 billion and there are high hopes Asian Venture Capital Journal
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avcjausnz.com #avcjausnz the event latest updates Number 04 | Volume 28 | January 27 2015 | avcj.com 3
NEWS
GREATER CHINA Talent shortages, financing JD Capital invests in online
issues hinder China buyouts finance site 91Wutong
Bain completes exit from Buyout transaction value in China is 10 times JD Capital, Tongxin Securities Direct Investment
China’s Gome larger than nine years ago, but executing deals and Shenzhen Jidi Xintian Venture Capital have
is still challenging in terms of getting financing invested in a Series A round for 91Wutng, a
Bain Capital has made a full exit from Chinese and placing the right operational expertise with Chinese online finance platform. The company
retailer Gome Electrical Appliances Holding after portfolio companies. focuses on high net worth individuals and
selling its remaining shares for about HK$1.06 “There are two main focuses for the buyout institutional investors that are looking to buy
billion ($137 million). The PE firm invested deals. One is what is your operational angle? wealth management products offered by trust
RMB1.59 billion ($233 million) in Gome in June Can you bring something from your platforms, companies and securities firms.
2009, giving it a 9.98% stake. Last July Bain sold a network, portfolios and prior experiences?”
5.4% stake for $130 million. Chinese radio mobile app
raises $20m Series C round
Infrastructure funds sell
rail asset to Cheung Kong Lizhi.FM, a Chinese radio broadcasting mobile
app, has raised $20 million in a Series C round of
3i Infrastructure, Morgan Stanley Infrastructure funding from Chinese smart phone manufacturer
Partners and Star Capital Partners have agreed Xiaomi and Shunwei Capital Partners. Existing
to sell Eversholt Rail Group, one of the UK’s three investors Matrix Partners and Morningside
major rolling stock operators, to a consortium Technologies also participated.
led by Hong Kong-based Cheung Kong
Infrastructure (CKI) at an enterprise valuation of Carlyle-backed Meinian
GBP2.5 billion ($3.8 billion). Onehealth invests in rival
L Capital invests $100m in Edward Huang, senior managing partner at The Meinian Onehealth Healthcare, China’s largest
mall operator Sasseur Blackstone Group, told the Hong Kong Venture private provider of healthcare check-up services
Capital & Private Equity Association’s (HKVCA) Asia and a portfolio company of The Carlyle Group,
L Capital Asia, a PE firm sponsored by luxury forum. “The second thing is, ‘Are the financing has invested in industry rival Ciming Health
goods conglomerate LVMH, has invested more markets mature enough?’ If the banks understand Checkup Management Group. CDH Investments
than $100 million in a second round of funding M&A products the better, that could create better and Tiantu Capital are both investors in Ciming.
for Sasseur Group, a Chinese outlet shopping financing opportunities.”
mall developer. Warburg Pincus, which invested Martin Mok, a partner with EQT Partners, Darby mezz fund exits
$250 million in 2013, also participated. noted that transaction value has grown from furniture manufacturer
$100-200 million in 2006, when the firm
RRJ, IFC invest $85m in completed the first buyout in China, to $6 billion Darby Private Equity, the PE arm of Franklin
China Everbright Water over the last two years. If take-private deals are Templeton Investments, has exited its holding
excluded, there have been 15-20 buyouts worth in Chinese furniture manufacturer Shayne
RRJ Capital and the International Finance $1.5 billion. The primary sources of these deals International Holdings for an undisclosed
Corporation (IFC) have agreed to subscribe to are succession planning and corporate spin-offs. sum. Darby invested $20 million in Shayne in
S$113.5 million ($85 million) in new shares issued However, the question remains as to whether November 2006 via its second mezzanine fund.
by China Everbright Water, a Singapore-listed this activity - which accounts for about 10% of
environmental protection and alternative energy the entire private equity market in China - is SCG leads $16m round for
business. The two investors will hold stakes of sufficient to justify a buyout-dedicated fund. China game review site
2.72% and 1.91%, respectively. “It depends on the size of your fund. If you’re a
very large fund, doing buyout deals in one place, Shenzhen Capital Group (SCG) has led a RMB100
Capital Today, New Horizon obviously it would be crowded. But in general, million ($16 million) Series A round of funding for
lead round for Beibei given that you have 10% of the market, you can Mofang.com, a Chinese mobile gaming reviews
deploy $150-200 million in mainland China alone site, with participation from Matrix Partners.
Capital Today and New Horizon Capital have led easily over four years,” Mok said. The company wants to develop a customized
a $100 million Series C for Beibei.com, a Chinese review service and establish a social networking
online discount retail platform for maternity and platform for users.
baby products. Existing backers Banyan Capital an undisclosed sum. Hosen made the acquisition
and IDG Capital Partners also took part. through its New Hope Investment Fund, which NORTH ASIA
is anchored by New Hope Group, China’s largest
China’s Hosen buys US beef animal feed producer. Last year the fund also
processor ventured overseas to buy a majority stake in Japan’s Mitsui Global backs
Australian beef producer Kilcoy Pastoral. Through clinical SaaS start-up
Chinese agritech-focused PE firm Hosen Capital Kilcoy, Ruprecht will have access to a new source
has acquired Ruprecht, a US beef processor, for of high-quality beef and lamb products. Japan’s Mitsui Global Investment and Dolby
4
avcj.com | January 27 2015 | Volume 28 | Number 04
NEWS
Family Ventures have together invested $12 Creador, SMRT seek buyout Kaizen backs India’s
million in cloud-based, clinical study software of Masterskill Education Impartus Innovations
start-up goBalto. Headquartered in Silicon Valley,
with bases in Pennsylvania and Singapore, Creador and SMRT Holdings have agreed to buy Education-focused Indian GP Kaizen Private
goBalto was set up by Jae Chung – founder of a 30.75% stake in Malaysia-based Masterskill Equity has made a $4.1 million Series A
Korean bio-pharma company Celltrion – and is Education Group from the major shareholder for investment in video learning platform Impartus
led by CEO Sujay Jadhav. MYR69.4 million ($19.2 million) and now plan on Innovations. The company’s flagship products
completing a full buyout of the business. The GP are Automated Lecture Capture and Flipped
SOUTH ASIA will buy 29.2 million shares – or a 7.75% stake – in Classroom – two platforms for distributing audio
Masterskill from Siva Kumar for MYR0.60 apiece. and video content from live lectures.
Listed IT services provider SMRT has agreed to
Temasek buys SVB’s India buy 86.5 million shares - or 23% of the company - Frontier markets classifieds
venture debt business from Kumar at the same price. platform receives $40m
Creador entered into an agreement to buy a
Singapore’s Temasek Holdings has agreed to 19.26% interest in Masterskill towards the end of Saltside Technologies, which operates online
acquire the India venture debt unit of NASDAQ- 2014 for a sum not exceeding MYR43.4 million. classifieds platforms in Bangladesh, Sri Lanka
listed financial services company SVB Financial and Ghana, has received a $40 million round of
Group for INR2.8 billion ($45 million). SVB India funding led by Chinese investor Hillhouse Capital.
Finance was set up in 2008 and offers debt Brummer & Partners and existing shareholder
capital to domestic, VC-backed, early and mid- Investment AB Kinnevik also took part. Saltside,
stage companies in India. It provides collateral which was set up by Nils Hammar and James
free loans of up to INR150 million on six-months Peck, both early employees at Skype, has a
to three-year terms. remit to build leading online marketplaces for
underserved areas.
India’s Suzlon sells German
SOUTHEAST ASIA
unit to Centerbridge
Suzlon Energy, an India-headquartered wind-
turbine manufacturer, has sold its German Two partners leave
subsidiary – Senvion – to Centerbridge Partners This means Creador and SMRT’s combined Saratoga Capital
in EUR1 billion ($1.16 billion) deal. The asset ownership will cross the 50% threshold on
sell-off is an attempt by Suzlon to unshackle itself completion of the acquisition from Kumar. As Indonesia-focused GP Saratoga Capital has lost
from about $2.6 billion of debt resulting from a such, the investors have offered to buy all the two of its five partners, with Eri Reksoprodjo
decade-long buyout binge. remaining shares, also at MYR0.60 apiece. departing the firm at the end of December
The takeover would value the entire company and Nigel Khoo scheduled to leave in February.
Blackstone exits India’s at approximately MYR225 million. The private equity firm is not looking to reduce
Agile Electric for $106m Brahmal Vasudevan, CEO of Creador, told local headcount and plans to bring in replacements.
media that he was confident the combination
The Blackstone Group has agreed to sell its entire of Creador’s financial expertise and SMRT’s Singapore expands Block
stake in Indian auto parts maker Agile Electric experience in the education sector could deliver 71 tech start-up hub
Sub Assembly to Japan’s Igarashi Electric Works a turnaround at Masterskill and break even within
(IEW) and Indian boutique investment bank a year. Singapore start-up hub JTC LaunchPad @ one-
MAPE Advisory Group, for $106.4 million. The exit The company is a leading provider of nursing north – better known to many as Block 71 – has
comes around 18 months after Blackstone paid and health education in Malaysia, principally in been expanded to accommodate 500 companies
$55 million for a 97.9% stake in the business. higher education and vocational training. It has and 35 incubators, with plans to create space for
two associate institutions – the Asia Metropolitan 250 more. The facility now comprises Blocks 71,
Temasek acquires 18% University and Masterskill Global College. 73 and 79, with co-working, incubation and start-
stake in hospital operator Masterskill generated revenue of MYR63.4 up space designed to support various stages of
million in 2013, down from MYR148.8 million the entrepreneurship.
Temasek Holdings has acquired a 17.74% stake previous year. Net losses escalated from MYR28.2
in Global Health, which operates the Mendanta million to MYR162.9 million. IFC backs Vietnam’s Pan
super specialty hospital in Gurgaon, India. The Pacific Corp
seller was energy and infrastructure firm Punj
Lloyd, which offloaded its entire stake for a Singapore-based Velos Partners have committed Sing The International Finance Corporation
reported INR7 billion ($113 million). $11 million in Series B funding to Indian (IFC) has invested $6.5 million in Vietnamese
babywear and kidswear retailer Hopscotch. agribusiness and food conglomerate Pan Pacific
Facebook co-founder, Velos Rise Capital and Jabbar Internet Group also Corp. in exchange for a 5% stake. The funding is
back Hopscotch participated in the round, as did existing backers intended to help the company fulfill its long-term
LionRock Capital and Skype co-founder Toivo strategy of acquiring and consolidating more
Facebook co-founder Eduardo Saverin and Annus. agricultural and food businesses.
5
Number 04 | Volume 28 | January 27 2015 | avcj.com
14th Annual Private Equity & Venture Forum
China 2015
28-29 May • China World Summit Wing,Beijing
GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjchina.com
What to expect at
GPs
LPs
AVCJ China Forum 2015:
O
TI
A
R
1 : 2 P
50+ G
-
distinguished speakers who P
L
have unique insights in global and Attended by 110+ LP
from China and overseas
domestic investments
Principal/VP/
Associates
15+
33%
thought-provoking sessions
Managing Director/
Partner/ CFO/COO
covering regional and domestic 32%
Director / GM /
most debated topics Chief Representative
E
20% L
T
Chairman / CEO / TI
300+ M15a%naging Partner BY
attendees who are
policy makers, fund managers,
investment professionals, corporate
China
executives from across the region 76%
Hong Kong
Y
13% R
6 T
N
roundtable sessions with top U
O
C
expertise and intimate networking Y
B
opportunities Over 344 participants from
15 countries and 230 companies.
Register for Super Early Bird Rate on or before 6 March 2015!
REGISTER NOW by emailing us: [email protected]
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14th Annual Private Equity & Venture Forum
COVER STORY
China 2015
[email protected]
28-29 May • China World Summit Wing,Beijing Soft power
SoftBank has laid down a marker in Asia’s technology space over the past six months, investing nearly $2
billion and promising much more. What does this say about the Japanese giant’s broader ambitions?
THE $627 MILLION INVESTMENT IN On the back this success, it appears that interest and the total sails past the listed entity’s
Indian e-commerce marketplace Snapdeal last SoftBank – now with more resources at its $75 billion capitalization.
GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjchina.com October was significant for two reasons: it was disposal – is looking to tap into the next big “One would have to say he has been the best
the second-largest venture capital round the tech trend, perhaps even recreating its success investor in the internet age – he has a vision that
country had ever seen (rival Flipkart raised $1 with Alibaba. But how does the recent spate of goes back 20 years, looking at where the internet
billion three months earlier); and it marked the investments tie into the company’s long-term was going to hit,” says Gary Rieschel, founding
What to expect at
GPs start of SoftBank Corp’s latest spending binge. ambitions, and perhaps more importantly, can it managing partner with Qiming Ventures, who
LPs
A second India deal was announced the same realize them? formally worked for SoftBank Venture Capital.
AVCJ China Forum 2015:
O day. SoftBank led a $210 million Series D round “What SoftBank is looking for are online “Sometimes he has been spectacularly wrong
TI of funding for taxi-booking platform Ola, with businesses that generate real money and have but when he has been right, no-one has been
A
1 : 2 P R participation from Tiger Global Management. The real money coming through them – where it righter.”
50+ G investments were accompanied by a pledge from is not just an advertising-based model, but a It is perhaps no exaggeration to say that Son’s
-
distinguished speakers who LP the cash-rich Japanese technology conglomerate transaction-based model,” says Neil Juggins, a vision for the last 20 years has been for SoftBank
have unique insights in global and Attended by 110+ LP that it would sink as much as $10 billion into partner with research firm Ji-Asia, who tracks the to become the largest technology company in
India’s fast-growing IT, communications and SoftBank. “Alibaba has proved that its business the world, at least, if not the largest company in
from China and overseas
domestic investments e-commerce sectors. model can generate money, so SoftBank has the world, period. Even in the company’s earliest
The Snapdeal and Ola transactions were gone into Snapdeal and Tokopedia because they years, Son pinned his colors to the mast. Within
Principal/VP/ made through SoftBank Internet and Media Inc. are two companies very much within that model.” the first 15 years, after SoftBank established
Associates
15+
33% (SIMI), a new entity set up to identify and execute itself as a software distributor, its tentacles were
thought-provoking sessions
Managing Director/ technology investments for the Japanese The golden goose reaching out into several sectors including
Partner/ CFO/COO
covering regional and domestic 32% company. It is headed by Google veteran Nikesh Clues to SoftBank’s broader strategy can communication, events and financial services.
Director / GM / Arora who was tempted away from the US search be found in the exhortations of its founder, With the creation of Yahoo! Japan in 1996
most debated topics Chief Representative E giant last July. Despite the headline-grabbing Masayoshi Son. In the six-month earnings internet services joined the portfolio.
20% L
T $10 billion pledge, SIMI’s remit extends beyond presentation given to investors in December, It wasn’t until 2004, 23 years after the
Chairman / CEO / TI
300+ M15a%naging Partner BY India. So far it has committed approximately Son’s message was simple: “SoftBank = Goose.” company was founded, that SoftBank entered
attendees who are $1.87 billion and has also been active in China, By drawing upon Aesop’s fable about the goose the industry to which it is most readily associated
Indonesia and Malaysia. that laid the golden the egg he sought to explain by purchasing Japan Telecom. Since then the
policy makers, fund managers,
To understand the reasoning behind that investments in companies like Alibaba, US company has evolved from a little-known
investment professionals, corporate SoftBank’s recent investments one need only internet giant Yahoo and games developer Gung upstart, competing against the incumbents such
China look back to an event that took place four weeks Ho represent massive windfalls – and SoftBank as the formerly state-owned NTT Docomo, into a
executives from across the region 76%
prior to the Snapdeal transaction: Alibaba Group has plenty more to offer. market leader.
Hong Kong raised $25 billion in the world’s largest-ever Comparing SoftBank’s market capitalization The crowning glory came in mid-2013 when
Y
13% R IPO. The stock soared on its first day of trading, to the value of its holdings gives an indication SoftBank acquired its US counterpart Sprint
6 T
roundtable sessions with top UN valuing the e-commerce business at $231 billion. of the sheer size of these eggs. The three most Nextel for $21.6 billion. But becoming a global
O SoftBank initially invested $20 million in Alibaba significant assets in which the company has a telecommunications leader is not an end in itself,
C
expertise and intimate networking Y in 2000 and its 32% stake is now valued at controlling stake – Yahoo! Japan, Gung Ho, and but a platform from which to support further
B
around $82 billion. Sprint – are worth $41 billion. Add in the Alibaba growth.
opportunities Over 344 participants from
15 countries and 230 companies.
SoftBank Timeline
Register for Super Early Bird Rate on or before 6 March 2015! Sep 1981 – Established Jul 1998 – Sets up Gungho Online (then ONsale) in JV with Onsale
Jan 1992 – Sets up SoftVenture Holdings (now SBI Holdings) Jun 1998 – Sets up E*Trade Japan in JV with US-based E*Trade Group
REGISTER NOW by emailing us: [email protected]
Dec 1994 – Buys US-based Ziff Communications Jun 1998 – Goes public
For sponsorship enquiries, please email: [email protected] or call: [phone]
Apr 1995 – Backs events division of US-based Interface Group Dec 1998 – Sets up SoftBank America
Jan 1996 – Sets up Yahoo! Japan Corp. in joint venture with Yahoo! US Jan 2000 – Invests $20m in Alibaba
Co-Sponsor VC Legal Sponsor
Feb 1996 – Buys Ziff-Davis Publishing Sep 2000 – Invests in Nippon Credit Bank (now Aozora Bank)
Jun 1996 – Partners with News Corp. to form JSkyB Sep 2003 – Exits Aozora Bank to Cerberus >>
avcjchina.com 7
Number 04 | Volume 28 | January 27 2015 | avcj.com
COVER STORY
[email protected]
Investment rounds led by SoftBank Internet and Media (SIMI) $100 million round last October. Nevertheless,
SIMI’s strategy is more specific in the kinds of
Date Amount (US$m) Company Country Business companies it is targeting.
Oct 2014 627 Snapdeal India E-commerce With the exception of Housing.com, an
Indian property portal that received $90 million
Oct 2014 210 Ola India Taxi-booking
in December, all of SIMI’s investments have
Oct 2014 100 Tokopedia Indonesia E-commerce
fallen into one of two buckets. Tokopedia is an
Dec 2014 250 GrabTaxi Malaysia Taxi-booking e-commerce market leader in Indonesia, just like
Dec 2014 90 Housing.com India Property portal Snapdeal in India; both have realistic ambitions
to become as dominant in the B2C space as
Jan 2015 600 Kuadi Dache China Taxi-booking
Alibaba has in China. Then there are the three
Source: AVCJ Research
taxi-booking platforms – Ola in India, GrabTaxi in
“Son is quite serious when he says he “In the mid-to-late 1990s SoftBank Southeast Asia and Kuadi Dache in China – that
is setting up SoftBank to be a 300-year-old experienced rolling periods of boom and bust are leveraging mobile technology to disrupt
company and he is laying the foundations for in terms of cash positions, so sometimes the existing industries.
that,” says Oliver Matthew, a senior research company had money to execute on its strategy “I believe Masayoshi and Nikesh have come
analyst at CLSA. “He does not see SoftBank merely and sometimes the VC funds would go out and to a fundamental belief that things like shared
as a telecoms company.” raise institutional money to support the strategy,” economy, transportation, and on-demand
In addition to making acquisitions, Son says Qiming’s Reischel. “There was a strategic services will be the main mega trend now,” says
fueled the company’s early ambitions by setting benefit even through SoftBank couldn’t put up Jixun Foo, managing partner with GGV Capital.
up several venture capital entities. In many cases all the cash.” “So they are betting on what they believe is the
these were set up either as joint ventures with category winner in each region.”
other firms or raised capital from third-party Balance sheet behemoth Ji-Asia’s Juggins goes further, suggesting the
investors. SoftBank Asia Infrastructure Fund – the SIMI is the product of a different age. The unit investments in Ola, GrabTaxi and Kuadi are not
forerunner to SAIF Partners – was formed in 2001 essentially invests off the company’s balance just about taxi-booking but also distribution and
in collaboration with Cisco. US-based SoftBank sheet and Reischel describes it as what Son logistics. By building a stable of Alibaba-type
Capital, SoftBank Ventures Korea, SoftBank China wanted to do all along if sufficient resources had businesses and combining it with a potentially
Venture Capital, and later iterations of SAIF been at his disposal. The likes of SoftBank Capital very strong distribution network – similar to the
Partners all cultivated their own LP bases. and SoftBank Ventures Korea tend to focus on way US car-ordering start-up Uber has branched
The strategy has given SoftBank the ability to early rounds for start-ups in their respective out into logistics with Uber Cargo – SoftBank has
tap external sources of capital and expertise and regions, committing small amounts for periods the makings of an e-commerce infrastructure to
allowed the company to broaden its investment dictated by the life of their funds. This is not the compete with the likes of Amazon.
activities. At the same time, it has presented case with SIMI. SoftBank differs from Amazon, of course, in
opportunities to seek out synergies between “SIMI’s investments tend to focus on larger that it is neither owner nor operator of these
businesses within the group and portfolio growth-stage companies, and they have a assets; the company is building an e-commerce
companies. strategic component and with a longer time ecosystem of minority stakes. It typically seeks to
There are, however, two principal limitations horizon,” explains a spokesman with SoftBank buy a 30-40% stake in the businesses in which
to this approach. First, deal size is ultimately Corp. “SIMI’s investments are global –they are it invests, enough to have a say in what the
capped by the size of the funds from which not limited to any particular region, but Asia company is doing but not necessarily assuming
investments are made. Second, traditional private is an area of focus due to the tremendous the role of ultimate decision maker. With the
equity and venture capital vehicles are obliged opportunities for growth that can now be found exception of Sprint in the US, all of the company’s
to exit businesses after a relatively short holding there.” control deals have been in Japan.
period in order to return capital to LPs. The spokesman adds that earlier fund “SoftBank are likely to look at whether they
While the funds have arguably given SoftBank investments still complement SIMI’s activities. For have the resources to run a business themselves;
access to a greater number of start-ups with example, SoftBank Ventures Korea made a small if they have faith that the management can do a
fewer resources, they have restrained its impulse investment in Indonesian online marketplace better job, they will let them run it,” Juggins says.
to bet big and bet long. Tokopedia in mid-2013 before SIMI led its “I think they are realistic about what they can
SoftBank Timeline
Jul 2004 – Buys Japan Telecom (now SoftBank Telecom) Oct 2011 – Sets up SBI Energy Corp
Feb 2005 – Cable & Wireless IDC becomes subsidiary via Yahoo! Japan Jan 2013 – Makes eAccess (now Ymobile Corp), a subsidiary
May 2005 – Gungho Online goes public in Japan July 2013 – Acquires Sprint Nextel Corp
Apr 2006 – Acquires Vodaphone Japan (now SoftBank Mobile) Oct 2013 – Pays $1.5b for 51% stake in games firm Supercell
Aug 2006 – Exits SBI Holdings Jan 2014 – Brightstar Corp. made a subsidiary
May 2010 – Forms Ustream Asia joint venture with Ustream Jul 2014 – Sets up Softbank Internet and Media (SIMI)
Sep 2011 – Invests in Singapore’s InMobi Sep 2014 – Alibaba goes public > ❘❘
8
avcj.com | January 27 2015 | Volume 28 | Number 04
COVER STORY
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and can’t do when it comes to investing in these Matthew, this comes in two different forms: companies and well-run businesses where
businesses.” hard synergies, for example offering start-ups management can be left to its own devices. If
As SoftBank pursues this strategy it is worth access to customers and technology; and soft a business goes wrong, Son will either look to
noting that the company has joined a growing synergies, such as providing expertise, advice and sell out or bring in new management. Taking
roster of large ticket players coming into late- mentorship. the latter course of action depends on his level
stage VC deals. In this sense, the approach has Kola stresses that the Snapdeal team has of influence in the boardroom and the strategic
been facilitated by a general trend among young benefited from both SoftBank’s experiences with importance of the company.
tech companies to spend longer under private Alibaba and its international network. This gives The big question is what happens if Son
ownership rather than rush towards a public credence to the argument that the Japanese – who is 57 – is no longer in charge. Ji-Asia’s
listing. Plenty of capital is willing to back these tech giant’s presence reduces the amount Juggins notes that building a company of such
businesses – which have already established of time it takes for a start-up to gain traction, size requires enormous passion and drive. He
themselves as market leaders – and valuations develop its products, build market share, and thinks it is unlikely that a company with minority
have risen steadily. raise subsequent rounds. Many argue that this stakes in more than 1,000 businesses could
Industry participants would rather blame snowball effect means market winners can be survive in that form under different leadership.
public market investors dipping into pre-IPO identified earlier. So where does that leave SoftBank in
rounds for additional alpha than SoftBank for “Masayoshi Son thinks long-term about how the medium term? For the time being,
contributing to this trend. different aspects of the things he is involved telecommunications will still form the backbone
“With the arrival of hedge funds valuations in can be put together,” says Qiming’s Rieschel. of the group. While SoftBank might not identify
have gone up a little bit but all of that can only “There is no question that if he invests in a itself as a sector specialist, this is the one business
be put in the context of the exit,” says Vani Kola, company in India, plus its equivalent in China, in which it has a direct relationship with a
co-founder of Kalaari Capital, an early Snapdeal they will wind up with some kind of synergy. He customer base. For all the other investments,
backer. “In hindsight if you look at what SoftBank is very strategic and he always thinks about how someone else is doing the billing.
has done with its investments in terms of value can leverage the assets he has to bring them “I don’t think it is out of the question that
creation, the valuations represent good value.” together in some way.” they would go for a another telecoms business,
The caveat is that if SoftBank becomes as big but if they try to do that now before they have
The SoftBank network as its ambitions suggest, will it still be able to definitively turned the corner with Sprint, we
Much of this value creation comes with the bring all of its operational expertise to bear? Not think they would get punished for it,” says
synergies that SoftBank is able to find with everybody thinks scale will be an issue – least of Juggins. “They would be biting off more than
existing portfolio companies. According to CSLA’s all Son himself. He tends to target fast-growing they can chew.”
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