Throwing $5 billion in coins, "the gambler" Sun Zhengyi raises a bet on Latin America

Softbank's Latin American fund doubled in size, but it was late.

Recently, Bloomberg News announced that people familiar with the matter revealed that Japan’s SoftBank Group plans to invest another US$5 billion in Latin American companies.

People familiar with the matter said that SoftBank’s board of directors is about to approve the new capital allocation plan, which means that SoftBank’s investment in the region will reach US$10 billion, which is double the previous one. The person said that SoftBank also plans to expand its investment in Latin America from seed rounds and A round companies to listed companies.

According to the person, the additional capital injection may be used to create SoftBank Latin America Fund 2 or expand the size of the existing fund launched in 2019. SoftBank Chief Operating Officer Marcelo Claure will continue to manage the fund.

In early 2021, celebrity technology companies including China Shell Search, South Korea’s leading e-commerce leader Coupang, and American food delivery platform DoorDash went public with high-profile listings, pushing their profits for the fiscal year 2020 to record highs.

In SoftBank's 2020 fiscal year earnings report, its net profit reached 45.8 billion U.S. dollars. In terms of net profit indicators, SoftBank surpassed Microsoft, and became the world's third-largest profitable company after Apple and Saudi Aramco. This greatly increased Sun Zhengyi's confidence and madness in investing in technology companies.

First, at the end of March this year, Sun Zhengyi doubled the size of the second phase of the SoftBank Vision Fund, in which SoftBank was the sole investor, to 40 billion US dollars. Now, it has set its sights on the SoftBank Latin America Fund established in 2019, and the operation is exactly the same-doubling the size of the fund.

Two years ago, Sun Zhengyi created the US$5 billion SoftBank Latin America Fund and "scheduled" his native-born Latin American chief operating officer Marcelo Claure to manage the fund to accelerate the pace of investment.

Since then, the Softbank Latin America Fund has extended a "hand of friendship" to Latin American entrepreneurs at an average investment rate of one family per month. As the vitality and potential of the Latin American venture capital market slowly emerge, after entering 2021, SoftBank’s investment rhythm seems to be accelerating. In the first half of the year alone, it injected nearly US$1.4 billion into 8 Latin American start-ups, accounting for Latin American funds. 28% of the committed investment amount.

The total investment received by Latin American companies in recent years Source: Bloomberg

In fact, SoftBank's investment history in Latin America can be traced back to the beginning of the 21st century. In 2000, SoftBank founded SoftBank Latin America Ventures (SoftBank Latin America Ventures) to develop an Internet startup investment business in the region.

Before the establishment of the Latin American Fund, SoftBank first used the Vision Fund to test the waters in Latin America. In 2017, the SoftBank Vision Fund invested US$100 million in the Brazilian ride-hailing company "99". In 2018, it invested another 100 million U.S. dollars in Brazilian express startup Loggi, and later both investments were included in the "winners" of SoftBank's Latin American Fund.

Since its inception, SoftBank Latin America Fund has invested more than US$5 billion in technology companies in the region. According to information on the official website of SoftBank Latin America Fund, as of now, SoftBank Latin America Fund has invested in a total of 24 Latin American companies, and some investment projects have not been disclosed due to legal, regulatory or other restrictions.

From the perspective of investment direction, Softbank Latin America Fund invests in e-commerce, financial technology, education, travel logistics, real estate online transactions and other fields. Among them, e-commerce and financial technology investment account for the largest proportion, accounting for nearly 50% of the total investment projects.

In terms of regional distribution, its investment focus is in Brazil, the core area of ​​the Latin American economy. According to the official website, SoftBank Latin America Fund has invested in 18 Brazilian start-ups, many of which are star projects in the region, such as real estate online trading platform Loft, home online trading platform Madeira Madeira, online education platform UOL EdTech, and the world's leading B2B2C health platform Gympass Wait.

According to SoftBank's 2020 financial report, the income contributed by Latin American funds in the last fiscal year reached US$1.77 billion, and the internal rate of return on net assets reached 62%. In contrast, the internal rate of return of Vision Fund 1 was 39%, and the internal rate of return of Vision Fund 2 was 119%.

According to sources, since March, the rate of return of Latin American funds has been rising sharply, and is currently comparable to the Vision Fund Phase 2.

• Fundraising

• Investing

• Technology

• Latin America

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