The $100 billion-tech fund that SoftBank has just launched with Saudi Arabia's sovereign fund Public Investment Fund (PIF) is good news for half a dozen Indian consumer internet companies including Snapdeal, Ola, Grofers, Housing, Hike and InMobi. Some of these firms are facing huge fund crunch as their key investor SoftBank put a pause on writing large cheques. These companies have a glimmer of hope now as Softbank chairman Masayoshi Son himself said that the new SoftBank Vision Fund will be the biggest investor in tech over the next decade.
While the new fund may not necessarily guarantee massive funding in SoftBank's India portfolio companies, they will have a potential source of support if capital is the only constraint that hinders their growth, say industry experts.
Softbank has already invested close to $2 billion in India. The Japanese company led a $627 million funding round in Snapdeal in late 2014 and subsequently participated in the ecommerce marketplace's $500 million fundraise in 2015. It became lead investor in taxi-app Ola with $210 million nearly two years ago when its then second-in-command Nikesh Arora led its big-bang India entry.
Snapdeal, SoftBank's biggest bet in India, has been under tremendous pressure as both global major Amazon and the bigger home-grown rival Flipkart are growing at a much faster clip, pushing it to a distant third in the fierce e-commerce battle. Taxi aggregator Ola is fighting with Uber, one of the most funded internet companies in the world which is currently focusing on scaling the India business after joining forces with its rival in the Chinese market.
Similarly, Grofers, which massively scaled down its business and streamlined its operations, needs funding to take on larger rivals such as BigBasket and protect its turf when Amazon starts grocery retailing.
Yesterday, a media report said that Ola is in talks with SoftBank and others to raise around $500 million. SoftBank also has a 35% stake in ad-tech startup InMobi for which it shelled out $200 million in 2011.
SoftBank's joint venture with Bharti Group- Bharti SoftBank owns India's WhatsApp rival Hike.
Ola, Snapdeal, Oyo and Grofers would be in need of funds soon to keep up with the fierce competition in their respective segments, and will be looking at these developments very closely. Email queries sent to Ola, Oyo and Snapdeal seeking comments did not elicit a response at the time of publishing.
Many of these investments were made, when Nikesh Arora was the president and chief operating officer of SoftBank. He abruptly left the company in June this year, two years after he joined from Google where he was chief business officer.
Arora had faced criticism for poor business decisions with regard to the India investments and a section of shareholders had demanded an inquiry against him. A SoftBank internal probe exonerated him of any wrongdoing but that did not stop him from leaving the firm.
Now that a new SoftBank fund under the leadership of another Indian-origin executive Rajeev Misra has been floated, there is a scope for the firm becoming active again in tech and internet investments in India.
The fund intends to make investments in the technology sector globally. The fund will be managed in the UK by a subsidiary of SoftBank Group (SBG) and will deploy capital from SoftBank and investment partners.
"A few large global investors are in active dialogue to join SBG and PIF to participate in this fund," SoftBank said in a statement.