Deal focus: The SoftBank effect, one step removed
The new owners of SoftBank Ventures Asia are cut from the same cloth – and even come from the same family – as the VC firm’s corporate parent. They aspire to reconfigure Asia’s tech ecosystem
SoftBank Ventures Asia (SBVA) will soon go by a different name, but the new owners appear keen to nurture a global transformation-through-disruption agenda akin to that championed by the Japanese technology conglomerate. There is even some continuity in personnel: Taizo Son, co-founder of The Edgeof, which has acquired SBVA, is the younger brother of SoftBank founder Masayoshi Son.
Taizo Son is a seasoned entrepreneur in his own right, having founded mobile gaming business GungHo Entertainment – in which SoftBank Group was an investor through 2016 – and then moved into early-stage investment. The SBVA deal is billed as a tie-up with Mistletoe, a “collective impact community” comprising entrepreneurs, investors, and researchers that Taizo Son established nearly a decade ago.
“We have been engaging behind the scenes with LPs. They are excited because Taizo is a figurehead for start-ups in Asia and this is the first time he raised third-party money. Previously, it was all family office and balance sheet,” said Atsushi Taira (pictured), who helped build Mistletoe and now serves as co-founder and chairman of The Edgeof. Before that, he spent years at SoftBank Group.
As to whether LPs had also asked questions about nepotism, Taira said that The Edgeof expects to retain a strong relationship with SoftBank Group – which may end up buying its portfolio companies – without being wedded to the giant. “The relationship is arm’s length. We can figure out who is the best buyer for an asset, we don’t have to focus on SoftBank, which would be unhealthy,” he said.
Origin story
SBVA was established in 2000 as SoftBank Ventures Korea and initially focused on the Korean market. It began investing globally in 2011 and was rebranded in 2019. Assets under management (AUM) are around USD 2bn across 20-plus funds. Most of the capital raised comes from third-party LPs.
The team numbers around 50 across investment and support functions. It operates out of Seoul, Beijing, Singapore, and San Francisco, mostly writing Series A and B round cheques of USD 10m-USD 20m for start-ups focused on artificial intelligence (AI), the internet-of-things (IoT) and robotics.
SBVA has always used its ties with SoftBank Group as a point of differentiation, claiming to “plug great start-ups into the SoftBank Group ecosystem in order to facilitate side-by-side growth.” There are numerous cases of SoftBank Vision Fund joining growth rounds for SBVA investees, from Indonesia’s Tokopedia to Singapore’s Funding Societies to China’s Keenon Robotics to Nigeria’s Opay.
SBVA was available because SoftBank Group – having seen the Vision Fund series hobbled by volatility in the tech sector – pledged to explore divestments as a means of alleviating its financial stress. Korean media reported last August that SBVA had been offered to several local strategic investors but to no avail. Soon after, claims emerged that Taizo Son was lining up a USD 150m deal.
Taira acknowledged that SoftBank Group’s repositioning was a factor, but not the sole rationale for the transaction. On a strategic level, The Edgeof will combine SBVA’s institutional fundraising and investment capabilities with Mistletoe’s networking and incubation activities.
Mistletoe has backed 170 start-ups to date across Japan, the US, Southeast Asia, India, and Northern Europe. Taira said that “several hundred million dollars” has been put to work with an emphasis on using technology to address social and environmental issues.
“When I left SoftBank and Taizo left as well because they divested GungHo, we talked about what to do next and we wanted to do something totally different,” he said of Mistletoe’s conception. “No one was talking about sustainability and impact investment, so we just went for it. We used a family office structure rather than a fund structure. It would have been hard for normal LPs to back us.”
The Edgeof will raise funds. The SBVA deal hasn’t closed yet, but Taira envisages launching a pan-Asian growth fund, an early-stage vehicle focused on deep-tech and long-duration innovation, and an AI and robotics fund. He suggested USD 500m as a reasonable target for the growth fund. Companies could be based anywhere, but there will be a common focus on the greater Asian market.
Chaos theory
While SBVA is intended to institutionalise the Mistletoe platform, The Edgeof doesn’t aspire to become a traditional venture capital firm. The name says as much. It is lifted from chaos theory physicist Norman Packard’s notion of a transition zone – called “the edge of chaos” – that exists in various systems and engenders a constant dynamic interplay between order and disorder.
The Edgeof is a holding company; a rebrand of SBVA is pending. But the established order Taizo Son and Taira want to break down is the silos they perceive in Asia’s technology ecosystem. It is about recreating the patchwork of synergies that turned Silicon Valley into a powerhouse but on a much larger geographic terrain where cross-border collaboration is frequently stymied.
“We cannot build a pan-Asian ecosystem on our own, so we want to connect with conglomerates and VCs in different markets and have them invest alongside us in good founders from around the world. The Edgeof focuses on partnerships, relationships, and networks; investment happens on the SBVA side. We want to use them to create a community,” Taira explained.
Immediate recruitment priorities include business development and networking talent to help piece together this ecosystem. Taira believes that building a platform of scale can help facilitate a more fluid and efficient deal-sourcing mechanism – matching capital and opportunities – and address Asia’s longstanding problems with liquidity.
“There are a lot of silos. About 70% of investment in Korean VC comes from Korea, but Korean companies can work with Indonesian companies to create a bigger entity. M&A is normal in the US, but in Asia exits are tough, IPOs are tough. We don’t see enough big companies acquiring start-ups, so we need a mechanism that grows companies organically on a cross-border basis,” he said.
“That is a very different play from traditional VC.”
More on North Asia
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.