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How $100 Billion from the SoftBank Saudi Fund Will be Transformative

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Startups and growth-focused technology companies need to pay close attention to the amount of capital sitting in sovereign wealth.

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Let the unicorns breathe. Unicorns are startups that have valuations of over US$ 1 billion. Tokyo-based SoftBank Group Corporation, overseen by Masayoshi Son, and Saudi Arabia’s Public Investment Fund (PIF) announced the formation of a US$ 100 billion technology-focused fund with a working moniker – SoftBank Vision Fund. The fund, to be based in London, could have less assets than US$ 100 billion dependent on how much it could raise. However, if destiny were to come true, the techie fund would be a multitude times larger than singular private equity funds managed by The Blackstone Group or The Carlyle Group. With regard to funding, SoftBank is kicking in US$ 25 billion over a period of time, while the re-oriented PIF plans to allocate US$ 45 billion over a 5-year span. The fund investment is in line with Saudi Arabia’s Vision 2030 strategy, in which to help diversify the country away from oil, according to Saudi Deputy Crown Prince Mohammed Bin Salman, Chairman of PIF, in a press release. The rest of the fund capital plans to be raised from long-term patient capital such as sovereign funds, pensions and other like-minded investors. Other public institutional investors have had their interest piqued in the technology fund. Abu Dhabi-based Mubadala Development Co. is in discussions with SoftBank on potentially committing a few billion dollars to the fund. Another sovereign investor, the Qatar Investment Authority (QIA), has also expressed a level of interest.

Increased Competition for High-Quality Growth Equity Investments

Startups with strong stories to tell and prospects for growth may fight for higher valuations, as more capital enters from the sidelines. In contrast, to mature startups that have failed to materialize and grow revenue. This formidable undertaking of the vision fund could transformationally impact how venture capital raises money. Historically, startups relied on angel investors and venture capital funds. The capital base has shifted as more large asset owners prefer to go direct, bypassing these fee-generating vehicles. Venture capital firms with less known reputation could be crowded out of investment opportunities, forced to take on higher-risk earlier stage startups, or face overpaying for sections of private companies. The fund could possibly create friction in the private equity growth community by competing for technology buyouts from firms like Thoma Bravo, MSD Capital, Francisco Partners and Vista Equity Partners.

Funding Large-Scale Innovation

More patient capital is steadily flowing into the venture and growth equity ecosystem, according to data from SWFI. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, January 16, 2018

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BP Plans to Take $1.7 Billion Charge to End Legal Claims on Deepwater Horizon

BP Plc is planning to take a US$ 1.7 billion charge to end legal claims regarding the disastrous 2010 Deepwater Horizon spill in the Gulf of Mexico.

Ethereum Co-Founder Leaves Fenbushi Capital

Vitalik Buterin, a co-founder of Ethereum, which is a cryptocurrency, exited China-based Fenbushi Capital. Fenbushi Capital was formed in 2015. Buterin is retaining his role as an advisor of Fenbushi Capital. Buterin dropped out of the University of Waterloo in 2014 when he got a Thiel Fellowship. This permitted him to work on Ethereum full time.

Kingdom Holding Sells Four Seasons Beirut Hotel Stake

Saudi Arabia’s Kingdom Holding sold its position in the Four Seasons Hotel in Beirut for roughly US$ 100 million. Blominvest, a unit of Blom Bank, advised on the transaction. The Four Seasons will continue to manage the property.

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Deutsche Bundesbank to Slowly Add Renminbi into Foreign Reserve Mix

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Deutsche Bundesbank’s executive board made a decision to invest in Chinese renminbi in the summer of 2017 as part of its foreign currency reserves. The German central bank on January 15, 2018, confirmed it will start investing in Chinese renminbi and also consider investing in additional foreign currencies. The move mimics the European Central Bank (ECB), which already considers the Chinese renminbi as a reserve currency. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Bpifrance, CDB and Cathay Capital Launch Third Cross Border Fund

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Bpifrance, China Development Bank Capital Co., Ltd. (CDB Capital) and Cathay Capital agreed to launch Sino French Midcap Fund II. This is the second fund the group is launching after the €500 million Sino French Midcap Fund I from June 27, 2014. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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