What is cooler than a billion dollars?

Well, for one thing, $1.5 billion. Rs 10,000 crore if you like your numbers well-rounded.

In profit.

If you are an investor in India, a return of this size would take you right off the VC sweepstakes in terms of absolute dollars earned.

It is a lot cooler if you make this enormous sum in just one year.

This is exactly what SoftBank achieved with Flipkart. In August 2017, it had invested $2.5 billion into Flipkart through a combination of primary and secondary purchases. In less than a year, as of last month, the company is said to have sold the entire stake to Walmart for $4 billion. A whopping return of 60% in less than nine months. A wonderful win for an investment from a fund vehicle that promises an overall internal rate of return (IRR) of 8% over its 10-year lifecycle.

Yet, this victory is a hollow one in many ways for SoftBank. In fact, one could actually say that rather than a definitive victory, it represents a vague defeat of sorts for the behemoth.

Why so?

Masayoshi’s Millions

SoftBank’s $100-billion Vision Fund is the most recent “big bet” of a man who is used to betting big and winning in equal measure. From a humble beginning selling PC software in Japan, Masayoshi San, the mercurial founder and CEO of SoftBank, moulded the company into a global conglomerate with interests in hundreds of technology, telecom and internet companies all across the globe. Underpinning this growth was a fortune that was so big that at one point in time, during the heady dot-com days, Son-san was briefly the richest man in the world.

But that was just the first act.

In 2016, Son-san put together the largest VC fund in history. The $100-billion Vision Fund. To understand and appreciate how large this sum is, one only needs to look at the total amount of money raised by the entire American VC industry last year—$33 billion. The Vision Fund is three times as big as this entire corpus, and what’s more, in less than two years, Softbank has already deployed over $33 billion into companies like Flipkart.

Ever since the launch of the Vision Fund, there have been a number of sceptics opining that the fund is too big to work

But a fund of this size and ambition also mandates a return on investment that is of commensurate scale. Which brings us to the point on why exiting Flipkart is more a vague defeat for SoftBank than a definitive victory.

Fund economics and Flipkart

While the size of SoftBank’s Vision Fund is unprecedented, the economics driving the fund is largely similar to all other VC funds.

AUTHOR

Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

View Full Profile

Available exclusively to subscribers of The Ken India

This story is a part of The Ken India edition. Subscribe. Questions?

MOST POPULAR

Annual Subscription

12-month access to 200+ stories, archive of 800+ stories from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 2,750

Subscribe
 

Quarterly Subscription

3-month access to 60+ new stories with 3-months worth of archives from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 1,750

Subscribe
 

Single Story

Instant access to this story for a year along with comment privileges.

Rs. 500

Subscribe
MOST POPULAR

Annual Subscription

12-month access to 150+ stories from Southeast Asia.

$ 120

Subscribe
 

Quarterly Subscription

3-month access to 35+ stories from Southeast Asia.

$ 50

Subscribe
 

Single Story

Instant access to this story for a year along with comment privileges.

$ 20

Subscribe

Questions?

What is The Ken?

The Ken is a subscription-only business journalism website and app that provides coverage across two editions - India and Southeast Asia.

What kind of stories do you write?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics.

We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

What do I get if I subscribe?

For subscribers of the India edition, we publish a new story every weekday, a premium daily newsletter, Beyond The First Order and a weekly newsletter - The Nutgraf.

For subscribers of the Southeast Asia edition, we publish a new story three days a week and a weekly newsletter, Strait Up.

The annual subscription will get you complete, exclusive access to our archive of previously published stories for your edition, along with access to our subscriber-only mobile apps, our premium comment sections, our newsletter archives and several other gifts and benefits.

Do I need to pay separately for your premium newsletters?

Nope. Paid, premium subscribers of The Ken get our newsletters delivered for free.

Does a subscription to the India edition grant me access to Southeast Asia stories? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

Do you offer an all-access joint subscription for both editions?

Not yet. If you’d like to access both editions, you’ll have to purchase two subscriptions separately - one for India and the other for Southeast Asia.

Do you offer any discounts?

No. We have a zero discounts policy.

Is there a free trial I can opt for?

We don’t offer any trials, but you can sign up for a free account which will give you access to the weekly free story, our archive of free stories and summaries of the paid stories. You can stay on the free account as long as you’d like.

Do you offer refunds?

We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Please write to us at support@the-ken.com detailing the error or queries.