Question

Masayoshi Son, the founder of Softbank, is famous for making large investments in future focused Tech Companies. With the WeWork flop, why did Softbank ignore the lack of profitability? Has Softbank shifted its strategic focus? If not, do you think Softbank will pivot to appease investors?

Answer 1

Softbank has recently written down over 9 billion dollars due to losses from We work, uber, slack and other tech companies.

Softbank is a company known for investing in potential future tech companies through its vision fund.

Softbank in many of its investment does not focus on profitability instead it focuses on revenue generation, business model, value addition and scalability of the business.

This can be clearly seen Softbank investment in Flipkart. Flipkart is making huge losses and burning it's cash in the form of discounts and offers to lure new customers and keep the existing customers.

Flipkart was sold to Walmart for $16 billion. A company which has billion of dollar loss. The valuation is justified on the basis of revenue generation(sales), business model, value addition and scalability of business.

The same is the case with Paytm, Zomato, Oyo and ola.

These businesses are in the starting stage of there long cycle- the main focus is the scalability of business instead of profit.
Once the business is mature, it has the potential to generate profits.

We work had great potential for profits and scalability BUT it was a premature business. It will take a decade to adapt to the culture of we work.

It's just like Amazon in the 1990s or early 2000s.

Softbank shifted its strategic focus?
SoftBank has not shifted its strategic focus.

In the start-up and venture capitals world, the success rate is less than the failure rate. the success is big success and failures are small failures. That's why many venture capitalist like Softbank is profitable.

It will continue to lure and satisfy the investors due to its diversified portfolio of startups.