JAPAN’S biggest companies have a case of SoftBank envy, and that’s good for entrepreneurs like 23-year-old Takumi Shimizu.
Billionaire Masayoshi Son, 56, has boosted SoftBank Corp’s market value to US$99 billion since founding the business in 1981, partly from outsized returns on investments in companies such as Alibaba Group Holding Ltd, the Chinese e-commerce operator that has been valued at US$153 billion. With stakes in about 1,300 technology businesses, his Tokyo-based wireless carrier is now more valuable than older rivals NTT Docomo Inc and KDDI Corp, which have more subscribers.
With Son’s success, companies including Docomo, KDDI, Sony Corp and Nissan Motor Co have allocated money to venture capital investments. That’s providing new financing options for Shimizu’s networking startup, in a country the World Bank ranks behind Nepal and Tanzania in ease of starting a business.
“Son’s success has provoked Docomo and KDDI,” said Satoru Kikuchi, an analyst for SMBC Nikko Securities Inc in Tokyo. “They are probably finding it hard to keep up with his moves.”
SoftBank invested an initial US$20 million in Alibaba.com in 2000 and now owns about 37 per cent of Alibaba Group, which said March 16 it’s preparing for an initial public offering in the US.
Alibaba has been valued at US$153 billion, according to the average of analyst estimates compiled by Bloomberg. That would make SoftBank’s holding worth more than US$56 billion, or 2,800 times its initial investment.
Hiroe Kotera, a spokeswoman for SoftBank, declined to comment on the company’s total investments in ventures.
Docomo, KDDI
Outpaced by Son’s strategic investments and facing saturation in Japan’s wireless market, Docomo, part of the former state telecommunications monopoly NTT, and KDDI also are looking to startups to help rekindle innovation and growth.
Docomo’s venture arm boosted the size of its investment funds in January by 40 per cent to 35 billion yen (US$345 million). The company set up a 10 billion-yen fund last year and acquired from its parent company an investment unit that operated a 15 billion-yen venture fund.
KDDI, started as an operator for overseas calls in 1953, is considering a new fund after spending about 60 per cent of its five billion-yen venture fund on 19 startups, including a game publisher, an online English-learning service in Japan and a smartphone-based taxi booking service in the UK, said Makoto Takahashi, a senior vice president for business development.
Cash hoard
Sony, Nissan and ANA Holdings Inc are investors in WiL LLC, a US$300 million venture-capital fund to finance local startups. The state-backed Innovation Network Corp of Japan, founded in 2009, has invested about 700 billion yen in 57 projects as it focuses on energy, electronics, information technology and biotechnology, it said Feb 12.
The push comes as Prime Minister Shinzo Abe looks to tap the US$2.2 trillion in cash held by Japanese companies to fund new businesses and help revive innovation in the world’s third-largest economy.
With most Japanese venture-capital firms run by banks hesitant to take on risk, startup investment totaled 102.6 billion yen in the 12 months through March 2013, the Tokyo-based Venture Enterprise Center said. That’s about three per cent of US investment, which was US$29.4 billion in 2013, according to the National Venture Capital Association.
GungHo stake
The World Bank ranks Japan 120th of 189 countries in terms of the ease in starting businesses. The US ranks 20th.
“It’s typical of large companies that have been successful to be unable to think beyond the business model that got them there,” said Nobuyuki Akimoto, chief operating officer at NTT Docomo Ventures Inc. “We need new ideas.”
A previous big push by Japan to boost startups by promoting deregulation in the late 1990s led to a venture-capital boom around 2000, which fizzled after the US information-technology bubble burst, Daiwa Institute of Research said in a March 2013 report.
Part of the renewed focus on entrepreneurship has been triggered by Son’s success. Four of SoftBank’s biggest investments alone are worth about US$73 billion combined, according to data compiled by Bloomberg.
In addition to Alibaba, SoftBank also was an early investor in GungHo Online Entertainment Inc, a Tokyo-based game publisher where Son’s younger brother, Taizo Son, is chairman. SoftBank has a stake of 33.6 per cent, according to its 2013 annual report.
GungHo surged more than eightfold in Tokyo trading last year and now has a market value of US$6.9 billion.
Yahoo Japan
Son’s company has about 43 per cent of voting rights in Yahoo Japan Corp, which has a market value of US$33 billion, and a stake of almost 37 per cent in Renren Inc, a Chinese social-networking website operator valued at US$1.4 billion, according to data compiled by Bloomberg.
SoftBank doesn’t provide information on the total value of its venture-capital investments, Kotera, the company spokeswoman, said by phone.
Last year, SoftBank paid US$22 billion for control of Sprint Corp, the third-largest US wireless carrier.
Docomo and KDDI are following Son’s lead in trying to transform themselves from telecommunications companies into information-technology businesses, said Nikko’s Kikuchi.
KDDI vets about a dozen ideas for possible investment every week and offers entrepreneurs a forum to draw investor attention, meet industry executives and receive assistance in polishing business plans.— Bloomberg