A colossal piece of news struck my attention this month. The Financial Times reported that SoftBank
is teaming up with Saudi Arabia for a USD 100bn fund to be deployed within the next five years in start-ups and / or later-stage tech companies.
At $100bn, the new fund would be the same size as all funds raised by US venture capital firms over the past two and a half years, according to data from the National Venture Capital Association, the FT says. 45% of it would be provided by Saudi Arabia - just some months after the announcement of Saudi Arabia’s $3.5bn investment in UBER
. What does that mean? For the UBER investment, an investment banker told me that probably the company got better terms compared to what they could have raised in an IPO. To some extent, I understand that line of reasoning; especially when one considers the company is judged by quarterly results, while it burns cash and aggressively invests in growth. I also understand that if a state invests $3.5bn it may have a say and could push the company’s activities in (Saudi Arabia’s) home markets. This makes sense if you think of women not being allowed to drive cars and the desire of the rulers in Saudi Arabia to tap into the female workforce as well.
But - with a $100bn fund you need 30 "UBER investments". I just do not see those companies. Could it be, that someone in Saudi Arabia is both overestimating himself, fearing that the country’s economy is not transforming quickly enough and is also badly advised by hordes of consultants and investment bankers who cash in before success which looms on the horizon off to the far far far east? Yes, the sun rises earlier in Japan, the home of SoftBank. And yes, it is brave and impressive of SoftBank to seed the fund with a total of $24bn. I just wonder if the founder of SoftBank has forgotten the market footprints of 2001. He lost a fortune, so he probably hasn't forgotten it.
At b-to-v, we do not think that "this time everything is different". Markets exaggerate in both directions and yes, zero interest rates do adjust those valuation corrections but not infinitely. Having said that, I will stop speculating and address another very extreme country much better known to me.
Dear Switzerland, being slow very often has its advantages - I know. You, however beat all measures and you finally must get your homework done too. I am talking about the "Future Fund" initiative which Henri B. Meier launched many years ago with tireless effort, talking to decision makers all over the country. This privately funded initiative aims to set up a Swiss fund of fund which would participate in venture capital funds investing in Swiss tech start-ups. Dear Switzerland, we need this. The EU created the European Investment Fund
(EIF) a long time ago. This institution is superbly and professionally run, generates positive capital returns and creates hundreds of thousands of jobs, mobilising entrepreneurial energy as well as private capital alongside state money. If you do not back the "Future Fund", why not ask the EIF for its supporting services? Especially the sectors of MedTech, BioTech and Hardware are capital underserved and the world-leading Swiss tech universities offer plenty of opportunities. Many strong entrepreneurs will embrace your decisiveness. And we definitively do not need $100bn in five years to move the needle; 0.5% of it will do.
Florian on behalf of the b-to-v Team