Clavel assumed his new position at the Japanese conglomerate a year ago, jointly leading its investment vehicle. SoftBank Vision Fund (SVF) with rajev misra. While Clavel heads SVF-II, Misra who stepped away from day-to-day operations in 2022 and subsequently launched One Investment Management, oversees SVF-I’s legacy investments. Clavel’s rise coincided with a hardening of course at the group founded by Masayoshi Son after years of exuberance, amid a broader reset in the world of technology investing.
Many opportunities in India that excite us
“Initially, there was some concern about the lack of capital markets here. While we were excited about the opportunities, we wondered if the IPO market would be large enough to provide liquidity for our exits,” Clavel said. “Fortunately, India’s capital markets have developed well, as progressive market regulations have stimulated capital flows and increased domestic liquidity, reducing our dependence on foreign markets such as Hong Kong or the United States.”
SoftBank portfolio companies first cry, Electric Wave and Unicomercio have been made public this year, and a $1.25 billion initial public offering (IPO) of Swiggy is scheduled for November.
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According to Prime Database, which compiles data on domestic capital markets, 64 companies have collectively raised Rs 92,645 crore through IPOs so far in 2024, making it the second-highest fundraising year after 2021.
Buoyant public markets have also meant that many companies want to avoid raising late-stage capital, which Clavel said was evident in India. “Founders may prefer to go public rather than make large private investments right before an IPO. This is understandable: when IPO markets are strong, founders might go public to avoid the time and dilution of private rounds. But there are still many business opportunities in India that excite us,” he said.
By contrast, U.S. public markets have been relatively stagnant over the past three years, he said. “There was a prevailing hope in the market that Arm’s IPO more than a year ago would open the floodgates, but that hasn’t happened,” the SoftBank executive said.
UK-based Arm Holdings, a chip design company where SoftBank has a 90% stake, debuted on Nasdaq as the largest IPO of 2023, raising $4.87 billion.
“The US market has been hit by election-related jitters, rising interest rates and geopolitical uncertainties… After the excitement of 2021, there is often a cooling off period, and that’s what we’re seeing now,” Clavel said.
He noted, “We have been the largest foreign investor in the Indian digital economy over the last decade and have invested $11 billion in Vision Fund-I and II. “If SoftBank’s equity is included, the total rises to $14 billion,” he said.
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In total, SoftBank has earned cash returns of $7.5 billion from Sale of Flipkart to Walmart in 2018and sales in the public market in pay, Policy Bazaar and Grofers (now Blinkit), where the investor abandoned completely.
However, Clavel said these exits in India were not due to any pressure to bring in liquidity, considering the pressure on the Vision Fund, which had been posting huge losses due to failed bets on high-flying startups like WeWork. “There is no pressure from SoftBank to push companies to go public in India…. If they do well and go public, we determine the best course of action for returns. We as investors do not have any vertical directives,” he stated.
“We believe we have backed the right founders in the right sectors, and our investments have been successful thanks to India’s stable government and favorable market environment,” the co-CEO said.
Going public, Swiggy, for example, has reached a market capitalization of $28 billion, achieving a leading position in both food delivery and fast commerce through Blinkit. “Food delivery and fast commerce are huge markets… Harsha (Swiggy founder Sriharsha Majety) and Swiggy approach business with an innovative and builder mindset, and we are optimistic about the company’s long-term execution capabilities.” deadline,” he said.
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Investments in AI
Softbank Vision Fund, which has deployed $160 billion globally in two editions, is looking at artificial intelligence (AI) infrastructure and data centers in India, following the euphoria around AI that has kept busy venture investors over the last two years.
“AI in India could be developed along these lines, taking advantage of the existing digital and technological infrastructure,” Clavel said.
SoftBank will invest $500 million in Sam Altman’s OpenAI, valuing the ChatGPT maker at $150 billion, Clavel confirmed to ET.
”We have invested in OpenAI and a host of other companies… Some may seem like competitors, but in technology investing, it is common to have multiple investments that could overlap in some way. We remain excited about the entire AI stack,” Clavel said, when asked about investments in Open AI, search startup Perplexity AI and others.
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Vision restoration
What started in 2017 as a mammoth $100 billion fund looks very different under the 49-year-old co-CEO, who has been at SoftBank for nearly a decade. Clavel, who joined after 20 years as an investment banker at Morgan Stanley, admitted that many things have changed in the group.
“Vision Fund had large limited partners from the Middle East and other regions, while Vision background II was fully financed by SoftBank. In 2016 and 2017, when the Vision Fund was being conceptualized, we were signing large checks. Today we cut smaller checks and have a flexible mandate,” he told ET.
SoftBank is finalizing a $30 million investment in Ultrahuman, a wearables startup, among its smaller checks, reflecting its new strategy. However, Clavel said that capital was not a limitation, since injected large amounts of money into OpenAI and led a billion-dollar round in Wayve British autonomous car.
Given the job of cleaning up the Vision Fund’s troubled investments, the executive has risen through the ranks at SoftBank in recent years. “Instead of striking mega deals or raising funds from investors as his predecessors did, Clavel earned Son’s trust as a steady hand, managing and fixing SoftBank’s complex or problematic transactions,” Reuters wrote in a profile published in January. .
“We look at a wide range of technology-intensive or closely linked sectors, and invest in companies that could be at an early stage or closer to an IPO. So if you look back and say, ‘Oh, SoftBank did more of this at the time,’ it’s not prescriptive. We have a flexible mandate,” Clavel said.
Clavel said the country’s long-term potential remains strong. “We have a significant portfolio in China, including major companies like ByteDance. Despite recent challenges, I believe in China’s long-term potential. I’ve lived there and studied the language since 1993, so my opinion of China is the same as my opinion of New York City; I never ruled it out,” he said.
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“The country has a history of creating value and building successful technology ecosystems, and we continue to support the companies in our portfolio,” Clavel said. While some capital from China may shift to India, the amount is relatively small, he added.
“Bankers have mentioned this change, but even if China’s IPO volume has decreased, capital does not necessarily move directly to India. The underlying growth and consumption dynamics in India are similar to what we saw in China a decade ago, which is encouraging for the market,” he said.
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