Masayoshi Son’s aggressive bets on a growing number of property-related startups have left some questioning his vision for those firms and the broader industry
Masayoshi Son (Credit: Getty)
Masayoshi Son responds to swagger.
It’s something only a handful of New York real estate executives may have realized about the 60-year-old SoftBank founder and CEO, who has poured billions into a slew of tech-focused startups over the last few years.
The Japanese billionaire, who prefers to meet with these potential recipients one on one, looks for extreme confidence and a bold vision behind the companies he invests in, according to multiple sources privy to the exchanges.
Those talks have gone down both in New York and overseas, and typically stretch over the course of several months. Perhaps the most famous meet-and-greet-turned-megainvestment was in late 2016, when Son impulsively penciled out a game-changing $4.4 billion deal in the backseat of his car with WeWork co-founder and CEO Adam Neumann. That funding propelled the co-working giant to a $20 billion valuation, as Forbes reported.
The eccentric Japanese native of Korean descent, short and balding, directly controls the fate of the companies he invests in and indirectly dictates the market for their rivals. Son is also now the richest person in Japan, with a net worth pegged by Forbes at $22.7 billion.
With the recent creation of SoftBank’s nearly $100 billion Vision Fund, the Japanese telecommunications giant is making investments that threaten to overhaul several industries from ride sharing to robotics — and even dog walking. But its interest in real estate is especially pronounced.
In 2017 alone, SoftBank made roughly 100 investments through the fund and other platforms, with a combined value of $36 billion, in companies such as Uber and Slack Technologies, according to data from research firm Prequin. Nearly $6 billion of that was pumped into budding real estate firms Compass, WeWork, Katerra and Lemonade. Separately, the conglomerate acquired the New York-based asset management firm Fortress Investment Group in a $3.3 billion all-cash deal in December.
To get a closer look, The Real Deal spoke to industry players about what these splashy investments mean for the market and which firms might be next to catch SoftBank’s eye.
But Son — who has said he wants the 16-month-old Vision Fund to help further his company’s growth for “300 years” — may have a new dilemma on his hands.
“They have the funds, but their challenge is when to deploy that kind of capital,” said Richard Sarkis, CEO of the real estate data startup Reonomy, which landed $3.7 million in funding from SoftBank in 2014. “They’re kind of in a trap.”
The fund saw a 22 percent return of about $3 billion over a five-month period starting last May, when it closed its first major investment round, SoftBank announced in October. It has already deployed one-third of its capital and is planning another 70 to 100 investments in tech firms in the near future, Vision Fund CEO Rajeev Misra told CNBC in late February. A spokesperson for SoftBank declined to comment for this story.
“People said [$100 billion] is too much,” Son told the New York Times last year. “I say it’s too little.”
For the young companies that go without SoftBank’s help, the situation creates an almost unpredictable, ultracompetitive environment in which a rival could soar past them at any moment, said Nick Romito, co-founder and CEO of the cloud-based leasing and asset management platform VTS.
“If someone overnight develops a huge war chest, that’s a scary thing,” he said.
Son’s unusual past makes it all the more surprising that he’s in such a position of power today. He grew up in a shack with his Korean family on the Japanese island of Kyushu, where his father, Mitsunori Son, worked as a pig farmer and owned a pachinko parlor.
Discrimination against Korean immigrants was widespread in Japan in the 1960s, and even though Mitsunori was ill at the time, he supported Son’s move to the U.S. at the age of 16. The budding entrepreneur attended Serramonte High School in San Mateo County, California, and went on to receive an economics degree from the University of California at Berkeley.
As an apprentice to an older Berkeley student, Son ran a network of video-arcade machines in Northern California that reportedly reeled in tens of thousands of dollars a month. In his mid-20s, he returned to Japan and launched SoftBank. The telecommunications giant is now Japan’s fourth-largest public company, ahead of Toyota, Mitsubishi and NTT — the latter two of which are also active in New York real estate. And while far younger than some of Japan’s oldest hotel and construction companies, which were founded before the year 800, SoftBank has already seen some impressive highs and lows in less than 40 years as a business.
Son founded the Tokyo-based company as a software wholesaler in 1981 and expanded to computer magazine publishing a year later. He then propelled his firm to a $180 billion valuation and became the world’s richest man at the height of the dot-com bubble in the late 1990s. But when the bubble burst, SoftBank took a huge hit and Son himself reportedly lost about $70 billion in a single day. The company’s stock price fell dramatically from $1,865 in 2000 to a mere $14.53 in 2002. It also faced significant losses from its failing Yahoo-branded broadband arm for four years.
It was a dark period for Son. He slept in the office, worked out of the conference room and exercised on a treadmill while holding meetings, according to a 2012 story in the Wall Street Journal. Sometimes, he would invite executives and partners over for late-night meetings that stretched more than eight hours.
“He would ask our people to go to his office at three o’clock in the morning,” Hong Lu, a business partner of Son’s at the time, told the Journal. “You cannot think of him as a normal businessperson.”
The firm rebounded as its founder placed big bets on Japan’s broadband market, and in 2006 SoftBank acquired Vodafone’s telecom carrier unit for $15 billion. The company began generating an annual profit again and in 2008 became the exclusive iPhone carrier in Japan.
Son’s signature prescient move, though, was a $20 million investment in the Chinese e-commerce startup Alibaba Group in 2000. Alibaba now has a market cap of nearly $500 billion, with Son holding a 28 percent stake.
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Now Son is knee-deep into another revolutionary investment spree. SoftBank is arguably the first Japanese firm since the 1980s to place bets on U.S. real estate at such a rapid and aggressive pace. Roughly 30 years ago, investors from the island nation collectively spent billions on Manhattan and Los Angeles properties and scooped up trophies such as the Empire State Building and Rockefeller Center.
But with Son, it’s a very different kind of real estate play. Not only is his firm focused on new companies rather than physical assets, its Vision Fund is backed by Saudi Arabia and the United Arab Emirates as well as tech giants including Apple, Qualcomm and Sharp.
While Son has not made any outright acquisitions of New York properties, his impact on the city’s real estate industry through his monster investments is abundant. And he is very hands-on when it comes to determining the Vision Fund’s recipients and how its contributions are later used.
The fund, which is essentially a huge private equity player, takes a 20 to 40 percent stake in the groups it backs. It also often supplies a board member and becomes top shareholder at those companies, giving SoftBank and its Vision Fund more say over its investees’ decisions.
The fund will give at least $100 million if it likes a company, but it prefers to keep contributions north of $250 million, sources said. And Son personally holds just over 20 percent of the parent company, giving him a crucial say in each major decision.
“They become a vote at the table,” said Riggs Kubiak, CEO of Honest Buildings, which to date has not received any funding from SoftBank. “In general, you want to be very careful about who that is.”
One of Son’s first known investments in U.S. real estate startups was the Reonomy deal. Josh Guttman, a venture capitalist who then focused on early-stage investments for U.S. affiliate SoftBank Capital, had heard about the newly created real estate data provider from a fellow investor in December 2013 and cold-emailed Sarkis.
The two first met at a Birch Coffee shop in NoMad, and just a few months later SoftBank — then seen as a middle-market player in the venture capital world — took a chance on Reonomy with a $3.7 million Series A investment it led with four return backers that included Resolute Ventures and High Peaks Ventur阿拉爱上海同城