A Global Chess Match for VCs

For the big players at least, Venture Capital is no longer just a vehicle to support entrepreneurs and ideas, but a means to guide and influence a global market. I did a deep-dive of VCs through the lens of the transportation landscape, and how it can drive the habits and characteristics of other industries in the future.

The State of Ride-sharing:

Let’s talk about Softbank for a moment, and how powerful they’ve become - here are the major two ride-share players to-date, and how much capital they’ve accumulated:

Softbank participated in a grand total of $8.9B (that’s 44.3% of total funding) in Uber for a 17.5% stake to-date, and $4.85B (that’s $22.4B of total funding) in Didi. Combined, that is $13.75B from Softbank of the $41.8B that had been raised by the two giants to-date (not shown in this chart is their investments in 99 in Brazil, Ola in India and Grab in SEA as well, which are smaller in sizes and with no precise dollar values available). 

These dollars came from the $100B Vision Fund, whose core mission is to invest in 70 to 100 tech companies over the span of the next years, as well as the $6B Delta fund, a twin fund that handles investment conflicts (for comparison: Sequoia’s latest fund size is around $6B, nearly 5.6% the total size of Softbank’s current active funds). It is said that ~15% of Softbank’s two fund alone contributed to ride-share companies to-date.

How the investments map out today is absolutely messy - here’s a snapshot of what it looks like, published by the WSJ earlier this year:

Some data may be outdated by now, but nonetheless still relevant. Src: WSJ - https://www.wsj.com/amp/articles/uber-battles-ride-sharing-startups-in-softbank-family-1520164801

​This overview shows simply how serious Softbank is to blanket map over the entire ride-sharing industry. The amount of money deployed by the Japanese conglomerate is simply unmatched, and how they did this consistently over time is even more impressive. To give a bit of perspective, here’s how many deals Softbank alone participated on a rolling annual basis:

Src: PitchBook.

That’s 16 rounds total over only the past 4 years. Not shown here are the number of rounds that Softbank actually led (meaning, they were the largest capital infuser, winning out against any other investors in that round). Investors do this in order to maintain ~20% equity stake, which is industry standard. 

What’s more interesting, however, is how SoftBank is now poised to use its influence to “broker peace” and be the global police for the ride-hailing vertical. Their involvement in the new age of on-demand transportation is absolutely driving and influencing the direction of these companies:

Src: The Information - https://www.theinformation.com/articles/the-new-global-order-in-ride-hailing-didi-vs-uber

​Rajeev Misra, CEO of Softbank, is looking to push Uber to focus on growth in areas he believes they can continue to win and not bleed out dry by Didi. Regions include: NorthAm, LatAm, EMEA and Australia. Misra had previously insisted that Uber exits highly unprofitable countries (APAC region led to $1.5B in 2017Q3 losses alone). This push was likely why Uber was ultimately driven out of China, Indonesia and many other APAC cities. 

At this point, Softbank secured Grab in Singapore and Didi in the rest of SEA. The resulting map would be one of regional dominance, where the local leader is dictated by SoftBank. This is no longer a game for what was once Uber’s hope for global conquest. Now, it is governed by a holdings conglomerate that is Softbank’s “300-year vision for its long-term future”.

A Domino Affect to Scooters:
​
I wrote a bit on scooters in my previous essays titled “The Last Mile e-economy”, which was written only a couple weeks ago. But even since then, a lot has changed.. Bird reached $2B in valuation (in less than a year, and two weeks after they went to $1B!), and there has been at least 7 more competitors that entered the market (not to mention Uber and Lyft applying for city permit to participate in e-scooters, e-bikes and others). 

But what’s crazy is the venture capitalists driving up these frothy valuations; Accel, another prominent firm, decided to back both Bird and Skip, while Menlo Ventures already backed both Skip and Jump (which was acquired by Uber). Fortune states it well via my tweet: 

• “Looks like a page out of SoftBank's playbook — who cares who wins the race if you've bet on the entire ecosystem?" – Fortune TermSheet

It’s only a matter of time before other industries like China copycats the scooter race - the same as when we copycatted bike-sharing. Already we are seeing Jackie Chan launch his own scooter company led by his firm Gogreen Holdings. I bet what’s going to happen is Softbank, and other international investors, will follow suit and take on the scooter race, just like how they’re taking over everything else (see what they’ve backed to-date). This industry is ripe for another global police as it matures and materializes en masse.

• • •

It seems more than ever that the investing world is in a constant warfare, egging each other to put more capital simply by the reputation and #FOMO (fear-of-missing-out) of something, rather than analyzing the viability of a business. Some calls the crazy, confusing situation of money thrown everywhere the next real bubble, after the dot com bust (and excluding the 08 crash). 

But is it really? At the EOD, the on-demand / self-serve transportation economy is absolutely lucrative - there can be players everywhere, in their own regions with incredible PMF (product market fit), and everyone can still make money. This is happening in the world of cryptocurrencies and tokens as well as self-driving automation, where investors are throwing money ruthlessly. Will it happen to AR and VR, too?

Venture capitalists realize there is opportunity everywhere, and in this day and age, the battle to find or become the big thing isn’t always a zero-sum game anymore.. opportunity is getting evenly distributed across the globe, and it’s becoming one massive, global chess match.

Ref: Crunchbase, Pitchbook, 1 2 3 4 5 6 7

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