What's up guys and welcome back to wall street millennial today, we're examining the epic rise fall and rise again of the world's biggest venture capital investor. We're talking about the japanese technology conglomerate softbank. This video was chosen by our channel members. Members get access to our videos one day in advance and also get a vote on some of our video topics.

Soft pink is a massive company with a market cap of 13 trillion, japanese yen or roughly 120 billion us dollars. They have assets worth 367 billion dollars making them the largest technology. Focused investment firm in the world softbank stock rallied more than 50 in 2020 fueled by the success of the technology companies within its portfolio. This has pushed the stock near its all-time high valuation.

However, the story of softbank is far from a straight line up when the tech bubble burst. In 2000, the company almost went bankrupt with a stock falling 98 from its highs. More recently, they invested almost 20 billion dollars into office space startup wework. They lost almost everything.

On this investment, when the troubled company was forced to cancel its ipo in 2019, this, along with a few other high profile failures, made people question whether the company had lost its edge in venture capital investing, but with their stellar performance in 2020. Softbank is back on top of the food chain in silicon valley. First, we have to establish what softbank does. Despite their name.

The company is not actually a bank softbank was established in japan by founder, masayoshi sun in 1981.. They started off as a publishing company where they distributed opc consumer technology magazine. The magazine was a huge success and had circulation of 140 000 copies by 1989 in the 1990s sun saw the potential of the internet. In its early days.

In 1996, he launched a joint venture with yahoo to make yahoo japan's search engine, which became the dominant search site in the country fresh off the success that he had with yahoo. Japan, sun had grand ambitions to expand softbank into the world's largest technology conglomerate. He used the profits from yahoo, japan, as well as capital raised from ipo and softbank on the japanese stock market to invest in early stage tech startups. In 2000 he invested 20 million dollars in exchange for a roughly 25 stake in the fledgling chinese e-commerce startup alibaba.

This turned out to be one of the greatest investments in history, increasing in value more than seven thousand fold to be worth roughly 140 billion dollars today. But the eventual success of these investments would not be recognized for quite some time when the tech bubble burst. In 2000, softbank stock fell 98, as many of its startup investments went bankrupt. This wiped out 75 billion dollars from the company's market cap.

Given this failure, sun decided that he needed to change the company's direction and aggressively moved into the internet and telecommunication space with his new company yahoo broadband. He reasoned that if japan was to fully adopt the new technologies enabled by the internet, ordinary people would need affordable and reliable access to high-speed internet softbank borrowed 2 billion dollars to build a nationwide gigabit ethernet network that supported 12 megabits per second download speed. This was orders of magnitude faster than other alternatives. At the time he made the service compelling to customers by charging the equivalent of just 21 per month.

At the time, the project was viewed with much skepticism by the media and financial analysts. Some critics said investing so much. Money into high-speed internet was akin to selling one dollar bills for 80 cents. It will allow you to grow rapidly, but will never be profitable.

The internet did grow rapidly in japan in the early 2000s, allowing softbank's broadband service to win. Many millions of customers and generate billions of dollars for the company sun proved the haters wrong and was now sitting on a war chest full of cash worth billions of dollars. He used this to acquire vodafone japan for 15 billion dollars that acquisition allowed softbank to enter the country's 78 billion mobile telecommunications market by the late 2000s softbank had become a dominant player in japan's internet and telecommunications industries. Its stock was slowly but surely making back some of the losses it experienced during the tech bubble with softbank now owning a stable cash generating telecom business sun had access to billions of dollars for new investments, both directly from the cash flow, as well as through the Company's ability to raise debt financing, he transformed softbank from a telecom company into a massive conglomerate owning stakes in a wide range of innovative tech companies.

In 2013 they acquired a 51 stake in finnish mobile game company supercell supercell is a company behind the hit game. Clash of clans, they bought a controlling stake in the french company alvaron robotics, which they rebranded as softbank robotics in 2014. Softbank robotics creates the humanoid pepper robot, which greets customers at softbank mobile stores in an attempt to expand their international footprint. They bought a one billion dollar stake in south korean e-commerce company kupang.

In 2015., in 2016, sun announced the 32 billion acquisition of british mobile semiconductor manufacturer arm holdings, which was softbank's biggest deal ever over the years. Softbank made hundreds of investments in startups around the world. He had billions of dollars worth of capital to deploy and wasn't afraid to invest in money losing businesses. He was also very aggressive in negotiations with founders.

He would often threaten to fund the company's competitors if they refused to accept his investments by the mid 2010s. Softbank was one of the most well respected technology. Investment firms and masayoshi's son was considered a legendary investor. The 2014 ipo of alibaba made softbank steak worth 60 billion dollars in the first day of trading.

This is 3 000 times the 20 million dollars he spent to buy the stake 14 years prior leveraging. His track record sun launched the softbank vision fund, which aimed to raise 100 billion dollars to invest in disruptive technology startups. This made it the largest venture capital fund in the world, sun, convinced saudi arabian crown prince mohammed bin salman to invest 45 billion dollars from the country's sovereign wealth fund. With the venture, a further 28 billion dollars came from softbank's own balance sheet.

The remainder came from other investors, including apple qualcomm, larry, ellison and others. Sun now had 100 billion dollars of capital to put to work between 2017 and 2019, the vision fund invested roughly 10 billion dollars into the shared working space company wework at a peak valuation of 47 billion dollars at its core wework was a real estate company, not A tech company, while it was growing fast, it was burning through billions of dollars of venture capital funding, with no real path to profitability. Wework, founder and ceo, adam newman also mismanaged corporate money to fund his own, extravagant lifestyle and entangled the company in shady related party transactions in 2019, wework tried to do an ipo, but there was so little demand for its shares that they had to call it off. Softbig was forced to ride down at stake in the company by ninety percent.

The vision fund was also invested in dog walking marketplace wag, which they sold in 2019 for a huge loss. One of the fund's biggest investments was in ride hailing company uber. They had to take write downs on this position to the tune of billions of dollars when the stock tanked following its 2019 ipo. This caused the fund to report a 9 billion net loss in november of 2019 with masayoshi's son, admitting that he exercised poor judgment in the wework investment in 2019.

Softbank tried to raise a second vision fund with a target of 108 billion dollars. However, with the abysmal track record from vision, fund 1 investors were understandably hesitant to give them more money. They were only able to raise less than half of their goal when the pandemic hit in 2020. Things were not looking good for soft paint with economies.

Closing all around the world, many of their portfolio companies were having their businesses disrupted significantly. The vision fund reported a jaw-dropping 18 billion loss in the spring of 2020.. This can mostly be attributed to further declines in wework and uber. Both companies suffered steep declines in demand relating to the pandemic in an investor presentation, some compared their portfolio, companies to unicorns that are stuck in the value of the coronavirus, while some will die in the valley, others will survive to make it out alive.

On the other side, many at the time criticized him for making this rather childish analogy. But sun wasn't about to go down without a fight. At the beginning of the pandemic, softbank announced that they would sell 41 billion dollars worth of non-core assets and use the proceeds to pay down debt and repurchase shares. This took advantage of the company's depressed share price during the pandemic sell-off, while some of the vision funds portfolio companies like wework, were negatively impacted by the pandemic, others were perfectly suited to the stay-at-home economy.

The vision fund made investments in food delivery companies, including doordash and grab these companies, saw their businesses boom, as people ordered food to the safety of their homes. On doordash alone, softbank turned a 680 million dollar investment into 11.5 billion dollars. When the company ipo'd in december of 2020.. They also made billions of dollars from their investment in coupe when it reached a valuation of 84 billion on its first day of trading, even uber, which initially tanked at the beginning of 2020, recovered to well over its pre-pandemic levels, as investors anticipate a rebound of their Business post-pandemic softbank's winners outweighed its losers and the company posted a record profit of 46 billion dollars for the year ended march 2021..

The majority of these profits came from the vision fund with the 2020 profits more than offsetting the losses that they suffered in 2019 and sun thinks that he can recreate the success going forward in future years between the two vision, funds and softbank's other investments. They have a total of 220 portfolio companies, although not all of them will be successful. If just a few of them can be the next alibaba the returns could be. Tremendous sun created an ecosystem where he can share softbank's expertise in ai and other disruptive technologies.

With the vision fund's portfolio companies, although many of his bets are long shots, softbank is one of the only companies with enough scale to provide meaningful capital to these unicorns sun has proven himself as a legendary investor through his investments in yahoo, japan and alibaba, as well As his ability to navigate his company through the pandemic of 2020 - and it is likely that softbank will continue to dominate the venture capital industry for many years to come, alright guys that wraps it up for this video. What do you think about soft things? Comeback? Let us know in the comments section below, if you like, this content, don't forget to hit the like and subscribe buttons also check out our second channel, the economic outlook, where we post interesting videos about economic topics. As always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.

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