Softbank: Visionary Entrepreneurship in Japan

Maria Metzger Xiuping Li David Harelick David Grosof

Agenda

 Size  Makeup  Recent News  Leadership  Early History  Middle Ages  Strengths  Issues  Emerging Market Strategy  Conclusion

Size

 Worth approximately $18BB  300 companies and affiliates

Makeup

 Financing value chain – Hotbank – Softbank Capital Partners • $1.25 billion later-stage fund.

– Softbank Venture Capital (SBVC) • $2 billion under our management  US Venture Managers – Rieschel on the West Coast – Charley Lax in Boston

Recent News

 Cisco invests $1BB in a Softbank fund  Cisco to purchase back Japanese subsidiary  Raising $4BB+ for broadband buildout – Fighting the entrenched NTT

Leadership

 Masayoshi Son, CEO (43) – Son’s share of Softbank is worth apx. $7 billion – charismatic, visionary – born in Japan, of Korean ancestry – immigrated to the SF as a teenager – University of California at Berkeley – made his first million inventing a multilingual pocket dictionary and translator • Sold to Japan's Sharp Corp – named Forbes Businessman of the Year in 2000

Dawn of Son

 Son Founded the Softbank Corp in 1981 in Japan  Established product-distribution channels for PC and game software – JV with Novell, Cisco Systems, and Microsoft  Late 80s/early 90s, entered many new IS markets – publishing, network services & information delivery  Went public in 1994 – Son retaining > 50 percent of the equity

Son Rises

 Made many “strategic” acquisitions – Ziff-Davis' worldwide exposition business – Comdex – Ziff-Davis Publishing Co. itself – 2% cost of capital from Japanese Banks – arbitraging the higher P/E rates of Japanese companies  Early Venture Investing – MediaBank Corp. - 1994 JV with NTT • video on demand and Internet services in Japan – Early investor in Yahoo! – CyberCash & E*Trade Group Inc.

Strengths

 Focused on Internet content and services  Ignored hardware and never challenged the big 3 – Microsoft, Intel, Cisco  Lower-risk porting of US-style business models to other markets

Issues

 Value fell 90% Between 2/00 and 12/00  49% stake in Nippon Credit Bank – one of Japan's “most corrupt & badly managed banks” – risky assets of $35 billion – Mitigant: Government backing  Launched Nasdaq Japan during tech-stock slump  Japanese broadband access initiative is weak  A few years ago Softbank in financial distress – threats of delisting, loan calls, accounting irregularities  Poor investments – Kingston Technology, Ziff-Davis, 3-D chat, etc.

Emerging Market Strategy

 Telecom infrastructure in emerging markets  Partnering with the World Bank – strong government relationships  Leveraging their Netbatsu’s conglomerate power – Immaturity of their capital markets – importance of politics/regulation  Partnering with Murdoch’s News Corporation in the UK, Australia, New Zealand and India

Conclusion

 Working hard to open Japan's ossified capital markets to a new generation of entrepreneurs  They entrepreneurs may transform the Japanese economy  Even if Softbank fails, the genie has been unleashed

Haikus

 Softbank is new way  A stone thrown into a still pond  Soon Nippon reshapes.

 New kid on the block  Old boys are nervous and scared  Information Rules.