Bloomberg Línea — SoftBank’s Latin American arm is just digesting the moves that prompted the exits of its global and regional leadership as it strives to maintain the vision of the largest private equity fund in the region, and which is set to grow significantly.
According to Juan Franck, one of the two managers of SoftBank’s Latin American Fund (the other is Alex Szapiro in Brazil), the investment firm founded by Masayoshi Son in Japan is seeking profitability on the back of the $6.5 billion it has invested in the region since 2019.
In an interview with Bloomberg Linea, Franck says that SoftBank’s mission in Latin America, beyond names and office managers, remains valid.
“The mission continues to be to invest a significant amount of money to transform the region,” Franck says, emphasizing that the priority is to “exacerbate” what was triggered by the pandemic, and that became tangible with an explosion in consumption via digital.
“We are transforming people’s lives, and that increased during the pandemic when people were forced to start consuming digitally, and we are invested in the platforms that offer them that possibility”.
For Franck, the clearest example of this is Rappi, the Colombian startup that, with its expansion to markets such as Mexico, has served as an example for firms seeking the mythical unicorn status.
Last month, Shu Nyatta and Paulo Passoni, two of the three managing partners of SoftBank Group Corp.’s Latin America Fund, left the firm to start their own venture capital business focused on startups in the region.
Previously, Marcelo Claure, who had fallen out with Son over his salary, and left the firm to focus on his family office and Claure Group.
“We Want ‘Decacorns’
Based on the idea that throughout Latin America there are “good entrepreneurs with huge problems to solve”, Franck says he and his counterpart in Brazil are not necessarily tapping into the startup pool in these countries, but are looking to break down geographic barriers.
And, above all, they are not just looking to invest in the next regional unicorn.
“We are looking for companies that can have, let’s say a very large size, not only that makes them a unicorn, but that can eventually become decacorns, $10 billion-valuation companies.
The challenge, for many firms, will be to transcend their local markets; that is, to not only target local markets, but to be truly regional, Franck says.
“In order to be able to justify that potential value five or 10 years from now, entrepreneurs have to be targeting a regional market,” says Franck. “It’s very difficult beyond potentially Brazil and Mexico because of the scale to be just a country-focused entrepreneur.”
Upload Ventures: ‘A Fund We Will Follow’
In April, SoftBank announced the launch of its spin-off, Upload Ventures, which will focus on financing early-stage ventures, and Franck says that its implementation will help those responsible for the Latin American Fund to focus on growth equity projects, as the anchor investor in high-potential firms.
In this scheme of things, he says, Upload Ventures will concentrate its efforts on locating and investing in firms that are just going for their seed or Series A capital, while the SoftBank team will cater to Series B-ready ventures.
“We’re going to focus on growth capital, which is the mandate we’ve had from day one,” Franck said.
‘No Names, Just People’
According to Franck, the departures from the firm of the likes of Marcelo Claure, Paulo Passoni and Sanuya, who opted to create their own funds, have not dented SoftBank’s philosophy.
“Obviously people will come and go from the fund teams as in any fund, but in the end the mission of continuing to invest a significant amount of money to transform the region remains,” said Franck.
It was one of the executives who recently left the company, Passoni, who said that SoftBank is about to release a $2 billion expansion to invest in companies in Latin America.
Without mentioning the amount, Franck said that SoftBank would be ready to expand its investment in the next 12 to 18 months, thus consolidating the firm as the largest fund operating in the region.
“This expansion is not committed,” said Franck, referring to the global and regional phenomena that plague the economic environment, such as the Russian invasion of Ukraine and the macro ups and downs, with high inflation, interest rate hikes, etc.
Franck says that although SoftBank invests liberally in many companies, the firm’s philosophy is not to pay attention to external factors, but rather to the value presented by each company’s founders, partners with whom they commit to a long-term relationship “as if it were a marriage”.
What is SoftBank Looking for?
According to Franck, SoftBank has to date invested $6.5 billion in some 80 Latin American companies, and this is the common denominator in them (and in those to come):
- Companies that seek to transform people’s lives.
- Models that fulfill the mission of increasing financial inclusion (a position that, he says, is shared by governments of all ideologies in the region).
- Companies that improve access to healthcare, education or basic services
- Companies that trigger innovation and improve the working conditions of their employees
- Entrepreneurs who eek to solve the most serious problems facing the region, such as transcending the mortality rate of family businesses