Soft cash where it's hard to put

SoftBank’s African Search Leads It Back To Familiar Turf

By  |  July 9, 2021

When it comes to backing billion-dollar startups from across the globe, one of the heaviest investors not just in Silicon Valley but also across the world’s tech startup ecosystem is SoftBank.

The Tokyo-based venture, which was founded about four decades ago, has also become one of Japan’s most examined and important public ventures. If it’s a high-profile check with way too many zeroes going into the “most likely to be successful startups”, it’s bound to the investment company started by a 24-year-old Masayoshi.

SoftBank actually started off as a store for computer parts, went through the Verizon and AT&T route and transitioned into a global investment vehicle, one accused of upsetting Silicon Valley’s VC ecosystem with insane ticket sizes.

Like a world Blackstone of sorts, SoftBank, through its Vision Fund, has become similar to a global VC with one of the unlikeliest funding capacities, a blessing of unicorns in its portfolio and an abundance of success stories. The company owns more than one-quarter of Alibaba, a controlling stake in Sprint, and the entire shareholding of Boston Dynamics.

A SoftBank with no real African soft spot

While the company continues to mint unicorns across the globe, its pockets remain somewhat reserved when it comes to Africa—especially for the region’s tech startup ecosystem.

SoftBank’s USD 100 Bn Vision Fund once indicated interest in funding some solar projects in the continent, but that was as of 2018. At the time, the company was also gearing for renewable energy deals worldwide.

However, those ambitions were hijacked by the renewables arm of Indian tycoon Gautam Adani’s conglomerate, who acquired SoftBank’s energy unit at a USD 3.5 Bn valuation. Thanks to the deal, Son retreated from solar investments, a development which also had African implications.

In July 2020, SoftBank broke another news which seemed of relevance to Africa, disclosing the formulation of a USD 100 Mn Opportunity Fund aiming to invest in ventures led “by people of colour”. Yet, the Fund is cut out to back African-Americans and Latinos operating businesses in the United States. Again, another SoftBank ambition that misses the African core.

In fact, back in 2018, SoftBank appeared to want one of its most valuable portfolio companies to pump the brakes on Africa and focus on external markets.

When the company led a USD 8 Bn consortium which acquired a 15 percent stake in Uber and became its largest shareholder, one of SoftBank’s board directors insisted that the ride-hailing company focus on its markets in the United States, Europe, Australia and Latin America.

That stance however misaligned with the SoftBank’s vision for Uber, and it’s probably why the ride-hailing giant is still operational in the continent today.

The only real, direct, and pretty sizable investment SoftBank has made in Africa lies in the coffers of Airtel Africa’s Kenyan operations. In 2018, the telco, which is Indian Bharti Airtel’s African unit, raised USD 1.25 Bn from six global investors that included SoftBank. Warburg Pincus and Temasek Holdings also participated in the primary equity issuance which valued Airtel Africa at USD 4.4 Bn pre-IPO.

Besides this big telco’s rescue investment (Airtel Africa planned to use the funds to reduce an USD 5 Bn debt and grow operations), SoftBank’s money remains beyond the reach of non-mainstream African ventures.

The SoftBank’s talk resurfaced in November 2019 when OPay—the Opera-created company that is one of Africa’s best-known fintech startups—was raising further funding. The company raised USD 120 Mn from a consortium of Series B investors that features not just SoftBank but also BAI, Redpoint, IDG Capital, and Sequoia China.

OPay is reported to be in talks to raise more funds tuning above USD 400 Mn, a raise that will likely slingshot the fintech into the African unicorn club. However, it remains an uncertainty whether Son’s SoftBank would be back for another bite.

Perhaps, if a unicorn isn’t confirmedly in the mix, SoftBank is likely to not invest, yet. Outside Africa, that’s how the company likes to operate.

Going where its tech is needed?

SoftBank isn’t one of the regular blue-chip VCs behind historic IPOs like those of Google and Facebook, but basically a telecom giant with an investment arm that sources money from foreign governments and its own pockets.

The way Son—who was once one of the world’s richest people—cultivated his company’s Vision Fund, the initiative is fundamentally betting that the future of tech is way brighter than its present criticisms. Son, who touts as the ultimate patient investor, likes to bet on companies “and industries” based on a 3-century vision for the world.

That is perhaps what has brought SoftBank back to Africa. According to reports, the Japanese tech giant has inked a deal with Smart Alliance Africa to deploy non-terrestrial internet activity to the underserved regions of the continents.

The reach? Well, Smart Alliance is a group of 32 African countries. Its aim is to double the internet penetration rate in Africa to 51 percent by 2025. The group’s Bulk Capacity Project plans to invest in delivering affordable internet access to Africans via large-scale, multi-party procurement efforts among its member countries.

SoftBank’s non-terrestrial network offerings include geosynchronous earth orbiting (GEO) satellite NB IoT (narrowband Internet of things) services provided by Skylo, LEO satellite communications to be provided by OneWeb, and high altitude platform system (HAPS)-based stratospheric telecommunication platforms from SoftBank subsidiary HAPSMobile.

By way of the SoftBank-Smart Africa Alliance partnership, further feasibility and demand studies will be carried out in the 5 African nations with existing interest in the Bulk Capacity Project. That includes Djibouti, Egypt, Kenya, Morocco, and Rwanda. Together, both parties will produce the plans for implementation and look at possible future market entries.

With a 1.2 billion population that is set to double by 2050, Africa remains one of the world’s most unconnected places, despite the huge uptake of smartphones and an abundance of emerging markets.

“We believe our NTN solutions will be extremely effective technologies to provide connectivity to African countries and regions that lack sufficient Internet access,” added Hidebumi Kitahara, SoftBank Corp. VP and Head of the Technology Unit’s Global Business Strategy Division. “With our NTN solutions powered by OneWeb, Skylo and HAPSMobile, we’ll work closely with Smart Africa to provide telecommunication networks.”

Interestingly, this isn’t the first time SoftBank is connected with encompassing and affordable internet for Africa’s last frontier markets. Back when Google’s Project Loon—the ballon-based initiative from the stables of Alphabet’s ideas factory, X—was still operational, SoftBank stood as one of the moonshot’s backers.

But Loon has since wound down, leaving Google’s Project Taara as Africa’s seemingly last hope at affordable internet. SoftBank owns HAPSMobile, which directly backed OneWeb, Skylo and the now-defunct Project Loon.

All this leads up to an era of Japanese tech in African internet connectivity, while the continent’s tech startup ecosystem waits to land another check from this Tokyo amalgamate.

Featured Image: ArtStation

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