Japan's SoftBank has gone from telecoms giant to being known worldwide as a powerhouse in tech investment. And its bets on household names from Uber to WeWork have made headlines, not least because of such firms' struggles to make a profit.
An executive at the company's $100 billion Vision Fund gave some insight Monday into how the tech-focused fund decides on what companies it invests in — and why making money isn't necessarily a deal breaker.
"We look for businesses that are addressing very significant pain points," the fund's managing partner for EMEA and Asia Munish Varma said at a fintech, or financial technology, trade show in London Monday. That means companies that are "addressing markets that are massive, with a product that clearly satisfies their needs."
For context, Varma was speaking alongside Rishi Khosla, co-founder and CEO of online lender OakNorth, which SoftBank's fund invested in earlier this year. OakNorth — unlike many tech firms that haven't yet booked a profit — has been profitable since 2017.
Varma further explained that the fund is "not too focused on when a company makes a profit," but on "whether the business makes sense" — the idea being that short-term profits aren't necessarily an indicator of long-term value and success.
SoftBank has become an almost ubiquitous force in the tech sector in recent years, with the company having invested billions of dollars into the likes of Uber, WeWork and Slack. The group's stake in Uber is expected to be worth around $10 billion when the ride-hailing giant goes public in May, according to a regulatory filing.
Explaining the thinking behind the Vision Fund's investments further, Varma stressed that it focuses predominately on growth-stage companies, and that those companies aren't in a rush to seek stock market listings any time soon.
"The last few years companies have been staying private for much longer but that doesn't mean capital needs have gone down," he said.
Khosla — once an investor himself in companies like PayPal — echoed that sentiment, saying it wasn't "imperative" yet for his digital lender to launch an initial public offering. In an interview with CNBC Monday, he said the tech investment titan provides "patient capital which doesn't necessarily look at quarterly results."
A recent tech IPO — namely Lyft's — has suffered steep declines since its market debut amid concerns around its ability to generate a profit.