SoftBank increases focus on Latin America with new US$3 billion fund

RIO DE JANEIRO, BRAZIL – SoftBank, the Japanese conglomerate behind investments in technology worldwide, is increasing its investment in Latin America. The group announced Tuesday (14) the launch of a second fund focused on the region, the Latin America Fund II, with US$3 billion available for investment – and the possibility of raising more capital.

As NeoFeed newspaper writes, the committed capital is from Softbank itself, which will seek an additional US$2 billion from other investors. This could bring the total to more than US$5 billion.

The investment thesis will not change. Softbank will continue to invest in startups with emerging technologies and artificial intelligence, focusing on e-commerce, digital financial services, healthcare, education, blockchain, and enterprise software.

Part of the resources – between US$100 million and US$300 million – will be reserved for investments in early-stage startups, an unprecedented strategy by Softbank in the region.

Since announcing its first US$5 billion funds in 2019, the gross internal rate of return in local currency is at 103%. In dollar terms, 90%. Some startups in the portfolio have seen a significant increase in value, such as the case of Kavak (4.4 times), QuintoAndar (2.6 times), and Inter (3.5 times).

“Latin America is one of the most important economic regions in the world, and SoftBank will continue to drive technology adoption that will benefit hundreds of millions of people in this part of the world. There is a lot of innovation and disruption happening in the region, and I believe the business opportunities have never been greater,” Masayoshi Son, SoftBank’s chief executive officer, said in a statement.

The group is one of the most important venture capital players in Latin America: of the 25 unicorns in the region, 15 were invested by SoftBank. In Brazil, companies such as Quinto Andar, Gympass, MadeiraMadeira, and Mercado Bitcoin are among those invested.

In the rest of the region, there are also important investments in Colombia (Rappi, Frubana), Argentina (Ualá, Satellogic), Mexico (Kavak, Bitso), and Chile (Betterfly) and Ecuador (Kushki).

The fund made the venture capital available in the region leap, no wonder that since then, the number of unicorns has kept increasing. The amount of the first fund is greater than all the investments received by Latin American startups in the entire year 2020 – US$4 billion, according to Lavca (Latin American Private Equity and Venture Capital Association).

According to the group, the launch of the new fund is anchored on the success of the first one, which has a net internal rate of return of 85%.

“Over the past two years, we have seen tremendous success and returns from the SoftBank Latin America Fund, which has far exceeded our expectations. The incredible work and vision that Latin American entrepreneurs have been demonstrating in the region gives us confidence that their digital transformation will continue to accelerate – in fact, we expect 2022 to be the biggest year in terms of IPO in Latin American history,” says Marcelo Claure, SoftBank’s executive director in charge of Latin America funds.

SoftBank’s investment and operations teams for Latin America, which total more than 60 people, are divided between Miami, São Paulo, and Mexico City and are led by partners Paulo Passoni and Shu Nyatta.

Outside Latin America, SoftBank has more than US$135 billion allocated in Vision Funds to support “revolutionary” technology businesses and US$100 million dedicated to investing in companies founded by black entrepreneurs in the United States.

The venture capital market in Brazil is experiencing a moment of accelerated growth. Between January and August this year, Brazilian startups have already raised about US$6.6 billion in investments, according to data from Distrito, an independent startup ecosystem.