Japanese fund SoftBank increased its bet on Latin America. The company announced on Tuesday, 14, the second fund in the region, with an initial value of US$ 3 billion. With the first, worth $5 billion, the giant bought stakes in 15 of the 25 Latin American unicorns. However, Marcelo Claure, executive director of the SoftBank Group and responsible for managing the funds in Latin America, said he believes that this money will not last even until next year: the goal is to reach US$ 10 billion in investments by 2022. “We are already thinking about announcing an even bigger fund in 2022,” he said.
Not even the political and economic crises that some countries in the region are going through (including Brazil) detract from the executive’s optimism about the growth of companies here. The current rise in interest rates in Brazil – and the expectation that the same will happen in the United States soon –, which could pressure the return on investments, does not discourage the executive. “It’s very difficult to go back to the world as it was before. The change is much stronger than any increase in interest rates,” he said.
According to Marcelo Claure, director of Softbank in Latin America, the goal is to reach US$ 10 billion in investments by 2022
Read below the main excerpts from the interview.
The fund is smaller than the first announced for Latin America in 2019. What has changed?
We thought the $5 billion fund would last for five years, or $1 billion a year. At that moment, everyone thought we were crazy. But we had the hypothesis that there were great entrepreneurs in Latin America and that there was a lack of capital to drive them forward. In the end, our hypothesis proved right. In the first two years, we invested US$2.3 billion. This year alone, we will reach US$ 5 billion and, next year, we estimate that it will be US$ 10 billion invested. The growth of technology companies is very strong. The entire amount we are going to invest only covers until this year and we are already thinking of announcing an even bigger fund in 2022.
How do you analyze the Brazilian market?
Brazil has a disproportionate size compared to other countries, which is why it had 60% to 70% of our investments. Basically, Brazil and Brazilian digital companies are changing life as everyone lives. That’s why the opportunities are so great. In 2018, Inter bank was a small digital bank and gained an important size and is not just another bank, as it also has an important insurance area and relevant e-commerce. Nubank’s growth is also impressive. The payment media industry and fintechs in general are changing banking. In addition, the cryptocurrency market, with companies like Mercado Bitcoin, are opening this market to Brazilians. And then there’s Vtex, which is changing e-commerce, Uber Eats, iFood and Rappi, which are completely changing the market. MadeiraMadeira changed the way Brazilians buy their furniture and QuintoAndar in real estate. The world is undergoing a transformation and there are many entrepreneurs doing this.
Will the focus continue on startups that are already relevant in size and that have been tested?
We are the only fund in Latin America that is open to invest at all stages. We are the only ones that can invest R$ 500 million in one morning and R$ 1 billion in the afternoon and with a presence throughout Latin America.
But SoftBank investments are still not as usual in smaller companies.
When we started, we were focused on companies that already had a tested line of business and good growth potential. Now, we want to expand investments in early stage companies. An example is Olist, in which we invested something from R$100 million to R$150 million, and today it is worth R$1.5 billion. But, in addition to them, we want to invest in large companies that need to go through digitization.
What types of companies? The most traditional ones?
One example is what we did in Mexico, where we invested in Televisa, which is practically a Rede Globo there. It will be a way to compete with Netflix in the Latin market. This is a great example of a large, traditional company that has great earning potential from digitization. These big companies are moving not to disappear. We’re going to have a fascinating world from now on and we’re going to see big battles between digital and traditional companies. This is just the beginning of SoftBank’s relationship with Latin America.
Will the reopening of markets and an eventual return to normal life be positive for the technology sector?
The pandemic has disproportionately accelerated the market and there is a digitization of everything we do. People are learning that it is now no longer necessary to go to a store to make a purchase. And with the reopening of the markets, the growth of these companies will accelerate even more. Therefore, we want to have the necessary capital.
Will the same happen in Latin America, in your opinion?
The best way to compare what happens in Latin America is to look at what happened in China five years ago. There was a huge growth in super applications and also in banking disintermediation. Companies like TikTok have come to change everything and this is the kind of revolution that will not stop.
But part of Latin American countries, including Brazil, is suffering from economic crises, high inflation and rising interest rates. Doesn’t that increase the risk?
The companies we invest in are growing fast and are not as affected by political problems, inflation or interest rate growth. It is very difficult to go back to the world as it was before. I have a 22-year-old daughter and I gave her a car after college. She asked me to return the car because she didn’t want to worry about insurance, parking or possible theft. Our thinking is the digital transformation of sectors. The change is much stronger than any interest rate hike.
In the past, you said that not investing in Nubank was a mistake. Do you keep that thought?
We always stop to analyze the goals we didn’t score and to learn from that. I wouldn’t even call Nubank a big mistake, as it allowed us to invest in Banco Inter, which is one of our best bets. We came in as an investor and they were worth less than $2 billion and now they are worth $10 billion and we have the Menin family as great partners and partners. Obviously, it would be great to go back in time and invest in Amazon at lower prices, but we managed to learn from it.
SoftBank has made several wrong bets since its existence, such as investing in WeWork. How can we not repeat these same mistakes in Latin America?
The moment allows us to understand the business models that have been tested abroad and that can be adapted for Latin America. It is much easier for us to invest knowing if the business model already works elsewhere. We ask ourselves: does this model work in Latin America? If the answer is yes, do we have an entrepreneur to run the business? That makes it easy. Our mistakes at WeWork, for example, were the amount of capital and very fast growth and we learned from that. Proof of this is that our investments in Latin America had a yield of 85%, above the best funds in the world. Now, that return will be difficult to maintain, but I think we’ll have great growth for the next 20 years in Latin America. It’s an opportunity for growth.
Looking to the future, which trend do you see as the strongest in the world of technology?
I believe the big change will be the blockchain. It’s internet 3.0. It will completely change everything, like the way our relationship with banks and money. The change is so strong that I believe that never in the history of mankind was it so good to be an entrepreneur in the world. In addition to the blockchain, we will have the introduction of robots, autonomous vehicles and even the way we heal ourselves, with healthtechs. That’s why SoftBank has become a company that invests in so many companies. Opportunities are great.