Explained: Why is Softbank slowing down investments, and what could be its impact in India?

The founder of Softbank Masayoshi Son has told his top executives to slow down investments, according to a report by Financial Times. Why has the Japanese conglomerate taken this decision? Will it affect the start-up ecosystem in India?

Softbank has backed some of the biggest names in the Indian tech industry, including Paytm, Flipkart, Ola, Oyo, Swiggy, Delhivery, InMobi, and Lenskart to name a few. (File Photo)

One of the most active investors in India’s consumer internet ecosystem SoftBank could take its foot off the funding pedal as the company’s founder Masayoshi Son has told his top executives to slow down investments, according to a report by Financial Times. We take a look at why the world’s largest tech investor has taken the call and what would be its impact in the country.

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Why is SoftBank slowing down investments?

As per the FT report, the world’s largest tech investor is looking to raise cash in light of falling tech stocks and a regulatory crackdown in China — something that has severely hit the SoftBank Group’s holdings. The estimated write-down at the Japanese company for this quarter stood at $30 billion, although a recent uptick in some shares meant it was now closer to around $20 billion, the report stated.

How important is SoftBank to India’s start-up ecosystem?

SoftBank, through its Vision Fund investment module, is one of the biggest investors in India’s start-up and consumer internet ecosystem, alongside the likes of Sequoia Capital and Tiger Global. In December, Son, speaking at India’s flagship global financial technology summit Infinity Forum, had said: “Just this year alone, we have invested $3 billion in India. We are the biggest foreign investor in the country. We are providers of about 10 per cent of the funding of all the unicorns — firms valued at $1 billion or more — in India.” He also claimed that SoftBank-backed companies in India have created more than 1 million jobs.

Which companies are backed by SoftBank?

The Japanese conglomerate has backed some of the biggest names in the Indian tech industry, including Paytm, Flipkart, Ola, Oyo, Swiggy, Delhivery, InMobi, and Lenskart to name a few. Lately, it has also invested in companies such as Zeta, Meesho, OfBusiness, and turned them into unicorns.

What could be the impact of SoftBank slowing down investments?

Given that SoftBank is a big player in the investment sector in India, the reported slowing down could push some of the start-ups to re-examine their ambitious projects. However, on a broader scale, the impact could be limited as a result of other funds accelerating their investments.

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Tiger Global, for example, has raised more than $11 billion for its latest growth-investment fund, which it plans to use in the US, India and China. Accel India, one of the earliest backers of Flipkart, recently raised $650 million in commitments for its seventh fund to invest in new opportunities across India and Southeast Asia. Sequoia Capital India, reportedly, is also looking to raise $2.8 billion to infuse into Indian and Southeast Asian startups.

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