SoftBank upends Latin American startups with billion-dollar deal binge

[SAO PAULO] SoftBank Group's Latin America foray, a multibillion-dollar deal spree that minted a wave of "unicorns" and upended the region's startup landscape, is just getting started.

The Japanese technology giant still has about US$4 billion left in the US$5 billion fund it launched in March for new technology companies in the region, and has its sights on roughly 300 targets, according to Andre Maciel, a managing partner at SoftBank Group International. About 200 of those are in Brazil, he said.

"We already feel that the opportunity in the region is bigger than what we originally thought," Mr Maciel, SoftBank's head of Brazil and structured transactions, said in an interview at the firm's Sao Paulo offices. "There's a lot outside of Brazil we still haven't got around to even looking at."

For the next round, Mr Maciel said he's looking at companies in the healthcare and real estate industries, as well as boosting bets in financial and mobility firms.

SoftBank's investments make up a vast chunk of the total market. Last year, investors stuffed US$2.4 billion into startups in the region, more than double 2017's total, according to PitchBook. In 2019 so far, deals have added up to US$2.1 billion, with SoftBank-backed transactions making up the bulk of the total.

"This is the kind of capital that has never been seen before in Latin America," Mr Maciel said.

SoftBank isn't the only venture capitalist pouring money in Latin America's startup champions. Nu Pagamentos, the six-year-old fintech known as Nubank, announced a US$400 million funding round led by venture capital firm TCV - an early backer of Netflix Inc and Spotify Technology - in its first large investment in Latin America. Tencent Holdings and Sequoia Capital, two existing Nubank investors, added money to the fund.

Beyond infusing Latin American companies with cash - in some cases more than tripling their valuations - SoftBank is also investing in local venture capital funds. In June, SoftBank announced a partnership with Valor Capital Group, a fund with about US$300 million invested in 37 Brazilian companies and US firms looking to expand in Brazil.

"In some cases we've more than doubled the investment firepower available to those funds," Mr Maciel said. "We don't have the reach and structure to look at smaller transactions, but those funds do. They can irrigate the system for entrepreneurs."

Mr Maciel, a 17-year veteran of JPMorgan Chase & Co, is one of Marcelo Claure's three lieutenants in the region, and the only one based in Sao Paulo. The other two are Shu Nyatta, who shuttles between the Miami and Silicon Valley offices, and Paulo Passoni, who worked at Third Point for seven years and is based in Miami. The trio report to Mr Claure, the Bolivian-American chief executive officer of SoftBank Group International who oversees the Latin America expansion.

New firms

Another part of the group's mandate is to help SoftBank's global portfolio of over 100 firms setting up footholds in Latin America. Mr Maciel says there are plans to bring around 40 of those to the region, either through partnerships or local offices. Some of SoftBank's most-successful ventures, from Uber Technologies and WeWork Cos to Didi Chuxing, already have sizeable local operations.

The company has 10 employees on its local team and plans to reach as many as 30 in coming months. It's also looking for a new building to house its offices in Sao Paulo, Mr Maciel said, but will keep running into one of the biggest hurdles of its Latin America deal binge: the everybody-knows-everybody tightness of Brazil's financial district.

Mr Maciel's solution? "I've started taking some of our more delicate business meetings in my living room."

SoftBank's Latin America investments:

Rappi: A Colombia-based delivery startup. In May, SoftBank agreed to invest US$1 billion in the firm, valuing it at around $3.5 billion, according to people familiar with the matter.

Clip: A Mexican payments fintech similar to Square.

Loggi: A Brazilian logistics platform. In June, SoftBank led a US$150 million infusion for the firm, valuing it at US$1 billion.

Gympass: A Brazilian fitness startup. In June, SoftBank led a US$300 million investment in the firm. Both the Vision Fund and the Latin American Fund participated.

Creditas: A Brazilian online lender for secured loans. In July, SoftBank led a US$231 million investment in the firm, tripling its valuation. Both the Vision Fund and the Latin American Fund participated.

Banco Inter: A Brazilian digital bank. In July, SoftBank, through a vehicle called LA BI Holdco LLC, bought an 8.1 per cent stake at the lender, paying roughly 760 million reais (S$265.3 million), according to a regulatory filing.

Volanty: A Brazilian digital dealership for used cars. In August, it received a 70 million reais investment led by SoftBank and Argentine venture capital firm Kaszek.