Remember when Facebook was edgy and cool and only available on college campuses? After just a dozen years, this novelty product known as a social network now boasts nearly two billion active monthly users. Remember how MySpace faded into obscurity after being the most popular destination in the nascent social network industry? There were many reasons for the dichotomy at play between these two companies, but one of the primary drivers was the leadership and investment each company received. Facebook received its first round of funding from none other than Peter Thiel, the billionaire founder of PayPal. MySpace, on the other hand, never received funding or the associated mentorship that comes with an experienced stakeholder as a part owner.
Why bother spending so much time talking about history? The reason for the lesson is because, over this past weekend, a Japanese bank called SoftBank announced that funding had closed for the largest-ever technology investment fund, according to Bloomberg. With over $93 billion in hand, this fund will be well positioned to help mentor and grow the very largest and most significant technology companies of the next several years. Interestingly, about half of that money came from Saudi Arabia and the United Arab Emirates. While the timing of the announcement and President Trump's recent visit to Saudi Arabia is likely only coincidental, this move does serve to bring the two allies closer together while reinforcing economic bonds.
The need for venture capital funding is apparent when you look at the success of Facebook versus the failure of MySpace. Private equity firms own many private companies. In return for their money, these parent businesses enjoy a seat at the board of directors, where they provide strategic input and help to connect the child company with partners and assets that would otherwise be out of reach. It is the proverbial win-win arrangement for a new business which is well-positioned to grow but lacks the necessary capital to expand. Uber is another perfect example of the explosive growth that is only possible through outside capital investment.
The most exciting part about the SoftBank Vision Fund is the name behind the scenes: Masayoshi Son. This man has an excellent track record of picking winners in technology dating back over twenty years. In the spirit of comparing successes and failures, recall the search engines Yahoo, Excite, and Lycos. Guess which one Mr. Son backed. Here is a hint: it is the only company which is still relevant.
So, what does all of this mean to you? Simply put, technology is changing the face of the world, and the powers that be have recognized the need to incubate and nurture the growth in this sector. The Vision Fund has already begun investing in several U.S. companies, including a company called WeWork. This investment is consistent with SoftBank’s promise to then president-elect Trump in December of last year where Mr. Son promised $50 billion in funding to create 50,000 new jobs in the United States after a meeting in Trump Tower.
Startups across the nation will see their prospects for landing a round of funding improve significantly now that a new player is on the scene. More entrepreneurs with exciting ideas will be able to grow their visions into life-changing realities. A larger number of Americans will have high-paying jobs in these exciting fields. The future is bright for the tech sector. The engine of economic growth may have found a new fuel source.
