Bloomberg — SoftBank Group Corp. plans to focus its investments in Latin America on startups already in its portfolio, a strategy aimed at helping to fund mergers and acquisitions amid a slump in valuations.
The idea is to dedicate about 50% of its capital investments to those companies in the next 12 to 18 months, up from 10% in recent years, Alex Szapiro, SoftBank’s head of Brazil, said in an interview in Sao Paulo.
As some venture capital firms pull back from Latin America and liquidity dries up in an environment of high interest rates, now is a good time to support the most innovative tech companies SoftBank has in its portfolio, he said.
“There were smaller companies knocking on the door from our portfolio firms last year, but they had valuations that didn’t make any sense,” Szapiro said. “Today, those companies haven’t grown as they’d hoped, and they’re knocking on the door again with better valuations and deals that make much more sense.”
The reinvestments will also aim to relieve immediate cash needs, he said.
“About 80% of the companies in our portfolio in Latin America have cash for more than 12 months, so there will be companies that will need a new round of investments,” he said. To avoid down rounds and negative impacts on stock options for employees, many investments are being done using debt that’s convertible to equity and other types of structured transactions, he said.
SoftBank’s pace of investment in Latin America has slowed after the company made a huge splash in 2019, when it began to allocate a $5 billion fund dedicated to startups in the region. About 30 months later, it announced a second fund with $3 billion. So far, it has committed $7.6 billion of capital in the region with a current fair value of $6.4 billion, according to the group. SoftBank is a publicly traded company and revalues its portfolio on a quarterly basis.
Szapiro was a founder of tech companies in the late 1990s, including e-commerce platform Submarino, which was eventually acquired by Americanas SA. He started local businesses for Apple Inc. and Amazon.com Inc. when they ventured into Brazil, and has been at SoftBank since 2021.
As managing partner of the SoftBank Latin America Fund, he reports to the chief executive officer of Softbank Group International, Alex Clavel, and works alongside the other managing partner for the Latin America fund, Juan Franck. SoftBank has 86 companies in its Latin America portfolio with some of the best-known in the region. They include used-car seller Kavak, delivery service Rappi, QuintoAndar, Gympass and fintechs Nubank and Banco Inter SA.
Among newer firms he’s excited about, Szapiro mentioned Olist, a marketplace similar to Shopify Inc., and Unico, an identification technology startup that began as a DocuSign Inc.-like firm and has evolved to providing face ID checks for banks, among other services.
SoftBank also has 2TM, the Brazilian owner of Mercado Bitcoin, as well as Mexico-based Bitso, in its portfolio. While crypto has taken a hit, SoftBank is still bullish on the technology behind digital assets, Szapiro said.
SoftBank is demanding a shorter path to profitability from companies, but it doesn’t plan to sell for now.
“We’re looking at things with a horizon of 30 years,” he said.
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