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What conditions does Softbank put to invest fresh dollars in a company, a project or startup?

The Japanese giant that created a US $ 5,000 million fund for Latin America requests some requirements before continuing to bet on ventures

SoftBank, whose US $ 5,000 million fund for Latin America is bringing unprecedented resources to new companies in the region, is also courting venture capital funds, an unusual initiative for the Japanese investor that is revolutionizing the technology sector .

SoftBank’s most common way of investing worldwide is to put money directly into new businesses, but in Latin America it has reserved some of the resources to disburse them in venture capital funds.

The business in Latin America

The venture capital industry is relatively incipient in Latin America and Softbank investments in the funds would help stimulate innovation, particularly in the development of larger new companies that are the main objective of the Japanese group.

But industry executives say SoftBank’s venture capital resources are linked to demands that many funds consider unfavorable.

Informed sources say that one of the conditions imposed by SoftBank is a preventive right to invest in portfolios of companies that decide at a later stage to raise more funds or put them up for sale.

This could put SoftBank at an advantage as a potential principal investor in future rounds of financing and could also give the Japanese conglomerate advantages over other investors in the same fund, according to sources.

In addition, sources say that SoftBank’s desire to obtain advantages could generate conflicts of interest with other investors who would also like to have the right to co-invest with the fund.

Two Brazilian venture capital funds rejected the conditions proposed by SoftBank, according to two sources with knowledge of the subject.

The priorities

SoftBank also urges the funds to accept a non-competition clause for investments in smaller startups and to prioritize the Japanese conglomerate in these companies, according to a source.

The venture capital industry is still small in Latin America, with total investments of only US $ 2 billion last year, although this represents four times the investment in 2016.

In Brazil, the largest economy in Latin America, venture capital represents only 0.04% of GDP, while in the United States it reaches 0.43% and in China 0.33%, according to a McKinsey report & Company.


Also published on Medium.

Published inStartups

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