After Masayoshi Son, founder and chairman of the Japanese technology firm SoftBank, launched the firm’s first “Vision Fund” in 2016, he reportedly told investors he had “no intention of making small bets.” With $93 billion to deploy, small bets weren’t really an option.
Over the next five years, SoftBank used this vast pool of capital to become one of the most significant backers of the platform economy worldwide. Even before the creation of the Vision Fund, SoftBank had backed Ola, the Indian ride-hailing company, joining a $210 million round that pushed Ola’s valuation above $1 billion. Since then, SoftBank has backed the sector’s two largest players — Uber in the U.S. and Didi in China, as well as the Southeast Asian leader, Grab. It has also invested in Zomato, the Indian food delivery business, and Rappi, which has expanded from its base in Colombia to become a Latin American super app. In Brazil, SoftBank invested in 99, another ride-hailing startup, which was eventually acquired by Didi.
SoftBank isn’t the only major investor in platform companies, but its influence and scale has placed it only a degree or two of separation away from most of the major players in the gig economy. The size of the bets it takes has allowed it to not just pick, but create winners, while its global reach means that it has been able to build regional monopolies, dividing up the world between a few giant players.
Mapping the gig work platforms
Global operations distribution of 12 of the largest international gig work companies, as of September 2021.
This approach has been very visible in Asia, where Uber ran against Didi in China and Grab in Southeast Asia. In both cases, after burning large amounts of capital to win market share, Uber sold its operations to its local rivals, ending up with sizeable stakes in both. Didi also has shares in Uber’s biggest domestic rival, Lyft. Alibaba, another SoftBank portfolio company, was an early investor. Didi also invested in Careem, the aspiring Middle Eastern super app which was later bought by Uber. SoftBank failed to convince Grab to merge with its regional rival GoJek, but the latter did then agree to tie up with another SoftBank investee, the e-commerce platform Tokopedia.
The cross-shareholdings and mutual investments mean that what constitutes competition in the platform economy isn’t clear-cut. This is also, experts said, a reflection of SoftBank’s approach and its ability to deploy huge amounts of money at speed. While other VCs might look to find a single company with a model that’s likely to scale globally, “SoftBank has $100 billion to invest,” Claudia Zeisberger, senior affiliate professor of entrepreneurship and family enterprise at INSEAD business school, told Rest of World. “So with Softbank’s head on, you can say, ‘Well, we don’t really have to find the best one right now. We just find the top five and we invest in all of them. And then we decide who wins where.’”
Who’s funding the gig economy
Common investors in 12 of the largest international gig work platforms, as of September 2021.
“Winning” for these businesses has, for the most part, been about achieving scale — almost at any cost. SoftBank, and to a lesser extent other VCs in the space, have thrown money down to give their portfolio companies the financial firepower to outgrow potential rivals without ever having to worry about whether their unit economics add up. “It’s very aggressive. You need extra funding, no problem. Where the first 5 billion came from, there’s another 5 billion, another 5 billion, no problem,” Zeisberger said. “When you have $100 billion fund, you’re basically playing ‘how do you spend it?’”
The availability of capital has also meant that the big platform companies have been able to stay private for longer, and haven’t had to test their valuations on the public markets. Stock markets haven’t always been receptive to loss-making tech companies. Uber’s stock sank more than 8% on its debut in 2019, and continues to trade below its last private valuation. Food delivery company Deliveroo — which is not a SoftBank portfolio company — lost more than 25% of its value on the day of its IPO in London in 2021. Not all of the listings have been as disastrous — Zomato’s IPO in July 2021 was hugely oversubscribed, coming amid a wider boom in Indian tech listings. Grab was due to go public in June via a special purpose acquisition vehicle, but postponed its listing.
Degrees of separation
Competition in the platform economy isn’t straightforward. Through shared investors, mergers and acquisitions, companies have ended up with stakes in one another. This diagram illustrates investments between companies and funders with directional ⟶ arrows. The areas of the ⬤ circles representing companies are scaled to the company’s current valuation — or most recent valuation for ○ acquisitions. Funders are represented by ◼️ squares and are unscaled.
Zeisberger, echoing the sentiments of several venture capitalists who spoke with Rest of World on condition of anonymity, said that there were still many questions about the long-term prospects for businesses that have yet to prove their models can work without constant cash injections, or prove they can withstand an economic shock. “I think the question will ultimately be: ‘Are these the businesses that will be sustainable for the long run?’” she said.
