The past few weeks have been rough for SoftBank’s efforts in Latin America.
In April, four of SoftBank’s regional managing partners left the company. A couple of months earlier, its regional head had announced their departure.
CEO Masayoshi Son said last year that LatAm was a “critical part of its strategy.”
With the latest exits, will the LatAm focus change?
The Japanese conglomerate manages some of the most significant tech funds in the region, and its fresh capital has helped raise the game and fuel international expansions for many local fintechs.
Some have seen their valuations break through the billion-dollar threshold, becoming so-called unicorn companies. Returns have also been significant.
But last month, Paulo Passoni and Shu Nyatta, two investment partners at SoftBank’s LatAm arm who spearheaded the fund, left to start their own businesses.
The announcement followed Marcelo Claure’s departure months earlier, a Chief Operating Officer with the company that oversaw the regional operation.
Over the past few months, management turnover has led Softbank to rework its LatAm structure.
Latin American Funds I and II have been absorbed into Softbank’s global Vision Funds family, one of the most significant tech funds in the world.
The LatAm focus would remain untouched, the company said.
Yet, the staff will now operate under a different leadership (Rajeev Misra, CEO of Softbank Investment Advisers, and Michel Combes, CEO of SoftBank Group International).
“SoftBank Latin America Funds’ operations, investment portfolio, and the team have officially completed their transition to becoming an integral part of the SoftBank Vision Funds family,” a spokesman said.
The company also spun off its early-stage investment unit, which will now work as an independent company called Upload Ventures. Run on its own by its two original partners. The entity will have Softbank as its largest shareholder.
Drawn by massive disruption from fintech firms and other tech startups, Softbank was a pioneer back in 2019 when it announced a $5 billion LatAm-specific fund, a significant amount of capital in a region that until then had minimal foreign private funds to draw from.
In late 2021, the entity doubled down its bet in the region as it announced a second dedicated private investment fund, SoftBank LatAm Fund II. Capitalized with $3 billion, the fund came on the heels of strong 85% returns booked by its predecessor.
“We have seen extraordinary results from Latin American funds, a testament both to the team we have in place and to the economic and entrepreneurial vibrancy of the region,” said Eduardo Vieira, head of LatAm public relations at Softbank.
“LatAm funds were a first-mover, and Softbank remains as committed as ever to the region.”
Strategy likely to stay
To this point, industry observers agree. Although there might be some short-term hurdles as the firm reorganizes, they claim it is unlikely that the strategy will be substantially changed.
“It would be very strange for a fund the size of Softbank to change its investment policy due to losing part of its staff, no matter how key people are,” Hernán Haro, founder at Mr. Pink VC firm, said. “There might be a short transition process where changes slow down the investment somewhat, but in the medium and long term, it should not have a significant impact.”
The first LatAm fund was a groundbreaker for fintechs in LatAm, where capital used to be scarce. As of September, it had invested $3.5 billion in 48 companies, most of which were at a growth stage. Its current portfolio includes many of the region’s largest fintech firms, such as Mercado Bitcoin, Ualá, Creditas, Addi, Clip, Banco Inter, Konfio, and Nubank.
“Capital commitment of $8 billion continues to fuel the remarkable growth of LatAm founders,” Vieira said. “We will continue to support our portfolio companies, and we are open to welcoming new ones. We are still monitoring all investment opportunities in the growth field.”
Haro argued, however, that it was likely that Softbank would draw lessons from its experience.
“In the future, they probably won’t consolidate too much control in one or a few people,” he said.
In his farewell post, former management partner Passoni wrote he and his partner were moving “towards achieving our own dreams (…) in our own way and with our own culture.” Passoni said Softbank was looking to announce a $2 billion extension as a further commitment from the Japanese group to Latin American tech, yet the company did not confirm his sayings.
Venture capital flows to Latin America did not decelerate during the first quarter of 2022. Even after a record-breaking 2021, investments continued on an upward trend of $2.7 billion invested. It was the fourth-largest quarter on record in Latin America, LAVCA, the association which tracks these flows, said.