Season 2, Episode 4: SoftBank, Fortress and the Vision Fund

[0] I don't know.

[1] I don't know if it's 2 and 20 or lower.

[2] Yeah.

[3] But even if it's lower, it's just such a huge amount of money.

[4] It feels like you can pay some associates with it.

[5] I have a lot of thoughts here.

[6] Welcome to Season 2, episode 4 of Acquired, the podcast about technology acquisitions and IPOs.

[7] I'm Ben Gilbert.

[8] I'm David Rosenthal.

[9] And we're your hosts.

[10] Today we are covering an acquisition that has forever changed the world of venture capital, private equity, and emerging technology companies forever.

[11] I think I said forever twice there.

[12] SoftBank buying fortress.

[13] It's so forever.

[14] It's doubly forever.

[15] It's double forever.

[16] And of course, the subsequent creation of the SoftBank Vision Fund.

[17] And we will tie up the connection between those two things.

[18] But before we dig in too far, David, I just need to say congratulations on the big news this week with the formal announcement of wave capital uh thank you ben thank you ben it's nice to uh as uh one of our listeners pointed out in the slack not have to be totally coy about what i'm doing anymore we're excited and uh it'll be fun to build wave over the next couple years who knows maybe in you know a couple years we'll be bigger than soft bank uh that is not the vision here that you see what i did see what i did not the vision it's not it's not the vision for your fund no awesome to uh you know that news be out and I'm sure it'll have lots of good opportunities to use that perspective to pepper in good thoughts for future episodes of Acquired.

[19] Indeed.

[20] A little bit of business before we move into the show.

[21] If you're new to the show, you can check out our Slack at Acquired .fm.

[22] I just checked and we're over 1 ,200 people.

[23] So come join us and talk about any big tech news that's going on, suggest episodes for us and chat with other people who listen to the show.

[24] Okay, listeners, now is a great time to thank one of our big partners here at Acquired, service now.

[25] Yes, ServiceNow is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

[26] 85 % of the Fortune 500 runs on them, and they have quickly joined the Microsoft's at the NVIDias as one of the most important enterprise technology vendors in the world.

[27] And, just like them, Service Now has AI baked in everywhere in their platform.

[28] They're also a major partner of both Microsoft and NVIDIA.

[29] I was at NVIDIA's GTC earlier this year, and Jensen.

[30] brought up ServiceNow and their partnership many times throughout the keynote.

[31] So why is ServiceNow so important to both Nvidia and Microsoft companies we've explored deeply in the last year on the show?

[32] Well, AI in the real world is only as good as the bedrock platform it's built into.

[33] So whether you're looking for AI to supercharge developers and IT, empower and streamline customer service, or enable HR to deliver better employee experiences, Service Now is the platform that can make it possible.

[34] Interestingly, employees can not only get answers to their questions, but they're offered actions that they can take immediately.

[35] For example, smarter self -service for changing 401k contributions directly through AI -powered chat, or developers building apps faster with AI -powered code generation, or service agents that can use AI to notify you of a product that needs replacement before people even chat with you.

[36] With ServiceNow's platform, your business can put AI to work today.

[37] It's pretty incredible that ServiceNow built AI directly into their platform, so all the integration work to prepare for it that otherwise would have taken you years is already done.

[38] So if you want to learn more about the ServiceNow platform and how it can turbocharge the time to deploy AI for your business, go over to servicenow .com slash acquired, and when you get in touch, just tell them Ben and David sent you.

[39] Thanks, ServiceNow.

[40] So David, the SoftBank Vision Fund.

[41] Well, first off, what is SoftBank?

[42] So SoftBank, if there's one big takeaway from the episode, SoftBank, not a bank.

[43] It is a conglomerate, a Japanese conglomerate founded in 1981, mostly focus on telecommunications businesses, and actually originally a PC software distributor in Japan.

[44] Indeed.

[45] We might just get into that.

[46] We might.

[47] We might.

[48] So they're going to buy Fortress.

[49] I'm going to talk all about that.

[50] They just started this Vision Fund.

[51] Presumably you've heard people talking about the Vision Fund.

[52] I'm sure down in Silicon Valley that occasionally comes up.

[53] You know, it's not really a big, no, actually this is like the only topic here.

[54] You can go like, you literally cannot walk into a coffee shop in San Francisco or Silicon Valley without hearing somebody talking about the Vision Fund and SoftBank.

[55] And it's an iconic founder, Masayoshi Sun.

[56] And SoftBank, is this just relevant like to you as a VC?

[57] Is this, like, do you hear other folks talking about it?

[58] Does it have repercussions outside of just being a venture investor?

[59] Well, so the Vision Fund is currently $93 billion can go up to $100 billion.

[60] It is the largest fund ever raised by anyone in the history of mankind across the entire world.

[61] And largest by a factor of like five.

[62] This is literally not just the largest venture fund, but pretty game changing in the entire investment world.

[63] You may have heard of SoftBank in this recent news of the tender for Uber Shepard.

[64] shares, a soft bank just bought 15 % of Uber.

[65] They've also made multi -hundred million or billion dollar plus investments into WeWork, DoorDash, Wag, Slack, and all very, very recently.

[66] Like, these deals are happening fast and they're huge and they're changing everything.

[67] Which is why we're here on the scene.

[68] And it just so happens that a key part of all of it was an acquisition.

[69] If we want to really pat ourselves on the back for timing, which we really can't do.

[70] We actually have a content calendar now and we don't know when these things are going to But SoftBank did just announce that they are moving Fortress and the Vision Fund under one roof.

[71] They just announced that this past week.

[72] And so today on Acquired, we will rewind history and cover the acquisition of Fortress and how that plays into this whole Vision Fund thing.

[73] Should we do it?

[74] Let's do it.

[75] All right.

[76] Well, we're doing a little bit of a switch up on history and facts here.

[77] We are going to cover Fortress a little bit farther on.

[78] But since this is the SoftBank Vision Fund, you really can't talk about any of this without starting with SoftBank.

[79] But first, it's really iconic founder who isn't as well known in the U .S. in the West as he should be, although that's changing quickly.

[80] But Masayoshi San, or Masa, as he goes by, he's a pretty interesting character.

[81] So he was born in 1957, in Japan, not in Tokyo.

[82] but on the island Kyushu in the south of Japan.

[83] His father was a fisherman and they were relatively poor.

[84] The family, they were Korean immigrants in Japan.

[85] So Masa's grandparents were all Korean and immigrated to Japan.

[86] That was not a great situation in Japan.

[87] Japan has always had a very complicated relationship with both Korea and China.

[88] When Masa was growing up, the Japanese government actually mandated that all Korean families in Japan had to change their surnames to be Japanese.

[89] So they had to essentially, like, reject their identity.

[90] And this happened when Masa was young.

[91] So this family changed their name from their surname from San to Moto.

[92] Real quick, David, is this like a thing that you knew about culturally before doing the research?

[93] Or is this a part of your research process?

[94] No, I did not know this beforehand.

[95] But Masa talks a lot about this.

[96] So this was, like, really formative to him.

[97] There's a great, we'll link to it in the show notes.

[98] He goes on Charlie Rose a couple years ago.

[99] Charlie Rose is a little bit of a controversial character himself now with some of the sexual misconduct allegations.

[100] But this interview with Maso is really great.

[101] He talks about his childhood and how much it shaped him.

[102] So through all of this, though, even though growing up, you know, son of a fisherman in rural Japan and the island, his parents really encouraged him and told him that he was going to be great.

[103] He was really precocious.

[104] He was going to do great things.

[105] When he was a teenager, there was a guy in Japan who was the president of McDonald's Japan, and he had written a book, a business book, and Masa got a hold of it.

[106] He read it, and he was super inspired.

[107] He decided he had to meet this guy.

[108] And so he started calling his office, got a hold of his secretary, and kept calling, like, time and time again saying, I need to come, I need to meet with him.

[109] And he said, you know, the secretary said, no, you're not going to meet with him.

[110] Finally, Masa flies to Tokyo, just shows up in the office.

[111] to meet with this guy.

[112] It says, I'm not going home until I get to meet with him.

[113] He does.

[114] He's 16 years old at the time.

[115] Finally, the guy says, all right, I'll let you in.

[116] I'll give you 15 minutes.

[117] That's a war of attrition.

[118] Literally war of attrition.

[119] And this guy tells him two things.

[120] Moss asked for his advice.

[121] You know, what would you tell me as a young 16 year old here in Japan?

[122] He gives him two pieces of advice.

[123] He says, one, learn English.

[124] And two, study computers and computer science because that's the future.

[125] Which is advice that you get today, not advice that you would have gotten what in the 60s and 70s?

[126] This would have been the mid 70s.

[127] Wow.

[128] Yeah, pretty crazy.

[129] This guy was pretty prescient.

[130] Masa, as you can imagine, knowing this little bit about him so far, he not only takes the advice to heart.

[131] Within like weeks, he moves to the U .S. His family has no ties to the U .S. and moves to the Bay Area, ends up finishing high school.

[132] the Bay Area, goes to university here.

[133] He goes to, he does two years at a college called Holy Names University.

[134] And then he transfers to UC Berkeley, where he majors in economics and computer science.

[135] So he's just going.

[136] And it's all of this is because he wants to follow in this guy's footsteps.

[137] He wants to be a businessman.

[138] He wants to start companies.

[139] So while he's at Berkeley, after he transfers there, he does two things.

[140] One, he convinces one of his professors to start a company with him.

[141] It was a physics professor.

[142] And they, make an electronic translator, the language translator, and then they sell it within a year to the Japanese conglomerate Sharp for $1 .7 million.

[143] Remember, this is back in like the late 70s.

[144] And a student, like what an awesome thing to do as a student.

[145] Yeah, I mean, a couple years ago, he was, you know, in a fishing village in Japan.

[146] And then the other thing he does during this time, partially with the proceeds from that sale, he starts importing space invaders arcade machines from Japan to the Bay Area and to the Berkeley campus.

[147] And supposedly, according to Masa, he makes about one and a half million dollars from...

[148] Presumably more money than his share of the sale.

[149] Yeah, totally, totally.

[150] It's totally reminded me of Tony Shea and Alfred Lynn and the Zappa story and selling pizza.

[151] Pretty crazy.

[152] So by the time Mossa graduates in 1980 from Berkeley, he's already a mom.

[153] multi -millionaire.

[154] And so he decides he's going to go back to Japan.

[155] In the interim, he actually, first he starts another company called Unison that gets acquired quickly by Kyosera, which I believe is a Korean company.

[156] Unclear how much money that one was for.

[157] Masa doesn't talk about that one.

[158] But he decides he's going to come back to Japan.

[159] He's made, you know, a little bit of a mark.

[160] He does does two things.

[161] Decides two things.

[162] One, he's going to change his last name back to San.

[163] He's done with the, you know, Japanese named that his family had adopted.

[164] He wants to, he talks about this.

[165] He wants to, he feels like he's living a, you know, false life.

[166] He wants to be himself, be his true identity, um, and be known as, you know, for what he is.

[167] And two, he decides, I'm going to start another company, but this one is going to have an enormous impact.

[168] So he moves back home.

[169] He literally lives at home, uh, lounge is around for about six months or so and decides to start a company and calls it soft bank.

[170] Why SoftBank.

[171] His business plan, what he wants to do is he wants to be a distributor of software in Japan.

[172] And this is back in the day, you know, software, you know, there are no CD drives.

[173] Like, these coming in packaged boxes that you buy in stores.

[174] You know, in a zero distribution cost world, we tend to devalue distributors in our heads like that doesn't strike you as a huge business.

[175] That was an essential part of the value chain that was, there are a lot of economics in there in a pre -internet world.

[176] Yep.

[177] Without distributors, without retail.

[178] and without B2B distribution of software on floppy disks, probably like not even the three and a half inch floppy disk, probably the big truly floppy disks at this point.

[179] You know, you can't get software onto your PCs.

[180] So he starts that and he also realizes that part of succeeding in distribution is you also have to be in the publishing game and not just publishing software, but actually publishing content so that people discover software and want to buy it.

[181] So he starts publishing PC magazines first in Japan, realizes that that's actually a really interesting business itself, and that goes pretty well.

[182] And he decides he wants to start to expand.

[183] And he wants to get, in particular, he wants to get back into the U .S. where he, you know, was educated and knows how much innovation is happening in software there at the time.

[184] So he does, we're now into the kind of mid -90s.

[185] He does, he does two things.

[186] First, he buys Zip Davis, which was the publisher of PC Week and a whole bunch of other stuff.

[187] I totally remember reading these magazines back in the day.

[188] So SoftBank acquires Zip Davis.

[189] And then he also acquires...

[190] Is it Comdex?

[191] Comdex.

[192] Yeah, an organization called Comdex, which was like the South by Southwest.

[193] Yeah, it was the computer show.

[194] If you were into computers and you were a distributor or a creator, like, you know, if you're actually, have you seen Halt and Catch Fire TV show.

[195] No, I've heard it's so good.

[196] It's awesome.

[197] One of the big moments in the show is the first sort of demo at Comdex.

[198] You know, I think this predates both you and I, but if you were into computers in those days, that was where you went to check out all the new stuff.

[199] Totally.

[200] Yeah, like the South by Southwest or, you know, what have you of, of its day.

[201] CES, E3.

[202] Yeah.

[203] All of it, like, rolled into one.

[204] It was all there was in the tech industry because it was all PCs.

[205] So he's now got this kind of empire going.

[206] And this is the mid -90s.

[207] He's starting to see the Internet is coming, too.

[208] And let's shape this empire.

[209] It's a little empire of PC distribution and media and events about PCs.

[210] Yes.

[211] In Japan and now in the U .S., he starts to see that the Internet is coming, and there's going to be a big opportunity to invest in lots of companies that are going to create new businesses on the Internet.

[212] So what does he do?

[213] He starts a VC firm, a U .S. venture capital firm, under the soft bank name, And he hires, brings on a few partners to be the partners and investors locally in the U .S. at this VC firm.

[214] Do you know, Ben, who one of those partners was?

[215] Brad Feld of Foundry Group.

[216] And listening to Brad is, Brad is, of course, at Foundry Group and Foundry's an investor in PSL and Wave as well.

[217] Yeah.

[218] So Mobius, which was the firm that he started before Foundry Group and where most of the Foundry Group partners had worked together at Mobius before, that was basically a spin -out from SoftBank.

[219] And a number of them had first started working together at SoftBank.

[220] Got it, got it.

[221] And I believe Brad can correct us here, but I believe Brad's first company that he started in Boston out of MIT was a software.

[222] publishing and distribution company, and I believe SoftBank acquired it, and then that's how we got into VC.

[223] We'll have to have Brad on the show and give us some of this history.

[224] That's awesome.

[225] Totally.

[226] So fun aside, so they start this USVC firm, and these are the go -go years of the mid -to -late 90s internet.

[227] Both the USVC firm and SoftBank itself, corporate, invests in tons of companies.

[228] They end up taking stakes in about 800 companies across the world.

[229] And what?

[230] One of those companies is Yahoo. So Masa, when he's in the U .S. at one point in time, he ends up meeting Jerry Yang right as they're getting started.

[231] And SoftBank invests a small amount in Yahoo. I don't know if it was alongside Sequoia or before or after, but they become a major shareholder in Yahoo. They end up investing about $350 million in Yahoo. And at the time of the IPO, SoftBank is the largest shareholder in the company.

[232] And they started Yahoo Japan, right?

[233] And together, yeah, Masa goes and proposes to Jerry, Yahoo, what you're doing in the U .S., like, you need to do that around the world, too.

[234] Why don't we start Yahoo Japan together?

[235] So they do that as a joint venture.

[236] It becomes hugely valuable, ends up IPOing in Japan itself and is a huge win for software.

[237] So you can start to see, like, some of what they're doing with the Vision Fund.

[238] It's kind of like what's old is new again.

[239] They've been doing this all along.

[240] They actually, they approach Amazon.

[241] They want to do the same thing with Amazon, apparently, and Bezos rejects them because Masa and SoftBank want too much of the JV, of the combined company in Japan.

[242] It strikes me that Bezos says, what do you mean, that's my opportunity?

[243] Yeah, exactly, exactly.

[244] So this is crazy.

[245] And I knew a little bit of this history before I started diving in doing the research, but this actually is shocking.

[246] So this is all going, you know, so well during the internet bubble.

[247] For a brief moment, Masa actually becomes the wealthiest person in the world.

[248] He passes Bill Gates.

[249] SoftBanks market cap goes up to almost $200 billion.

[250] And they've got the stakes in all these companies.

[251] Bubbles do crazy things to non -liquid stock.

[252] Indeed, indeed.

[253] And so apparently he's like vying with Bill Gates through all this to be the world's wealthiest person.

[254] Bill comes over and visits him in Tokyo, and Masa had built, he tells the story on Charlie Rose and elsewhere, he had built in his house, in his mansion in Tokyo, a golf simulator in the basement that was like, so not just like a, you know, like video golf, but like had simulated sea breezes and like ocean sense and like all this stuff and simulated light.

[255] and apparently Bill Gates is like blown away.

[256] I mean, this is the point in Bill Gates' life where it was like famous that he had the pictures that change on his walls.

[257] Yep.

[258] Like that's right up his alley.

[259] Yep.

[260] Unfortunately though, for Masa, shortly after he passed Bill, the bubble burst.

[261] And then Masa gets another infamous distinction.

[262] I believe this is still the case.

[263] As a single person lost the most amount of money that anyone has ever lost in history.

[264] So his personal wealth within a matter of weeks during the bursting of the internet bubble fell by 70 billion, 7 -0 billion in 2001.

[265] That's like the GDP of a small country.

[266] Yeah, totally, totally.

[267] It's like, you know, seven -tenths of the Vision Fund.

[268] But he learns a couple things from that.

[269] And, you know, ever the resilience individual, he's kind of more determined than ever to come back.

[270] But what he learns is that, and what he decides after that is that cash flow and profits are very important in businesses.

[271] I mean, notoriously, part of the problem with the whole the Internet bubble was like there wasn't even, certainly not cash flow and not even revenue at a lot of these companies.

[272] And so Masa kind of learns less and he's not going to do that.

[273] He decides to pivot soft bank at this point away from.

[274] just being a software and company and tech investor into more infrastructure.

[275] He gets really interested in infrastructure because he sees the sort of attractive cash flow dynamics of it.

[276] And specifically what he does is he gets into broadband in Japan.

[277] So this is when broadband is like becoming a thing and people aren't using dial -up anymore.

[278] And Japan was particularly advanced.

[279] And we should say one other thing that happened during this time in 2000 still kept doing some early stage investing.

[280] And one of those investments was a $20 million.

[281] We're coming to it.

[282] Cliffhanger.

[283] Cliffhanger.

[284] He doesn't stop the investing.

[285] But so he gets into broadband, he buys Japan telecom and then starts investing in broadband, sees that, I promise I'm going to come back to the investing in a minute.

[286] But this is actually, I think, an even better story.

[287] He starts seeing that mobile is going to be the future.

[288] And this is a thing about Masa.

[289] Like, he's very, bold, but he's always thinking like a couple years in advance.

[290] So like mid -2000s, Japan, you know, mobile telephones are much more advanced than anywhere else in the world.

[291] But it's still not like what we think of as mobile today.

[292] It's kind of like halfway there.

[293] He decides that mobile's the future of the internet.

[294] He wants to get in on it.

[295] And what's the best way to do it?

[296] He thinks he needs, he's not in mobile at all.

[297] He's only in wired broadband at this point.

[298] he thinks he needs like a game -changing, really, device to do this.

[299] So he flies to the U .S. and he meets with Steve Jobs.

[300] This is in like 2005 -2006.

[301] Wait, what?

[302] Yeah.

[303] So Masa, he's thinking about how he can enter the mobile, you know, telephone world.

[304] He decides that he needs a game -changing device.

[305] He decides the only person in the world who could develop such a device would be Steve Jobs and Apple.

[306] So he comes over.

[307] He meets with Steve.

[308] this is like 0506.

[309] Apparently he brings a drawing that Masa himself had made, a drawing of an iPod with a phone in it.

[310] It's like apparently like the Tony Fidel version of the iPhone.

[311] No way.

[312] He did that.

[313] He made the P1.

[314] He made the P1.

[315] He made the P1.

[316] He comes, he sits down with Steve.

[317] He meets with them and he's like, I want to get into mobile.

[318] I need a great device.

[319] You should make it.

[320] I have a drawing for you.

[321] And meanwhile, Apple's into like in the midst of this head -to -head internal competition what 12 months away from launching the iPhone totally and uh and Steve apparently laughs and he's like I don't need your drawing like you think we're not working on this and Moss is like fine I don't care like if you make this I want to be the first and Steve's like this is hilarious you know nobody knows we're working on this but we are but because you came to see me and you said you had such a hutzpah you know show me a drawing uh I'll work with you on it.

[322] So, you know, let me know what you need, but, you know, we need a mobile carrier.

[323] And Masa's like, I got it.

[324] Give me like a couple, give me like a year.

[325] So he goes back to Japan and he orchestrates a deal to buy Vodafone Japan, which is one of the largest, was one of the largest mobile carriers in Japan, like AT &T or Verizon or Sprint, but he doesn't have the money to do it.

[326] So he goes and he raises like $20 billion in debt financing from the capital.

[327] markets.

[328] And in particular, he raises, I believe most of it from Deutsche Bank, from a guy named Rajiv Misra at Deutsche Bank.

[329] He's going to come back into the story in a little bit.

[330] He ends up buying Vodafone, knowing in his back pocket that when the iPhone does come out, he's got this handshake agreement from Steve to be the exclusive provider in Japan.

[331] That's in 2006.

[332] iPhone obviously gets announced in 2007, goes on sale in the U .S. And then in 2008, the newly renamed SoftBank Mobile, which was Vodafone Japan, becomes the exclusive carrier of the iPhone in Japan.

[333] And this, like, is huge.

[334] They triple their market share.

[335] Japan falls in love with the iPhone.

[336] 3D chess, David.

[337] 3D chess.

[338] Totally.

[339] All because of that drawing.

[340] So this is arguably at this point, the greatest thing that's, you know, happened to SoftBank.

[341] Huge comeback from having had the infamy of losing more money than anyone else.

[342] in the world.

[343] And then actually later in 2013, he tries to get into U .S. mobile carriers.

[344] They buy Sprint.

[345] So SoftBank owns Sprint here in the U .S. And wholly, right?

[346] They're 100 % own subsidiary.

[347] I think at first they bought like 73 % or something like that.

[348] I don't know if they now own 100 % of it.

[349] But they certainly own a vast majority of the stake.

[350] But there's this other little thing that happens over the interviewing years that Ben, you were referring to.

[351] And now, was that all the way back in, it actually was in 2000, so it was before the tech bubble burst.

[352] Masa made one other of the 800 investments that he made.

[353] He put $20 million into a company in China called Alibaba in the year 2000.

[354] Fourteen years before they IPOed.

[355] 14 years before the IPO.

[356] So fast forward to 2014, Alibaba goes public in, I believe, the largest IPO ever.

[357] Definitely one on our list that we're going to have to cover.

[358] And when that happens, that stake that SoftBank owns in Alibaba is now worth $60 billion in liquid publicly tradable securities on the open market.

[359] And that really is a combination of all of these things.

[360] But I think it's really that that leads to the Vision Fund.

[361] All of a sudden, SoftBank has $60 billion that they've done in tech investing in liquid securities.

[362] And that happens in 2014.

[363] Is my math right there that that's a 3 ,000 X return on $20 million?

[364] It's uncalculable.

[365] And people talk about this as like, this may well be, lots of people reference this as the best investment of all time when we did the next acquisition, the Apple acquisition of Next, you know, we called it the best acquisition of all time that created a trillion dollars in market cap.

[366] I think that $20 million investment might be the single best investment anyone's ever made.

[367] Hmm.

[368] Do you know if that's how the Yahoo Alibaba relationship got started?

[369] Do you know if there's a tie -in here?

[370] There definitely is.

[371] So I didn't research the exact timeline.

[372] So I don't know if it was Jerry Yang who first met Jack Ma or if it was Masa who first met Jack Ma and invested.

[373] But both of them, both Jerry Yang and Yahoo and SoftBank invested in Alibaba.

[374] And that was famously a huge part of Yahoo's market cap when Alibaba went public was the Alibaba shares.

[375] Yep, yep.

[376] And a couple years before Yahoo ended up getting sold off, they sold half of their stake in Alibaba before Alibaba went public at a much lower valuation.

[377] than when they did go public.

[378] You got to have Masa's conviction to hold, man. Totally.

[379] I mean, this guy is like, if it wasn't clear already, like he's a pretty amazing character.

[380] It's not the Oracle of Omaha, but the Oracle in Japan.

[381] Yeah, he's like the Jeff Bezos and Warren Buffett of Japan, like, rolled into one.

[382] Feels like a guy that should deploy $100 billion.

[383] I don't know.

[384] Well, if anybody can do it.

[385] So today, Masa is the richest person in Japan.

[386] And so he has accomplished his, that wasn't explicitly his goal, but when he started SoftBank, he wanted to make an impact.

[387] And he is the 39th richest person in the world.

[388] As of January, his personal net worth was estimated at about $22 billion.

[389] So still not the 70th that it once was, but still pretty amazing.

[390] After that IPO of Alibaba in 2014, they now have all of this capital.

[391] It's taken a long time, but they've been very successful at being investors.

[392] One thing that is worth noting is they don't always work.

[393] Like, they bought Sprint, but Sprint hasn't hugely grown in value.

[394] They're good investors.

[395] You know, they also had a huge return on buying some supersell shares and selling to 10 cent.

[396] But Sprint isn't anything to write home about.

[397] It doesn't give you, you know, tens of billions of dollars on which to go and raise the largest fund in history.

[398] Nope.

[399] But if you have 60 billion of your own, that gets you a long way.

[400] So a couple things.

[401] In 2015, they bring on a guy named Nikesh Aurora.

[402] and Nikesh had been an early Google employee, and he was the chief business officer at Google.

[403] So he was in charge of building all of Google's ad business over the years, and he was essentially head of monetization.

[404] They hire him away at SoftBank.

[405] He becomes the president and COO, and he's very explicitly next in line to kind of take over for Masa when Masa when Masa retires.

[406] Masa's in his late 50s, early 60s at this point.

[407] Nikesh.

[408] And then they get, you know, they have all this capital.

[409] Now from the Alibaba, IPO.

[410] Nikash is originally from India before he came to the U .S. He starts investing in India growth companies.

[411] So like 2014, 2015, there was a big, well, in retrospect, really kind of bubble of tech startups in India, companies like Ola and Snapdeal and Flipkart.

[412] Wait, did you just say Snapdeal and Flipkart, David?

[413] So no, SoftBank invested in Snapdeal, but not Flipkart.

[414] I think they actually did.

[415] So I think kind of a crazy thing is, one thing they're willing to do is, is cut and run, or at least invest in a competitor.

[416] So Snapdeal wasn't going the way that they were hoping it would go.

[417] Later on in the Vision Fund, in April of 2017, they put $4 billion into FlipCard.

[418] Oh, wow, wow.

[419] But that was via the Vision Fund.

[420] Okay, so that hadn't happened just yet.

[421] The Cash Kid kind of led investing in these companies in India.

[422] So yeah, I should take that back.

[423] Maybe that's not fair.

[424] Maybe a better assessment is, you know, that was a different entity, a different vehicle.

[425] Yeah, interesting, Interesting.

[426] Although it is part of the Vision Fund's reputation now.

[427] And Nikesh, when they hired him, they paid him, his contract was he got paid $200 million over two years.

[428] He was the highest paid executive in the entire world.

[429] You know, when Masa does something, he goes big.

[430] David, it's not that much money because it's trunched out over multiple years.

[431] Yeah, too.

[432] But as you were alluding to, some of these India investments don't go so well, particularly snap deal.

[433] And the relationship kind of sours between Nikesh and Masa, supposedly for a bunch of reasons.

[434] And Nikesh actually leaves in 2016.

[435] And so now there's kind of this whole of Masa's, you know, still has this huge vision for soft bank and investing, but the guy who was going to run it is no longer there.

[436] Now, flashback to right after, right around the same time as the Alibaba IPO, Rejeev Misra, who I had mentioned earlier, had been at Deutsche Bank and had helped orchestrate the debt financing for the Vodafone Japan acquisition.

[437] Masa had also lured him away and hired him into SoftBank as head of strategic finance.

[438] Rajiv is from India, but London -based, is that correct?

[439] Yep, based in London, yep, also from India.

[440] And then Rajiv worked on what I believe was and still is SoftBank's largest acquisition.

[441] which was the UK company Arm Holdings, the designer of mobile phone chipsets, which ultimately got done in 2016 for $32 billion.

[442] So that was what Rijiv worked on for his first couple of years.

[443] And so kind of simultaneously as Nekash is leaving the company, and Rijiv has just had this big success.

[444] And it's worth pausing for a moment there.

[445] It's interesting to look at Prevision Fund SoftBank, what they're doing in this era.

[446] They're really building out different pieces of the mobile value chain.

[447] So they've got the commerce layer with Alibaba, they've got the telecommunications layer with Sprint and with SoftBank Japan, they're buying the technology that is the design for the chip sets of every mobile phone today all the way down at the hardware layer.

[448] It's a very clear play on we want to benefit from every piece of the value chain on what we see as the future and it is mobile.

[449] Yep.

[450] One really gets back to that vision, which will quote unquote, that Masa has after the bursting of the tech bubble of getting into infrastructure, getting into cash flow businesses.

[451] And, you know, what are sort of like the Amazon tax?

[452] Like, what are the, what are the elements of this massive market for mobile?

[453] What are the elements of the value chain that are, you know, just as mobile grows are going to be taking a tax, you know, on the industry.

[454] And it's chip design.

[455] It's the carriers.

[456] It's commerce and Alibaba.

[457] It's all of these things.

[458] So they acquire arm.

[459] And then immediately after that, another interesting meeting happens.

[460] Masa, so Masa and Rijiv are starting to think about Nikesh is out.

[461] They're starting to think about like, how can we really systematize this investing that we're doing and really build something large?

[462] And Masa ends up having a meeting in 2016 with the deputy crown prince of Saudi Arabia, who's in charge of running Saudi Arabia's sovereign wealth fund.

[463] That's an amazing title.

[464] The deputy crown prince.

[465] I want business cards to say that.

[466] Yeah, totally.

[467] It's like the famous Mark Zuckerberg CEO business cards.

[468] Yeah.

[469] Which I don't think we can say on the show and keep our clean rating.

[470] No, I don't think we can.

[471] But you should go watch the social network if you haven't already.

[472] So Masa gets this meeting in Tokyo with the deputy crown prince.

[473] Apparently, it's a 45 -minute meeting.

[474] And by the end of the 45 minutes, Masa has convinced the crown prince to invest $45 billion.

[475] Yeah, that's how I always go.

[476] A billion dollars per minute.

[477] Yep, yep, exactly.

[478] I mean, that's really how it went, it wave.

[479] Not quite.

[480] So by the end of this meeting, they have a commitment from the public investment fund of Saudi Arabia to put $45 billion into a new technology, in global technology investment fund that SoftBank is going to start and that Rajeev is going to run and that's the beginning of the Vision Fund.

[481] So SoftBank itself commits $25 billion on top of the 45 from Saudi Arabia.

[482] So that gets us to $70 billion.

[483] That's a heck of a general partner commit right there.

[484] Totally.

[485] Yeah, we did the same.

[486] No, not even close.

[487] And then they announce at the end of 2016 that they're going to create this fund, which is already the large, Just ever.

[488] They're targeting $100 billion for the total fund size.

[489] They do the first close in May of 2017.

[490] They bring on Mubadala, which is the sovereign wealth fund of the UAE.

[491] They bring on Apple.

[492] So Apple invests a billion dollars into the fund.

[493] Sharp, I think, is another billion dollar investor.

[494] Investor.

[495] Yep.

[496] As is Foxconn and Qualcomm as well.

[497] Three billion from Qualcomm.

[498] Yeah.

[499] I think Larry Ellison's family.

[500] the office, it's a pretty, pretty nutty lineup.

[501] It's, it's totally nutty.

[502] And so the first close is done at 93 billion.

[503] So they still can raise up to 100, but, but they have 93 billion that they've closed on.

[504] As I mentioned at the top of the show, this is like, like the largest fund ever raised in any other asset class, private equity, hedge fund, real estate, what have you, is like $20 billion.

[505] So this just blows it out of the water.

[506] And it's worth thinking through to like seed funds will be, you know, 30 to 100 million.

[507] You'll have your sort of early stage funds that can typically or traditionally go up to to 300 million.

[508] You've got these funds that go across stages that, you know, people three years ago were talking about how quote unquote crazy it was that you were having these new billion dollar venture capital funds.

[509] And, you know, your Andreessen Horowitz's and your Sequoias.

[510] And then this happens.

[511] Even when if you look all the way up at huge private equity firms like KKR, they manage 168 billion, but that's the across a ton of funds that's happened over decades and decades of sort of building reputation and risk models and sort of an understanding of what the types of investments they're going to make.

[512] I mean, this is so unprecedented by an order of magnitude.

[513] Yeah.

[514] And the other really interesting thing, so the term of the fund, so what's in the charter of the fund for how long, what its time horizon is, is 12 years, 12 years plus a two year extension.

[515] So up to 14 years.

[516] for this fund to play out, that's even longer than your typical early stage venture fund.

[517] The typical early stage venture fund is 10 years plus a one -year extension.

[518] So not only is this the largest fund ever raised, it explicitly has a longer time horizon than anything else, you know, private equity funds are usually five years.

[519] Hedge funds usually have like a one -year lockup and then you can remove your capital after that.

[520] So it's it's both the largest and the longest fund, longest.

[521] time horizon fund ever raised.

[522] And here's why this gets really interesting.

[523] So their goal with the fund is to deploy it and they want to make 70 to 100 investments, which puts your average deal size around a billion dollars.

[524] And so typically, like if we rewind in a world before the vision fund, you would have a longish lifetime for early stage investing.

[525] But if you're doing mezzanine rounds, so buying some equity right before an IPO, hoping to get a 1 .5 or a 2x markup, or if you're doing growth equity where you think a business maybe has two -ish, three -ish more years before a big exit, an IPO or an acquisition.

[526] Those will be that sort of bigger check size, but, you know, shorter life.

[527] They're making billion -dollar investments and they don't have to return the capital to their investors for 12 years.

[528] This is very much changing the dynamic of what do big companies do as they mature and how are they capitalized to do that.

[529] Yep.

[530] Totally.

[531] In the past, historically, there's always been an inverse relationship between size of fund and stage of investing and time horizon.

[532] And they just went, you completely turned that on its head.

[533] What if we have a ton of money and we don't have to give it back for a while?

[534] How does that sound?

[535] Well, to a lot of people, it sounded pretty great.

[536] So we promised you that we would be covering the fortress acquisition here.

[537] And again, apologies for the very, very long preamble to it.

[538] We'll get to it now.

[539] But I think it was super important to understand the context for all this.

[540] What happens in the interim between when they announce, make the press release essentially, of the commitment from the Saudi Arabia public investment fund, and then when they do the first close, in between that, in February of 2017, SoftBank makes a really curious announcement.

[541] They announced that they're going to buy an investment firm called Fortress, which was a publicly traded private equity firm and hedge fund, a so -called alternative asset manager.

[542] And they're buying it for $3 .3 billion.

[543] And everybody was kind of scratching their heads.

[544] Like Fortress was and is a manager of multiple private equity funds, multiple hedge funds, multiple credit funds, debt funds.

[545] They invest in things like mortgage servicing, subprime lending, real estate itself, transportation.

[546] Zero technology.

[547] Yeah, not at all a technology investor.

[548] This is about as far away as you could get from technology.

[549] and venture, you know, in the money management world.

[550] They're kind of a second -tier Wall Street asset management firm.

[551] They're kind of a middle, I mean, $70 billion under management, you know, it's a lot of money, but for the types of groups that they would be sort of competing with, they're not the marquee brand.

[552] No. They're, most of that $70 billion that they have is in fixed income credit funds.

[553] So these are, you know, think, you know, corporate debt, municipal debt, you know, government treasuries, that kind of stuff.

[554] And when you manage those types of assets, the management fees that you take on that are much, much lower.

[555] So, you know, a typical venture private equity firm will take what's called two and 20, so a 2 % annual management fee to run the business on the capital that they've committed.

[556] So if you have a billion dollars committed, you'll take 2 % of that annually in fees, and then 20 % of the upside of profits that you make from your investing.

[557] And Fortress for their private equity funds had structures like that.

[558] But for the vast majority of their capital, it was much lower.

[559] Makes sense.

[560] So that's why, you know, it's possible to have that 70 billion under management, but still get bought for what is a highly marked up $3 .3 billion.

[561] Yep.

[562] So Fortress, super interesting, was actually, it was started in 1998, originally as just a private equity farm, by three former investment bankers.

[563] And then two others joined shortly thereafter.

[564] And this was in kind of beginning of the private equity boom.

[565] And then Fortress has also the dubious distinction of they were the first large private equity, you know, hedge fund asset manager to go public.

[566] Yeah.

[567] So in 2007, right before the financial crash, they go public.

[568] And then this kicked off a wave of KKR went public after this, Blackstone went public.

[569] Which is a fascinating thing in itself, right?

[570] You have a firm whose responsibility is to manage other people's money and take a fee and profits off of those investments off the top that themselves are publicly traded as equities, either by retail investor or other funds who are buying shares in them, you know, as a basket of other things.

[571] It's nutty.

[572] And basically, it's been kind of decided at this point that any fund that would do something like this, like this is a really bad sign and a bad way to manage these companies.

[573] And there was a ton of drama with Fortress and with these other firms that did this because essentially what they did, they took the quote -unquote management company public.

[574] So if you're an investment firm, you know, if you're Medrona or a wave or, you know, KKR or whomever, it doesn't matter, they're all structured the same way.

[575] There's a management company and that is what the people who started the firm, that's what they own.

[576] And the fees that we were talking about those 2 % annual fees on capital commitments, that's, That's revenue that flows into the management company, and that's how the financials of these firms work.

[577] Now, if you take that public or if you sell that company, then the fees that your investors are, in theory, paying the people who run the firm to run the firm are actually getting dividended out.

[578] Are now getting dividended out to public shareholders.

[579] Like the alignment is all messed up here.

[580] Not to mention, if you're a shareholder in the management company, but the governance of the actual funds, fund is in any way allows it to make independent decisions.

[581] The fund could make decisions in its own best interest that the shareholders of the management company wouldn't actually get those cash flows.

[582] Now, I would assume upon going public, they needed a structure in a way that that couldn't happen.

[583] But it is interesting that you're taking an entity public that is wholly dependent on the fees from another entity continuing.

[584] Yeah.

[585] Well, yes.

[586] And what it essentially does when you do this, you've created a situation where the fee streams that are supposed to go to the people running the fund and making investments are now going somewhere else.

[587] And this is interesting.

[588] This is kind of what SoftBank and the Vision Fund ultimately end up picking up on.

[589] If you go back to Masa's now vision of infrastructure, of cash flow, of guaranteed cash flow payments, what is more guaranteed than a contractually locked up management fee that is going to happen for 10, maybe in SoftBank Vision's case, even 12 to 14 years.

[590] So when SoftBank acquired Fortress, everybody said, what is going on here?

[591] You know, SoftBank wants to be a technology investor, but they're acquiring this asset management firm.

[592] It doesn't make any sense.

[593] Well, Flashboard, it takes a little while for the deal to close.

[594] There was a lot of regulatory scrutiny.

[595] It ends up not closing until the very end of the year in 2017, so just a few months ago.

[596] then what happens, as we mentioned at the top of the show, just last week in March 2018 now, SoftBank announces that they are creating a new division of the company called SoftBank Financial Services.

[597] Rajiv Mishra is the CEO.

[598] He's going to be running it based out of London.

[599] And in this financial services division, they are going to build, create, manage, and acquire multiple funds.

[600] So the Vision Fund, the $93 billion vision fund is put into this vehicle, all of Fortress's funds that they still have.

[601] They divested a few of them, primarily the large fixed income fund that we were talking about that was just trading in debt.

[602] The rest of those are getting pulled into this vehicle as well.

[603] Which is about $40 billion, right?

[604] Which is about a little over $40 billion.

[605] All told, this new division, SoftBank Financial Services, has almost $140 billion.

[606] billion dollars in capital under management with a goal of doubling that in the next five years and all of that capital is getting management fee streams and then eventually profit streams on the value of the investments when they exit them.

[607] Okay.

[608] So what we're here today on Acquired to talk about is soft bank is most of the way they've got 70 billion of their 100 billion already raised into the Vision Fund.

[609] No, 93.

[610] 93 of the hundred.

[611] Oh, I'm sorry, at the time when they announced the acquisition of Fortress.

[612] So they've got $70 billion.

[613] There's nothing that looks like technology investing about Fortress.

[614] Why are they buying Fortress?

[615] What are they doing with that?

[616] How does that make sense?

[617] And fast forward to today, they're under the same umbrella, under Rijiv.

[618] They've gotten rid of the sides of the business that don't make sense as much.

[619] But why?

[620] Why they do that?

[621] Well, and I think this is what we see now is and why we couldn't do episode till now, people are asking this question.

[622] But now it's clear they want and Masa wants to become the largest money manager in the world.

[623] And they're already pretty close.

[624] So like the next largest fund manager is KKR, which has 168 billion under management.

[625] KKR has been around for decades.

[626] The soft bank financial services, you know, has been around for like a year, a year and a half.

[627] And they have 140 with a goal of doubling in the next five years.

[628] So they are very likely soon to become the largest money manager in the world.

[629] Yeah, there's the quote from, I think this is the New York Times from Rijiv.

[630] Right now we are close to $140 billion, counting the combined assets.

[631] If we perform well, we hope to be two times that number in the next five years.

[632] That's a mark on the wall.

[633] Yeah.

[634] Here's a question I've got, David.

[635] In one sense, it's just accounting.

[636] It's what pocket does it end up in.

[637] But the $25 billion that SoftBank contributed to SoftBank Financial Services, Does that draw a management fee and is there carry on that or how does that work?

[638] Yeah, I don't, I don't know.

[639] I suspect, though, if they structured it like a typical, what would be a general partner commitment in funds, so what the general partners of funds, the amount that they would invest personally into the fund, I suspect there is no management fee on that, but then they get 100 % of the profits.

[640] So they don't, instead of getting 20 % of the profits, the carry, they get 100 % of the profits on that capital.

[641] And so then this is sort of interesting question of what is SoftBank financial services?

[642] Is it a venture fund or P .E. Fund or call it a private equity firm that has one very large LP called SoftBank that put in 25 and then another very large LP that put in in 45?

[643] Or is it corporate venture where they've also taken on a whole bunch of other investment?

[644] like the biggest corporate venture of all time that actually is a way bigger business than their core business.

[645] It's this weird in -between thing that we've not really seen before.

[646] Yeah.

[647] Well, let's move into acquisition category now.

[648] So I think, you know, what's going on and with this announcement, to me, this is a new major division of SoftBank that is going to be its own business entity that let's just assume they have 2 % management fees on capital under management and that they have $25 billion of the commitment from SoftBank, so they're not getting fees on that.

[649] So remove that down to $115 billion under management.

[650] That is an annual fee stream of $2 .2 billion annually of just straight cash flow into SoftBank.

[651] As I was skipping ahead a little bit to where I was going to grade, I was just doing my calculation on if just the $75 billion of the non -Soft bank money in the Vision Fund, over the 12 years of the fund, that draws an $18 billion management fee.

[652] So if you couldn't do the Vision Fund without buying Fortress, was it worth the 3 .3 to generate 18 guaranteed over 12 years, it really gets to that guarantee that you're talking about that was so interesting and what SoftBanks saw in Fortress.

[653] Yeah, yeah.

[654] And not to mention, if they can 2X the Vision Fund, that carries another $15 billion, the carried interest on the profits of the, of the, of the, of the, of the, that venture fund.

[655] And, you know, the goal obviously is to do it.

[656] You mean the, uh, do you mean the manager.

[657] Oh, if they return two X in terms of profits on, on the vision fund, uh, then the carry that they get 20 % of that is yeah, another, well, it's even more than that.

[658] If say the vision fund ends up at $100 billion, if they return $200 billion, oh, I was thinking of just the, just the non -soft bank portion.

[659] Oh, just the non -soft bank portion.

[660] Yeah, yeah.

[661] They, two -xing a $75 billion fund, you know, $75 billion a profit, of which $15 billion goes to soft bank financial services just as they carried interest off that profit.

[662] Now, I bet you they believe they can do a lot more than 2x, but...

[663] Well, I don't know.

[664] Maybe they do.

[665] Maybe they don't.

[666] So this is where I think is sort of, to me, this announcement and doing all this research, what came out of it, the key to me is that realization that Masa had after the tech bubble burst about the value of stable, predictable cash flows and the management fee.

[667] So even put aside performance of the Vision Fund, they could lose all of the money.

[668] And yet still, they're going to make $18 billion in management fees over the next 12 years from that, like 100 % certainty.

[669] What can you finance within all the rest of SoftBank with that cash flow?

[670] If that's not rent -seeking, I don't know how you define rent -seeking.

[671] And it's just incredible.

[672] It's justifiable in lots of ways, but there is no arguing that that is just incredible.

[673] Yeah.

[674] So for me, the category, actually, I don't know that anybody would have predicted this when they announced the Vision Fund a year and a half ago and then announced this acquisition.

[675] But to me, this is a business line.

[676] This is a new business line within SoftBank that is a asset management business.

[677] line that is going to be extremely cash flow positive, regardless of the outcome of any of the investments.

[678] Yep.

[679] And in a couple of interviews, they've alluded to the fact that Fortress probably isn't the only one in the next couple of years that they're going to buy.

[680] Yep.

[681] Yep.

[682] They're going to buy more asset management firms that may or may not have anything to do with technology.

[683] You know, I thought when I first cursory understanding of this before I did real research was that they needed to buy Fortress to have the sort of credibility to run and deploy a fund before they could raise the Vision Fund.

[684] I don't actually think that's it.

[685] I think they want to be in the business that Fortress is in and they want to be in a lot of other financial services businesses too.

[686] Yep.

[687] Yep.

[688] Now the question then is, why would, if you know this about the incentives, why would you invest?

[689] I think there actually still is a really good argument for why the investors in the Vision Fund would invest, which is that if you think about who those investors are and the amount of capital that they have, whether the Saudi Arabia sovereign wealth fund or Mubatala or Apple, there's really no other way to try and generate returns on that amount of capital without doing something like this.

[690] You just can't say they wanted to invest in Sequoia.

[691] You know, Sequoia's early stage venture fund is it will even take their growth fund together too.

[692] That's probably about $2 or $3 billion across the two of them.

[693] They're not going to take Apple as an LP taking half of the fund when they've already got all these other LPs.

[694] Apple has hundreds of billions of dollars in cash.

[695] And Apple can't even put that money back into your core business.

[696] Like they're trying and they can't put that money back into their core business to generate a return on it.

[697] Yep.

[698] And the dynamics are totally the same with the sovereign wealth funds.

[699] They just have so much money.

[700] They need to put it somewhere to try and create a return.

[701] turn.

[702] So actually, what the product that SoftBank and Mesa have created is a vehicle for that to happen.

[703] One thing we haven't talked about yet is it's called the Vision Fund.

[704] What is the vision?

[705] And the vision is to own pieces of all of the companies that may underpin the global shifts brought on by artificial intelligence to transportation, food, work, medicine, and finance.

[706] And so if you look at the seemingly scattershot investing that they're doing, what it is is owning big pieces of companies where they have actually quite a bit of control and, you know, big governing chunks of the companies in a lot of cases that are.

[707] Yeah, way more than your average venture investor.

[708] Yep.

[709] That have tons of data, tons of access to, you know, these companies that generate tons and tons of data that soft bank believes creates the constellation of what the world looks like in the future that is highly autonomous, data -driven, lots of information moving around in real time across a bunch of different sectors.

[710] It's a little loose and it's a little fuzzy, but to the extent that you agree with that vision and you believe that that's where the world's going, Massa's been prescient a few times before and there are worse people to follow.

[711] Well, this is really the third time he's tried to do it.

[712] This is by far the biggest swing he's ever taken, but the first time was with the first wave of the internet, with Yahoo and Alibaba.

[713] Now, SoftBank invested in 800 companies to get those two.

[714] But between those two and then Yahoo Japan.

[715] That's the game, baby.

[716] It doesn't matter.

[717] They got it.

[718] They made probably, if I, 60 billion from Alibaba alone.

[719] Then you add in Yahoo Japan.

[720] That's probably another 10ish, I'm guessing.

[721] So let's say 70 billion.

[722] And then now they're in the middle of doing this with the next wave of mobile, you know, what that they did with Vodafone Japan, the carrier, then getting the iPhone.

[723] and then buying Arm, and now they're doing it with the next future wave of, you know, well, sort of hard to define, but machine learning, artificial intelligence, yeah, stuff, the next wave of stuff, and now they're doing it with this massive fund.

[724] It's a broad vision.

[725] It's not a vision like we invest in really great marketplaces.

[726] It's a vision like we invest in the future of the way that people do things using technology.

[727] I mean, truly, like, does anybody have a divergent vision?

[728] from what the vision fund's vision is?

[729] Like, do we think that it's not going to be tons of sensors everywhere, generating data that are used to make intelligent decisions and do autonomous things and use a bunch of maps and use a bunch of geo -date?

[730] Like, it just feels like their vision is sort of like what everyone has looked around and nodded their heads and agreed upon is the vision.

[731] But nobody else has created a vehicle like they have.

[732] That's true.

[733] That's true.

[734] I'll throw in.

[735] I also think it's a people acquisition, also.

[736] It's, you know, it's a business line, but there's a thousand people now in SoftBank Financial Services.

[737] Many of them came from Fortress.

[738] They aren't the big name people.

[739] You know, it's not Rijiv that's, you know, running the operation.

[740] Although we did, we forgot to mention the most important thing about the Fortress acquisition, Rijiv had worked at Fortress directly before joining SoftBank.

[741] So he was only there about six months.

[742] But he, from Deutsche Bank, he went to UBS, and then from UBS, he went to Fortress briefly and then joined SoftBank.

[743] Yep.

[744] Great point.

[745] Great point.

[746] But it's a huge team of people that are really the infrastructure on how do you raise, deploy, manage, account for do everything that you need in a big fund.

[747] Compliance, you know, a trading desk for the liquid public securities, all of these things.

[748] That SoftBank didn't have anybody.

[749] And Fortress is over a thousand people, most of whom are this back office element doing all this.

[750] So category, you would say, I'm still going business line, but it's a little bit of an infrastructure play also.

[751] It's like infrastructure of people.

[752] Yeah, yeah.

[753] I almost said infrastructure, but that was actually what I was going into the episode or going into the research.

[754] Which is not a category that we have on this show.

[755] We're taking our license to just add more categories.

[756] Add more categories.

[757] But doing the research, I really realized that, like, no, this is a business line that is a new thing within, a new product and business line within SoftBank.

[758] All right, listeners.

[759] sponsor is one of our favorite companies, Vanta, and we have something very new from them to share.

[760] Of course, you know Vanta enables companies to generate more revenue by getting their compliance certifications.

[761] That's SOC2, ISO 2701, but the thing that we want to share now is Vanta has grown to become the best security compliance platform as you hit hypergrowth and scale into a larger enterprise.

[762] It's kind of wild.

[763] When we first started working with Vanta and met Christina, my gosh, They had like a couple hundred customers, maybe.

[764] Now they've got 5 ,000, some of the largest companies out there.

[765] It's awesome.

[766] Yeah, and they offer a tremendous amount of customization now for more complex security needs.

[767] So if you're a larger company, and in the past, you showed Vanta to your compliance department, you might have heard something like, oh, well, we've already got a compliance process in place, and we can't integrate this new thing.

[768] But now, even if you already have a SOC2, Vanta makes maintaining your compliance even more efficient and robust.

[769] they launched vendor risk management.

[770] This allows your company to quickly understand the security posture of the vendors that you're choosing in a standardized way that cuts down on security review times.

[771] This is great.

[772] And then on the customization front, they now also enable custom frameworks built around your controls and policies.

[773] Of course, that's in addition to the fact that with Vanta, you don't just become compliant once, you stay compliant with real -time data pulled from all of your systems, now all of your partner's systems, and you get a trust report page to prove it to, your customers.

[774] If you click the link in the show notes here or go to vanta .com slash acquired, you can get a free trial.

[775] And if you decide you love it, you will also get a thousand dollars off when you become a paying customer.

[776] Make sure you go to vanta .com slash acquired.

[777] Okay.

[778] What would have happened otherwise?

[779] This is like the weirdest one to do this section on.

[780] I know.

[781] Well, okay, but let's take it from the investors in the vision funds standpoint, the apples, the sovereign wealth funds, they have all this capital.

[782] They need to do something with it.

[783] They want to chase returns.

[784] They want to, they want to invest in the future of technology without something like SoftBank.

[785] How do they do it?

[786] Well, let's just say it would have been harder to park big piles of money and generate the kind of returns that the Vision Fund hopes to return.

[787] Where is the tradeoff?

[788] The question is, is it zero sum or not?

[789] Like, is SoftBank, Are the soft bank returns that are going to these new investors, these new LPs in the Vision Fund, being generated at the expense of where cash could have gone otherwise?

[790] Or by creating this new financial product, have they actually created new value?

[791] I don't know.

[792] I'm not sure it could have happened otherwise.

[793] Like, who else would do this?

[794] Yeah.

[795] I mean, maybe a bank, an actual bank, as opposed to a soft bank.

[796] But they wouldn't have the credibility.

[797] Yeah, and I guess what happens otherwise is each of those companies try to deploy, because ultimately what's happening is big companies alongside sovereign wealth funds and soft bank are putting capital into growth stage startups or late stage startups, or actually what they haven't done yet but said they could do with some of it is take privates, so public companies that they take private.

[798] And what could have happened is instead of unifying that all into one fund, which takes its own management fee and carried interest.

[799] They could have all done that individually through very large corporate venture, but very large corporate venture isn't really a thing, and companies aren't that good at doing that, and it creates conflict of interest all over the place.

[800] And so if you have that arm's length transaction of having a separate fund managing that for you, then you get exposed to upside that corporations tend not to get the exposure to because they're worried about cannibalization.

[801] Well, and you're just limited, too.

[802] I mean, SoftBank made $60 billion from Alibaba, but that's still, even if they turned around and used all of that capital to reinvest, that's still only $60 billion.

[803] Now, less than two years later, they have $140 billion because they've opened it up to others as well, to Apple, to Qualcomm, to Foxcon, to Sharp, to sovereign wealth funds.

[804] I guess I'm trying to make the point of, like, what does Apple do with that billion dollars?

[805] yes, they could go invested in startups, but they tend not to.

[806] Right.

[807] Oh, yeah.

[808] You're saying they would do it themselves.

[809] Yeah.

[810] Yeah, exactly.

[811] Exactly.

[812] Yeah, but they're not equipped to do it.

[813] Apple by itself is a lot of money, but it's less money than Apple plus soft bank plus Qualcomm plus the sovereign wealth funds.

[814] Right.

[815] I guess I don't really care about how much money, because it's the same money, whether it's all spread out or put together.

[816] But for example, let's see.

[817] What's a good example of one of these recent big soft bank.

[818] investments.

[819] Well, take the Uber investment.

[820] I mean, that was $8 billion.

[821] Yeah, how do you line up $8 billion from the types of LPs that the Vision Fund has in order to invest it in Uber and have that unified front in order to do the weird tender thing that they did for the lower price?

[822] You basically can't get everybody in a line to do that on their own.

[823] Like, that's the argument for centralization.

[824] Well, and could you imagine Apple trying to do that?

[825] Then it's like Apple's negotiating with Uber to do this thing and to replace the CEO.

[826] The arm's length is actually value creative in that way.

[827] I'm buying it or I'm trending toward buying it.

[828] Well, I do think it's a new product, you know.

[829] Nobody could do something like that before SoftBank.

[830] Right.

[831] It's also value creative in the sense, like if you believe that partially saved Uber, it's massively value creative that that company would continue to thrive when they wouldn't have been able to get their ducks in a row before because they had too many warring shareholders.

[832] And there could be future ubers that require someone like soft bank to do something similar in order to to line everyone up.

[833] Which honestly, the traditional venture, well, traditional venture community, I mean, you've got folks at the end of the spectrum like wave that are, it's just a totally different thing.

[834] But even the larger investors and the later stage investors, they're not, they're not really equipped to do it either because the amount of capital they're bringing is as much less.

[835] The stakes they're taking are much smaller.

[836] If you're taking a 10 % stake in a business, you know, with, well, let's take the valuation of Uber.

[837] I mean, the firms that were investing in Uber's late stage rounds were taking a 1 % or less stake in the business.

[838] You can't then drive change with that.

[839] Right.

[840] Great point.

[841] Great point.

[842] One other thing that I do want to say that you just reminded me of about the vision fund is even though they're deploying private equity sums of money or even larger than that, they are acting like venture investors.

[843] So whereas a private equity firm would either take a company private and cut head count or buy a late stage profitable company and cash flow it, SoftBank is primarily buying cash flow negative companies or chunks of cash flow negative companies that still have a lot of growth left in them and investing in that growth rather than trying to suck all the profits out of it and over leverage it with debt or have it declare bankruptcy later or something like that.

[844] So it's the first time we've seen this much money from a private investor be deployed into high -growth companies.

[845] And the alternative that you would see that is if this is another form of what wouldn't have happened otherwise, but if the Vision Fund didn't exist, some of these companies would have to go to the public markets in order to continue to get growth capital, which we will hold on to in our tech themes.

[846] Indeed, indeed.

[847] It's the time horizon of the fund, too.

[848] It's not only is it the largest fund ever raised, it also has a very long time horizon.

[849] So that's why it's structurally set up to operate just like you're talking about Ben, to be more of a venture investor mindset than a private equity I'm going to come in and within three years squeeze.

[850] Yeah.

[851] All right.

[852] Well, the first tech theme, stay private longer.

[853] Stay private indefinitely.

[854] So that is the question, right?

[855] Is it, are we in this period?

[856] So to recap, I want to throw out a couple of pieces of data.

[857] And I want to try and make this as digestible as possible in a verbal format.

[858] In 2017, there was $84 billion deployed by venture capitalists, which is twice as much as 2013.

[859] So it's been steadily increasing since 2009, since after the real estate crisis, and twice as much venture dollars being deployed into companies today, or I'm sorry, in 2017 as compared to 2013.

[860] However, the total exit value of these companies has stayed relatively steady, and the number of deals has actually gone down.

[861] So the exits are less companies exiting for more money.

[862] And so what does that lead to?

[863] There's more private companies than ever that are around today.

[864] And the question that everyone's asking is, are we waiting for the IPO explosion where are the 70 plus unicorns that exist today, the billion dollar plus valuation companies, are we waiting for them all to IPO?

[865] Are we somehow believing that there's going to be M &A that's actually buying that many billion dollar plus companies?

[866] Like, are there actually acquirers that have the appetite for that?

[867] Or are we entering this new era where with funds like the Vision Fund, is it possible to sustainably stay private?

[868] And in the old days, that was either sort of owned by the person who started the business or it went to private equity and it was really a stopped growth and it was really about cash flows.

[869] Are we going to be able to see the Vision Fund create a new way to be held privately through your growth years all the way until profitability and never go public?

[870] And then you get segmentation in something like the Vision Fund where there's some sort of true private equity once the growth has graduated, but they still hold onto it for the cash flows.

[871] And then there's other younger high growth companies in there.

[872] I don't know.

[873] It's kind of an interesting, interesting different future.

[874] There's pluses and minuses, but one big minus is the retail investors and the American public or any other public doesn't really get access to the profits of innovation.

[875] Yeah.

[876] Well, in many ways, I have to imagine that for the Vision Fund, the model for the Vision Fund is Alibaba.

[877] You know, they invested in the year 2000.

[878] They invested 20 million, and the company then didn't go public until 2014, so 14 years later.

[879] And when they went public, it was at over a $200 billion market cap.

[880] So all of that value creation happened privately.

[881] Now, if that had been in the Vision Fund and generated $60 billion of value, or perhaps even more because they would have been able to invest far more than $20 million in the beginning.

[882] And along the way, it's like they're playing the venture game where there's a power law, but they're doing it at this enormous scale.

[883] But the downside is, like, all the companies that aren't at the top of the power law, I think what you're saying is like what happens to them.

[884] Right.

[885] What happens to the 68th unicorn that is worth like $1 .1 billion and doesn't have a likely acquirer?

[886] I don't know.

[887] Yeah.

[888] Well, maybe the answer is just like you're saying, they operate as a private company in the same way that in the past they would have gotten public and would have been a one to two billion dollar market cap public company indefinitely.

[889] they'll just be that privately.

[890] But yeah, I don't know.

[891] Well, to keep going on that philosophical piece there for a moment, there's a societal trend of wealth polarization.

[892] And a sort of parallel trend is more power and more economics going to corporations over individuals.

[893] And if the late stage growth, all the profits of that are going to shareholders like a vision fund instead of shareholders like retail investors, then, and all the LPs of the Vision Fund are either sovereign wealth funds or huge corporations that does further entrench that narrative of more of the profits of innovation, even later stage going to corporations, even when they actually are very, they're not even in the same line of business.

[894] They were just an investor in the pool that continue to capitalize that company later on.

[895] I think there's a yes but here.

[896] Yes, a hundred percent.

[897] But soft bank itself is a public company.

[898] So anybody, you know, you and I can go invest in soft bank right now.

[899] And then we're benefiting from this, which is super interesting when you actually think about this and compare that to how it would work otherwise.

[900] If this were all, you know, if this were, you know, Sequoia or whomever, which Sequoia supposedly is raising a, I think, $12 billion fund.

[901] It's the last I saw.

[902] keep in some sense with soft bank here.

[903] The public has zero access to that.

[904] Whereas anybody, you know, our parents and grandparents can go buy shares a soft bank.

[905] So at the end of the day, it's just one more money manager in the middle of a chain of money managers who are all getting a cut.

[906] It's turtles all the way down, Ben.

[907] And it is actually circular too.

[908] That's the craziest thing.

[909] It's like, I don't need to paint the whole circle.

[910] But like, there are ways where you can owns something and simultaneously be owned by something all the way around.

[911] Okay, so my question for you, David, we've talked a lot about the value creation here.

[912] Let's talk for a minute about being value destructive.

[913] Is there any way that some of the repercussions of what the Vision Fund creates and the amount of capital that it needs to deploy and the speed at which it needs to deploy it, are there situations where that could be value destructive?

[914] Well, talk to any VC in Silicon Valley and they'll talk your ear off about this.

[915] It feels like they may have an opinion or incentives to have an opinion.

[916] Yes, yes.

[917] Well, with that caveat in mind, I mean, I think this scenario in which this is value destructive is, you know, what is, you know, I view as, you know, having been in VC for a while and observed, like companies, there's this almost like law of gravity with companies and fundraising where if you raise the money, you will spend.

[918] the money no matter what your intentions or and let's be clear like that's not just like i wonder how that happens thing that is largely driven by iR like if if you're an investor and you put money in a company you want to be able to return the most money as fast as possible to your shareholders so all of the forces that play on that company from you know when you put a bunch of money into a company you get a board seat you get you get you get influence on the business is to encourage the deployment of that faster so that they can grow faster so that they can raise more, you know, on and on and on and and get a return out of it.

[919] Yep.

[920] The problem is when you have so much money flowing into the ecosystem and into direct competitors with one another, primarily then the way that the money gets spent is in customer acquisition.

[921] And when you have multiple companies spending money in customer acquisition, all you're doing is driving up the price of customer acquisition.

[922] And giving money to Google and Facebook on their ad platform.

[923] by both spending gobs and gobs of money against each other, bidding on the same keywords.

[924] It's shocking to me that Google and Facebook aren't investors in the Vision Fund because they're the biggest beneficiaries.

[925] Truly, truly, truly.

[926] It also can train an organization to only know how to spend irrationally on customers where you will never be able to, when you have to spend rationally, be able to get customers for less than their long -term value and their lifetime value.

[927] I'm thinking back to, you know, our episode on Zappos with Alfred Lynn and him talking about the best thing that happened to Zappos was, was the dot -com crash, where they then, A, had to learn how to operate leanly and acquire customers through things like the ad units in the shoe trays and in the TSA security lines and airports, but it was that they didn't have the competition spending against them in all these things.

[928] So the question is, and the sort of downside scenario that a lot of VCs would paint about what the Vision Fund is doing, is it's just going to create this hyper competition in so many markets like you've seen play out in ride sharing, where the revenues just keep growing and growing, but everybody's hemorrhaging massive amounts of capital in this kind of war of attrition, whether that's Uber or Lyft or D .D. or Grab or any of these companies.

[929] Do you think it drives up valuations?

[930] well of course yeah I mean if you're taking this money or do you think it irrationally drives up valuations or unjustifiably drives at valuations depends how big you think any individual market opportunity is yeah well one more tech theme I feel like we've we've now painted all sides here one more I want to slide in before we move to grading is just this whole story and doing the research It really, and learning about Masa reminded me so much of Jeff Bezos.

[931] A theme I just want to call out here is what he's done, if you look at the Vision Fund and this whole asset management business line as a business, what he's done is the same thing that Bezos is doing with Amazon, which is adding more legs to the stool of SoftBank, more great businesses with predictable cash flows that can then come in and then finance, use those cash flows to finance the next businesses that they add.

[932] SoftBank just happens to be much more acquisitive in how they add businesses versus Amazon, which builds them in -house.

[933] But I think it both approaches have the same route, which is just being willing to constantly push the horizons of what your company is and how big it can get.

[934] There's two models of innovation.

[935] There's internal and external for big companies.

[936] And SoftBank is doubling hard on the external.

[937] Like if I have, asked you in the last five years, what innovative product has SoftBank created?

[938] It's market engineering and financial engineering right now in a big way.

[939] And you look at Amazon and you'd ask that same question.

[940] And it's 30 things.

[941] And it's two or three that are multi -billion dollar.

[942] It's a very different way to go about kind of the same problem.

[943] And they have very different reputational things associated with them.

[944] Like if you talk to somebody who has SoftBank on their board, they may tell you, boy, it's really tricky to deal with them.

[945] They take tons of control of provisions.

[946] They take a huge number of voting shares in the company.

[947] They're highly opinionated on what we need to do and how we need to do it.

[948] I think your mileage may vary and different people may say different things.

[949] But if an investor is sort of too controlling and coming into a company, it often has negative reputational things associated with it.

[950] Look at the way that Amazon is doing it instead of SoftBank.

[951] they have 100 % of the of the economics in that the new quote unquote company they have 100 % of the decision making authority they can force any employee's hand in that new quote unquote company to do whatever they want and so it's kind of this funny like not invented here us versus them inside outside dichotomy yeah David I love I love the way that you framed it in comparing it to Amazon because it really sort of it extends the borders of what is the system and who is the us to companies that you own pieces of rather than just us as a company.

[952] Yeah, yeah, that's interesting.

[953] Maybe the ultimate what would have happened otherwise would be if Jeff Bezos had accepted Masa's proposal to create a joint venture Amazon Japan.

[954] Amazon Bank.

[955] Yeah, that'll be a story for another day.

[956] Should we grade it?

[957] That's great it.

[958] The criteria were graded.

[959] on here is how good of a decision was it for SoftBank to buy Fortress.

[960] And so to walk through that, you sort of need to have a, since they're not done yet, a perspective on what SoftBank will be in the future, how big it can be, and how much buying Fortress actually had to do with that.

[961] And was it worth laying out the $3 .3 billion?

[962] I'll make the case that just from a, is it a good place to park your money perspective, they did actually pay up pretty good for for fortress yeah i mean it was not 40 % premium yeah yeah and typically when you're buying a publicly traded company we see 20 to 25 % premiums so expensive purchase but you know the the question is if it was essential to creating this new vehicle this uh soft bank financial services that as we talked about will generate you know 20 plus billion dollars over the next 12 years from the Vision Fund and Fortress, just from fees, you know, it feels super justifiable.

[963] The question is, is it, you know, Apple Next justifiable?

[964] Is it Instagram justifiable?

[965] Like, did buying Fortress give them this 100x upside on that purchase?

[966] Do you want a grade first or you want me to?

[967] I want you to grade first.

[968] Well, I'm going to go, to me, I never would have said this before we dug in on the episode.

[969] I mean, especially being in the Silicon Valley ecosystem.

[970] here and everybody poo -pooing soft bank, which again, there are definitely negative consequences to what's happening here.

[971] I think it's brilliant.

[972] Like, Masa is, he created a brand new product, which is a vehicle for these very large pools of capital to credibly invest in growth and in the future.

[973] And I don't think anybody else except him could have done it credibly.

[974] And I think the fortress acquisition for $3 .3 billion, as a means to jumpstart that and to within a year and a half become the world's second largest fund manager and with a goal to in another few years being double that to me it's an A. I mean we will see how it plays out over the next few years but even already like adding that infrastructure to get them the guaranteed cash flow streams from the management fees across these funds is brilliant.

[975] So I think it's an A. Do you think Apple would have put money in?

[976] Do you think Sharp would have put money in?

[977] if they hadn't bought Fortress?

[978] Well, I think they would probably be justifiably pretty worried.

[979] Before they bought Fortress, like the Vision Fund was like a couple people, you know, with no management, no compliance, no trading desks, no nothing.

[980] So the question then to me is like, let's say that they could paint the right picture and get them to put the money in.

[981] If they would have been worse at deploying it because they don't have the scale to deploy it, did Fortress actually give them the ability to deploy that capital?

[982] Or is it still pretty much, you know, Rijiv and Masa that are doing the main investing?

[983] Well, I think you got to think about it beyond the Vision Fund.

[984] Like, Fortress gave them the ability to be a money manager.

[985] The Vision Fund is the first product in this new business line.

[986] I was thinking about, like, do they have to show returns from the Vision Fund in order to raise Vision Fund 2, no, but will they have to raise Vision Fund 3?

[987] Yes.

[988] And let's say they're not actually that returns focus.

[989] They're more fee focused at this point.

[990] What really matters in this context, I think, is would they be able to raise Vision Fund 3 and draw the predictable cash flows from the management fees of that?

[991] Well, what I'm saying is it's not even all about the Vision Fund.

[992] With Fortress and now with this new unit, the Vision Fund is just one product of what will be many.

[993] They're going to buy other asset management firms.

[994] I'm in.

[995] I'm less convinced than you, so I'll go A -Minus, but I think this is a very dangerous company for the next few decades.

[996] Yeah.

[997] But, you know, again, like, it's, I totally agree.

[998] On the other hand, it's a publicly traded company.

[999] It's not like the global public does not have access to the returns.

[1000] Right.

[1001] Right.

[1002] Well, listeners, you know, before we jump on to the next part here, thanks for bearing with us over this in a very long episode.

[1003] It's a topic I've, long been curious about and heard people talk about and has been the topic of of dinner parties and you get bits of information here and there.

[1004] The whole story is really fascinating to follow end to end.

[1005] And if you're still listening, you know, thanks for coming with us on this journey.

[1006] And we hope that this sort of provides a nice canonical understanding of what is SoftBank, what is the Vision Fund?

[1007] Why is it all happening?

[1008] And what's it going to be?

[1009] It certainly shaped my thinking on it.

[1010] Yeah, me too.

[1011] Thank you as always.

[1012] Carbouts?

[1013] Carbouts.

[1014] So I've got two.

[1015] The first one is a shout out to friend of the show Brian McCullough of the internet history podcast.

[1016] So Brian's launched a new podcast with tech meme called The Ride Home where you can get highlights of the news of the day.

[1017] So if you want to stay current in a bite -sized chunk, it's really fun.

[1018] And Brian's a great host.

[1019] And it's a really great way to kind of keep in touch with what's going on and get a little bit of Brian's loose editorial on things, which is always great.

[1020] And the second one is, David, I think I texted you this.

[1021] I finally got around reading e -boys.

[1022] Oh, so great.

[1023] It is such an awesome book.

[1024] For those who haven't heard of it, it is about the founding of benchmark capital.

[1025] It was published in 2000.

[1026] So the whole thing is colored with, you know, it's the five, six years, five years, I think that benchmark was around.

[1027] The really sort of special relationships between the founding partners, bringing on Bill Gurley, the early investments that they made, the incredible story of eBay, the nuttiness of the dot -com bubble.

[1028] And the author is actually embedded with benchmark to do all of the writing.

[1029] He's actually in meetings like transcribing stuff.

[1030] And he's sort of a fly on the wall.

[1031] And so you do get to hear these really, like everyone, you talk to lots of people, especially now in crypto or back in the bubble days who will tell you like, oh, I called it.

[1032] And you're like, really?

[1033] Because like, why didn't you move all your money out then?

[1034] And you get to hear some of the comments in 98, 99 in Benchmark's office where one partner will say to another.

[1035] This doesn't feel right to me for these reasons.

[1036] And it's, it's amazing to actually have documentation of that.

[1037] And so the most fascinating part of the book is it's really before everything completely falls apart.

[1038] And there's just a few sort of early indicators of, uh -oh, like this feels weird to me. But I would love to, I kind of want, like, I want to read part two.

[1039] Like what, you know, what are all the opinions in 2004?

[1040] And, you know, how are they reflecting on those conversations?

[1041] But it's also kind of thrilling.

[1042] Like, it's really well written.

[1043] So if you like this podcast, You will love that book.

[1044] This book could never be written again.

[1045] No. It's the very fact of it being written and the reaction when it came out, like no venture firm would ever do this again.

[1046] But it's just so great that it happened and it happened with Benchmark, one of the very best firms.

[1047] Like I learned so much reading this book.

[1048] It's just an incredible resource.

[1049] David, I don't know much about it.

[1050] What was the reaction when it came out?

[1051] Well, I think Benchmark was mortified because it like it paints this window.

[1052] into, you know, and during the go -go days, too, when everybody was making so much money.

[1053] They did all make an insane amount of money.

[1054] An insane amount of money.

[1055] And, like, all the dirty laundry gets aired, like, you know, people's opinions of other people and, like, oh, you know, is this founder the right part?

[1056] Are we going to fire there?

[1057] You know, like, and bringing in the new, Meg Whitman is the new CEO of eBay.

[1058] I will say, though, like, benchmark comes out pretty good.

[1059] Like the, oh, yeah, they do.

[1060] It's the other firms that I would.

[1061] All of this stuff tends to be so private.

[1062] And that's why, like, this book could never be written again.

[1063] Like, it's a real true window into, like, what it's like on the inside.

[1064] And an industry that has only gotten more private.

[1065] Yep.

[1066] Yep.

[1067] And, like, the names are named, you know?

[1068] Yeah.

[1069] Yeah.

[1070] And there are the names.

[1071] Like, every name that's in there is the names in Venture.

[1072] Yep.

[1073] Yep.

[1074] Uh, totally recommend it.

[1075] Well, mine real quick, just can't, you know, give enough shoutouts and thank you to Nick fight other friend of the show and former episode.

[1076] one of the other books he recommended to me was he's just got all my carve outs like covered was the three body problem this amazing sci -fi book written by chinese author lu shishin i hope i'm pronouncing that right it's incredible uh the three body problem is the first in a trilogy the trilogy is the remembrance of earth's past three body problem is great the second book in the series the dark forest was actually my favorite there's like a what the dark forest is like this completely mind -blowing concept.

[1077] It's all set in the future and very sci -fi, but like, it's very realistic, too.

[1078] And the whole series is sort of about, um, an answer to the Fermi paradox.

[1079] The Fermi paradox being like, statistically, it's very unlikely that we are the only life in the universe, uh, that Earth has the only life in the universe.

[1080] But we haven't received any signals from anyone else.

[1081] Why not?

[1082] And this is like a, an, a potential answer to why not?

[1083] Uh, And it's really cool.

[1084] So highly recommend it.

[1085] Thank you, Nick.

[1086] Cool.

[1087] Well, David, I think that's what we've got.

[1088] Believe it or not, we are out of things to say.

[1089] I know.

[1090] Our episodes just keep getting longer.

[1091] We need to get some quick ones in here.

[1092] We do.

[1093] Listeners, there's some exciting stuff coming up in the next few weeks.

[1094] We've got an IPO with Dropbox.

[1095] We've got, is it technically an IPO of Spotify?

[1096] A direct listing.

[1097] Yeah, I think it's just a direct list.

[1098] listing.

[1099] There's no offering because they're not creating any new shares to sell.

[1100] No. So that'll be a fun one.

[1101] We'll try and get that out in short order after trading begins with a typical acquired narrative and our quick take on what's going on.

[1102] I think that's all we've got, though.

[1103] We're out of gas.

[1104] We are.

[1105] I'm hungry.

[1106] Thanks for sticking with us.

[1107] Yeah.

[1108] We'll talk to you guys soon.

[1109] Our sponsor for this episode is a brand new one for us.

[1110] Statsig.

[1111] So many of you reached out to them after hearing their CEO, Vijay, on ACQ2, that we are partnering with them as a sponsor of Acquired.

[1112] Yeah, for those of you who haven't listened, Vijay's story is amazing.

[1113] Before founding Statsig, Vijay spent 10 years at Facebook where he led the development of their mobile app ad product, which, as you all know, went on to become a huge part of their business.

[1114] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

[1115] Yep.

[1116] So now Statsig is the modern version of that promise and available to all companies building great products.

[1117] Statsig is a feature management and experimentation platform that helps product teams ship faster, automate A -B testing, and see the impact every feature is having on the core business metrics.

[1118] The tool gives visualizations backed by a powerful stats engine unlocking real -time product observability.

[1119] So what does that actually mean?

[1120] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

[1121] It's super cool.

[1122] Statsig lets you make actual data -driven decisions about product changes, test them with different user groups around the world, and get statistically accurate reporting on the impact.

[1123] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

[1124] There are like so many more that we could name.

[1125] I mean, I'm looking at the list, Plex and Versel, friends of the show at Rec Room, Vanta.

[1126] They like literally have hundreds of customers now.

[1127] Also, Statsig is a great platform for rolling out and testing AI product features.

[1128] So for anyone who's used Notion's awesome generative AI features and watched how fast that product has evolved, all of that was managed with Statsig.

[1129] Yep.

[1130] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's Statsig is awesome for that.

[1131] They can now ingest data from data warehouses.

[1132] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today.

[1133] You don't even have to migrate from any current solution you might have.

[1134] We're pumped to be working with them.

[1135] You can click the link in the show notes or go on over to statsig .com to get started.

[1136] And when you do, just tell them that you heard about them for from Ben and David here on Acquired.

[1137] If you aren't subscribed and you want to hear more, you can subscribe from your favorite podcast client.

[1138] If you're on Breaker, comment on this on Breaker.

[1139] We love the hearts and even more of the comments.

[1140] Would love an iTunes review or an Apple Podcast review.

[1141] So if Apple Podcasts is where you are listening to this, or if you have a free moment right now and enjoy this show, we'd love nothing more than share it with your friends on social media, more privately on IMessage or a review or a comment on one of those platforms.

[1142] and thank you so, so much.