SoftBank to restart India investments mid-2024 as founders reset valuations: Sumer Juneja

SoftBank gears up

“In 2022 and early 2023, all investors, especially early-stage investors since they have a much more extensive portfolio, were focused on ensuring their portfolio reduces burn and survives the funding winter. It resulted in decreased deal-making across the board. As Seed and Series A/B deals have picked up in the second half of 2023, you will see an increase in the pipeline for growth investors,” Juneja said.

However, Juneja said 2024 will be different from previous years as founders will now come to terms with a reset in valuations and will be open to repricing themselves as they seek to grow and tap market opportunities. Cheque sizes at the growth stage could also moderate after founders undertook a raft of measures to bring down costs.

“We will do smaller cheques only if the market dynamics require it, especially since companies have become more capital efficient and want to raise less. We are excited about the India story and will not sit on the sidelines. We will be fine investing $50 million, but ideally not lower than that. An investment below $50 million will not move the needle for SoftBank,” Juneja said.

SoftBank, which typically prefers investing over $100 million in each round, will however stick to growth-stage investments.

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“We are very clear that as investors, the biggest mistake we can make is a style drift. We are not Seed or Series A investors, and we will not move away from our style. That's not how you build a sustained platform. We have a playbook that has worked. We have picked multiple winners and avoided many poor outcomes – we want to continue that. Our pipeline might have reduced, but will not compromise on quality and diligence,” he added.

India bets

SoftBank Investment Advisers has pumped in about $11 billion into Indian startups since it began operations in November 2018 and has already clocked exits worth $6.2 billion-$6.5 billion.

“We did Delhivery, Lenskart and Policybazaar, Meesho, Mindtickle, Whatfix, OfBusiness and others. These companies were seeded in a vintage when liquidity was limited and hence, these companies were created with a focus on capital efficiency. The best entrepreneurs come out when liquidity is limited and high-quality founders get funded,” Juneja explained. “Robust liquidity results in companies with weaker building blocks being created. That’s why the companies funded mid-2023 onwards – when capital was limited – will be an amazing cohort to invest in. Vintage is important in investing.”

Monetisation has been a key focus for SoftBank over the past year as it exited its positions in Zomato and PB Fintech via block deals.

“There is performance of companies and then there is a factor of how robust the market is. So, whenever there's an opportunity, we will sell. Exits are important for any investor, including SoftBank, to remain excited about investing. As disciplined as you are going in, you have to be as unemotional and disciplined coming out,” Juneja said.

Brush with Dalal Street

While four of its portfolio firms – Zomato, PB Fintech, Paytm and Delhivery – are listed, it is now preparing to list the next set of companies from its portfolio, which will include Swiggy, Firstcry and Ola Electric.

Asked about the key takeaways from the first batch of initial public offerings that SoftBank will now apply in upcoming share sales, Juneja said it is important to leave something (returns) on the table for retail investors and also engage deeply with domestic mutual funds.

“We also understood the importance of Indian mutual funds as they decide how an IPO will do. The Indian mutual fund industry is becoming very strong. We get around $1.5-$2 billion in monthly systematic investment plans (SIPs). So, today in India, a company cannot price an IPO without the mutual funds being in the lead. Even foreign institutional investors follow mutual funds,” Juneja explained.