Softbank, News Corp and Vivendi yesterday announced plans to pour $450m (£284.8m) over the next two years into backing internet start-ups and new business concepts in Britain. The three intend to invest a further $550m in mainland Europe.
The move comes just two days after Benchmark Capital, the US fund behind eBay, announced plans to open a London office and invest $500m of its own in European start-ups.
Tokyo-based Softbank, run by Masayoshi Son - whose shareholding is on the verge of making him the world's richest man - is the driving force behind both funds.
As part of a global reorganisation of its net investment strategy, Softbank is investing $275m in SoftBank UK Ventures. It will be managed by E*partners, a News Corp and Softbank-backed venture fund contributing $150m. Softbank Europe Ventures will be made up of $400m from Softbank, $100m from Vivendi and $50m from strategic partners.
Softbank denied suggestions that its entry to the market was late or that it would merely distort deal prices as a mass of venture capital chases a limited number of quality business plans in London and the regions.
"We won't participate in any kind of feeding frenzy just to ensure our capital is at work," insisted Eric Hippeau, president of Softbank's international investments.
However, E*partners chief executive Mark Booth, the former head of BSkyB, admitted it would be "a challenge" to spend the $450m. "There is no question that there is a lot more risk capital in the UK than before, that people will make mistakes with their investments and that there will be deal inflation," he said.
"This offering is not just about the capital, it is about a unique blend of experience, capital and assets.
"We offer unrivalled speed to a global market and we're very comfortable about what we can bring to the entrepreneur. This is like Christmas for British entrepreneurs."
Mr Hippeau said Softbank would seek to take significant minority stakes in ventures. "We will be a very active investor and take board seats, but we do not want control," he said. "The market will dictate the size and number of investments we make."
Softbank has already made about 300 net-related investments around the world, Mr Hippeau said.
The company is most famous for its 20% stakes in Yahoo and E-Trade. "We expect all our investments to succeed but realistically not all of them will," he said. "The UK in particular has some excellent entrepreneurs but there are also some flimsy business plans out there we need to avoid."
The majority of Softbank's investments have been made in privately held companies. Softbank's total investment, including public companies, was estimated at around $2bn by Mr Hippeau. "I'd say the part of our portfolio that is publicly quoted is worth around $50bn."
The strategy and investors' appetite for hi-tech stocks has transformed the company into one of the world's most valuable, at around $60bn.
Mr Son's claims that Softbank holds more than 7% of the publicly listed value of the world's net firms. His holding has put his personal wealth on a par with that of his friend, Microsoft chairman Bill Gates.
Mr Hippeau said Softbank's enormous exposure to hi-tech investments did not put the company at undue risk, even if the 15% to 20% correction in internet valuations many analysts predict does materialise.
"These changes are as profound as the industrial revolution. They are not an overnight phenomenon ... We are long term believers, and will not be put off by a selloff. I'm not going to wake up one day and say, 'Oh my God, it was just a figment of my imagination'."
