SoftBank Group’s chief operating officer Marcelo Claure, who serves as executive chairman of WeWork, has spent much of the last year dealing with one controversy after another: the SoftBank Vision Fund’s disastrous bet on WeWork and subsequent lawsuits from founder Adam Neumann, pressure from an activist investor, and SoftBank’s first annual operating loss in 15 years.
But in a leaked audio recording of Claure speaking at a private Robin Hood event, he laid out an optimistic vision of SoftBank’s future — one he thinks will be boosted by an AI revolution.
While being interviewed by Starwood Capital Group chairman and CEO Barry Sternlicht, Claure pointed to SoftBank chief executive Mayayoshi Son’s $20 million investment in Chinese internet conglomerate Alibaba years ago — now worth some $150 billion — as an example of the scale of the potential the firm is looking for when trying to identify new investments.
“Every time we invest in a new entrepreneur, we go at it thinking, ‘This could be the next Jack Ma; this could be the next Alibaba,’” Claure said. “That’s the way we invest, and that’s why some people don’t understand our investment philosophy.”
The conversation was one of several discussions with hedge fund and alternative investment managers at the private event this week, held annually to raise money for the charity. A representative for Claure said he declined to comment on the remarks. A representative for Sternlicht did not offer a comment on the remarks by the time of publication.
Claure said SoftBank’s investments were earlier driven by the explosion of the internet, but he thinks the rapid expansion of artificial intelligence will be an “exponentially” bigger phenomenon — and one that has been greatly accelerated by the Covid-19 pandemic.
“We are figuring out ways to continue to invest in the philosophy we have, that the world is undergoing one of the most transformational revolutions ever,” he said. “We call it the AI revolution. Any company that’s utilizing AI to disrupt traditional business models is what we are interested in, and that’s what we’re putting our money behind.”
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He gave two examples. One is REEF Technology, an operator of parking lots, logistics hubs, and mobile kitchens in the U.S. The company still generates cash through operating its parking lots, but now it’s benefiting from a new revenue stream as a “last-mile distribution center” for grocery stores, restaurants, pharmacies, and other retailers taking advantage of the Covid-19-fueled demand for same-day item delivery, Claure said.
He also pointed to Rappi, a company that claims it is trying to be the “everything store” of Latin America. Rappi is growing its customer base by hundreds of thousands of users a month, according to Claure; customers use Rappi to order prepared food, groceries, clothing, and “virtually anything,” according to its LinkedIn page.
“These are companies that people don’t know about,” said Claure. “We funded some entrepreneurs and they are just killing it. The pandemic has massively accelerated the digitalization of the world.”
He also marveled at the growth of — and technology behind — TikTok, the viral video-sharing network founded in China that now boasts several hundred million subscribers. SoftBank is an investor in TikTok parent ByteDance.
Calling TikTok “one of the most innovative companies in the world,” Claure praised the company’s use of AI, noting that a colleague told him, “TikTok knows me better than I know myself.”
“We traditionally saw China as the market that stole technology from the U.S. Now the market is changing real fast,” he said. “What I have seen is the power of the Chinese entrepreneur — that determination, that vision, that ambition — backed by technology. We’re in for an awakening to understand the power of China going forward.”
Sternlicht also asked Claure about the status of WeWork, the controversial, money-losing co-working company that SoftBank plowed billions of dollars into before it was forced to shelve a planned IPO when investors questioned its lofty valuation and profligate spending. Claure insisted Sandeep Mathrani, WeWork’s current CEO, has dramatically slashed costs, and he swore by its potential.
“The fundamental of the business model has never changed,” he said. “Real estate has never been disrupted to its core. If you ever want a lease, you have to get a ten-year lease, you have to get a permit, you have to hire an architect, you have to hire an office manager; it’s painful. Or, you go to WeWork and you can be in business in 24 hours. The idea is brilliant.”
Calling the company “a great value proposition,” Claure said Mathrani “has taken costs to a level that if we have the same occupancy we had pre-pandemic — which we will — then this company should be an amazingly profitable enterprise. Two years from now, a year from now, this is going to be an amazing story, one we will be proud to be a part of.”