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October 14, 2016

SoftBank, Saudi Arabia create $100bn London based tech fund

$20bn a year will be invested over the next five years.

By James Nunns

SoftBank and the sovereign wealth fund of Saudi Arabia are launching a $100bn tech fund.

Based in London and funded with $25bn from SoftBank and $45bn from Saudi Arabia’s sovereign wealth fund over the next five years, the goal is to create a tech investment fund.

Due to be called the SoftBank Vision Fund, the $100bn equals the same amount of all funds raised by US venture capital firms over the past two and a half years, according to the National Venture Capital Association.

That gives the deal some scale and highlights the hunger from investors for the tech sector.

Despite market concerns the tech sector has bounced back in recent weeks with a number of successful IPOs from the likes of Nutanix. This has encouraged companies such as Snap, formerly Snapchat, to hire bankers ahead of a proposed $20-$25bn IPO next year.

SoftBank said the $100bn would be invested over a five-year period, so $20bn a year, which would be a quarter of total annual investments in US-based venture backed start-ups.

SoftBank CEO Masayoshi Son.

SoftBank CEO Masayoshi Son.

It has not been said whether the investment fund will be aimed at start-ups or more established companies but both SoftBank and Saudi Arabia’s wealth fund have been heavily involved in the tech sector.

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SoftBank for example acquired UK chip company Arm in a £24bn deal, while the country’s wealth fund, known as the Public Investment Fund, invested $3.5bn into Uber this year. SoftBank has also invested in Sprint, Alibaba, Yahoo Japan and emerging companies such as Grab and bioengineering start-up Zymergen.

Russ Shaw, Founder, Tech London Advocates, said: “This unprecedented move by two global giants is a huge vote of confidence in the continued strength of the UK tech sector. In times of uncertainty, plummeting sterling and the growing spectre of Article 50, the value of UK technology companies remains consistent and shows that our sector can weather changing market cycles.

“London has a world-beating technology sector and it is top of the list for mature international investment. Combined with the success of Mayor Khan’s recent tech trade delegation to New York, this shows that the power of the UK technology is continuing to grow unabated.”

The fund will be led by SoftBank’s head of strategic finance, Rajeev Misra, a change from Nikesh Arora who had previously been in control of tech investments but left the company this year.

Saudi Arabia’s interest stems from its 2030 economic plan which includes reducing boosting the private sector and lowering the reliance on fossil fuels.

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