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Masayoshi Son just pulled off an impressive judo flip on Snapdeal

LiveMint logoLiveMint 11-08-2017 Tim Culpan

Just as we started to question Masayoshi Son’s sanity for attempting to buy, well, everything, the Japanese visionary pulled off an impressive judo flip in India.

As the largest backer of e-commerce startup Snapdeal, Son’s SoftBank Group Corp. had been trying to engineer a merger with Flipkart Group so the combined entity could better take on Amazon.com Inc.

Like petulant children refusing to eat their greens, Snap’s co-founders scuttled that deal despite it being best for the company’s health.

“No worries,” thinks Son. “I’ll invest in Flipkart instead.”

In the world of venture capital, investing in a portfolio company’s rival breaks an unwritten rule (and often written ones, too). Thankfully for Son, he has $100 billion and a different entity through which to funnel the money: SoftBank Vision Fund.

SoftBank Vision Fund investment in Flipkart

With Amazon pledging to spend $5 billion in India, the country’s e-commerce market is beginning to resemble an arms race, with cash the biggest weapon. It also means each funding round becomes a zero-sum game: More money for Flip is bad news for Snap.

SoftBank Vision Fund is injecting about $2.5 billion into Flipkart, split between new cash for the company and the purchase of some of Tiger Global Management’s stake, according to Bloomberg News’s Saritha Rai. That takes total investments in Flipkart past $6 billion, according to Crunchbase, leaving it with more than $4 billion in cash and a valuation of almost $12 billion.

Venture capitalists know most of their investments will become flops, so they bet on massive returns from a choice few. Son is being pragmatic here, ensuring he has a stake in the Indian e-commerce market either way.

His investment paves the way for three possible outcomes:

Snapdeal clearly thinks it’s bigger than it really is. But like in judo, Son has used that perceived size against it to win this bout. Bloomberg

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