SoftBank Son's youngest brother poised to buy Korean VC arm

Taizo Son, the youngest brother of SoftBank Chairman Masayoshi Son, is poised to buy the group's South Korean venture capital arm for around 200 billion won ($150 million), according to people familiar with the matter on Wednesday.

The younger Son, who manages Singapore-based VC firm Mistletoe, is in talks to buy the entire stake in SoftBank Ventures Asia from the parent group.

SoftBank Ventures was understood to have approached Taizo to propose the stake sale, after its negotiations with South Korean retail giant Shinsegae Group fell through last month, the sources said.

Prior to entering into talks with Shinsegae, the VC arm had reached out to other Korean conglomerates and private equity firms but to no avail.

The sale, if successful, will come after SoftBank posted its largest quarterly loss of $23 billion hit by the Vision Fund’s investment losses. To address the record shortfalls, Masayoshi Son pledged sweeping cost-cutting efforts.

The estimated price for SoftBank Ventures Asia is 65% above its 2021 book value of 120.8 billion won, including a management premium.

Established in 2000, SoftBank Ventures Asia manages 10 VC funds, with a combined 2.2 trillion won under management as of the first quarter of this year. It targets early stage startups, or those in the Series A funding round.

The companies in its portfolio include Iyuno SDI Group, the world's largest dubbing and subtitling service provider; Naver Z Corp., the operator of the metaverse platform Zepeto; and online sneaker platform SODA.
  

Taizo Son is 15 years younger than his eldest brother. At the age of 23 as a Tokyo University student, he joined his brother to set up the Yahoo Japan web portal as a founding member in 1996. He then led the establishment of the in-house gaming venture GungHo Online Entertainment in 1998.

GungHo made a big hit with Ragnarok Online, a massively multiplayer online role-playing game, based on a South Korean comic book, or manga. Its huge success paved the way for its public offering on the Osaka Exchange in 2005 and led to Taizo Son joining the ranks of billionaires.

Since then, he moved to Singapore and launched the venture capital firm Mistletoe in 2013. Mistletoe has invested in a South Korean edtech startup Classting.

Last year, SoftBank Ventures Asia reaped windfalls from the exit of South Korea’s leading video chat startup Hyperconnect and the US fiction app Radish Fiction. It sold them respectively to the US-based Match Group and South Korean mobile platform Kakao Corp.

Unlike conventional investment funds that raise a chunk of capital from external investors, the SoftBank Vision Fund has a high ratio of equity capital committed by its parent group. Thus, the Vision Fund’ losses forced SoftBank Group to secure fresh funding through asset sales or cost cuts.

Its VC arm in South Korea has built investor trust thanks to its close collaboration with the Vision Fund. Put another way, the fund tended to invest in the companies backed by the VC arm.

Its sale to the brother of Masayoshi Son will likely stem the outflow of key investment professionals. When SoftBank Ventures held negotiations with Shinsegae, some of its portfolio managers expressed their intentions to resign.

Write to Jun-Ho Cha and Chae-Yeon Kim at chacha@hankyung.com
Yeonhee Kim edited this article.