Jun 3, 2020 - Economy

SoftBank to launch $100M fund backing companies led by people of color

SoftBank Group Logo.

Illustration: Aïda Amer/Axios

SoftBank COO Marcelo Claure said in a letter to employees early Wednesday that the firm will create a $100 million fund that "will only invest in companies led by founders and entrepreneurs of color."

Why it matters: The Opportunity Growth Fund is one of the first to put significant capital behind companies' statements of empathy and outrage in response to protests over systemic racism in the U.S. typified by the killings of George Floyd, Breonna Taylor and other African Americans by police.

  • It immediately makes SoftBank a leading presence in the impact investing space dedicated to backing businesses owned and operated by people of color.

What they're saying: "The Opportunity Growth Fund will be the biggest fund providing capital to black Americans and people of color," Claure said in the letter. "We believe in this investment strategy, and we believe in these founders."

The big picture: The fund could mark a sea change from talk to action for well-heeled financial institutions.

  • Bank of America announced a $1 billion four-year program to "address economic and racial inequality" that will target people of color by funding initiatives including virus testing, support for minority-owned small businesses and investment for affordable housing.
  • JPMorgan, Citi, Wells Fargo and other major U.S. banks have released statements condemning racism and supporting diversity efforts, but none have yet announced similar projects or investment.

Where it stands: The fund will invest in "companies that use technology to disrupt traditional business models," and will donate an unspecified portion of gains from the fund’s investments to organizations focused on "creating opportunities for people of color."

  • 50% of the gains from the fund's investment will go toward future programs with similar aims.
  • SoftBank said it "will not take a traditional management fee" on the Opportunity Growth Fund.

Yes, but: The fund has not yet identified any companies or dedicated any capital, the spokesperson said.

  • SoftBank is in the midst of a public relations battle after announcing earlier this year it would sell off $41 billion in assets and facing a wave of criticism from investors over money-losing investments in WeWork, Uber and others.

Between the lines: The letter also announced the creation of a diversity and inclusion program, admitting the company needs to "do better at hiring underrepresented groups for open roles at SoftBank and our portfolio companies — especially for leadership and board seats."

The players: Prominent black Silicon Valley executives Stacy Brown-Philpot, CEO of TaskRabbit, and Paul Judge, co-founder of TechSquare Labs and Pindrop, will serve as "founding members" and "fund advisors," a SoftBank spokesperson told Axios.

  • The two will serve on an investment committee with Claure.
  • Investing will be overseen by Shu Nyatta, a managing partner who works on the company's Innovation Fund, and run by managers at SBGI.

The bottom line: "Founders and entrepreneurs of color have so much potential, but they face unfair barriers that white founders don’t face," Claure wrote. "This is our opportunity remove those barriers for a new generation of founders."

Editor's note: This story was corrected to say that Stacy Brown-Philpot and Paul Judge will serve on an investment committee, changing an earlier version that said they would not be involved in investment decisions. The change is based on a clarification from a SoftBank spokesperson.

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