Investments

SoftBank, Abu Dhabi Plan To Pump Money Into New European Tech

SoftBank, Abu Dhabi To Invest In European Tech

European tech startups are getting a new source of funding thanks to a new $200 million investment from Japan-based SoftBank. The news comes as concern builds about young companies spending too much and not holding enough capital as worries about the global economy increase.

SoftBank reportedly will invest that $200 million in Mubadala, the state investment company of Abu Dhabi. In all, Mubadala has earmarked $400 million for investment in European startups, according to reports. An account in CNBC said the fund “will help Mubadala to invest between $5 million and $30 million in individual startups. Mubadala announced in June that it would create the $400 million fund to invest in European tech companies. It said at the time that SoftBank would participate as a strategic investor, but did not disclose the extent to which it would contribute.”

Back in 2017, Mubadala invested $15 billion in SoftBank’s Vision Fund, which focuses on relatively large-scale investments — much larger than the investment amounts planned by Mubadala — such as its $940 million investment earlier this year in Nuro, a U.S.-based robotics startup.

Vision Fund

In 2018, the SoftBank Vision Fund made investments in more than 20 deals to the tune of $21 billion. Meanwhile, according to SoftBank’s annual Form D disclosure that it is required to file with the Securities and Exchange Commission (SEC), it raised about $98.58 billion from 14 investors since it launched the fund on May 20, 2017. In its 2017 filing, SoftBank said the fund raised $93.15 billion from eight investors. That means this year it raised $5.43 billion and brought on six new investors, noted the report.

Among the most recent investments? On-demand storage startup Clutter is reportedly raising between $200 million and $250 million in a funding round led by SoftBank.

Startup Worries

As those SoftBank investments accumulate, there are growing anxieties from some quarters that startups are spending too much and saving too little. As PYMNTS recently covered, venture capitalists are reportedly urging startup companies to curb their spending and hold onto more capital, as concerns about the volatility in the stock market and the growth of the global economy are starting to worry them.

Some tech investors reportedly are also telling the tech startups to prepare for the chance of a downturn in the economy that could prompt companies to scale back spending on tech and that they could face a much harder time raising capital in an environment like that. The Financial Times, in fact, pointed to SoftBank’s move to cut its planned investment in WeWork as an example. SoftBank is now planning on investing $2 billion in the company that provides access to shared office space — instead of $16 billion. That is raising concerns that the valuation of tech startups that are still private will start to come down.

That may be, but the lure of profit from the European tech sector will reportedly result in Mubadala’s new European venture fund being out of a new London office, which is expected to open in the spring, according to CNBC. The report added that “Mubadala already has a U.S. venture fund based in San Francisco.”

China Growth

The news of this new funding boost for European tech startups comes not only during a period of new anxiety about their financial health, but also fresh evidence of the growth of the Chinese startup market. Last year, nearly 100 technology startup companies in China garnered a valuation of more than $1 billion.

Those companies were led by eCommerce and video streaming services, the Financial Times reported, citing data from Hurun’s ranking of China’s top tech companies. According to the report, Hurun, which also produces the annual Global Rich List for China, found there are 186 Chinese tech startups that have valuations of more than $1 billion. In first place is Ant Financial, the digital payments affiliate of Alibaba.

Some kind of reckoning for startup tech firms may or may not be coming. But for now, this fresh money from SoftBank and Abu Dhabi promises to help further develop the European tech scene.

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