Outlier Ventures Weekly Brief Issue #16  View Online
Softbank's 300 year vision is already outdated
Softbank's capital is everywhere. From an on-demand, dog walking app to the latest in autonomous mobility, the fund's investments have changed the very dynamics of how venture capital works. Bold bets sized anywhere between $100 million to multiple billions have birthed new industry leaders, created new economies and generated generous returns. From Alibaba to Uber, Masayoshi Son has consistently taken large bets in businesses that change our lives. However, his broad 300-year-old vision could be outdated. Our CEO, Jamie Burke recently penned down his thoughts on why that's the case. We cover it in the week's newsletter.

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Why a winner takes most strategy may be flawed

Economies of scale and network effects are a core part of Softbank's investing model. It focuses heavily on a winner takes all approach to ensuring market success. By investing in similar ventures around the globe and even merging a few of them, Softbank ensures that they hold bulk of the market share for product categories and the data that comes with it. The current portfolio focuses largely on synergistic categories such as real estate (offices, storage, robotics) or e-commerce and logistics (last mile delivery). These are usually AI optimised companies that at scale, with a data advantage could put most competitors out of business on a long enough period of time. 

The move to "global utilities"

We are witnessing a global shift from cloud computing to large scale, open-source internet protocols that come with the same benefits of scale, but through decentralised marketplaces. Bitcoin is a prime example of this. It mobilised billions in specialist hardware and electricity - all in pursuit of tokens that were released on the basis of a simple algorithm and reward system. At Outlier Ventures, we are seeing our portfolio enable this transition. For instance, Haja networks help enable interoperability between traditional databases. Fetch, on the other hand, helps autonomous economic agents unlock value from data. When combined they provide an emerging stack of technologies that level the playing field for startups by bringing economies of scale for a longtail of market participants. This means many of the old advantages that underpin Son’s vision such as data monopolies and centralised IT infrastructure will be available to all through these new ‘global public utilities’.

A possible alternative

A simple, effective hedge for Softbank right now would be to deploy a small chunk of their $100 billion towards open, decentralised networks. Given their experience with the dot com bubble and the present state of token markets, it may be a good time for entry. One thing the ecosystem is in short of is patient capital. Softbank could lead large rounds of protocols that complement their existing portfolio. This could bring in much-needed capital and help accelerate the rate of adoption we see in the space. 

Read the entirety of Jamie's piece here and stay tuned for an update to our convergence stack coming soon from the team!

Interesting Reads For The Weekend
1. Crypto in 2019 - Kleiner Perkins

2. 4th ICO/STO Report - PWC

3.  From Co-ops to Cryptonetworks - A16z

4. Moore's law for self driving vehicles - Medium
Just bought a ⁦ @Trezor  hardware wallet with bitcoin through @CashApp
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