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SoftBank: Opportunity Fund for Minority-Owned Startups

In June in response to Black Lives Matter and the global reckoning on race, numerous companies announced major initiatives to help close the gap with Black and minority communities and try to redress lingering inequities. Perhaps no company’s initiatives had quite the same dollar amount attached as SoftBank’s $100 million Opportunity Fund of venture capital earmarked for BIPOC-led companies. Ethisphere Magazine spoke with Marcelo Claure, CEO of SoftBank Group International, for more about the genesis of the Fund and the impact he hopes it will have.

Marcelo Claure, CEO, Softbank Group International and COO, SoftBank Group Corp. The portfolio Claure oversees include WeWork, SB Energy, Fortress, and Boston Dynamics.

Tyler Lawrence: The announcement of the Opportunity Fund was prompted by the summer’s reckoning over racial injustice that started in the United States with George Floyd and spread around the world. Tell us just a bit about how the initial idea for the fund came about in early June.

Marcelo Claure: What happened to George Floyd had been happening all over the world and all over the US every day, every hour. And maybe people don’t always get murdered, but the racial injustice that we live in is just something that has existed and with the exception of a few groups, we chose to ignore it. You know it’s there, but really it never got the recognition that it has got now. I think the main reason for that is we live in a world today where every person is a reporter, every person has a mobile phone. I think it was amazing how somebody was able to capture footage, and then with social media you don’t let the media influence the way things are going to be broadcast.

I got tired of people saying, “We support Black Lives Matter. We support the Black community.” Support is cheap. Talk is cheap. I had a very personal idea. One of my daughters came to me and said, “Dad, I want to go protest. I want to go to the Black Lives Matter protest.” And I said, “I’ll go with you.”

That’s as much as she can do. She doesn’t have money. Her voice is not heard. If she is willing to do something, which is a big step for her, I asked myself, “What can I do?” At SoftBank, we’re the world’s largest investor. We invest in businesses every day. And I figured that the best thing that we could do was actually put together a fund that will support entrepreneurs of color. Where there’s racism in the way police treat Black or white people, there’s the exact same level of racism that happens when an entrepreneur goes and tries to get money. They’re no different, right?

I want to start a fund solely dedicated to entrepreneurs of color, to give them not only the same opportunity, but a better opportunity, because it will be fully dedicated to them. I said, “That’s my way of contributing back.” We have the financial means to do this. My call to action to every leader was that each one of us have a moral obligation to do something with the means that we have. My daughter can go protest. We can set up the largest venture fund for entrepreneurs of color ever. Other companies are going to start adding Black and Hispanic people to their boards. I think if everybody just does one thing using our means, then we can make the world a better place.

In order to do this, I want like-minded people. I’m a Henry Crown Fellow, and two other fellows are just outstanding. One is Stacy Brown, the former CEO of TaskRabbit. She’s African American, and she breathed this problem. We sat many times and said, “Both of us have made it pretty far in life, but we’ve had to work extra hard”—her because she’s Black and me because I’m Hispanic. So she totally understood. I said, “I want you to be here with me.” And she said yes, on the spot. And the other one is Paul Judge, who is the head of TechSquare Labs. And he’s been funding, with limited capital, Black entrepreneurs. I just thought, “Hey, let’s put the dream team together.” I found an African partner in SoftBank, Shu Nyatta, and the four of us said, “Let’s launch this.”

We’re not a charity organization. This is not a grant. We’re going to hold you to the same standard that we hold any other entrepreneur, but there’s a large amount of money dedicated only for entrepreneurs of color.

And I’m blown away by the quality of the talent. I’m blown away by the entrepreneurs that have been discriminated against in the past—whether people would like to admit it or not, many people have a bias against giving money to Hispanic or Black people. We automatically think that there’s something wrong with them, and nobody will admit it. The only thing we’re willing to admit is that only one percent of funds are given to Black entrepreneurs.

Well, guess what? Between Black and Hispanic people, I think we’re about 35 or 40 percent of the population. We’re not 20 times dumber, but nobody wants to admit that. We have a dedicated fund where they know they’re going to be treated the same way that we would treat a white person. I’m just blown away by the quality of the talent that’s coming in, the quality of the entrepreneurs, the quality of the companies they’re founding.

TL: So you all announced the fund with $100 million at the beginning of June. What has happened since then? It sounds like you’ve already received quite a bit of interest. Where are we?

MC: We have evaluated 700 companies. We have made 20 investments since June, from healthcare to consumer companies to gaming. The demographics are 25 percent Latino male, 12.5 percent Black female, and 62 percent Black male.

I think we have a team of maybe 20 people dedicated to the fund. We cannot keep up with the amount of work, and we’re hiring more people and it’s great. People always say, “Why $100 million?” We really have no limits, right? We manage hundreds of billions of dollars of investments, and we just had to throw a number out to get it started.

TL: So, as you just mentioned, only one percent of VC-backed founders are Black. And in the past, lots of people in the industry have argued that the reason that Black and other minority founders don’t get that kind of investment is that there’s a pipeline problem—there just aren’t enough entrepreneurs of color who are out there with good ideas and who are coming to them, that there’s something else that’s stopping them before they even get to your stage. As an entrepreneur yourself and a Hispanic man, what do you make of that argument?

MC: That argument is false. There’s a tremendous pipeline of highly capable entrepreneurs of color. I learned that in Latin America, when I launched another fund, which is the $5B SoftBank Latin America Fund. Latin America is half the size of China, but venture investments in China were $100 billion, and investments in Latin America were around $1 billion.

In the first year and a half, we have invested $2.7 billion, and we anticipate deploying additional amounts over the next several years. People told us at the beginning that there’s no money because there’s not a pipeline. That was totally false. There’s an enormous pipeline. I think since we got in, total investments in Latin America jumped from $1 billion to $8 billion. We were there, we took the risk, and now there’s plenty of capital available, there’s plenty of entrepreneurs, and we’re part of building the ecosystem.

My goal in the US was to do the same thing. Other people have followed our lead. A couple of days after we announced, Goldman Sachs and Twitter came out with similar initiatives. I had a meeting with a Black entrepreneur the other day. He said, “I’ve gone from having to beg for money, to people begging me to invest in my company.” That is a fundamental change. We take full credit for being one of the first to take a stance and say, “We’re going to do this.” There are so many other people that followed, and today Black entrepreneurs have the same problem that white entrepreneurs have—if you build a great business, there’s competition for funding, and you get to choose based on, “Do I relate better to this fund? Do I like the investor better?”

What’s going to happen is, because you’re betting on these Black entrepreneurs that are as good as any other white entrepreneur, then you start creating a flywheel effect, right? Then you have more Black people who believe that, “Hey, if there’s going to be money, I’m going to go and build businesses.” I’m really hopeful for what the future of venture capital funding is going to look like for the community of entrepreneurs of color.

TL: SoftBank’s usual strategy with other funds, the Vision Fund and the SoftBank Latin America Fund, has been large investments in certain sectors—AI, robotics, fintech, sectors where there’s potential for long-term growth in the future of the economy. Do you think that will shift at all for the Opportunity Fund? Is your lens going to be a bit broader?

MC: I think here it’s much broader. We’re looking for amazing entrepreneurs who build innovative companies that will disrupt traditional business models without necessarily having artificial intelligence at the center of what they do. It had to be much broader because, in technology, you traditionally haven’t had Black and Latino entrepreneurs. We wanted to make sure that if we want to grow this fund from $100 million to $1 billion dollars, or whatever the size of the entrepreneurial opportunities, that we make the fund very broad.

Now, that doesn’t mean that we take bad businesses. We’re looking for exceptional entrepreneurs that build exceptional business that will deliver great investment returns. That hasn’t changed. This is not a charity organization to just give money because it’s the right thing to do. We’re business people, right? We’re out there to generate a great return. Now, how do we do good? A percentage of the return that we generate is going to go to promote inclusion of these entrepreneurs. We are not taking a traditional management fee, and the large portion of our profits will be donated to relevant causes or reinvested in future opportunity funds. If we hit a home run, think of the size the next one will be.

TL: It sounds like you’re already thinking ahead to the potential to grow this fund and to have future iterations of it down the line. How seriously are you planning for that? Or are you really focused right now just on this first $100 million, this first class of investees?

MC: No, we’re thinking of fund two and fund three, because this first $100 million is going to be gone very soon as we start finding some amazing companies. The first set of investments were small, $100,000 or $200,000. These are earlier venture companies, but we’re seeing some growth companies that might take the whole fund. So we’re thinking of the next fund already.

This article is part of a series for the Ethisphere Equity and Social Justice Initiative, convened to share leading practices, resources, case studies, conversations, and shared experiences from global companies and leaders.

TL: Even outside of the Opportunity Fund and future potential opportunity funds, you all committed to reviewing the way the entire SoftBank organization assesses investments, diversifying internally, and all of these other steps. Do you think that doing this work contributes to a stronger sense of purpose for the organization?

MC: One hundred percent. I had a townhall with my employees, and I think 40 percent of all the questions were employees telling us, “We want a more diverse company.” So for me, it’s not just the right thing to say or the right thing to do because the world is watching you. In a selfish way, if you have a country where the population is 30 to 40 percent Black or Hispanic, there’s no reason why your leadership shouldn’t reflect that, right? It just makes you better, and you understand your customers better. When I was the CEO of Sprint, I was the first one that came out and said we should put in extra effort to hire in a way that’s representative of our customer base. We have to do the same at SoftBank. We have to make sure that we have a totally diverse management team, a totally diverse investment team, a totally diverse associate team. We’re just replicating who we’re investing in, because if I am a Black investor, I am going to understand that Black entrepreneur significantly better than if I’m a white investor totally disconnected from what the Black entrepreneur is doing. If you have a diverse leadership team, you’re just going to do a better job. It’s going to be a competitive advantage to better serve your entrepreneurs, better serve your customers.

TL: One last question—you look forward five years, maybe even 10 years, what are you hoping that the impact of this is on the investor landscape more broadly and the ecosystem that you all are operating in?

MC: I think there’s a really good effect. We’re all serious about making sure that you’re allocating the right amount of capital to a more diverse group of entrepreneurs. If we as investors do a great job, and this company is delivering amazing returns, then this has a flywheel effect, right? The same thing happened in Latin America.

The same thing needs to happen in America with Black and Latino entrepreneurs. Right now, there’s an amazing effort, but to be fair, if we invest and the returns are not generated and these companies don’t do well, then little by little, this will disappear. My hope is that the investments we make are as good as any other fund—and I ’m convinced they will. People are not doing this just because it’s the right thing to do or because their employees are demanding it. They’re doing this because there are amazing Black and Latino entrepreneurs. I’m hoping that this becomes a self-sustaining machine, not a machine that’s being pushed because of racial and social injustice.

About the Expert:

Marcelo Claure serves as CEO of SoftBank Group International and COO of SoftBank Group Corp., where he oversees the company’s strategic direction and its portfolio of operating companies, including WeWork, SB Energy, Fortress, and Boston Dynamics. He also spearheads the $5 billion SoftBank Latin America Fund dedicated to investing in technology growth opportunities throughout the region, as well as the newly launched SB Opportunity Fund, a $100 million fund focused on investing in entrepreneurs of color. Claure also serves as Executive Chairman of WeWork.

Previously, Claure served as President and CEO and then as Executive Chairman of Sprint, where he is widely recognized for delivering the best financial results in Sprint’s 120-year history and architecting its merger with T-Mobile U.S. Prior to Sprint, Claure founded Brightstar, which he built into the world’s largest global wireless distribution and services company and the largest Hispanic-owned business in US history, with operations in more than 50 countries and revenues exceeding $10 billion.

Claure is a Board member of SoftBank Group and Arm and serves as Chairman of Fortress. He also runs Club Bolivar, Bolivia’s most successful soccer team, and serves as Chairman and Owner of Club Internacional de Futbol Miami (Miami Beckham United), one of the newest Major League Soccer franchises. Claure immigrated to the United States from Bolivia. He is married and has six children.

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