The most scarce resource in tech today is AI talent — and it's one of the key reasons that valuations at Europe’s crop of emerging AI starlets are so high, says SoftBank’s managing partner of Europe, the Middle East and India, Sumer Juneja.
“When you find a few people who are real AI scientists who really want to build true AI — that is a scarce resource,” he tells Sifted. “If someone says ‘why are AI valuations so high’, I’m like ‘it’s hype, sure’, but putting together an A+ AI team is very rare.”
But SoftBank is now on the warpath, trying to bring that kind of talent into its portfolio. The Japanese investor giant has said it's willing to commit $9bn a year to AI deals and has pumped eye-watering sums into European startups developing the tech in recent months.
In May, SoftBank led and, Sifted understands, contributed more than half of autonomous driving company Wayve’s $1bn Series C and in July it completed a $600m+ acquisition of semiconductor startup Graphcore.
There will likely be more AI dealmaking in Europe for the firm — which typically invests between $25-300m — in the near future; it's keeping a close eye on a number of Europe’s brightest startups in the space, Juneja says.
Speaking to Sifted at SoftBank’s London offices in Mayfair, Juneja namedrops the AI companies he’s got his eye on, shares SoftBank’s plans to use Wayve’s tech across its portfolio and discusses where Revolut might list.
Betting on AI
SoftBank is not a typical VC.
The firm was founded in 1982 as a software company, before expanding into internet services and telecoms. It was an early backer of Yahoo and saw a 3000% return on a $20m investment into Chinese company Alibaba when it went public in 2014.
Three years later it launched its $100bn Vision Fund — still the world’s largest tech fund — and its Vision Fund 2 in 2019, which Juneja tells Sifted has deployed $50bn.
It participated in neobank Revolut’s $800m Series E in 2021, buy now pay later company Klarna’s $639m round the same year and acquired UK chip designer Arm for $24bn in 2016 — before taking the company public a year ago (it now has a market cap of $135bn). It's also pumped huge sums of money in US tech companies like ride-sharing app Uber, self-driving vehicle scaleup Cruise and coworking giant WeWork.
SoftBank made a name for itself with ambitious bets in the tech space — but has remained conspicuously absent from the cap tables of many of Europe’s hottest young AI startups of recent times.
The investor is keeping a keen eye on what Juneja calls “AI first” startups in the region, specifically pointing to the likes of text-to-speech generator Elevenlabs, AI video creator Synthesia, genAI coding tool Poolside and workflow automation startup 11x. “We are looking at names like [those] and more in the ecosystem.”
UK-US-based Elevenlabs raised $80m and became a unicorn in January this year, London’s Synthesia raised $90m and hit a $1bn valuation in June 2023 and US-founded Poolside picked up $126m and relocated to France in August 2023. Other big rounds in the European AI space this year include Mistral’s €600m and H’s $220m.
But, with valuations often running way ahead of revenue numbers, “you’re betting a lot on the future,” he tells Sifted. Juneja says he doesn’t expect SoftBank to invest more than $100m into a European startup in the next 12 months.
That’s because the Japanese investor deploys the big bucks when a company has historical revenue data to analyse — and many of Europe’s current crop of AI darlings are still too young for this, he tells Sifted. “You deploy large capital when you see [a company] go through a cycle — I don’t think in the next year we’re going to see them go through a cycle,” he says.
Over the next year, Juneja adds, the probability is that SoftBank will do “smaller cheques” of between $25-40m in Europe — “unless we see a dramatic change, [those companies] grow [revenue] 300% year-on-year and we get convinced they’re building a sticky product”.
He tells Sifted that there are “one or two” more European AI deals currently in the SoftBank pipeline.
Strategic investments
For more experienced European AI startups, SoftBank’s pockets have been very deep in recent times. It has been anything but frugal on what it sees as “strategic” bets — investments in companies developing tech that it sees potential for use across its portfolio, as opposed to having an exit timeline attached to it.
Wayve was one of those, with a SoftBank spokesperson saying it invested a “substantial majority” of the $1bn round.
“Access to the underlying operating technology is a key part of the [Wayve] investment, and the ability for that technology to be brought to other parts of the SoftBank ecosystem,” the spokesperson says, pointing to the potential for the startup’s AI tech to be used in other companies SoftBank has backed.
The investor‘s portfolio also includes unicorn mobility startups like Brazilian delivery company Loggi, Indian ride-hailing and delivery app Ola and US-based autonomous driving tech designer May Mobility.
Juneja says that the huge opportunity in autonomous driving is a “core belief” for SoftBank — but adds that Wayve’s tech also has potential to be used in robotics and warehouse automation.
Graphcore is another strategic bet. Prior to the Bristol-based chip designer announcing its acquisition by SoftBank, it had been reported that SoftBank was on the hunt for deals that could benefit portfolio chip designer Arm.
When asked whether Graphcore would be working on projects with Arm going forward in July, founder and CEO Toon said that the company would be “cooperating across the SoftBank family”.
Alongside Wayve and Graphcore, SoftBank’s only other European deal in 2024 was for Spanish travel agency TravelPerk, which raised a $104m to integrate AI into its platform in January — and falls into the “financial” category of bets, which do have exit timelines.
Looking for exits
Those timelines are reaching their end for companies SoftBank backed between 2019 and 2021, Juneja says.
“Our job is to invest and exit. The vintage of 2019, 2020 and 2021 — we would love to start getting exits with them going public,” he tells Sifted. “That’s not a SoftBank problem — all of us [late-stage investors] are waiting.”
Startups SoftBank backed during that period include fantasy football game Sorare, surgical robotics company CMR Surgical and talent platform Job&talent.
For the past two years, the public markets have remained pretty much closed to tech companies. Expectations around revenue have also shifted, says Juneja.
“If you spoke to bankers in 2021 and you were a $100m annual recurring revenue (ARR) SaaS company, you could go public. Today if you speak to a banker [they’ll say] ‘if you’re anywhere below $400m ARR, don’t bother’.”
With that exit route remaining rocky, a lot of companies will have to look to M&A instead, he adds.
Some of SoftBank’s European portfolio are reportedly mulling listings, though. Klarna is said to be lining up banks for an IPO in the US and Revolut — which was recently granted a UK banking licence and saw its valuation shoot up to $45bn — has also said it could look to list in the coming years.
The neobank told the FT in July that the company would “keep an open mind” on the venue of a potential public offering, but Janeja tells Sifted IPO’ing in Europe would be “tough” because of the depth of liquidity markets in the region. The value of shares of companies on the London Stock Exchange is £3.5tn, compared to $28tn on the New York Stock Exchange, according to Statista.
But, with interest rates falling, public markets are opening up again for high quality companies, says Juneja, and they could see some high-profile tech activity in the next 12 months.
Correction 10/9/2024: An earlier version of this article stated that Wayve's $1bn raise would be paid in revenue-based tranches. This was incorrect — Wayve has been paid in full.
