Behind SoftBank’s investing cleanup, a US dealmaker who survived the turmoil

[January 11, 2024]  By Krystal Hu

(Reuters) - When he left Morgan Stanley to join SoftBank Group in Tokyo in 2015, Alex Clavel had little in common with the swashbuckling dealmakers who surrounded CEO Masayoshi Son.

After years of executive departures and soured bets, including a $16 billion investment in co-working space firm WeWork, the 49-year-old former tech investment banker is Son's top lieutenant leading SoftBank's attempt at a turnaround.

As the Co-CEO of SoftBank Investment Advisers, Clavel is responsible for managing investments for the firm's $160 billion Vision Funds and another $35 billion on the group's balance sheet.

Where and how SoftBank deploys its billions will shape the future of many technology startups as well as the fortunes of its shareholders, who have suffered four consecutive quarters of losses.

It will also determine whether the Japanese conglomerate will again manage outside money, after disappointment with its first Vision Fund forced SoftBank to fund its second $60 billion fund exclusively with its own capital.

Interviews with Clavel and 12 current and former colleagues shed light on how he rose through the ranks as an unassuming problem solver. Rather than bringing in mega deals or raising funds from investors as his predecessors did, Clavel won Son's trust as a steady hand managing and fixing SoftBank's complex or troubled transactions.

SoftBank needs such skills as it faces a cooling in global tech investment amid higher interest rates. After slowing its investment pace to regroup, the firm said it went on the offensive again in the middle of 2023, focusing on artificial intelligence and robotics. It has pivoted from making huge, concentrated tech bets to those that are smaller and more spread-out.

Rajeev Misra, the other co-chief executive of the Vision Funds business, said in an interview that Son decided last July to streamline decision making by elevating Clavel above an executive committee he had created to deliberate on new investments.

Misra, a top SoftBank executive since 2014, launched his own investment firm last year but remains at SoftBank. Misra said he groomed Clavel as his successor and recommended him to Son.

Clavel has worked on the turnaround of some SoftBank's investments, including bankrupt WeWork and OneWeb, a satellite company that emerged from bankruptcy after SoftBank doubled down on its bet and inked a deal to combine it with Eutelsat Communications.

With Clavel's help, SoftBank scored several wins in recent months, including the successful $4.87 billion initial public offering of its chip designer Arm Holdings. and a long-awaited $7.6 billion windfall from its stake in U.S. wireless maker T-Mobile.

WINNING OVER SOFTBANK

Trained as a Morgan Stanley technology, media and telecommunications banker in the 1990s, Clavel first established ties with Asian investors in Hong Kong in 1996. A Mandarin speaker, he won Chinese clients and later was sent to Tokyo to lead a similar expansion. There, he helped lure SoftBank as a client.

One of Clavel's managers at Morgan Stanley was Paul Taubman, who now runs his own investment bank, PJT Partners.

"He's always asking questions, and he's direct in this unfailingly polite, gentle manner. He's loyal and trustworthy, which makes you feel he's never trying to take your job--he's just trying to do his," Taubman said.

Clavel, who took morning lessons in the office to learn Japanese, made the jump from Morgan Stanley to SoftBank in 2015 after impressing SoftBank with the advisory work he did for them on telecommunications deals, including the firm's acquisition of U.S. wireless carrier Sprint.

Alex Clavel, co-CEO at SoftBank Investment Advisor, is photographed in the firm's Silicon Valley office in Silicon Valley, California, U.S., September 2023. Handout via REUTERS

By keeping his head down and his career ambitions to himself, he stayed clear of the internal infighting and jostling for Son's job that resulted in his predecessors exiting.

Misra, who spearheaded Vision Fund's investments, relied on Clavel to run numbers and manage teams. Even though he was not sourcing deals, Clavel became a valuable resource for other SoftBank partners needing advice.

When SoftBank chief operating officer Marcelo Claure exited in 2022 over a pay dispute, Clavel took over much of his portfolio, although he would still stick with managing investments rather than making new ones.

"He gets along with people and gets in the nitty-gritty of the details of the organization," Misra said of Clavel.

CONSERVATIVE APPROACH

Clavel spent his first months in his new role flying around the world to visit Vision Fund staff and help execute deals orchestrated by the group.

Technology executives and some of his colleagues at SoftBank say he still faces a long road to establishing himself as a major investor in the tech community, given his background as an investment banker.

Under Clavel, SoftBank's second Vision Fund, which has about $9 billion left to spend, has so far taken a conservative approach. It has written relatively small checks to startups such as Tractable and Cato Networks, while passing on high-profile AI investment opportunities, such as OpenAI and Anthropic, due to concerns over frothy valuations in the sector.

Paul Golding, analyst at Macquarie, said SoftBank was being selective as it rehabilitates itself as a cautious dealmaker.

"The investment amounts have not been substantial in recent quarters relative to the liquidity available to them," he said. "A major challenge is finding supply of high quality potential investment targets that meet the criteria."

The Group side, which handles SoftBank's balance sheet investments, has made more bold bets on robotics companies, including on Symbotic, Berkshire Grey and Stack AV.

In an interview in his office – a modest meeting room in a WeWork space on Manhattan's Park Avenue – Clavel said SoftBank has enough firepower to back ambitious founders in artificial intelligence, a top investment priority.

If SoftBank doesn't find enough opportunities to spend its dry powder, then the firm will seed its own, as it did with trucking venture Stack AV, which it created as a SoftBank subsidiary by partnering with autonomous driving entrepreneur Bryan Salesky, Clavel said.

SoftBank has also been eying other ways of deploying capital, such as forming joint ventures with companies or lending to them.

"When there's a market for deals getting churned out, then we look at those companies. When there isn't a market, then we create our own magic," Clavel said.

(Reporting by Krystal Hu in New York; Editing by Greg Roumeliotis and Anna Driver)

[© 2023 Thomson Reuters. All rights reserved.]
This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.