Will the Improbable deal be a winner for Japan?

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Why has the Japanese company Softbank invested a big sum of money in a British company which has not yet made a profit?

That’s the question raised by Softbank’s deal with a young tech firm which creates virtual worlds on computers. It is called Improbable and rather improbably for a firm with no disclosed income, it has announced a deal with Softbank worth around 500 million dollars.

Softbank, which is not a bank but a huge tech and telecoms conglomerate, will gain a stake in Improbable but not a controlling stake. Softbank’s Managing Director Deep Nishar is joining the Improbable board.

A person close to the deal told me that Softbank shares a vision with Improbable about how its technology can be shared globally. Softbank’s chief executive, Masayoshi Son, loves to invest in companies which share his exciting dreams for the future.

Softbank has been operating a $100bn Vision Fund out of London, backed with money from the Saudi government as well as Apple. The Improbable deal is not part of that fund, but could be offered to its investors.

Some commentators have complained that this sounds like another British company selling out to foreigners. The BBC’s Rory Cellan-Jones wrote: “Time and again, we hear the same lament: that Britain has great universities turning out lots of clever start-up technology firms, but we lack the ambition to stay the course.”

Nevertheless, Japanese investment in the UK is welcome during the Brexit negotiations. David Rowan, the editor of the tech magazine Wired told the Financial Times: “the influx of large-scale funding from respected out-of-Europe investors will be a huge boost to the tech sector’s confidence.”

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Last year Softbank bought the British chip designer Arm Holdings for 24 billion pounds. That deal came very soon after Britain’s vote to leave the European Union. Quietly, a few months later, Softbank sold 25 percent of its stake in Arm.

Another deal involving Softbank does not come as a huge surprise. Last week, I reported in my blog that a senior banker in the City of London told me that Japan’s companies have billions of dollars to spend and are “very much up for it” when it comes to buying foreign businesses.

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