Soft landing
By : Roseanne Gerin
Rumors of the Japanese tech giant Softbank entering the Polish market were finally laid to rest in April when the company opened an office in Warsaw for its venture capital subsidiary, Softbank Emerging Markets (SBEM) (http://www.softbank.com/scripts/main.asp). The project was its first and only office in "emerging" Europe and will serve as its regional hub for the region.
But can the company that is the largest shareholder of U.S. Internet companies Yahoo, E*Trade and CNET duplicate its investment strategy here and elsewhere? Softbank believes it has a good eye for investments in the Internet and IT sectors and wants to export its strategy to worldwide "emerging markets" in Central and Eastern Europe, South Africa, Latin America, the Middle East and Southeast Asia.
SBEM intends to disseminate the business knowledge it has accumulated from its investment portfolio of more than 600 companies to new-economy firms in countries like Poland.
"We can avoid many pitfalls and mistakes that other plans made in the process of investment because we know the space," said Richard Guziak, the 42-year-old managing director of SBEM Poland.
Yet, with operations in Poland and elsewhere getting started, SBEM seemed to have temporarily retreated from the headlines. But the firm has been quietly reviewing business plans before making its first investment in Poland by the end of the year, Guziak said. He also said the firm is reviewing investment opportunities in Hungary and the Czech Republic and will have a management team of fewer than 10 investment specialists in place this week.
Although Guziak was tight-lipped about the companies SBEM Poland is evaluating, he said they might come from the fund's four strategic investment areas: e-business, wireless technologies, Internet infrastructure and Web "enablers," or technologies for e-business applications.
"Everything in the scope of the new economy and Internet space will be covered by us," said Guziak, adding that of these categories Internet access investments would be the most beneficial for Poland, which has a slow and sagging Internet infrastructure.
Poland proved an attractive locale for SBEM to set up shop due to its rapid micro and macroeconomic growth in the past few years, the country's quick adoption of Internet and mobile technology, and its large population of almost 39 million, Guziak said.
Like its other global offices, SBEM Poland's strategy is to invest in short to medium-term business opportunities via direct investments. SBEM's shareholders, Softbank Corp. of Japan and the World Bank's International Finance Group (IFG), have together committed $200 million to the fund.
According to the parent company's Web site, SBEM typically invests $500,000-$1 million in private companies at an early stage of development and seeks to own at least a 20% stake of the firms after financing them. But Guziak insisted specific amounts were irrelevant since SBEM sets no investment quotas. Because business plans are evaluated on a case-by-case basis, he said he could not forecast how much money SBEM Poland intends to invest or hopes to reap as returns. He also declined to say how many business plans the Polish operations has reviewed so far, but that his firm would only provide funds to companies that promised great returns, or showed net income after about a year of operation.
Part of SBEM's strategy is to team up with other big corporations or VC funds as investment partners, Guziak said.
"If we find the areas where we can collaborate and exist together, we will do it straightaway because we are open to interesting ideas and creating value for any parties who work with us," he said. "We call ourselves simply a strategic investor."
One local venture capitalist agreed. "In this industry there is no competition," said Tomasz Czechowicz, the president of Polish venture capital firm MCI Management (http://www.mci.com.pl), which has held some preliminary talks with SBEM Poland about a possible alliance.
"You fight to grow the value of your investments, you don't fight over the investments," Czechowicz said. "If you have one project and it's good, instead of fighting it's better to co-invest because you decrease your risk and increase your chances for making a nice return on your investment."
Despite the current downswing in the Internet and IT sectors, SBEM sees potential in Poland. "The timing is completely detached from whatever happens in the technology, IT or business world at the moment," Guziak said. "This may be a coincidence, but it's the perfect time for us because it's a buyer's market. When you think about the inflated Internet bubble created two years ago being deflated just last year, for the same investment today you would have to pay three to four times as much. So with a lesser amount of money, we can still get the best business cases."
