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Reuters/Yuya Shino
They are now backing Snapdeal and Ola.
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Japan’s richest man just became a major player in India’s internet economy

Founded in September 1981 as a distributor of packaged software, Japan’s Softbank has a singular aim: It wants to become Asia’s number one internet company.

For India, that intent could translate into $10 billion worth of investments in the next few years. The first tranche of its ambitions in India has just been announced. The recipients of the big bets by billionaire Masayoshi Son, Japan’s richest man, are Snapdeal, an Alibaba-like marketplace, and Ola, which is an Uber-like taxi aggregator with more than 33,000 cabs in their network.

SoftBank Internet and Media Inc. (SIMI) is investing $627 million in New Delhi-based Snapdeal and leading a $210 million investment round in Bangalore-headquartered Ola, the companies said today. They did not reveal the equity Softbank would receive in return.

In July, Snapdeal’s rival Flipkart received $1 billion in funding, which was immediately followed by Amazon’s announcement to invest $2 billion in its Indian operations.

For SoftBank, making big bets in e-commerce is not new. Fourteen years ago, it invested $20 million into a fledgling online venture in China, only to grow it to some $50 billion as the company, Alibaba, went to the market last month. Softbank owns about 34% of Alibaba.

With this, Snapdeal has secured close to $1 billion in funding. In May this year, the company raised $100 million from Temasek, BlackRock and others. Earlier in February, Ebay along with Bessemer Venture Partners, Intel Capital and others had pumped $134 million into it. Other investors in Snapdeal include former Tata group chairman Ratan Tata and Wipro chairman Azim Premji.

Snapdeal was founded in 2010 as a deals website modelled along the lines of Groupon. The startup changed its business model eventually and now has over 50,000 merchants selling through the portal.

With over 25 million registered users, it has grown by 600% in the last year to become one of the biggest competitors to Flipkart and Amazon in the country. During its Diwali sale earlier this month, the startup registered a 100% growth in sales, selling 10 products a second. The company expects $1 billion in revenues this year.

“India has the third-largest Internet user base in the world, but a relatively small online market currently. This situation means India has, with better, faster and cheaper Internet access, a big growth potential,” Nikesh Arora, vice chairman of SoftBank Corp and CEO of SIMI, said in a statement.

SoftBank also led a $210 million round of investment in Ola, the cabs aggregator founded by 29-year-old Bhavish Agarwal. Existing investors Tiger Global, Matrix Partners India and Steadview Capital also participated in this round.

“We believe India is at a turning point in its development and have confidence that India will grow strongly over the next decade. As part of this belief, we intend to deploy significant capital in India over the next few years to support development of the market,” Son said in a statement.

Arora, who joined Softbank in July after a decade at Google, where he was the chief business officer, will now get a seat on the boards of both SnapDeal and Ola.

“We will continue to build towards our vision of transportation as a seamless and ubiquitous service in every corner of the country and focus on the driver ecosystem to enable micro entrepreneurship and skill development at scale,” Ola founder Agarwal said in a statement.

Media reports have said that Softbank is also reportedly looking to invest $300 million in Paytm, a mobile commerce company.

SoftBank also has a joint venture with Bharti Enterprises, a conglomerate that owns Airtel, India’s largest telecom operator. The JV—Bharti SoftBank—has invested more than $21 million in Hike Messenger, a mobile messaging application founded by Kavin Bharti Mittal, son of Bharti Enterprises chairman Sunil Bharti Mittal.

InMobi, a fast-growing Bangalore-based mobile ad network, has also received $200 million in investments from SoftBank. The secretive New York firm Tiger Global is the other foreign investor with a wide exposure to India’s internet businesses.

Son met Prime Minister Narendra Modi on Monday.