A serial mega entrepreneur who overcame a tough start in life to become one of the world’s richest men bought a world leader in the highest of technology last week. You may have missed this story because it was painted in the red, white and blue of Brexit. Or cloaked in the fog and fudge of a nationalist industrial strategy.
Multi billion dollar deals for unique companies are like America’s Cup yachts. SoftBank's bid for ARM is a great example. It is a one off. A product of its time and circumstances for sure. But at the cutting edge. An example to learn from and a template for the future. Not a symbol of the present.
The mindset of a startup not a global corporation
Masayoshi Son is a second generation Korean immigrant to Japan. He grew up dirt poor in the distant South West of Japan. A background that is the definition of social and economic exclusion. And the antithesis of the conservative, corporate Samurai we typically associate with Japanese business. He built Softbank through his own entrepreneurial talent. If Son San was American or Chinese he would be one of the heroes of the startup world.
He has made his name and his fortune through a series of high profile investments in the internet and mobile sectors. His hallmark is a combination of Warren Buffet long termism, Steve Jobs vision and venture capital willingness to make big bets for great returns. SoftBank is an investment vehicle not a trading multi-national. The loose technology theme links together holdings in Sprint and Alibaba with Yahoo and Vodafone in Japan.
How does ARM enrich and invigorate this empire?
ARM is the leading designer and developer of microchips for smartphones and mobile devices. This is huge global business. The Cambridge group’s leads in both intellectual property and market position. These advantages will ensure strong revenues for many years. Attractive for sure. But the era of explosive growth in mobile device markets is over. Is the annuity enough to satisfy a risk taker and 30 year thinker like Mr Son?
This deal only adds up if we think about the future. IOT, virtual and augmented reality and artificial intelligence will all drive demand for microprocessors and storage chips. Buying ARM is a bet that the company can be a leader in these new markets.
Entrepreneurial logic not industrial strategy
And that means a wager on brain power. ARM does not make semiconductors. All its past, present and future value is wrapped up in research and development talent. Like any creative or service based firm, ARM’s assets walk out of the door at the end of every working day.
Seen in this light, SoftBank’s strategy to double the number of UK jobs becomes clearer. ARM can only maintain its lead by continuing investment in the best people carrying out the best research. Smart people are sensitive to the culture and support environment in which they operate. So doubling down on Cambridge as a science base makes complete sense.
This is my kind of protectionism. An overseas investor with a compelling strategic motive. Committed to keeping the UK at the bleeding edge of a vital technology. If you want to reference a recent deal, the Tata acquisition of Jaguar Land Rover is much more relevant than HP’s ill fated purchase of Autonomy. With the bonus that the ARM deal also gives a bunch of investment funds a big exit. And the opportunity to recycle some of that cash into exciting future opportunities.
An example for startups and entrepreneurs
That money will make no difference to the UK economy or the global technology industry. Unless the recipients raise their game in response to the ARM acquisition. One final unusual aspect of this transaction. Both parties offer inspirational lessons for entrepreneurs.
Rather than striving to fit the deal to today’s agenda, learn from these examples to build a better business for the future.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.