Federal Government Must Watch Foreign Investment Carefully

Earlier this month, the federal government announced it had divided up any potential antitrust investigations into Facebook, Amazon, Google, and Apple. This gave the Justice Department jurisdiction over Google and Apple and the Federal Trade Commission jurisdiction over Facebook and Amazon. This latest move by the government to look into how best to monitor and regulate these large tech companies shows they are taking it seriously — finally. But can we all agree the government is late to the game on this?

It’s good the government is finally acknowledging its responsibility to monitor and regulate these companies. While Facebook and Google certainly draw the most headlines, they aren’t the only entities out there that pose a systemic risk. Take the SoftBank Vision Fund, for example. Softbank, a Japan-based multinational holding company, launched the Vision Fund in 2017 with the plan of investing $100 billion into tech startups. They have investors from around the world, but two of their larger and more well-known backers are the governments of Saudi Arabia and Qatar. In just two years since its inception, according to Business Insider, SoftBank’s Vision Fund has become the world’s largest tech investor, investing in companies whose names we all know like Uber, WeWork, and Slack.

But many of these companies aren’t profitable, even after years of operating. Take Compass for example. They are a real estate company that most people have probably not heard of but are a big recipient of Vision Fund money. The Vision Fund has invested more than $800 million into Compass, who has been using that money to quickly expand into top housing markets by offering large signing bonuses to lure top agents and buying up smaller brokerages.

But seven years since their founding, the company is still unable to turn a profit. And apparently, they have no plans to do so in the near future. According to their own chief operating officer, they have no strategy to actually turn a profit “because we haven’t really talked about it.” Instead, Compass is placing all its proverbial eggs in the IPO basket — just like their sister Vision Fund-backed company Uber.

And we all saw how well that went.

Outside investment by venture capitalists isn’t a new idea. But the idea that a very small number of individuals who work for a foreign venture capital fund that’s financed by foreign – and not always friendly – governments is a fairly new phenomenon. And it’s very troubling.

Earning a profit is the core of starting a business – just ask any small business owner. They expect to run in the red for a few years and plan accordingly with loans and other capital. But the fact that SoftBank Vision Fund recipients aren’t even talking about how to turn a profit – let alone determining when that might happen – is concerning because it threatens the livelihoods of these companies’ employees and can negatively impact all of the American consumers they service.

The results of these investments so far have been large, well-known companies that many Americans rely upon for employment and services that are currently unsustainable. What happens to Compass’ agents when the SoftBank investment money dries up and they have no plan to be profitable? Or what happens to the employees of all of the companies who utilize WeWork if they go belly-up once their Vision Fund money runs out?

The answer, of course, is that the American people and the American economy suffer.

Now, SoftBank Vision Fund is looking to raise an additional $100 billion for what they are calling Vision Fund II. This means we could continue to see SoftBank and it’s foreign government contributors – continuing to play a pivotal role in shaping American markets.

Thankfully it looks like regulators have learned their lesson and are already speaking with SoftBank. The government cannot afford to drop the ball again. We need more oversight of foreign venture capital firms – especially those like SoftBank that are primarily funded by foreign governments. And we need it now.

Octavio Cesar Martinez is an author and speaker. Formerly, he was a Chaplain and Pastor. His books include ‘Habits: Six Steps to the Art of Influence’ and ‘It Was A Beautiful Day When My Father Died’.