It is now becoming clear that bankers with certain skills – such as complex structuring and deal-making as a blood sport – will have an increasingly important role in the development of the technology industry.
The recent battle for influence over Uber highlights how bankers with a capacity for personal reinvention are finding a niche in the evolution of technology.
Travis Kalanick, the co-founder and former chief executive of Uber who lost control of the firm after a series of governance scandals, spent much of the summer manoeuvring for position against the board members who ousted him.
Kalanick surprised his rivals in late September with a move to add two new board members at Uber to increase his leverage in negotiations. One of his nominees was Ursula Burns, a former CEO of Xerox with degrees in mechanical engineering and a high profile as a leader in science and technology initiatives in the US.
The other nominee was John Thain, former CEO of Merrill Lynch, who is best known for spending $1.2 million to redecorate his office just before Merrill Lynch headed into financial disaster and a forced sale to Bank of America.
To be fair to Thain, he too has an engineering degree, but it is probably safe to assume that Kalanick picked him as a nominee so he would have someone with experience of corporate infighting and financial structuring at his side, rather than to get another view on the future of the driverless car.
Kalanick’s enemies appeared to gain the upper hand in a deal agreed at the beginning of October that paves the way for an investment in Uber of as much as $10 billion by SoftBank, as a prelude to a planned IPO by 2019.
Despite its name, SoftBank is a Japanese owned technology conglomerate, not a bank. But some former bankers play key roles in the SoftBank Vision Fund that is the single biggest technology investor in the world at the moment with its $100 billion target size.
The fund is run by Rajeev Misra, former head of credit at Deutsche Bank, and it recently hired Colin Fan, who was once one of Misra’s deputies and later became co-head of all corporate banking and securities at Deutsche Bank.
Technology may transform finance, but it seems the technology industry itself can expect mutation at the hands of a select few financiers
Misra and Fan can charitably be described as wily operators, though some of their former rivals and deal counterparts use different phrases. They are both experts in highly complex credit structuring, not technology investment.
After SoftBank’s founder and CEO Masayoshi Son unveiled the SoftBank Vision Fund with its eye-catching $100 billion size, many observers wondered why he was entrusting it to former bankers with no decent technology experience.
It is becoming apparent that the deal structuring behind the fund’s investments may be as important to its success as the choice of technology targets.
The way the fund itself has been set up is both complex and closer in form to a structured credit investment than a traditional private equity or technology investment vehicle.
Outside investors will buy debt in the form of preferred units as well as equity, which will provide them with some downside protection and a coupon, but leaves SoftBank itself with more upside exposure to the performance of its investments – and the effective ability to deploy leverage.
SoftBank’s investment in Uber will come via the Vision Fund, and appears likely to have structuring quirks designed to get the biggest bang for Masayoshi Son’s buck.
As he tries to gauge the motivation of both SoftBank and his existing frenemies on the Uber board, Kalanick may wish to consult Merrill and Goldman veteran Thain for an angle on why any given structure is being proposed.