Betting on

Softbank Corp, with ownership positions in over 300 Internet companies that
Yahoo! (YHOO)
E*Trade (EGRP),
is a name that both private and public market investors monitor
closely. The firm is best known for its global Internet infrastructure
and platform. As growth drivers in the U.S. continue to weaken, such as
percentage growth of new users online, Softbank is playing an
increasingly important role. Essentially, Softbank has become the
gateway for leading U.S. Internet companies to enter the Asian,
European, Australian and other foreign markets. The firm acts as an
operational and holding company with several subsidiary groups.

Softbank Capital Partners (SBCP), led by partners, Masayoshi Son,
Ronald Fisher, Charles Lax, and Bill Burnham, is one of the groups
acting as the firm’s late stage pre-IPO and post IPO investment arm.
Portfolio investments of SBCP include Webvan (WBVN), (BUYX),
PeoplePC, and

We had the opportunity to sit down for an exclusive interview with Bill
Burnham, a true pioneer and success story in the Internet space.
Burnham was the first analyst on Wall Street to have “electronic
commerce analyst” on his business card–a lot of people doubted then that
there would be enough companies brought public to support his niche.
While at Credit Suisse First Boston, he was the lead analyst for the Commerce One (CMRC)
IPO and he is still regarded as the authority on the online financial
services sector. In August of 1999, Burnham left Wall Street to join
Softbank Capital Partners.

[email protected]: What kind of value is Softbank providing its
partner companies that is attracting the best entrepreneurs and models
to the Softbank brand and team?

Burnham: Softbank sees its value added in three primary areas.
First, we have a huge portfolio of partner companies. So we work
diligently to make sure that lines of communication are maintained
between the portfolio companies. We want the companies to have access
to each other and to strike partnerships when it makes sense. Second,
we’re really the only global venture capital fund at this point.
Softbank has venture capital and other operations in the U.S., Japan,
China, South East Asia, India, Europe, Latin America, and an investment
partnership with the World Bank. We pretty much have an investment
presence now in every country of the world if you count the relationship
with the World Bank. As a result, we are able to take companies
global. We are helping a lot of U.S. companies go global as fast as
possible–a lot faster than they could do on their own. The third piece
is a whole group of value added services that help in every level from
an early stage company to a late stage company. We’ve created an
infrastructure of support. At the early stages we have incubators,
entrepreneurs in residence, and in-house recruiters. In the late stage
environment we have a business development team, an International
development team, a research analyst team and other services that help
companies develop and get big fast.

[email protected]: Softbank seems extremely excited about the
financial services sector…

Burnham: First and foremost, if you think about a sector which
has the potential to be completely moved to the Internet, it’s the
financial services sector. It’s all about moving digiti

around. We believe in the long-term potential. It’s a lot easier to
sell financial services over the Internet than it is some kind of
extraordinarily bulky, touchy consumer good.

[email protected]: You’re on the board of directors at partner
company What is the opportunity for Softbank here?

Burnham: is the dominant legal portal in the
business-to-business (B2B) space. They offer everything a lawyer could
need in terms of information, services, and resources. So there isn’t
only content in the form of news and analysis, but also e-commerce with
legal texts, books, an online legal career center, and education
offerings. We invested because 1) law is a huge and growing industry
and 2) this is one of the few B2B exchanges I’ve seen that did real
revenues last year and the revenues were very diversified; spread across
advertising, sponsorship, e-commerce and transaction. We have the
potential not only to dominate the B2B side in the U.S., Europe, and
abroad, but also the potential to dominate the B2C side. It has a great
URL and credibility because this is where professionals are going to get
their legal needs met.

[email protected]: “B2B” is so broadly defined and applied these
days. How exactly can’s model fit under the B2B umbrella?

Burnham: Well, other lawyers and law professionals are selling to
other lawyers. It’s not an exchange model where they’re trading
plastics or something like that. It’s a number of folks (professionals)
selling legal products and services to the legal community. It can be
remote learning for lawyers online or a number of other offerings and

[email protected]: CMGI is backing FindLaw,’s only serious
competitor at this point.

Burnham: Yeah, It’s still unclear though whether they’re going to
focus on the B2B or B2C market. Frankly, from a revenue perspective, no
one is even close to us. FindLaw can’t even hold a candle to where is at today.

[email protected]: One of your public partner investments,,
has come under a lot of pressure from investors and skeptics of the

Burnham: I really think that is misunderstood by a lot of
people. has almost zero capital employed. There is very little
overhead at Not only can they offer really low prices and
still make money, but it also means that they’re not going to hemorrhage
cash from an operating perspective like some of these other B2C
companies are. could be profitable tomorrow by raising their
prices by only a couple of percentage points. It’s not about selling
below cost, as a lot of investors believe does. It’s about
selling at a very low gross margin but if you’re selling billions of
dollars worth of goods, with no real overhead, you can make very good
money doing that. will be profitable before a lot of the other
B2C companies. There are only 250 people that work at and it
did about $600 million in sales last year. Analysts are predicting
close to $1 billion in sales this year.

[email protected]: Lets talk about this “invisible” infrastructure.

Burnham: Yeah. partners with very large distributors.
Those distributors actually hold the entire inventory and manage all of
the warehouses and people associated with the operation. When you buy a
computer at, it’s actually shipped to you from Ingram Micro,
which is the world’s largest computer distributor and does about $21
billion in sales each year. is one of their best customers and
gets their best rates. So is able to benefit from the
purchasing power of a $21 billion company without any of the overhead,
inventory risks, and people associated with that.

[email protected]: What is’s response to’s model?


TheAmazon response is “you can do that but you can’t
provide the type of customer service we can because we control
everything.” I would say that in the short-term, Amazon could provide
some elements of better customer service. For instance, if I order a
book and a CD, Amazon can pack it all up in one box from a single
warehouse. However, over the long-term will be able to offer
equal service to Amazon and the other B2C players that own their
distribution infrastructure. The difference in service will soon be
minimal and customers will focus on who is providing the best selection
at the best prices. I don’t think that’s success has to come at
the expense of Amazon. Both companies are more than likely to feed off
the vertical retailers. Vertical retailers are quickly realizing that
if you just sell one item, you still have to pay just as much as Amazon
or to acquire a customer. So a company might only be able to
sell me software, but and Amazon can sell me everything under
the sun. Customers are worth a lot more to Amazon and

[email protected]: Are there any recent Softbank investments that
private and public market investors should be excited about?

Burnham: One company in our early stage portfolio is smoking hot,
a company called TeraBeam Networks. They’re marrying wireless
technology with the hottest laser technology to deliver massive amounts
of information over a “fiberless” infrastructure. It’s one of the
coolest things I’ve seen in a long time. That’s one of those companies
you look at and you say, holy shit, that’s big!

[email protected]: Is there one example you can give our audience of
Softbank’s dominance and expertise in scaling successful U.S. Internet
ventures abroad?

Burnham: I think the best one would be Yahoo! Yahoo Japan was
set up by Softbank in three months, was profitable from its first day of
operation, and now accounts for $25 billion in market value.

[email protected]: Thanks Bill.

Burnham: Thank you.

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