SoftBank Ratchets Up D.C. Lobbying to Boost Its Startups

(Bloomberg) -- Masayoshi Son’s Midas touch has been wearing off lately. The SoftBank Group Corp. chief executive officer is seeing some of the company's largest investments crumble while struggling to raise a new technology fund and keep an activist investor at bay. On Wednesday, he made a rare appearance on Twitter to propose a solution to the shortage of coronavirus tests. The plan was immediately panned, and Son quickly walked it back.

However, there’s one part of Son’s team where the charm offensive looks like it’s working: SoftBank’s Washington lobbying operation.

The Japanese conglomerate known for flooding the world of technology startups with cash—sometimes billions of dollars in a single funding round—is now wielding its wallet in D.C. The company’s lobbying bill climbed to $1.94 million in 2019, a step up from $225,000 in 2018, according to filings with Congress. That spending, which doesn’t include lobbying by its subsidiaries, is far lower than that of American tech giants like Amazon.com Inc. or Facebook Inc., but is more than double the amounts for Netflix Inc. or PayPal Holdings Inc. Of the 10,000 or so organizations that report lobbying every year, the Center for Responsive Politics says, SoftBank ranks among the top 4% of spenders.

“Two million is a lot in Washington,” said Dan Auble, a senior researcher at the Center for Responsive Politics, even though that can look like a small sum for the tech industry. In D.C., he said, "a relatively modest expenditure can have a big return."

SoftBank’s Washington push represents a new interest in politics for the company. For the three years prior to 2018, it had virtually zero U.S. lobbying expenditure. Now, as the company grapples on other fronts with activist investor Elliott Management and under-performing investments in companies like Uber Technologies Inc. and WeWork, it also has plenty of reasons to be in D.C. SoftBank’s recently assembled team of seasoned lobbyists is advocating for both the parent company, as well as the dozens of startups that it's invested in, a roster whose policy wish lists encompass topics ranging from self-driving cars to commercial spacecraft.

SoftBank started staffing up in D.C. two years ago when it hired Ziad Ojakli away from his post as the chief lobbyist at Ford Motor Co., and began contracting with lobbying firm Carmen Group. Last year, SoftBank registered four in-house staffers as lobbyists, and added two respected shops, Fierce Government Relations and Subject Matter, to its roster of outside firms.

Today, SoftBank is on the cusp of a major victory. The hotly contested $26 billion sale of SoftBank-owned Sprint Corp. to T-Mobile US Inc. had been mired in regulatory and legal challenges. Now, after approval last year by the Federal Communications Commission and the Justice Department, along with defeating a lawsuit brought by more than a dozen states, the deal is set to close. The clearance required substantial legal resources, separate from lobbying, devoted to the lawsuit. Ojakli, SoftBank’s global government affairs officer, said his staff had advocated for the merger over the course of months of conversations with members of Congress, FCC officials and representatives for the Justice Department.

“We helped make the case to the government that it was going to be incredible for the U.S. in terms of 5G,” Ojakli said, referring to the next generation of mobile broadband. “The spadework was what allowed us to succeed ultimately in court.”

SoftBank’s efforts helped along those of T-Mobile, which spent an additional $8.92 million on lobbying last year, according to filings, and Sprint itself, which spent $3.49 million. And as with all lobbying spending disclosures, the official figures rarely encompass all of a company’s expenditures in Washington, including legal fees, advertising and other forms of soft influence.

Beyond megamergers, Ojakli said the bulk of SoftBank’s lobbying is spent advocating for its portfolio of startup investments. “Really, most of the time in our lobbying work, we have to deal with the smaller ones,” he said. Typically, younger companies have neither the connections nor resources to argue their interests in Washington. Startup executives are often “triple-hatting” in different jobs, Ojakli noted, leaving them little time to ponder how to navigate D.C.

Starting last year, SoftBank’s disclosure filings showed lobbying activity around autonomous vehicles, where the company has made several investments via its $100 billion Vision Fund. Those investments include Uber and General Motors’ Cruise LLC. But one of the smaller companies it has backed, Nuro Inc., recently won a significant regulatory greenlight. The National Highway Traffic Safety Administration granted Nuro an exemption from a rule requiring features such as windshields for a new fleet of low-speed delivery vehicles that Nuro calls R2s. Now, Nuro is rolling out R2 testing in Houston that will soon include Domino's pizza deliveries.

The victory stemmed not so much from traditional lobbying as from a "technocratic process," said Matthew Lipka, Nuro's Washington-based head of autonomous vehicle policy. Ojakli celebrated the victory, calling the exemption a "terrific, terrific outcome." Nuro and SoftBank staff are focused on updating autonomous-vehicle rule-making overall at the federal level, Lipka said, a process that can take eight to 10 years per rule, and which involves members of Congress as well as Transportation Department officials.

A spokesman for the NHTSA said the agency’s decision-making hinges on a “safety equivalence evaluation, performed by safety engineers and attorneys,” and “is based on objective standards and legal requirements.” The process ignores "non-relevant factors," he added.

It’s been helpful for Nuro to work with SoftBank in Washington, Lipka said. “SoftBank is a partner with us,” he said. “They have a lot of expertise.” The company’s Washington team can augment Nuro’s strategy, for example by tapping existing relationships with different members of Congress, Lipka added, “It’s helpful to have another voice.” Nuro spent $120,000 on lobbying last year, via outside firm Mehlman Castagnetti Rosen & Thomas Inc.

Another beneficiary of SoftBank’s work in Washington: Plenty Unlimited Inc., an indoor farming company that raised its profile considerably in 2017 when the Vision Fund led its $200 million funding round. At the time, it was an extraordinarily large investment for an agricultural technology startup, but a relatively modest sum for the fund.

Last year, “we arranged for Sonny Perdue to come out and see Plenty first-hand,” Ojakli said about the secretary of agriculture. SoftBank lists the Agriculture Department as a target agency on its lobbying disclosure forms, and Ojakli said he was pleased when in January this year, after intense efforts by industry groups, the department won $5 million in congressional funding to set up a new office for Urban Agriculture and Innovative Production. The office’s mission includes promoting urban and indoor agriculture, which could help Plenty. Plenty declined to comment.

SoftBank is also hoping for wins in a few other areas. Like space, for example. SoftBank put in the lion’s share of the $3.4 billion raised by OneWeb, a British satellite maker, and has listed “commercial space issues” as a topic of interest on each of its three lobbying disclosure forms for last year.

OneWeb could benefit if the FCC signs off on a plan to allow it to provide U.S. internet access from more satellites. However, Ojakli said his team has advised OneWeb from a broad strategic perspective rather than work on any single issue. “We are grateful to SoftBank for providing guidance and support as we look to share the OneWeb story across the government,” said a spokeswoman for the startup.

SoftBank also lobbied last year on financial technology, an area where it holds investments including Lemonade and Kabbage; life sciences, where its bets include Zymergen Inc.; workplace technology, where it has backed Automation Anywhere Inc.; and artificial intelligence, an industry that undergirds Son’s investing thesis, and where it has funded companies including Mapbox Inc. and SoftBank Robotics Group.

Not all of SoftBank’s efforts go the way it hoped. Take its work on renewable-energy tax credits, which it says would benefit portfolio company View Inc., in which the Vision Fund has invested $1.1 billion. The startup makes glass walls that automatically darken and lighten to keep sunlight in or out as required, saving on heating and cooling bills. Congress didn't include tax credits for dynamic glass in its December spending legislation.

“It was a bummer we didn’t get it across the finish line,” said Ojakli. “We ran out of time more than anything.” View has also worked with Washington lobbyist Cassidy & Associates over the last five years. View declined to comment.

Besides its varied startup investments, Ojakli and his team also advocate on behalf of SoftBank itself, which as a Japanese company is subject to additional rules and restrictions on its U.S. activities. Ojakli’s staff must contend with the Committee on Foreign Investment in the U.S., an interagency body with authority to review foreign investments in American companies. CFIUS isn’t listed on official forms as an agency that lobbyists can try to influence, unlike its component agencies such as the Treasury Department. The group is tasked with making sure foreign acquisitions of American businesses don’t hurt national security, and has final say over many SoftBank deals, including its bailout package of WeWork parent We Co. last year.

“We’re the most frequent customer of CFIUS by far,” quips Ojakli, whose team works alongside SoftBank’s legal team on fielding CFIUS inquiries and meeting with its staff. “We’re coming at it from the perspective of being a U.S. ally that wants to invest in some of the most innovative companies in the U.S.”

CFIUS has become more powerful since Donald Trump was elected president in 2016, but that’s a person Son has done a little lobbying with on his own. A month before Trump’s inauguration, Son met with him at Trump Tower in New York, and announced SoftBank would invest $50 billion in U.S. businesses over an undisclosed time frame. “We’re well on our way to meeting that commitment,” Ojakli said.

To contact the authors of this story: Sarah McBride in San Francisco at smcbride24@bloomberg.netBen Brody in Washington at btenerellabr@bloomberg.net

To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net, Andrew PollackMark Milian

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