US fund 500 Startups joins race to finance Japanese ventures
SACHIKO DESHIMARU, Nikkei staff writer
500 Startups founder Dave McClure discusses the firm's new fund for Japanese venture investment at the Tech in Asia conference.
TOKYO -- American venture capital firm 500 Startups will step up its Japanese involvement with a new fund, joining the rush of companies moving into the largely untapped startup market here in light of the weak yen.
500 Startups will invest in ventures in robotics, health care and other fields with global applicability through a new Japan fund announced Tuesday. The fund will have $30 million in assets, founding partner Dave McClure revealed at the Tech in Asia conference. The firm will establish a Tokyo office as it seeks a larger presence in the country.
500 Startups provides a relatively small amount of funding -- as low as several million yen -- to a large number of emerging companies. The California-based company has funded around 1,200 ventures since its 2010 inception. It has some previous experience in Japan, backing electric-wheelchair developer Whill and others. But all investments came through 500 Startups' U.S. fund.
The new Japanese fund will expand 500 Startups' Asian operations, which include funds in South Korea and Vietnam. The project will back Japanese startups in fields that call for a high degree of expertise. Robotics will be one focus, following Google's acquisition of a humanoid-robot venture born at the University of Tokyo. Health care, including cutting-edge Japanese developments in regenerative medicine, is another top interest.
Rising tide
500 Startups is not the only American player looking to compete in the Japanese game. California-based Fenox Venture Capital unveiled in July plans to put some 20 billion yen ($166 million) into startups here over the next three years, compared with just 400 million yen last year.
"The Japanese venture world is a mountain of undiscovered possibility," CEO Anis Uzzaman said. "I wouldn't be surprised if we found the next Mark Zuckerberg here."
Uzzaman has deep ties to the Japanese startup world, having studied at the Tokyo Institute of Technology. Fenox has previously backed Tokyo-based electric-motorbike developer Terra Motors and others.
The softening yen is largely responsible for overseas investors' renewed interest in promising Japanese tech startups. Funding from abroad to ventures here has jumped dramatically this year, with each dollar of support packing a heftier punch.
A world of possibility
Foreign venture capitalists are also looking to buy up promising Japanese businesses. U.S. education company EnglishCentral acquired earlier this month Langrich, a startup offering English lessons via video call. "We expect a synergistic boost to our performance as we expand internationally," said Masayasu Morita, CEO of Langrich parent Hitomedia.
Japanese ventures themselves are growing more amenable to funding from and acquisition by companies abroad. Many founders previously emphasized developing their companies in the home market before going global. But as increasing smartphone use and other developments have made national borders less significant to businesses, more startups have turned their eyes to the world stage from the outset.
The involvement of backers abroad is starting to speed the pace of business development in Japan. Joining forces with 500 Startups has proved useful in finding customers and business partners, given the firm's global network, said Matthew Romaine, CEO of translation service provider Gengo. The company was one of 500 Startups' first investments here.
Sources overseas provided in 2014 around 3% of the funding received by Japanese ventures 5 years old or younger, up from nearly zero in 2013, a survey by the Venture Enterprise Center found. Venture investment in Japan still lags behind that in China and Singapore, and amounts to just a fraction of the nearly $50 billion that U.S. startups receive. The market here is yet largely untapped and ready to grow.
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