On the Japanese Approach to Investment
Japan is a country known for its discipline and it is a definitive feature of the individuals and corporations that have come from it. JAFCO ventures, is Japan's largest private equity firm, and its subsidiary JAFCO Asia is has been investing in South Asia since the year 2000 with a focus on companies looking for series A investments.
Demonstrating the diligence and discipline that is famously associated with the Japanese, JAFCO ASIA has close to 50 success stories over its 11 year old investing tenure in South Asia. YourStory.in caught up with Murli Ravi, investment head for South Asia, JAFCO Asia and we were treated to the Japanese perspective on investing.
JAFCO Asia – Numbers So Far
Prior to the year 2000, investments in South Asia were done under the joint venture of Namura-JAFCO. “Towards the end of the alliance, Namura wanted to concentrate on investment on bigger players while JAFCO wanted to be a part of early stage companies. JAFCO Asia, since its advent, has managed over 800 million dollars in funds and has made over 190 investments.”
“While the sizes of individual investments have differed due to various reasons, the average ticket price has been between 2 – 4 million dollars. Our tech fund series has been a great success and the investments made for this fund have been returned to the shareholders” says Murli, on JAFCO’s investments so far in South Asia.
A Preference for Technology
JAFCO Asia’s funds so far have been predominantly technology ventures. However, Murli has a broad definition for technology. “For me technology is anything with intellectual property. Any tech venture should have a fair degree of magic associated with it. With that being said, our investments in technology companies in India include areas in education, semi-conductor, telecommunication and
“I personally prefer investing in Tech Companies because scaling it is not as capital-intensive as some of the other industries” says Murli. “Furthermore, most of our LP’s are not only financial bodies. Some of our LP’s are corporations and we have a business development team that helps our portfolio companies to engage with some large corporations who are also our LPs.”
So far, JAFCO Asia has invested in 9 companies in India and 3 companies from Singapore.
India Specific Challenges
When asked about the challenges that companies face, Murli’s experience resonates with many others in the startup arena. “Getting the right kind of people to work with you is most difficult and especially senior level resources. There are many challenges such as salary and getting senior people to understand the advantages of ESOPs is difficult.”
“Also, industries fall in and out of favor very easily and only the more mature ones understand that. The less mature entrepreneurs become over cautious with their decision making and lose out on many business opportunities,” shares Murli, through his experience of working with various companies.
“I also find this concept of Jugaad or to make do with undesirable. Jugaad may be good, but it’s not great and good is the enemy of great. You just can’t make do with certain things and Indian entrepreneurs are notorious for overly improvising. Its good in some places but our guys take it way too far! “
Advice for Indian Companies
On a sign off note, Murli left us with 3 crucial pieces of advice for entrepreneurs looking to build a global business. “It is crucial to have worked at a startup environment before taking the entrepreneurial plunge yourself. It provides you with a great value add and I think it is essential for most people.”
“Second is to be aware of the nature of the market. I think every entrepreneur should have a vision of the current goals and targets while having a vision for the future at the same time. This might mean that the past of the company may not be relevant for its future and entrepreneurs should be mature enough to understand that. The founder shouldn’t hesitate to step down from leading the company if the situation demands it and many great companies have done it in the past.
“And finally, always look to hire the best people and work in house. Outsourcing all the operations of a company is like running a recruitment company. There is no business after that.”
JAFCO’s investment philosophy reflects great effectiveness which one would associate with the Japanese, and such mentorship will be priceless for the Indian Startup Ecosystem. We thank Murli Ravi and JAFCO Asia for the insights he provided and wish them all the best with their future investments.