New Indo-Japan fund of funds set up for emerging technology startups
Japanese funds investing in Indian companies is not new. SoftBank is the biggest example with investment in companies like OYO Rooms and Flipkart. Other smaller funds such as the UTEC have invested in successful healthcare technology companies like Tricog and Bugworks Research. Now, with the support of TV Mohandas Pai, Chairman of Aarin Capital, a new Japanese fund is coming to Indian shores.
The Indo-Japan Emerging Technology and Innovation AIF is a fund of funds (FoF) with a unique proposition of investing and managing a portfolio of 15 to 25 India dedicated VC funds. It will undertake its first closure around the end of September this year.
Commenting on the same, Mohandas Pai said,
"Japan is a great partner to India with over $8 billion invested over the last few years. The FoF is a great example of how the two nations can collaborate. This is only a precursor of things to come as India's digital might from startups can work with the industrial might of Japan to help the two nations forge a deeper business partnership."
Reliance Nippon Life Asset Management Limited (RNAM), the Indian Asset Management Company of Nippon Life, will be managing the fund. The FoF will raise money from both Japanese and Indian investors. The strategic intent is to provide access to large investors to source ideation and technology from startups as well as to provide a platform for collaboration and strategic investments.
The fund has created great interest among investors and will sign letters of intent (LoI) with four major Japanese investors - Mizuho Bank, Development Bank of Japan, Nippon Life, and Suzuki.
While $150 million (80 percent) is being raised from Japan, $37 million (20 percent) from India, bringing the total fund size to $187 million. Prime Minister Modi will visit Japan to attend the G20 Osaka Summit and the launch of this fund will be welcomed as a symbol of strong bilateral ties between the two countries.
Genesis of the fund
Last May, the Ministry of Economy, Trade and Industry (METI), the Government of Japan and the Minister of Commerce issued a joint statement initiating a 'Japan-India Startup Initiative', and METI launched the 'Japan-India Startup Hub' at JETRO, Bengaluru, a PSU under METI, to connect Indian startups and Japanese companies.
Here, Rajiv Kumar, Vice-Chairman of NITI Aayog, proposed the idea of a fund to Minister Hiroshige Seko, and to subsequently launch an India-Japan fund of funds. Accordingly, METI, RNAM, Mohandas Pai and RK Mishra (non-resident scholar at Carnegie India) facilitated the participation from India and Japan.
Last October, Prime Minister Modi and Japanese Prime Minister Shinzo Abe shared their views in the ‘India-Japan Vision Statement’, stating,
“Both sides will encourage and support the creation of funds to invest in startups in India with participation by Japanese stakeholders.”
Ideals of the fund
The FoF is expected to invest in more than 200 unique Indian tech startups in emerging fields including Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML), fintech, healthcare, consumer, education, robotics, automation, and B2B software.
The fund will also look towards working on next-generation technologies where the integration of hardware and software will be increasingly required to develop IoT and AI solutions for societal benefits and to explore joint collaboration in emerging technologies.
"India and Japan would be able to build a distinguished partnership by leveraging advantages of each other," says Keiichi Onozawa, Representative of METI for South Asia, Ministry of Economy, Trade and Industry, Japanese Government.
Lately, Japanese interest in India has picked up steam. Suzuki is developing technologies in electric vehicles and connected vehicles and will participate in the fund. Mizuho Bank is also keen to collaborate with the Indian startup ecosystem. JETRO will facilitate the B2B matching between investee Indian startups and Japanese companies.
"As of now, Japanese presence in India is still small, but this FoF will stimulate the partnership in the digital area and will expedite participations from Japan to the Indian startup ecosystem," says Keiichi.