Why this Japanese fund is ‘very bullish’ on the Indian startup ecosystem

Japan’s Akatsuki Entertainment Technology (AET) Fund is “very bullish” on India and sees enormous potential in the country. It has already made investments in 13 early-stage startups since its launch in March.

Akatsuki Entertainment Technology (AET) Fund's Partner and India Project Lead Yuki Kawamura is in Delhi on his monthly visit to India from his base in Tokyo, Japan. The former Netflix executive, who launched the streaming platform in Japan five years ago, joined AET in 2018. 

Dressed in smart casuals, he is sipping on a cold red beverage inside the balmy confines of a 5-star hotel coffee shop in Lutyens Delhi on a chilly January afternoon, when YourStory meets him.

India is an important market for AET Fund, which explains why Yuki needs to make monthly trips to the country.

“We are very bullish on India and see huge potential here, especially in entertainment and that’s where we want to invest,” says the 35-year-old, who holds a master’s degree in Computer Science.

AET Fund Partner and India Project Lead Yuki Kawamura

The fund does not have a “person on the ground” in India and typically partners with other funds that have ‘boots on the ground’ to co-invest. The venture capital arm of Tokyo and Los Angeles based entertainment company Akatsuki Inc. has so far partnered with venture capital (VC) firms such as Accel India Partners, Blume Ventures, Sequoia Capital India, Inventus Capital Partners, Chiratae Ventures, DSG Consumer Partners, 3one4 Capital, InfoEdge Capital, and Shunwei Capital.

While AET Fund wants to continue with the co-investment model, the fund is now considering “having someone full-time” in India. 

“We are having quite decent markups, our investments are doing well and if this continues, we would want someone on the ground in India to do sourcing,” says Yuki.

With a corpus of $50 million for investments in India and the US, AET Fund has made 13 early-stage investments in the country – some undisclosed – so far. “We’ll make announcements soon regarding the new investments,” he says.  

Since its inception, the fund has made over 40 investments across Japan, India, and the US. AET Fund is focussed on three areas – entertainment, content, and media – as far as its investments are concerned. 

The fund’s India portfolio includes the likes of edtech startup Doubtnut, superhero merchandise startup Planet Superheroes, media startup LBB, mobile gaming company Mech Mocha, and B2B ecommerce startup ShopKirana

The average ticket size of an AET Fund investment in early-stage startups is in the range of $1.5 million.

“We do follow-up investments as well. We want to support the companies in the long term,” says Yuki.

What AET Fund looks for in startups

Yuki says the fund looks for six values in the startups it invests in. These are “partnership-driven, integrity, forward-looking, impactful, risk-taking, and curiosity”. 

“We value these six factors a lot. If we don’t have a good sense of sharing these with the founders, we might not be interested in engaging,” he says. 

AET Fund has a special interest in startups working with regional Indian languages. “We are really bullish in the vernacular space, especially the vernacular media space. We see a strong pick up in content consumption through cheap Chinese phones and Reliance Jio,” says Yuki. 

He adds that the fund believes that there isn’t enough vernacular content available and is extremely keen to invest in that specific area. 

One of its portfolio companies, Doubtnut, offers educational videos in local languages, while another – Mech Mocha – is focussed on vernacular games. 

Indian startup ecosystem vis-a-vis US and Japan

Commenting on how the Indian startup ecosystem fares or is different compared to the ones in the US and Japan, Yuki says, “I don't think there is much difference. But one thing is for sure that in India, because this mobile entertainment space is still emerging, we see a lot of growth potential here.” 

He believes there are more “open spaces in the Indian market” compared to the two other countries which have more mature markets. 

“In the US and Japan, since their markets are more mature, we have to identify opportunities specifically. In India we think we can do anything,” Yuki says.

(Edited by Saheli Sen Gupta)