By Taslima Khan, ET
Bureau | Updated: Mar 09, 2017, 12.51 AM IST
NEW
DELHI: A new wave of small Japanese investors is scouting in India for
early-stage startups they can bet their money on, undeterred by a bearish spell
that threatens to upset Tokyo-based Soft-Bank’s biggest wagers in the country.
REAPRA Ventures and Asuka Corporation are the
latest Japanese early-stage investors preparing for their India debut, joining
Incubate Fund, GREE Ventures, Mistletoe Capital and other funds that have
recently started investing in the country.
This fresh infusion of capital likely signals a return of
confidence in India’s startup ecosystem despite a recent battering of some
well-known consumer internet companies, although not without a healthy dose of
caution.
Unlike SoftBank that invested hundreds of
millions of dollars in potential blockbusters such as the now struggling
Snapdeal, the new investors from Japan are cherry-picking small startups with
niche technology that can be exported to other Asian markets. Some of these
investors ET spoke with said they were more likely to spare much smaller sums
of $1-5 million for companies they decide to back. “We are not eyeing models
like Uber, which are easy to have ideas on, disrupt and scale.
We are
looking for startups that can create business models in complex markets,” said
Japanese entrepreneur Shuhei Morofuji, the 39-year-old founder of REAPRA
Ventures who wants to take Indian companies to Southeast Asian markets. “An
example would be startups experimenting with experiential travel or trekking
within the larger travel market.”
Morofuji, who hosted a dinner for 30 startup founders and
investors in New Delhi last month, said India will be a major market for 30
investments planned this year from REAPRA, which will invest about $1million
per deal.
REAPRA has invested nearly $30 million in 60
startups across Indonesia, the Philippines, Bangladesh, Singapore, Thailand,
Korea and Malaysia. Several of the Japanese funds that have entered India in
the last two years are expanding their fund allocations for for the country and
accelerating their pace of deal-making.
Incubate Fund, which has invested in three
startups including Indore-based ShopKirana since it entered India in 2016,
expects to back another dozen companies this year and expand its India fund
size to $15-20 million from $5 million, ET reported recently.
GREE Ventures has overshot its target corpus of
$60 million for its South East Asia Fund from which it invests in Indian
startups. The fund has made six investments so far, including in Mumbai-based
fashion rental startup Flyrobe. A couple of more deals are in the pipeline for
the India market.
“It will be a 50:50 split between Southeast Asia
and India from our current fund. We are quite bullish on India,” said
investment manager Nikhil Kapur. “We don’t want to get swayed by market buzz
words. We don’t mind working against the market; it is challenging but you get
the best outcomes also… It is clear in India that customer loyalty is fickle
and price sensitivity is the major barrier.”
The fresh capital flow from these funds into
India comes at a time when the overall value and volume of investments in
domestic early-stage ventures have dropped. The number of venture capital deals
fell 21% to 405 in 2016, and the total capital invested fell 28% to $1.4
billion, according
to data from Venture Intelligence.
DEALS WORTH $2.39 B
In 2015 and 2016, 19 Japanese investors participated in
domestic startup investment deals worth about $2.39 billion, show data from
researcher Tracxn.
REAPRA Ventures and Asuka had their earliest
exposure to India through their investments in the funds of Japanese
early-stage investor Beenext, which has been active in India for 4-5 years now.
Beenext, which was earlier known as Beenos, has led a
financing round of Rs 200 crore in used cars marketplace Droom along with
Japan’s Digital Garage and other investors. It has invested in 10 India
companies so far.
Droom and rental startup NoBroker are heavily
funded by Japanese investors. “We have raised $20 million so far, out of which
one-third is from Japanese investors,” said Amit Kumar Agarwal, chief executive
of NoBroker, which is backed by Beenext and Digital
One big attraction towards Japanese investors is their
ability to forge contacts with other Southeast Asiafocused investors for
domestic startups. “Japanese investors value relationships a lot,” said Rajesh
Sawhney, who raised $2.5 million from Japanese investors M&S Partners and
Mistletoe for his food startup InnerChef in the final quarter of last year,
“and if they like you they will bring other Japanese investors in the next
round”.
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