Japan Investment Corporation joins latest Vertex SEA fund as LP

Vertex Ventures Southeast Asia and India (“VVSEAI”) announced that it has completed the fund raising for its fifth and newest fund with commitments of USD 541m. VVSEAI Fund V is 80% larger than VVSEAI Fund IV which was raised in 2019.

The new Fund V raise for VVSEAI comes on the heels of strong cash-on-cash returns from its portfolio. This includes hugely successful exits from its investments in Grab, FirstCry, XPressBees, Recko, among several others. VVSEAI Fund V is backed by both existing and new Limited Partners, including sovereign wealth funds, financial institutions, corporates and family offices across Asia and Europe. New Limited Partners include Japan Investment Corporation (JIC), International Finance Corporation (IFC) and DEG (German Development Finance Institution).

JIC, which actually announced its USD 30m commitment to Fund V in April, aims to stimulate a virtuous cycle of risk capital to support next-generation industries in Japan. To achieve this vision, JIC promotes open innovation as a means for supporting growth and enhancing the international competitiveness of businesses. JIC approaches these challenges by stimulating private sector investments in open innovation together with JIC’s own investment, while fostering investment professionals.

Given these investment objectives, the commitment to a non-Japanese fund investing in Southeast Asia and India appears a bit of a stretch. However, Yuka Hata, Managing Director and Head of Fund Investments at Japan Investment Corporation, explains:

“Digital transformation in Southeast Asia and India is accelerating rapidly, creating new opportunities for Japanese companies to implement cutting-edge technologies into their business areas. Through our investment in Vertex Ventures Southeast Asia and India, we aim to promote open innovation initiatives and forge business alliances between their startups and Japanese enterprises to drive digitalization in our domestic markets, while also providing crucial support for Japanese startups seeking to expand into Southeast Asia and India.”

Further, VVSEA has achieved business alliances with Japanese operating companies in approximately 30% of the projects in which it has invested. VVSEA V will focus on Consumer Internet, Enterprise & SME, Fintech, Digital Health, Agri Tech & Sustainability, and Mobility as its main areas of investment, and plans activities with an eye on the Japanese market, both in terms of considering potential investment targets and also supporting startups in these areas.

Vertex Group sees potential in the development of the Japanese startup ecosystem and is looking to create investment opportunities at a wide range of stages to help domestic startups become more competitive internationally. It has also established an office in Japan for the purpose of investing in Japanese startups and supporting business development in Japan for its portfolio companies.

A 2% annual management fee on a USD 30m commitment is certainly a nice subsidy for opening a Vertex office in Japan. Critically, one could also assume that JIC is so flush with cash that it cannot possibly invest all into the still nascent domestic startup market without skewing valuations.

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