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Vertex Holdings, the venture capital arm of Singapore’s Temasek Holdings, is expanding its start-up investment in Japan through a new dedicated fund, in a rare move by a leading global investor to tap into the nascent cluster.
Vertex chief executive Chua Kee Lock told Nikkei the latest fund is targeting to raise ¥10bn ($64mn) over the next year or so. The holding company will fund about a third of the target as the anchor investor, while most of the rest will be raised from Japanese institutional investors and large corporations.
“Japan is very much focusing on growing its start-up ecosystem, attracting global investors and reinvigorating its semiconductor industry,” Chua said. “We see strong potential.”
Despite being one of the world’s largest economies, the Japanese start-up cluster has traditionally lagged behind China, Singapore and South Korea, with relatively few overseas venture capital firms investing in the country.
Japan has also had only a handful of unicorns, start-ups valued at over $1bn, as many young companies choose to go public much sooner in part due to smaller private capital available for larger start-ups.
But in recent years, the Japanese government has pledged to boost start-up investments and foster a strong ecosystem through policy plans and reforms, such as loosening residency rules for angel investors and entrepreneurs from overseas.
“The government’s strong support and efforts make it the right time for us to invest [in Japan],” Chua added.
Vertex Ventures Japan will invest ¥200mn to ¥500mn in at least 15 early-stage companies. Among the targets are consumer and enterprise software companies, and “deep tech” start-ups with cutting-edge technologies in advanced science and engineering.
Vertex is known as an early investor in south-east Asian super app operator Grab and has more than $6bn in assets under management with more than 300 portfolio companies. The group has minted more than 20 unicorns globally, including Singapore-based intellectual property tech PatSnap and cross-border payment provider Nium.
Vertex is the anchor investor that provides capital to its global network of more targeted funds in specific regions or sectors. The new Japan fund is its seventh and newest network, following similar vehicles focused on south-east Asia and India, China, the US, Israel, healthcare and growth-stage start-ups.
Over the years, Vertex has raised funds from Japanese investors seeking to tap into its global network. Investors include state-backed Japan Investment Corporation, Sumitomo Mitsui Banking, trading house Marubeni, Development Bank of Japan and Risa Partners, an investment firm owned by leasing company NEC Capital Solutions.
But so far, the Singaporean VC group has only invested in Japanese start-ups through its incumbent funds. In 2022, Vertex’s growth-stage fund invested in a Tokyo-based AI start-up called Alt, its first portfolio company in the country.
Through its new fund, Chua said the group can look for much wider investment opportunities from the ground and connect these local start-ups to its global funds and experts, sharing knowledge and expertise with those looking to venture abroad.
“The Japanese market is quite big but the rest of the world is even bigger,” Chua said. “Like all good start-ups, you must make sure your own home market is successful — and then go global. That’s the part that we will always encourage.”
A version of this article was first published by Nikkei Asia on May 17. ©2024 Nikkei Inc. All rights reserved.
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