Rakuten Ventures launches new $85m fund for Japanese tech startups

Visual of Rakuten website. November 2015.

Rakuten Ventures, the venture capital (VC) and investment arm of Japan-based Rakuten Inc, has launched the JPY 10 billion ($84.2 million) fund focussed on on technology startups.

The new Rakuten Ventures Japan Fund will operate out of Singapore by managing partner SaeMin Ahn and investment manager Hogil Doh.

Building on successes in Israel, Asia Pacific (APAC) and the USA with Rakuten Ventures’ 2013 Southeast Asia Fund and 2014 Global Fund, the new Fund aims to empower the expanding community of Japanese startups with advanced technology and business models.

Investments from its previous funds were made into startups such as online marketplace Carousell and alternative payment solutions provider Coda Payments.

Ahn said, “With the launch of Rakuten Venture Japan Fund, we hope not only to find the right fit in domestic startups but also bridge Western and South East Asian market opportunities with brilliant founders from Japan.”

Targeting Japan-based Internet ventures at the early and growth stages, the theme of the fund is a “strong focus on unique technologies and business models, as well as high growth potential”, according to a Rakuten media release.

Rakuten Ventures will also seek to support the business growth of these ventures by “driving synergies with the technologies and platforms of the Rakuten Group.”

Additionally, with this capital commitment approved by Rakuten Inc, Rakuten Ventures is aiming to further expand the size and scope of its investments both in Japan and globally, Some possible target sectors are “unique ecommerce models”, marketing and advertising technologies, advertising technology in the realm of programmatic audio, and native advertising, as well as gaming.

In an interaction with Tech in Asia, Ahn added that the equity stake and capital commitment would vary, but would be seeking to provide a runway of two to two-and-a-half years for the venture, in order to enable the company founders to focus on building traction and organisational development without worrying about funding.

“Through investing in diverse industries and sub-verticals we reaffirmed our philosophy of investing in good tech, products, and services that Rakuten Ventures understands and can add value to,” Ahn says.

Also Read: Flipkart stops selling e-books citing lukewarm response; to transition users to Rakuten Kobo from Dec 17

Japan’s Rakuten launches $100m fintech-focussed global investment fund

Amazon’s massive investments in logistics worry analysts

Possible investment approach and strategy?

The fund is likely to reflect Ahn’s own investment approach, which involves sourcing startups and conducting his own due diligence as well as founders with a global outlook and some degree of international experience. In an October 2014 interaction with BeSuccess, Ahn shared: “I find technology that I’m interested. I have certain themes that I track each quarter or each year and I search for starups that are solving problems in those particular spaces.”

However, given that the fund is managed from Singapore, investments in startups based in emerging markets are likely to be a major part of the funds investment strategy, as well as funding rounds aimed at financing the expansion of Japanese startup ventures into the region, which is currently seeing significant growth in both its middle class and smartphone usage-driven sectors.

This new fund comes as Rakuten seeks to become an international brand and build itself up as a global enterprise. This is despite the vast majority of earnings originating from Japan. The Wall Street Journal observed that Rakuten’s  e-commerce operations see overseas transactions account for about a sixth of overall volume.

In an interaction with the Wall Street Journal, Hitoshi Sato, senior analyst at InfoCom Research observed: “Rakuten is facing increasing competition domestically and finding it difficult to differentiate its services from rivals. But so far it has been unable to optimize its acquisitions due to its weak overseas brand recognition.”

With the current prospects for e-commerce and finance in Southeast Asia, particularly in growing markets like Vietnam, the Philippines, Myanmar and Indonesia, it is likely that the first wave of investments from this fund will target online marketplaces and financial services ventures, given the gaps in these segments and their scalability.

Also Read:

Rakuten acquires S’pore-and Japan-based startup Voyagin for $3.5m

PocketMath raises $10m in Series A from Rakuten

Lack of credit risk data is key challenge to SME lending: Kuznicki, Capital Match