TOKYO -- Japanese venture capital companies are racing to find promising Internet startups in Southeast Asia, highlighting the growth potential of a region where more people are getting their hands on smartphones and other wireless devices.
In early April, President Yasuhiko Yurimoto of Japanese venture capital company Global Brain visited the Singapore headquarters of online beauty products retailer Luxola for a final check before deciding whether to invest. He asked Luxola Chief Executive Officer Alexis Horowitz-Burdick, an American entrepreneur, about the company's business strategy.
Yurimoto reached the conclusion that the company could be highly successful. Eight days later, Global Brain decided to invest about 100 million yen ($971,000) -- just a month or so after the Singaporean retailer became a candidate for investment. This marked its first investment in Southeast Asia. It plans to finance about 10 businesses in that region this year.
Singapore's high-tech startups received $1.7 billion in investment money in 2013, according to Hong Kong's Asian Venture Capital Journal. The figure surpassed the money invested in Japan's tech startups, which totaled $1.15 billion last year, for the first time. The tally for all of Southeast Asia was $2.1 billion, a 20-fold increase from 2011.
This figure pales in comparison to the $11 billion in venture capital received by the U.S. software industry last year. But the American tally has climbed just 46% since 2011. Although the U.S. market is bigger, growth potential is stronger in Asia, said an official at a Japanese venture capital company.
Japanese venture capital companies began to look for partners in Southeast Asia in the 1990s. After taking a hit from the 1997 Asian currency crisis, they shifted investment activities into full gear a few years ago.
Jafco Managing Director Yoshiyuki Shibusawa reveals that the Japanese venture capital concern has some 30 candidates in Asia outside Japan at present. Two Singaporean startups that it financed were acquired by major U.S. and European information technology companies in 2012 and 2013. Jafco is enjoying solid returns on its investments in that region, according to Shibusawa. The company intends to invest about 500 million yen a year in Southeast Asia for the time being.
In the Indonesian capital of Jakarta, an online baby products retailer was established in 2012 with a business model of delivering products using motorcycles, which can navigate the city's constant traffic jams. Bilna's sales have been growing 15-20% a month. CEO Ferry Tenka argues that the possibilities are endless in the Indonesian market, which has some 250 million consumers. He aims to turn Bilna into the nation's largest e-commerce business by moving into new fields.
One of Bilna's backers is CyberAgent Ventures, which has invested in roughly 30 IT startups in Southeast Asia since 2009. The Tokyo-based company typically provides about 50 million yen to newly established businesses. President Soichi Tajima claims that his company makes money about 90% of the time.
Internet businesses in Asia have huge upsides because smartphones have spread so rapidly. "The next Google or Facebook will be born in Asia," says Tajima.