The cross-border Japanese-U.S. venture capital fund Draper Nexus has raised $30 million for its $100 million second fund in the latest sign that the former affiliate funds in the DFJ Global Network are growing up.
A little over a year ago, DFJ restructured its network of affiliate funds, changing the payment scheme and flattening the management structure so that the main DFJ fund did not exercise control over the rest of the funds in the network.
Sixteen outside funds had joined the network over the years. And 11 of those (including Draper Nexus) were outside the U.S. The firms were always independent when it came to fundraising, LPs, and decision-making on when to fund startups, but initially, the firms gave DFJ some carry in exchange for branding and access while also paying dues to DFJ for access to facilities.
As part of the restructuring, DFJ created a governing board to oversee the entire network, which includes DFJ’s own funds, DFJ and DFJ Growth. The board is composed of a DFJ partner and includes representation from other network partners. Along with the board, the partner networks dropped the DFJ branding from their names. For example, DFJ Nexus Fund became Draper Nexus.
All of this was done in an effort to make the partner network more collaborative and decentralized with less of a command-and-control structure, according to Gabe Turner, a director of the DFJ Global Network.
“What you get as part of the DFJ Global network, instead of operating as a four-person team, you get a 100 plus brainpower CPU,” says Turner (although maybe Steve Jurvetson counts as a 100 plus brainpower CPU on his own?).
The firms can co-invest and do with some regularity. For instance five out of the 18 investments in the Draper Nexus portfolio involve co-investments with other DFJ Global Network funds, according to Draper Nexus managing partner Quaeed Motiwala.
At Draper Nexus, the changes to the network hasn’t affected the firm’s strategy, which remains focused on cross-border deals between the U.S. and Japan.
“We’ll go in with a one-third, one-third, one-third allocation,” says Motiwala. “We will probably be a little more focused on Japan. Before it was hard to do deals in industrial energy, robotics, industrial materials, agriculture and food [in Japan]. We’re starting to see more of those companies coming out of Japan.”
Draper Nexus (previously known as DFJ Nexus) had raised $50 million for its first fund. Now well on its way to its $100 million target, with commitments from large Japanese corporations, the firm is able to write larger checks, and has felt the momentum for investment begin to shift in its favor, according to Motiwala.
“A good portion of our money comes from large Japanese corporates and we can use those relationships to pilot startups’ technologies with these limited partners,” Motiwala says.
According to the Draper Nexus managing partner, the firm will invest between $4 million to $8 million in total in the companies in its portfolio. Before those numbers were closer to $1 million to $5 million.
And while the market has improved, there are still risks to investing in Asian markets these days, Motiwala says. “Services get copied much faster, and before your competitors put their roots into other markets, you’ve got to move fast,” he says.
While Draper Nexus is the latest fund from the network to get back on the fundraising trail, it’s far from the only one. Draper Triangle, another affiliate fund, closed on $75 million for its new fund earlier this year, and the network has picked up a new member with the Singaporean investment firm Wavemaker Pacific, which has raised $30 million to invest across Southeast Asia.