Rakuten Ventures, the investment arm of one of Japan’s largest Internet companies, has launched a 10 billion yen ($84 million) fund dedicated to the country’s startups. The Japan Fund will focus on promising early-stage and growth tech companies that can potentially work with businesses in Rakuten‘s ecosystem, which include its e-commerce platform, an online bank, and messaging app Viber.
Since its inception in 2013, Rakuten Ventures invested in startups from Singapore (Carousell, ViSenze, Coda Payments, PocketMath), South Korea (Send Anywhere), the United States (Algorithimia, Epic!, OneSignal), and India (AdsNative). Why finally home in on Japan?
“For me as a venture partner, I would say better late than never, in that we launched Rakuten Ventures almost three years ago and gained a lot of learnings in how we want to do investments and support startups,” says the firm’s managing partner SaeMin Ahn, who will be running the Japan Fund with investment manager Hogil Doh.
“We thought there were a lot of advantages due to our historical investment patterns that we can bring to startups in Japan,” he adds.
Rakuten has been called “the Amazon of Japan” because of its wide-ranging Internet ecosystem. In addition to the largest e-commerce site in Japan, it also runs online travel and financial platforms and owns digital products like e-reader Kobo, streaming entertainment site Viki, and Viber, which it acquired in 2014 for $900 million.
“As long as we invest in good tech companies, there are deep synergies, not only from Rakuten’s ecosystem in Japan, which is very deep and diverse, but our existing portfolio companies, which can work with each other in a deep and beneficial way,” says Ahn.
An example is image recognition company ViSenze, whose tech is used by mobile marketplace Carousell to tag inventory more quickly. Other clients include Flipkart, one of India’s largest e-commerce platforms, and ad-tech companies.
Ahn wants to see companies that don’t depend on “heavy marketing dollars and subsidies” to grow. Rakuten Ventures has cut checks for amounts ranging from $500,000 to $10 million, but he says the firm’s goal is to enable its investments to last for about two and a half to three years without additional fundraising, because “looking for funding takes the focus off of building a good company.”
The Japan Fund will look for e-commerce and ad-tech companies (Ahn is especially interested in audio ad targeting) and “practical AI [artificial intelligence] companies.”
“We’re not looking to build the Skynet of 2020,” he says. “I’m looking for an AI that, for example, will build an NPC [non-player character] in a game that can interact with human players, without the developer having to spend a lot of time developing it.”
The Japanese startup industry is often viewed as insular and risk-averse, making it hard for fledgling tech companies to break out internationally. Ahn believes, however, that they have an opportunity to make an impact on other markets, especially Southeast Asia and South Korea.
“Some startups do have a relatively high barrier of entering overseas markets because of how they build companies here and how sustainability is measured using very different metrics in Japan than in the U.S. So we see some well-funded Japanese startups have had trouble gaining traction in other developed markets,” says Ahn.
“From that perspective, there is a barrier, but if these companies are having trouble, then there are other companies that can flourish overseas and we see that as an untapped well to inject liquidity into.”