Land of the rising sun shining benevolently on India

Global investors, including early-stage investors, are actively looking to grab a pie of India's growth story because its thriving entrepreneurial ecosystem is seen as one of the most lucrative investment destinations across the world. While US investors have been active in the Indian start-up scene for long, it is now the turn of Japanese investors to commit significant investment and management focus to grab the India opportunity.

According to a recent venture capital (VC) funding report released by CB Insights, India has outpaced China in the number of deals struck by VC funds in the first quarter of 2015. Though, China was still ahead of India in terms of deal value at $2.99 billion, India's funding stood at $1.35 billion. For India, this marks a rise of 225 per cent over the same quarter of the previous year. In this entire funding scene, Japan saw around 28 start-up deals by VCs during the first quarter of 2015.

Making Inroads for Japanese Investors

Gurgaon-based Green House Ventures (GHV) Accelerator is leading the way in enabling Japanese investors to access opportunities in India. GHV Founder & Chief Mentor Vikram Upadhyaya, who has a deep and decade-long connection in Japan, launched the sector agnostic accelerator venture in October 2014. He works regularly with Japanese investors scouting for opportunities here and strives to bridge the gap between the Japanese investors and the Indian start-up ecosystem, making it mutually beneficial for both sides.

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Soon GHV announced its partnership with World Innovation Lab (WiL), one of Japan's largest VC funds, to help Indian start-ups not just with growth capital, but also the required resources and connections to go global, particularly in the technology and innovation hotbed like Silicon Valley.

(image) Emphasising on the importance of the partnership with WiL, Upadhyaya says, "WiL is our great partner and a great supporter. Being Japanese, they supported my concept and admired my passion before anyone thought about this concept in India. Well-funded by LPs (Limited Partners) from Japan like Sony, Hitachi, Nissan, JVC & NTT Docomo among others, WiL aims to prepare Indian start-ups for Series A round of funding at a much faster pace and help them grow beyond India – whether it’s Silicon Valley or Japan.”

(image) After China, Japanese investors perceive India to be the new big-bang in the internet and mobile space, and expect more vertical players to emerge in areas like eCommerce, internet and classifieds among others. Expressing his views on the rationale behind partnering GHV, Gen Isayama, Co-founder & CEO, WiL, shares, "India is a large and exciting market that we had to be in, but we waited for the right partner. With GHV Accelerator, there was a match of mission. Our objective is to scale up start-ups, take them global and significantly reduce the time taken from concept to global markets.”

WiL is one such example of intent turning into action. The Tokyo and Palo Alto-based VC fund looks to invest in start-ups with global appeal and disruptive potential, typically investing $5 million to $30 million in early-stage ventures, as well as, growth-stage start-ups through multiple rounds of investments. In addition to the capital, WiL also provides operational expertise and strategic partnerships to accelerate their portfolio companies' global expansion.

(image) To multiply its value proposition, GHV has further collaborated with angel investor and mentors like Google India’s MD Rajan Anandan, Prajakt Raut; and firms like LetsVenture, Nasscom 10,000 Startups, etc. On GHV’s partnership with WiL, Rajat Tandon, Senior Director, NASSCOM 10,000 Startups, says, “Till recently, going global for tech start-ups meant addressing the US markets only. A lot has changed now. Start-ups are slowly recognising the opportunity to be truly global. Partnerships like GHV & WiL will not just help Indian tech start-ups get insights and assistance in tapping the Japanese and the US markets, but open up access to a new pool of investors as well.”

Indo-Japan Investment Corridor

Leading investors or funds echo that Indo-Japan investment corridor is one of the most important corridors for country’s growing economy, but the same remains underserved as far as the investments and interactions in the start-up and venture space is concerned.

(image) Bringing to light the need to address this gap, Rehan Yar Khan, Managing Partner, Orios Venture Partners, says, "The Indo-Japan investment corridor is potentially the most important corridor, as it can be seen historically in automobiles, electronics, and transport & infrastructure space among others. But the same has been extremely under-represented in the new world of consumer internet and software.” Orios’ portfolio companies include names like – Druva, Yumist, PrettySecrets, Ola, Sapience and many others.

(image) Speaking on the same lines, Shailesh Vikram Singh, Executive Director, Seedfund, says, “Though SoftBank, and a few others have been active recently and have forged some venture partnerships in India, the Indo-Japan corridor is still pretty empty. I think it is high time these two great Eastern cultures take a closer look at the current opportunity and build deeper relationships than what has been achieved so far. GHV is laying the foundation of a much-needed bridge here, and we can see the Indo-Japan relationship to move to the next level." The early-stage venture capital fund has invested in companies like Chumbak, CarWale, EduSports, Browntape, Nearify and many others.

Eyeing the Indian Start-up Goldmine

With the current trend of start-up growth expected to continue, India is showcasing great potential to become the second largest start-up system in the world after the US. And Japanese investors, who are labeled as one of the most tech savvy nations in the world, are showing avid interest in India.

When asked about the active participation of Japanese investors in the Indian start-up scenario, Upadhyaya explains that the Japanese have a very small consumer market. Hence, they have always looked at emerging markets like China. And with the high growth of start-ups, Japanese investors find India to be the next logical geographical destination. Indian start-ups must build asset-light models and address pain points pan India, which can be replicated globally.

He adds further, “Over the past few years, I have been in talks with several large investors and companies from Japan, and advising their boards on their India strategy. As the Indian market opportunity emerged clearer, I noticed their intent change to action. While the likes of SoftBank have already made announcements, other Japanese giants are now rapidly making their moves in India.”

The Way Ahead

The interest of Japanese investors in the Indian VC space is on the rise due to factors like growing number of smartphone users, increasing Internet penetration, luring millennial generation, and changing lifestyle of urban middle class, etc. Several Japanese-led firms like Softbank, Tokyo-based Beenos Partners, Singapore-based Rebright Partners and other seed stage investors such as IMJ Investment Partners and M&S Partners are eager to be part of India's growth story.

SoftBank is one of the significant investors in the Indian eCommerce space, with bets in ventures like Housing.com, Ola and Snapdeal among others. Recently, Tokyo and Singapore-based venture capital firm Rebright Partners announced its plans to enter Indian market. Typically seeking investment in early stage ventures, the firm launched a new $20 million fund for Indian start-ups.

Similarly, Japan's Netprice.com Inc, a consumer-internet incubation-cum-investment firm, is also planning to step up its activity in India by investing in a clutch of start-ups in the web and mobile space. There have also been reports that Tokyo-based global start-up incubator-cum-early-stage investor Samurai Incubate is also looking to foray into India, in partnership with domestic incubators.