Takashi Sano, the Singapore-based venture partner and regional manager of Japanese VC Global Brain Corporation, is enthusiastic about middle-income markets in Southeast Asia such as Malaysia and Thailand that have seen a surge in growth over the last five years.
Indonesia, a larger market, is “getting a bit congested”, he told this portal, with valuations still heated relative to startup traction.
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The Global Brain fund operates on a worldwide basis and targets startup ventures located in Japan, the US, South Korea and Asia, with a focus on Series A and pre-Series A rounds.
In December 2016, it launched a $175 million fund, with Q3 2017 activity to date seeing it exit its portfolio firm Kabuku (acquired by Futaba Corporation), as well as lead investments in US-based visual processing startup 4DReplay and Japan-based VR startup Tricol Co. For H1 2017, it made investments in Telexistence, Loom Systems, Peerspace, Araya Brain Imaging, and Credifi.
For Japanese startups looking to venture into the growth markets of Southeast Asia or vice versa, Sano recommends direct go-to-market activities or alliances with local partners. He sees Singapore as an attractive base for Japanese startups looking to enter the regional market.
He elaborates: “Industry-wise, Singapore is introducing smart integration and deep tech. Japan has a lot of those technologies or companies working with technologies like AI, space, robotics, Big Data, cybersecurity, and transportation. They may be able to enter Singapore and the regional market more easily than traditional companies. But it’s not just limited to Singapore.”
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As for those entrepreneurial ventures looking to access the mature market of Japan and its higher levels of disposable income?
“Outside of Japan, startups need a local partner or support to help them foster growth at the beginning. Then once it takes off, the more talented Japanese can handle the branch. But initially, in the early stages, you need a local partner to assist you,” he said.
One of its highlights of its portfolio in Southeast Asia is Arcstone, which provides software that enables manufacturing plants to have better insights into their operations and work flows via its data analytics solution.
Sano explains: “In Southeast Asia, there are still a lot of things where each process of the line is unconnected. You’re not even able to get the real-time data. That’s why Arcstone is targeting the manufacturing sector, so that the manager or even someone outside of the factory is seeing what is happening in the real time. That is our first step in factory automation in this region.”
Corporate capital & exits
Corporate venturing is another area that Sano sees growing in the region, with an increasing supply of risk capital, though he cautions that an excessive supply can create unfair valuations.
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He says, “Generally, I think it’s a good thing. We are managing different CVC funds. Basically, those funds have the same strategic focus, and it’s good for startup companies to work with corporates. It opens up opportunities to make deals or get alliances. I’d like to recommend startups to seek funds from those who can help you the most with your strategic growth picture.”
Meanwhile, in terms of exits, Sano believe the Tokyo Stock Exchange (TSE) supports judicious valuations and is supportive of startup exits – specifically on the Mothers Market and JASDAQ – given the volume of technology deals, the bourses’ liquidity and the presence of comparable emerging enterprises.
However, no ventures outside of Japan have listed on these growth boards. Sano believes that it’ll require a “signature deal”, which he argues Global Brain is more than happy to support, particularly as the venture ecosystem across Southeast Asia and the broader Indo-Asia Pacific region mature.
He notes, “Towards 2020, the market is changing quite a bit across Europe and the US, and we want to be prepared. 2017 is very different to previous years and we want to continue to invest in startups and drive the development of the startup ecosystem in Southeast Asia and make a positive impact.”