A Japanese fund focused on early-stage, Asian deep tech startups is doubling down on the opportunity, despite a wider slowdown investing in moonshots globally. Tokyo-based Beyond Next Ventures is targeting up to ¥25 billion (about $168 million) for BNV Fund 3, its third fund, and today, the venture capital firm said it completed a first close of ¥10 billion (approximately $67.7 million — money it will be using to invest in deep tech startups in fields like robotics and biotech.
The firm aims to close the fund by March 2024 and plans to use the money for seed, Series A and later-stage rounds in around 25 companies, according to CEO of Beyond Next Ventures Tsuyoshi Ito. Its check size per investment is between $670,000 and $2 million, or up to $13 million across multiple rounds per company. For some context, that is about triple the maximum limit compared to the previous funds.
The Japanese VC believes the lack of later-stage funding in the country limits startups from going global, and it hampers overall valuations.
According to a 2021 report by the World Bank, the volume of later-stage investments in Japan is behind compared to Europe, North America and other countries. Ito told TechCrunch one of the reasons for the lack of later-stage funding in Japan is that limited partners like institutional investors have only recently participated in active investment in VC firms.
That means the fund size of VC firms in the country has been relatively small, so many VCs had to focus on seed and early-stage startups. Another cause is that the Tokyo Stock Exchange Growth Market allows companies with a market capitalization of several billion yen, leading many startups to early IPOs to raise funds, Ito explained.
But the funding for middle- to later-stage startups is increasing, so startups don’t hasten to go public as before, Ito noted.
To offer continuous financial support for startups on a worldwide scale, Beyond Next intends to increase later-stage investments, such as Series C and Series D, and additional follow-on investments through the latest fund. On top of that, it will extend the fund’s operational period to 11 years, one year longer than the previous fund, and add an extension of up to three years with the consent of the limited partners.
Beyond Next seeks deep tech startups emerging from universities and research institutions, which need entrepreneurial strategies to commercialize their innovative technology and science inventions. The VC firm works on matching research teams with more than 3,000 business and management experts.
Including this latest fund, it will have more than $316 million of assets under management.
Its limited partners of BNV Fund 3 include existing backers Organization for Small and Medium Enterprises and Regional Innovation, MUFG Bank, Dai-ichi Life Holdings and Tokyo Century, and new investors SMBC Nikko Securities, Mitsubishi UFJ Trust and Banking and FFG Venture Business Partners also put funds into the round.
In 2020, the VC opened its regional office in India. The firm says the startup market in India is “growing remarkably, which makes it an attractive medium- to long-term business expansion destination for Japanese portfolios,” Ito explained.
Founded in 2015, Beyond Next set up a first fund ($37 million) in 2015 and a second fund ($111 million) in 2019. It invested in nearly 80 healthcare, agri-food and deep tech companies in Japan and India. The Japan-based VC has exited some of its portfolios across Fund 1 and Fund 2 via initial public offerings (Susmed and QD Laser) and mergers and acquisitions (Repertoire Genesis and GigIndia).
>“Digital Therapeutics (DTx) is now gaining momentum in Japan,” according to Ito. One of its portfolios, CureApp, which raised about ¥7 billion ($47 million at today’s exchange rate) from Carlyle last year, has built a therapeutics app that allows users to receive medical device approval and insurance reimbursement. Susmed, which has developed a therapeutic app for patients with insomnia, is the first Japanese IPO in the digital healthcare sector, Ito noted.
Beyond Next also invested in Regional Fish Institute, a food tech startup that uses genome-editing technology to breed fish faster than usual; Elephantech, an ecofriendly print circuit boards manufacturer; and iCare, a Japanese healthcare management provider.