Japanese VCs targeting Africa

by Johan Burger

When Samurai Incubate, a Tokyo-based venture capital firm, its US$18.6m ‘Samurai Africa 2nd General Partnership fund’ was oversubscribed in April it set off an Africa fever in the Japanese VC community. The fund had hit its target in a matter of days with 54 investors joining in as LPs. These VCs included Kepple Africa Ventures, TIBU, LULA, and Numida.

Japanese VCs are looking at investment opportunities in Africa to offset an oversupply of capital in the Japanese startup system. TIBU, LULA and Numida invested tens of millions of dollars (raised from private and corporate investors in Japan) in about 100 startups across the African continent. They offer Africa’s governments and its private sector an alternative to Chinese funding. In contrast to Japanese VCs, China’s investments in Africa are almost entirely driven by state banks, loan agencies and public sector grants.

According to Ryosuke Yamawaki of Kepple, Japanese VCs see Africa as the market of the future. Its start-up market needs capital, which has created an opportunity for Japanese investors. Kepple invested US$12m in 61 firms in nine African countries in the past three years. Samurai invested in 25 companies in Nigeria, Kenya, South Africa, Ghana, Uganda and Rwanda, while Asia Africa Investment & Consulting (AAIC) invested in 20 African companies.

Kentaro Sakakibara founded Samurai Incubate, and in 2018, the firm began investing in Africa by establishing a subsidiary called Leapfrog Ventures. It invested US$2.5m in 20 African startups since 2018. A year later it renamed itself Samurai Incubate Africa. A sector-agnostic fund, Samurai Incubate Africa has already invested in 26 companies. The six from this second fund include Eden Life, a tech-enabled home service startup; online loan marketplace Evolve Credit; energy startup Shyft Power Solutions; microfinance services for car lenders FMG; freight forwarding company Oneport; and online grocery platform Pricepally.

In addition to cash for investments in Africa’s start-ups, Japanese VCs have brought knowledge-sharing platform for the firms in their portfolio. They also provide advice to their clients. Some VCs focus on one sector: AAIC targeted the health care sector. Like Kepple and Samurai, others invested in energy, fintech, agriculture, retail, logistics, transport, entertainment, and health care startups. Geographically, all three of these funds focus their investments in Nigeria (Kepple and AAIC have offices there), Kenya (where Yamawaki is based) and South Africa. However, their portfolios indicate a willingness to invest wherever opportunities are available.

POINT OF INTEREST