Exclusive: Tokyo Based Dream Incubator To Enter India With $100 Mn Fund, Plans To Invest In Consumer Goods Startups

Dream Incubator Inc. (DI), a Tokyo-based PE firm is plotting its route to India and South-East Asian (SEA) countries with $100 Mn DIAIF II fund, in June this year. DIAIF stands for Dream Incubator Asian Industrial Fund. With this, it aims to create business opportunities in consumer goods industry with not much focus on Technology. This includes verticals such as wholesale, retail, restaurant chains, food products, FMCG, and peripheral medical products /services.

Founded in June 2000 by Koichi Hori, (Ex-President of BCG Japan), this Cayman registered fund is co-operated by DI and Orix Corporation, a Japan based financial services group. The fund’s main purpose is to create business, instead of just “investment return”.

Major investment under DIAIF I- a $50 Mn fund, was done in Vietnam into the leading companies in domestic demand based industries such as Consumer goods, Retailers, Health care, etc. All were listed and private companies. For example, Nutifood, diary manufacturer invested in 2011; JVC, medical distributor (2012); Santedo, Pharmaceutical distributor and retailer (2013); MESA, FMCG distributor (2014), etc. The investors (LP) included Japan Bank for International Cooperation, Major general trading company, Food/beverage company, Food/condiment company, Major retailer, Securities company and Entertainment company.

In November last year, the company formed a strategic alliance with the US-based global merchant bank, The Raine Group LLC (“Raine”). As well as it laid an investment in the venture capital fund managed by Raine, to explore joint initiatives in the technology, media and telecommunications (“TMT”) sectors. “With an established track record of partnering with early stage companies we are excited to work with them to both source investment opportunities and to expand the reach of our portfolio companies into Asia,” said Gordon Rubenstein, a managing partner of Raine’s venture fund.

Since past few years, foreign incubators and investors have taken a keen interest in Indian and SouthEast Asian startups, with Japan being the most prominent one. Some of these include:

1. Alibaba-Globals: Last month, Alibaba agreed with Bangalore-based analytics solution company, Globals to create a startup incubator program focused on mobile internet and commerce.
2. Netprice.com: In 2014, the Japan-based consumer internet incubation cum investment firm entered India, with plans to invest between $500K – $4 Mn in web and mobile space.
3. In 2014 only, Tokyo and Singapore-based venture capital firm Rebright Partners entered India, with plans to invest  between $100K and $1 Mn in early stage startups. So far, it has invested in Tookitaki, a data intelligence startup and News in Shorts, a mobile-based news stories aggregator. Besides, it is also looking to increase its investments in India with its second fund launched this year.
4. Also, there were indications given by Tokyo-based early stage investor, Samurai Incubate to foray into India in early 2013.

In India, the major factors driving this force are rise in middle class status, improving internet reach and increasing smartphone sale. Also, presence of world’s highest potential youth population is playing a key role in attracting foreign investors.

If talked about SEA countries, than Malaysia, Vietnam and Cambodia are the major emerging markets. According to Alexander Jarvis, Founder of 50Folds, an early stage Venture capital, Japanese see South East Asia as their back yard and given various domestic factors will continue to be buoyant about investing in the region. Increasing digitalization, untapped demand and growing online markets are other growth factors, attracting investors in SouthEast Asia.

We reached to DI’s Business Producer, Isawa Norihiko to talk more about their foray in India. Here are some edited excerpts:

 

Inc42: How do you see India in comparison to other SEA countries?

Norihiko: The size of the Indian market is more attractive than other SEA countries. It is a huge advantage over other SEA countries. However, regulations unfavorable to foreign companies seem to be a problem, while Singapore has set forth policies and acceleration programs which attract foreign startups and investments to Singapore.

Inc42: How are you different from other private equity firms already having their presence in India?

Norihiko: There two major differences: management consulting capabilities which could be utilized to support companies, especially in aspects of CEO matters, and firm relationships among Japanese leading companies and ministries which could support Indian companies obtain knowledge from Japanese companies, especially those in manufacturing and high-tech sectors.