Japanese VCs Shift Focus to India Amid Southeast Asia's Slowdown
Japanese venture capital firms are increasingly exploring India for startup investments as returns in their home market and Southeast Asia remain disappointing.
Japanese VcsIndia StartupsVenture CapitalIpo MarketDeeptechReal EstateAug 04, 2025
The development is still in its early stages, with most Japanese VCs maintaining a cautious approach. However, those that have invested in India are doing so with smaller fund sizes and cheque amounts. Despite this, the interest in India is growing, driven by the country's booming IPO market and the openness of its startup ecosystem.
“Japanese investors are realizing that the Southeast Asian market is a difficult market and India is an emerging market open for everyone,” Nao Murakami, founder and general partner at Incubate Fund Asia and partner, investments at SMBC Asia Rising Fund, told Mint in an interview. “On top of that, the country’s IPO market is booming.”
In 2023, Incubate Fund Asia closed a $30 million fund, with 80% of the capital allocated to Indian startups. The firm has invested in companies such as Captain Fresh, Yulu, ShopKirana (recently acquired by Udaan), and Plum. This year, Incubate Fund Asia plans to raise its largest fund yet, a $75-100 million fund with a strong focus on India, according to Murakami.
India's IPO market has been particularly robust. In the first half of 2023, Indian exchanges saw 119 companies go public, collectively raising ₹51,150 crore (approximately $6.1 billion), according to a S&P Global Market Intelligence report. In contrast, Southeast Asia saw only 53 IPOs raising over $1.4 billion during the same period, as per a Deloitte report.
In 2022, Southeast Asia's primary markets raised approximately $3 billion from 122 initial public offerings (IPOs), according to Deloitte. In comparison, the Indian market raised $19.5 billion from 268 IPOs, as reported by the National Stock Exchange (NSE). The biggest IPO from India last year was from Hyundai Motor India, which raised $3.3 billion. In Southeast Asia, the largest IPO in 2022 was a $531 million offering from Malaysia's 99 Speed Mart Retail Holdings Berhad, the country’s largest public offering in seven years.
Other Japanese VCs are also ramping up their investments in India. BeyondNext Ventures, which entered the country in 2019, has backed 14 Indian ventures, according to Jay Krishnan, the company’s partner and head of India investments. “Back then, the idea was to get a taste, get some exposure. Now, we’ve decided to go full hog in India,” Krishnan told Mint in an earlier conversation. BeyondNext is currently raising a $50 million India-focused fund from its Japanese limited partners.
Enrission India Capital, another Japanese firm, allocated the entire $120 million it raised in Japan last year to Indian startups. “The feedback we’ve received from our Japanese LPs about their market is that it doesn’t give great returns. It’s like India’s fixed deposit story; it’s just depleting, and they’re looking for options,” said Harsh Deodhar, principal at Enrission India Capital. The company has made 16 investments this year, including in startups like Loopworm, Peppermint Robotics, and Bambrew.
Enrission provides seed and pre-seed funding ranging from $500,000 to $1 million. For follow-on growth investments, funding can go up to $2 million.
Other notable investments include University of Tokyo Edge Capital, which led clean energy startup Aerem's ₹100 crore (around $12 million) Series A fundraising round. SMBC Asia Rising Fund was part of a $35 million round in mortgage-tech startup Easy last year. Suzuki, the automobile manufacturer, is focusing on startups in agriculture, financial inclusion, supply chain, and mobility spaces after launching its first India-focused ₹340 crore fund in July last year.
The most recent fund to expand its focus to India is Genesia Ventures, which focuses on pre-seed and seed investments. The company is currently raising money for its fourth fund (GV-4) and has received $22.5 million from Japan Investment Corporation (JIC) as an LP investment. With this investment, JIC aims to “strengthen its support for partnerships between Japanese companies and local startups, with the goal of helping Japanese companies create new businesses and expand into new markets,” according to its announcement.
Several other Japanese VCs are still in a wait-and-watch mode, but Murakami believes this cautious approach is typical of Japanese firms. “It’s still slow, but it’s faster than before. It’s why the SMBC Asia Rising Fund is so important because one of the largest banking groups from Japan is putting $200 million to support Indian startups,” he said.
In terms of sectors, banking and real estate have generally been favored by larger institutional investors from Japan. However, smaller funds, which have traditionally invested in fintech, consumer, and climate tech, are now looking at emerging sectors like sustainability, deeptech, and semiconductors.
BeyondNext is particularly bullish on biotech. “India can take an IT services approach to biotech because of the industries around it like vaccines, active pharmaceutical ingredient manufacturing, and generic pharma. All those will have second-order effects on new innovation coming up,” said Krishnan. The firm aims to leverage its ties with larger Japanese corporations to bring Indian startups to Japan, where they can benefit from R&D assistance and then expand globally, including into markets like the US.
Enrission, on the other hand, is sector-agnostic. “We’re constantly discussing with our LPs, asking them what they like, what they want to invest in. Currently, there’s interest in the consumer space,” said Deodhar. The firm has made investments in deeptech companies like Loopworm and Peppermint Robotics in the first quarter of FY24.
Most smaller funds are entering Indian startups early, taking a larger stake, and are willing to hold their investments until the company goes public or is acquired for a substantial sum. This is why deeptech has emerged as a new go-to sector for Japanese funds.
Incubate Fund Asia has traditionally invested in fintech and consumer companies, offering cheque sizes ranging from $750,000 to $1 million. Going forward, they will target sustainability as well, according to Murakami. “In the fourth fund, cheque sizes will be bigger. We’ll probably do between $1 million and $1.5 million and then double down later,” he said. For growth-stage investments in breakout companies, the Incubate Asia Fund taps into SMBC's Asia Rising Fund, which is currently sized at $200 million.
Through the lifecycle of the new fund, portfolio construction will remain the same, with the firm investing in 15-20 startups. This time around, they’ll be setting up the fund in India itself, though the fundraise will happen from Japanese LPs. The company is building its thesis around deeptech, defense, and semiconductors.
“Earlier, people were skeptical, but now they are seeing the success of companies like Pixxel and AgniKul and their ability to pivot, scale, and generate value is opening up sectors,” said Rajeev Ranka, partner, India investments at Incubate Fund Asia and SMBC Asia Rising Fund. “Defense is another category where India is for the first time becoming the consumer rather than the investor.”
Frequently Asked Questions
Why are Japanese VCs shifting focus to India?
Japanese VCs are shifting focus to India due to the disappointing returns from investments in their home market and Southeast Asia, coupled with India's booming IPO market and open startup ecosystem.
What sectors are Japanese VCs interested in India?
Japanese VCs are interested in a variety of sectors including banking, real estate, fintech, consumer, climate tech, sustainability, deeptech, and semiconductors.
What is the current investment strategy of Japanese VCs in India?
Japanese VCs are currently making smaller, early-stage investments in Indian startups, taking larger equity stakes, and are willing to hold their investments until the company goes public or is acquired.
Which Japanese VC firms are actively investing in India?
Firms like BeyondNext Ventures, Enrission India Capital, Incubate Fund Asia, and Genesia Ventures are actively investing in Indian startups.
What are the potential benefits of Japanese VCs investing in Indian startups?
Japanese VCs can benefit from the high growth potential and robust IPO market in India. They can also bring Indian startups to Japan for R&D assistance and help them expand globally.
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