Japan’s Folio secures $16 million to help non-savvy investors better trade stocks

Folio CEO Shinichiro Kai
Image credit: Takeshi Hirano

See the original story in Japanese.

Tokyo-based startup Folio is currently developing an online asset management platform under the same name leveraging theme-based stock investment models and a robo-advisor service. The company announced on Thursday that it has secured 1.8 billion yen (about $16 million) from JAFCO (TSE:8595), Monex Ventures, Mitsui Sumitomo Insuarance Venture Capital, and Rakuten Fintech Fund, in addition to its current investors DCM Ventures and Draper Nexus. The investment ratio and the payment date are undisclosed, and this funding is subsequent to its seed round raising 300 million yen (about $2.7 million) conducted last March. The money secured will be spent for marketing and securing human resources related to development of the product which is planned for launch this spring.

The entire image of the brand-new online securities company has been gradually become clarified after the preparation in a stealth mode since last year.

Founded in December 2015 by Shinichiro Kai who was formerly working at Goldman Sachs as a trader, the FinTech startup is aiming to make asset management more accessible without requiring advanced financial literacy to leverage the power of technology. There are two pillars to Folio’ services: theme-based stock investment models and a robo-advisor-enabled asset management platform. Each service requires both a type I financial instruments and an investment management business licenses issued by Japan’s Financial Services Agency.

Kai explains that the applications of registration have been currently accepted and if the registration is successfully completed, the firm commences its business operation as an online securities company this spring. According to The Nikkei, Folio is an online securities company dealing domestic stocks to be established after a ten-year blank since the authorization of security business shifted to a system based on registration under Financial Instruments and Exchange Acts, appearing to be a matter fraught with great emotion.

Console of the Folio platform under development

I actually tried the platform under development and the impression was, in short, so simple. Users can invest only by choosing a favorite theme out from among a plurality of ones and adding it into the cart. Users with advanced skills are allowed to change the purchasing ratio of each stock.

Although the concept of a theme-based stock investment itself is not particularly new, I found that this platform selected major promising stocks using its own algorithm based on each company’s data including corporate performance and presented to me quickly, even for topics which are easily influenced by current situations such as “automatic driving” or “Tokyo Olympics.”

As Kai said “60% by algorithm and 40% by human”, the platform will be tuned by human in the end but gave me a modern impression having a system capable of creating large number of themes from transitory trends. In addition, the participating-type method to invite public participation in themes may cause a novel outlook as well.

By the way, users can invest 100,000 yen (about $880) at least into each theme.

While the theme-based stock investment allows users who enjoy investment in matching with their own interest, the robot-advisor function offers fully entrusted asset management. It provides management at a professional investor level where high-return can be expected with lower-risk than investment to individual stocks. Folio features a balance of a theme-based stock investment and a robo-advisor-based management, as well as user interface to visualize the two.

Kai talked about the view of his company:

It is important to make investment methods easier off course, but I think people cannot increase their knowledge or senses about the finance without a kind of passion. We aim a securities company allowing users to obtain financial literacy while enjoying investment rather than just a full automation.

Although the firm’s vision of offering asset management while enjoying is clear, an investment is just an investment and involves the risk of principal loss, as a matter of course. In some cases, situations like increased impulse to gamble may occur depending on the theme configuration. Kai regards this point to be quite serious an issue and emphasizes the establishment of internal compliance rules.

It looks like FinTech-related matters are so interesting this year. Can it flush the money out from under the mattress — the so-called “bedrock of Japanese economy” — with the power of technologies? For the moment, best wishes for a smooth start to their operation.

Translated by Taijiro Takeda
Edited by “Tex” Pomeroy, Masaru Ikeda