Japan’s MUFG launches $135M 3rd fund to work with more GenAI startups

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MUFG Innovation Partners (MUIP) recently announced that it has just launched its fund III, following its fund II announced in August of 2021. The new fund is expected to have a size of 20 billion yen (about $135 million), the same as each of the previous two funds. The new fund is managed by Mitsubishi UFJ Innovation Partners with financially backed from MUFG Bank and other group companies.

In contrast to Mitsubishi UFJ Capital (MUCAP), which usually makes pure investments, MUIP is a corporate venture capital focused on strategic investments exploring collaboration with MUFG companies. MUIP’s AUM (assets under management), including its three core funds and fund of funds (FoF) for the US and Israel markets, now totals approximately 80 billion yen (about $540 million).

According to Takashi Sano, Chief Investment Officer at MUIP, the new fund will more focus on investments in Japan and the U.S., following the establishment of the MUFG Ganesha Fund ($300 million US) for India and the MUIP Garuda 1 Fund ($100 million US) for Southeast Asia from last year through this year. In addition, the MUIP Fund II has increased the ratio of investments in Japanese startups compared to the Fund I although it is unclear whether or not this trend will be applied to the Fund III.

MUFG’s investment and financing initiatives for startups (Amounts represent the total amount of investment including unexecuted amounts)
Image credit: MUFG Innovation Partners

Sano says,

MUFG has invested in Liquidity Capital, an Israeli FinTech startup investing in AI startups, from its Fund I and II, and has also invested in Mars Growth Capital, a joint venture established by MUFG Bank and Liquidity Capital in 2020. Mars Growth Capital is preparing a growth stage-focused fund (up to 20 billion yen or $134.6 million US) for the Japanese market while other MUIP-related initiatives are also increasing in Japan.

MUIP will continue to invest in non-fintech startups, including generative AI startups, to explore synergies with MUFG companies. It will also work with overseas banks in which MUFG Bank has invested, such as Bank of Ayudhya (Krungsri) in Thailand and Bank Danamon in Indonesia, to encourage these banks’ business partners to introduce new technologies from the startups in which they have invested.

MUIP has invested in more than 40 startups through several funds to date, and the total investment in 2022 reached about 10 billion yen ($67.3 million US). For middle-stage and later startups, MUIP has also made direct investments from MUFG Bank and others, bringing the total amount of its investment framework in startups and other digital companies to approximately 570 billion yen ($3.8 billion US).

As for large funds from major Japanese financial conglomerates, SMBC launched a $200 million corporate venture capital fund called SMBC Asia Rising Fund in Singapore in May, jointly with Incubate Fund. In April, Mizuho Financial Group established a $10 billion corporate venture capital called Mizuho Innovation Frontier. In both cases, their investments are intended to explore synergies with their core businesses respectively.