See the original story in Japanese.
Japan’s ABBALab, a startup incubator focusing on IoT (Internet of Things) or IoE (Internet of Everything) business, last week announced the establishment of ABBALab IoE 1st Investment Limited Liability Partnership as its new fund.
The fund was formed with about 1.5 billion yen (about $14 million) in committed capital from investors including Mistletoe, Hon Hai venture capital fund 2020, Sojitz, Sakura Internet and angel investors. The redemption period of the fund is ten years.
Its investment target is not only hardware but also general products or services in IoT / IoE field, while covering wide investment stages from the prototyping stage or a pre-seed round to a series A round phase. Also follow-on investment will be considered according to the situation.
In ABBALab, CEO Osamu Ogasahara’s personal assets had been invested in IoT startups so far, with the investment targets being disclosed as well.
- No New Folk Studio (smart footwear) … See this article
- Exiii (personalized myoelectric hand) … See these articles
- Vinclu (smartphone accessory / hologram AI) … See these articles
- Symax (health condition analyzer inside toilet) … See these articles
- Fove (eye-tracking Virtual Reality headset) … See these articles
- Up Perfoma (footballer’s motion analyzer) … See this article
- Inupathy (dog mental visualizer)
- SenSprout (agricultural sensor) … See these articles
- Tsumug (smart lock)
Necessity of forming funds
Upon fund establishment, I had an interview with CEO Ogasahara (all question in boldface asked by the writer, and answered by Ogasahara).
First of all, would you explain your activities so far? You had invested your personal assets in ABBALab.
During the past two years, I started ABBALab with Taizo (Son, CEO of Misletoe) as a profit-making corporation, and been involved with investment for prototyping or communication activities. Meanwhile, I have participated in starting up DMM.make AKIBA, IoT Platform of Sakura Internet or Japan Region of OpenFog. Those are all to set a ground from which new startups will be born.
The investment targets steadily increased. Was that within your expectation?
Actually, I could not have met any startups with impact other than my investment targets during the first year. While receiving a few requests for investment examination in one month, I might possibly not have been able to notice promising startups to invest in during prototyping phase with just my senses.
You had run an acceleration program once in ABBALab. Would you tell me the unsuccessful points of the program?
We formed a fellowship system to have businesspersons participate in the activities as mentors, but the cost effectiveness was bad because it was hard for them to work within the startups’ timeframe.
There was also a system to build teams anew by gathering failed startups. Could you provide actual examples?
There was no case where separated individual members had united into one. However, we found a case in which a team manufactured a concept model of a product in combination with a close team, of course with charges though.
How much do you evaluate that in score?
A 70. Although each startup is responsible for its own business, I think I myself could do more in terms of speed or number of matters as an accelerator.
Let’s move on to the topic about the new fund. The return on personal asset-sized investment may be a kind of community creation for example, which means just support. However, fund establishment will produce a financial business aspect. Could I ask you the reason why you formed the fund this time?
For example, it may be not so bad as a portfolio to continue investing a few million yen into 10 to 20 startups per year under the current style. However, even if only ABBALab was given excellent investment targets, there is no guarantee that a better environment would be formed in ten, twenty or fifty years later.
To deal with this, I noticed the need to change the system on the assumption of follow-on such as prototyping, seed and series A. Moreover, it is difficult to run ABBALab in such a style only with personal assets.
By only increasing the number of shareholders and raising money from them, I think our degree of freedom will be limited as a result, because we just have unlisted startups’ shares in the prototype phase (in most cases), for which valuation is difficult.
So you thought that simply forming fund is easier to understand than fundraising and investing as a corporation.
As for our result of investment activities, we had shown a not-too-bad performance for introduction to investors, where some of the invested startups had succeeded in fundraising during their next round, so that I came to consider raising money by forming a fund as ABBALab, not capital increase.
Is there any change with establishment of the fund?
What the good thing is, simply an increase of the amount and the possibility of follow-on, or possibility of collaboration or additional investment by LPs. By having more concerned people with the fund between us, we can contribute to the resource secure for startups through requests for assistance or mentoring that we have not been able to handle.
One point which will widely change is, when considering follow-on of tens of millions in scale, we have to share that with an advisory board in advance, because we invest the fund received from LPs, not personal assets.
What do LPs (limited partners) expect in addition to investment return?
Foxconn (managing Hon Hai venture capital fund 2020) had already invested in Fove, and Sojitz started supporting a deal with Symax. Also, Sakura Internet is working to adopt Tsumug’s products in home IoT business with Apaman Shop (Japanese rental housing broker).
Thank you for your time today.
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Translated by Taijiro Takeda
Edited by “Tex” Pomeroy