Japanese investor interest in Africa has risen sharply over the last few years, with a number of firms becoming extremely busy on the continent.
Key among them are Kepple Africa Ventures and Samurai Incubate, while the Japan International Cooperation Agency (JICA) is also busy. Newer to the party is UNCOVERED FUND, launched last year by Takuma Terakubo.
Launched in June of last year, UNCOVERED FUND is a venture capital fund targeting early and seed stage startups in Africa. The fund is scheduled to close soon, with a total size of US$15 million. Terakubo previously worked for Samurai Incubate, focused on Japan and Israel, but feels he has found his calling in Africa.
“I wanted to think a little bit about my future, so I started traveling around the world again. At that time, I visited Kenya and Rwanda for the first time in 2017. It was my first Africa visit. In the countries, what I found there was a shock that changed my life drastically. Startups were leading the country and creating the future, from basic infrastructure systems like power and water supply to logistics and human mobility,” he said.
“In Japan, where I grew up, there are many large corporations and strong vested interests from the past, which makes it difficult to challenge new things and create a national system that is resistant to innovation. However, I was shown the power of such African startups to change not only the African continent, but the world at large.”
Terakubo started investing in African startups in 2018 as CEO of Samurai Incubate Africa, but after gaining experience in investing on the continent, he decided to take on bigger challenges.
“The first fund had finished investing and the portfolio companies had grown. I decided to completely separate the company and start a new fund as UNCOVERED FUND,” he said.
The fund’s main investors are large Japanese companies in sectors such as power, automotives, finance and retail, while it also boasts the founder of unicorn Japanese startup and professional soccer player Keisuke Honda among a group of angel investors. UNCOVERED FUND started investing officially last year, and has now backed seven companies.
“We have also created alliances between the Japanese companies. In fact, after our investment, three companies have already succeeded in getting huge investments from our LPs,” Terakubo said.
“We are also working with a major Japanese automotive company to prepare a scheme to support African startups. The effective use of open data in mobility may help startups to make their business more accurate. That will be announced in a few months.”
The firm is busy, then, with Terakubo saying its goal is to work with talented entrepreneurs to create the economic foundation for Africa in 2030. UNCOVERED FUND has seven investment themes – retail, fintech, e-health, logistics, MaaS, agri-tech and food-tech, and smart city – and is not constrained by geography.
“I know that there are talented and passionate entrepreneurs in every region. We believe that any country in Africa is a good place to invest. However, it is important that the business is scalable enough to expand to multiple countries,” said Terakubo.
UNCOVERED FUND will help its portfolio companies with the scaling process, however.
“In addition to providing financial support, we are also helping them to expand their sales channels and grow their business through alliances. We also provide technology support from LP companies to help African startups integrate high-tech and hardware from Japan into their business,” Terakubo said.
The premise of all of this is his belief that new innovations will be born in Africa that will fundamentally change industrial structures and systems.
“Africa will eventually become the most advanced innovation continent in the world. In the future, I would like to bring such new innovations born in Africa back to Japan. So, Africa is the future for us, and the Japanese can learn a lot of things from Africa,” said Terakubo.
UNCOVERED FUND plans to invest in around 50 companies from this fund, yet Terakubo says he is still selective about who gets backing.
“Rather than the number of investments, our KPI is the rate of capital increase after our investments, and we aim for 100 per cent of our companies to raise US$1 million or more within one year after our investments. This is my passion to support entrepreneurs with responsibility as a VC, and to support entrepreneurs for a long period of time,” he said.
Interest from Japan in Africa is increasing year-by-year, he says.
“Geographically, Japanese investors and large corporations have been investing westward from Japan to China in the 2000s, Southeast Asia and India in the 2010s, and now Africa in the 2020s. So, in the next five years, many Japanese will start to invest in Africa,” he said.