Sat. Jan 28th, 2023

Three women who are veterans of Japan’s financial industry are setting up a $150 million venture-capital fund with a focus on good governance—an unusual undertaking in the country’s undersized and male-dominated startup market.

MPower Partners Fund LP launched on May 31 with money from investors including

Dai-ichi Life Insurance Co.

8750 -3.27%


Sompo Holdings Inc.,

8630 -0.61%

and Sumitomo Mitsui Trust Group. It will focus on later-stage Japanese startups and will work with the companies it invests in to make sure they are meeting governance standards, said Kathy Matsui, one of MPower’s general partners and a former vice chairwoman of Goldman Sachs Japan.

Integrating good-governance practices early “is one of the keys to revitalizing or revolutionizing Japan’s venture ecosystem,” said Ms. Matsui, in an interview. Japan has plenty of money and talent, but its startup industry is being held back partly because there is “not enough global ambition, perspective, diverse views,” she said.

Although MPower isn’t that big compared with many venture funds in the U.S., it is large for Japan. Only two venture funds that raised money in 2020 were larger, according to Tokyo-based data tracker Initial Inc.

Japan’s venture industry has been growing rapidly recently, but it is still undersized compared with the size of the country’s economy. And it is tiny relative to venture powerhouses in the U.S. and China. Last year, Japanese venture investment totaled less than 1% that of the U.S. and 5% that of China, according to Venture Enterprise Center, Japan, a foundation formed to support Japanese startups.

MPower’s all-female leadership team is rare even for Silicon Valley, and doubly so in Japan, where women are severely underrepresented in the upper echelons of business and finance. Japan ranked 121st out of 153 countries in the World Economic Forum’s 2020 gender-gap index, largely because of its low scores in political empowerment and economic participation.

Many Japanese startups are light on female board members and managers—which could hamper the companies as they prepare to go public and engage more broadly with investors and other businesses internationally, MPower’s partners said.

MPower’s other general partners are Yumiko Murakami, former head of the Tokyo office of the Organization for Economic Cooperation and Development and Miwa Seki, previously a portfolio manager for Japanese equities at New York-based asset manager Clay Finlay. The fund’s managing director, Eriko Suzuki, is a venture-capital veteran who has worked at Fresco Capital and Mistletoe Inc., an investment group founded by Taizo Son, the brother of

SoftBank Group Corp.

Chief Executive

Masayoshi Son.

MPower will primarily target later-stage Japanese startups that are deploying technology to solve societal challenges, such as healthcare, the partners said. It will also invest about a third of the fund in overseas earlier-stage closely held companies, largely in the U.S.

The fund hopes to differentiate itself by asking investees to work with the fund’s partners on strengthening environmental, social and governance practices, or ESG. The areas to strengthen could range from reducing carbon footprints to creating a more diverse board or reviewing how employees are treated, the partners said.

The fund will help the companies they invest in create a concrete plan to implement the improvements needed, said Ms. Matsui.

It is important to get companies to focus on such matters when they are still at the teenager stage, said Ms. Matsui, who has long lobbied to increase women’s power and representation in Japanese businesses and the economy.

“It is really hard to change behavior once you’re a big company,” she said.

Write to Phred Dvorak at [email protected]

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By rahul