JIC makes LP investment in Kepple Liquidity Fund 1

・Utilizing directsecondary investment to create unicorns

・Contributing todevelopment of the domestic secondary ecosystem

・Attractingprivate investment funds and risk capital from institutional investors

 

Tokyo, August 10, 2023 – Japan Investment Corporation(“JIC”) has announced its decision to make an LP investment of JPY3 billion in KeppleLiquidity Fund 1 (“Kepple LF1”), which is managed by Kepple Group, Inc. (“KeppleGroup”).

 

JIC aims to stimulate a virtuous cycle ofrisk capital to support next-generation industries in Japan. To achieve thisvision, JIC promotes open innovation as a means for supporting growth andenhancing the international competitiveness of businesses. JIC approaches thesechallenges by stimulating private sector investments in open innovationtogether with JIC’s own investment, while fostering investment professionals.

To achieve its mission, JIC invests inpolicy-relevant strategic business areas through LP investments in funds underJIC’s umbrella and in private funds.

 

 

About LP investment in Kepple LF1

 

(1) JIC investmentcriteria

JIC’s investment criteria* identifies “Creatingunicorn startups” as a focus area. A long-term, large-scale supply of riskcapital is required for the creation of unicorns—defined as privately heldcompanies with an enterprise value of USD1 billion or more—that can grow theirbusiness sustainably with competitive global economic strength.

 

* https://www.j-ic.co.jp/en/investment/criteria/

 

(2) Current status of investment market

In addition to the limited supply oflarge-scale risk capital for growth-stage startups, the domestic market is alsoexpected to see an increase in the number of domestic VC funds reachingmaturity. Meanwhile, an underdeveloped secondary market, where primaryinvestors trade equity stakes in startups, is one of the reasons for therelatively modest scale of IPOs for startups in Japan and a barrier to thecreation of unicorns. Finally, when it comes to exits, startups have limitedaccess to options other than IPO (i.e., M&A, etc.), and the need forsecondary funds for startups that intend to grow and expand their businesseswhile remaining unlisted is expected to increase.

 

Currently, few GPs in Japan have asecondary investment strategy, and the supply of private risk capital forsecondary funds is also limited.

 

(3) About Kepple LF1

Most domestic secondary funds focus on secondaryinvestments in LP interests as their main strategy, but Kepple LF1 focuses ondirect secondary investment, especially in areas where private investmentcapital is scarce. Kepple LF1 invests in mid- to late-stage startups that areexpected to go public within a few years, directly acquiring existingshareholder interests in secondary investments. It is expected to function as avehicle for further boosting the growth curve of startups that have been forcedto exit through small IPOs, etc., and for creating unicorns.

 

JIC expects that the LP investment in Kepple LF1will contribute to the creation of unicorns originating from Japan by enhancingKepple LF1’s investment activities in mid- and late-stage startups throughsecondary transactions. JIC also expects to contribute to the development of adomestic secondary ecosystem that will enable startups in deep tech and otherareas to obtain long-term support to grow and expand their businesses whilestrengthening and expanding the entire domestic startup ecosystem. In addition,JIC intends to provide Kepple Group with risk capital and support for systemdevelopment, etc., in order to attract private investment funds and promoteincreased fundraising from institutional investors.

 

 

About Kepple LF1

Name:                                Kepple Liquidity Fund 1

Established:                       2022

Duration:                            7.5years (with a possible extension of 2 years)

GP:                                     Kepple Liquidity Fund 1 Limited LiabilityPartnership

 

Overview of management company

Name:                               Kepple Group, Inc.

Established:                      2023

Address:                            Shibuya-ku, Tokyo

Representative:   　　　   Representative Director, CEO, General Partner TakahiroKanzaki

 

(For reference)

JIC’s fund investment strategy　

(For reference)

Objectives of JIC’s LP investments

 

1. Stimulate the supply of risk capital to helpcompanies grow and to enhance their competitiveness

JIC intends to provide capital to areas that areessential from the perspective of strengthening industrial competitiveness butlack private investment capital (investment strategies, sectors, stages,regions, etc.) with the aim of stimulating private investment capital in theshort term and medium-long term.

 

2. Create diverse investment teams, professionals, andstrategies to support a virtuous cycle of risk capital

1) Investmentteams

JIC promotes growth of the investee fundsas a leader in the intermediary of risk capital provided by institutionalinvestors (pension funds, foreign investors, etc.) towards the establishment offuture funds. This will be achieved by expanding experience and track recordsamong its fund investment team (management company) and by further improvingits ability to respond to institutional investors.

 

2) Investmentprofessionals

With the cooperation of industryorganizations such as JVCA, institutional investors, and investee managers, JICsupports the research and introduction of best practices of managers and thedevelopment of human resources serving as investment professionals.

 

3) Investmentstrategy

JIC will add diversity and depth to themarket by making an LP investment in funds even for those with strategies thatare not common in Japan yet, in response to their fund raising, including atthe time of its establishment.

 

 

About Japan Investment Corporation (JIC)

Japan InvestmentCorporation (“JIC”) was established on September 25, 2018 under the IndustrialCompetitiveness Enhancement Act. JIC’s investment focus areas are driving thecreation of new businesses for Society 5.0, creating "unicorn startups",leveraging promising untapped regional technologies and promoting businessconsolidation across industries and organizations. JIC provides risk capital tothese areas through funds independently established by JIC and LP investment inprivate funds to promote open innovation and contribute to strengthening thecompetitiveness of Japanese industries and expanding the investment ecosystem.

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