The land of the rising startups: how India is luring Japanese investors

India’s startups have been mostly looking West for investment cash, but this is changing. Last year was an inflection point when Masayoshi Son, founder and CEO of Japanese telecoms giant SoftBank, visited India and announced plans to pump US$10 billion into India’s “information revolution.” Two-thirds of the first billion from SoftBank went to Snapdeal, to help it compete with ecommerce leaders Flipkart and Amazon. And nearly a quarter of a billion went to taxi app Ola to take on Uber.

Those were mega deals in fairly well established tech services. But now Japanese investors are looking into India’s earlier-stage startups too. Japan-based Rebright Partners has just made its second investment in India, joining Tiger Global in funding News in Shorts. This comes a month after seed investment in Tookitaki, in partnership with Jungle Ventures.

Seasoned entrepreneur Takeshi Ebihara, who founded Rebright Partners four years ago, recounts to Tech in Asia how they were drawn to India:

Until now, we invested only in Southeast Asia. But in the last couple of years, we received a lot of fundraising offers from Indian startups. We started to visit India in the last six months and found out that the startup scene in India is phenomenal. So we have decided to be a Southeast Asia-plus-India focused fund now.

Looking to Japan’s consumers

Rebright Partners is an early stage VC, backed by Japanese tech corporations, which has invested in 17 Southeast Asian companies. So its entry into India is good news for Indian startups targeting the Southeast Asian and Japanese markets.

“Southeast Asia is a very close market for Indian startups,” says Ebihara. “In terms of culture too, the region is very similar to India. And of course, Japan is the third largest technology market in the world. Some of the startups I met in India, such as TookiTaki, are very keen to enter the Japan market. We can help them get market entry as well as strategic partnerships with large Japanese corporations.”

When AdNear, a location-based advertising intelligence startup, raised US$19 million in series B funding recently, it wasn’t the money that determined its choice of new investors. It picked Japanese VC Global Brain because it wanted help with entering a new market. “The Japanese culture is unique, and we had to keep that in mind. Global Brain’s local partnerships and expertise are vital to the success of an international entrant like AdNear to the Japanese market,” AdNear founder Anil Mathews told Tech in Asia.

While Indian startups are getting increasingly interested in opportunities in the East, the converse is equally the case. Recently, a Bangalore-based instant messaging app for local shopping, Lookup, picked up seed funding from Japan’s leading social games company DeNA and Teruhide Sato, founder of Beenos group, a global conglomerate with a business incubator.

Such an early-stage deal from leading Japanese tech titans in a fledgling Indian startup would have been inconceivable even a couple of years back, even though Lookup founder Deepak Ravindran has impressive credentials as a serial entrepreneur who was picked by MIT as a top innovator.

Opportunity in chaos

Sho Nakasone, a rare Japanese entrepreneur based in Bangalore, explained to me why the Japanese have been slow to take to India. Culturally, he says, the Japanese like things to be well-organized. They like order. “Without solid on-the-ground research, Japanese companies will not enter a new market. In a market like India, which is growing so fast and in different directions all at the same time, things are chaotic. That’s tough to negotiate,” he says.