Leading the Development of the Asian Economy by Investing in Asian Startups: What’s the Aim of the SMBC Asia Rising Fund?

The ARF is a corporate venture capital (CVC) established jointly by SMBC and Incubate Fund. SMBC provides most of the capital, and Incubate Fund manages it in the role of a fund manager. The word “rising” in the fund is also used in the “Rising Mark,” the ascending curve in the SMBC Group logo. It is an extremely important word for SMBC Group. It contains our hope for giving rise to new business together with startup companies in Asia and for developing together with Asia.

Since the ARF is a CVC, we place emphasis on synergies with SMBC Group. As investment targets, we are primarily looking at fintech companies and focusing on the fields of lending, payment, supply chain finance, and digital assets.

So far, we have invested in four financial institutions in Southeast Asia and India. Our multi-franchise strategy is a strategy for building a second and third SMBC Group centered on these institutions. We hold a share of over 90% in Bank BTPN in Indonesia; it is our most important investment. Next, we have around a 75% share of SMFG India Credit (formerly Fullerton India) in India, and we have also made investments in financial institutions like RCBC in the Philippines and VPBank and FE Credit in Vietnam in order to expand our strategy.

SMBC and Incubate Fund had already had a close relationship through venture investment in Japan. We make investments as a limited partner in startups that Incubate Fund has found, work to add value, and provide continuing support as a bank for their business expansion even after listing. We have built this positive relationship with Incubate Fund over many years.

At the same time, from around two years ago, in Singapore, I began providing DX support on the theme of supply chain optimization for corporate customers. Amid discussions with many customers there on supply chain DX and in working to develop embedded solutions for value chains in various industries, there were many needs and concerns that were voiced that went beyond conventional financial services, and I perceived then the importance of constantly collaborating with startups, speedily incorporating new business models, and utilizing them in business development including financial and non-financial.

Asian startups exhibit remarkable growth, and with our multi-franchise strategy we are aiming to create new financial groups. So that we don’t miss out on the timing of this growth, we adopted the format of CVC, which can more quickly seize this chance.

Around the time we put out the press release in May 2023, we conducted interviews with venture capital and fintech startups in India, and the response was extremely positive. It is of course difficult for startups to expand to a certain scale of business on their own, so when SMBC Group, which carries out business globally and has investment capacity, entered the market, they welcomed us warmly.

I’ve gotten the same impression. This initiative is being received very positively in Asia. We have local networks of venture capital and startups, and they want to utilize the SMBC Group’s assets to further grow their business, so the response has been very positive toward collaborating.

When I talk with Asian startups that we are thinking of investing in, I get the sense that they are very receptive to the multi-franchise strategy of SMBC Group and to its presence as a global bank. When the service of an Indian startup is deployed in Southeast Asia or an Indonesian service is expanded to Vietnam, having a local partner is essential. There are therefore numerous startups thinking of partnering with SMBC Group.

The biggest point for this initiative is the social impact we can make in Asia using the enormous infrastructure possessed by SMBC Group. It gives local startups high hopes. There is a limit as to how much startups can grow under their own power. Fintech companies in particular have high expectations regarding partnering with SMBC Group to increase user numbers and expand markets. As for us, we will continue the challenge to meet their expectations, and I believe many startups in Asia also expect us to do so.

Nine years have passed since I became involved in Indian business, and I have thought this the entire time: Compared to Korean, Chinese, US and European companies, Japanese companies have not become involved in collaborations with local startups. The fact that Japanese companies have not incorporated innovation occurring in India and Southeast Asia is something that we have felt through our investee companies. Strategic investment and large business collaboration have always been with the US, Europe, or Korea. While we feel rather shameful about this, SMBC Group, Japan’s leading bank, is beginning a major initiative by establishing a CVC in Asia, which I think has major significance.

Basically, we will invest in fintech and businesses that are extensions of existing businesses, such as lending, transactions, and e-wallet. Conversely, the areas we won’t invest in are, for example, insurtech (a portmanteau of “insurance” and “technology”) because we are a bank. Also, areas like Web3 are distanced from our business domain, so they won’t be our main investment targets. It is a growth area, though, so we may put a foot in the door.

When it comes to Web3, we may invest in digital assets like virtual currencies. Regardless of the current thinking of banks, we will make investments while incorporating the opinions of Incubate Fund, which has a great deal of experience in startup investment.

In India and Southeast Asian countries, financial services are still not being delivered to individuals or corporations. Efficient investment will be continued in this central area of finance. We are not going to go against the grain to grab a major market—that is our basic strategy.

In Japan, SMBC Group has a decent business scale, but overseas we are still at the entryway, so how we will expand the business is the issue. We will get rid of the notion that it is difficult to expand business in Asia; we will closely align the ARF with local conditions and steadily build up an overseas track record. This will result in an increase in the presence of Japanese companies in Asia, so we are prepared to be the touchstone.

We see this initiative as a bold challenge to make open innovation a success overseas. Collaborations between large companies and startups are still difficult even in Japan, but I believe succeeding overseas will have a big impact on Japanese society.

The ARF has three missions: “We rise with Asia,” “We grow with founders,” and “We pioneer SMBC’s future.” With around 400 years of history, SMBC Group could provide an explosive boost to people working not just in Asia but in other countries as well, and we intend to engage in business going forward with the recognition that SMBC Group is in the vanguard of a new era.