UMJ Russia Fund attracts Japanese companies’ shares in Russian high technologies for more than 10 years. Yusuke Otsubo, Managing Partner of the fund and regular participant of the annual Russian International Forum ‘Open Innovations‘, shared with Pan Pacific Agency witch investments could be successful in TMT market.
Your fund has been operating in the Russian Technology, Media and Telecom market for more than 10 years. What projects you’re more heavily investing in?
Since 2007, UMJ Russia Fund had invested in 10 companies: four companies in IT and Internet areas, three companies in new materials, and the rest in media, consumer, etc. Now we have shares only in two Russian companies.
What case was the most successful?
In 2012 we have invested in a cross-sectorial online platform for physicians and students “Mir vracha”, at the confluence of Internet and pharma business. “Mir vracha” is functioning successfully, now more than 345 thousand accounts are registered on the platform. “Mir vracha” is the most successful case for us, I think. We still keep this portfolio, hope it to become like m3.com in Russia. Actually, M3 is an investor of “Mir vracha”. Of course, we need to consider that the size of healthcare market of Russia is much smaller than of Japan.
No one could only win dealing with investments. Could you tell about your failures in Russia?
Of course, we are not an exception. In 2010 we’ve enriched our portfolio with the stakes in the television company Gameland TV. Unfortunately, Gameland TV stopped broadcasting. We’ve already wrote down the investment, it was unsuccessful for us. We couldn’t forecast the market trend correctly. Another similar case was in 2015, when a Russian company “Mamba” bought our shares in the dating site Teamo.ru. In RUB terms, it was a good investment. But in USD terms, as the RUB was devaluated almost half in Dec 2014, it wasn’t successful unfortunately.
With such a rich experience interacting with Russian TMT market, what spheres are the most attractive for investment?
Russian software engineers are the best. Software, optics and laser, new materials technologies have no equal in the world. But most of them are quite basic. It would take a long time to commercialize them.
Will the fund expand its presence in the Russian market in the nearest future?
We keep watching Russian tech sector: IT mostly software, healthcare and agritech as well. Our target is 20% IRR, but it’s not easy to realize this level of return for the fund in reality. Now we’re planning to launch new fund “Japan Russia New Frontier Fund” with local partner Davinci Capital and Russian Venture Company as anchor partner. The fund focuses on tech companies which can increase the value with Japan-Russia collaboration. The capital of the fund will be up to $200M.
This is not your first time participating in Open Innovations Forum. How useful is this for the fund?
It’s very helpful for the tech investors to see the people and companies at the event. After the sanction, the speed of globalization is slowing down, but the direction is the same.
Interviewer: Dmitrii Shcherbakov – Pan Pacific Agency’s Managing Partner, Editor-in-Chief.