A hub for venture capital firms will be established at Azabudai Hills, set to open in late November – provided by Mori Building.
Mori Building is set to inaugurate the Azabudai Hills in Tokyo’s Minato Ward at the end of November, a complex that will serve as a major hub for some 70 venture capital firms, including NTT Docomo’s corporate venture capital (CVC) arm. The initiative aims to invigorate the growth of startups and attract domestic and international investment funds by sharing expertise in fund management and other areas.
The Azabudai Hills, comprised of three high-rise buildings among other facilities, will house the “Tokyo Venture Capital Hub.” This hub will allocate two floors of one building to office spaces, shared working areas, and event venues.
Already committed to moving in are seven venture capital firms, including the University of Tokyo Edge Capital Partners (UTEC), and the Japan Venture Capital Association (JVCA). It has now been revealed that three more firms, NTT Docomo Ventures, Samurai Incubate, and Incubate Fund, will also be relocating their headquarters there.
NTT Docomo Ventures expresses an intent to “strengthen collaboration with other firms and boost the growth of investees,” according to Representative Yasumoto Ayamoto. Kentaro Sakakibara of Samurai Incubate anticipates “an increase in co-investment in promising companies.”
Incubate Fund plans to focus on hosting events for startups and investors. Representative Partner Akira Akaura envisions “a confluence of VCs amplifying the allure of startups and facilitating the influx of overseas capital.”
Interest from foreign VCs in Azabudai Hills is on the rise. There’s a notable demand to “create a base to support the Japanese market entry of investee companies” and “join the Japanese VC network to attract investors.”
According to Mori Building, about 50 of the 70 firms will be CVCs, with the remaining 20 being independent VCs. By sharing expertise in fund operation and startup nurturing, a synergistic effect is expected. Kenta Hidematsu of Mori Building’s Office Business Division envisions it as “a driving force to foster startups.”
Japanese VCs are often criticized as being “small in both quality and quantity” compared to their global counterparts, and there has been a noticeable disparity in the provision of risk money. According to research firm CB Insights, fundraising for startups in the United States reached $198.4 billion in 2022, with China following at $46.5 billion. Japan lagged at $4.3 billion.
To counter this trend, Mori Building looks to the model of Sand Hill Road in Silicon Valley. This thoroughfare, spanning approximately 2.3 kilometers, is lined with giant VCs like Andreessen Horowitz and Sequoia Capital.
Crunchbase reports that as of 2022, Andreessen Horowitz’s cumulative funds under management reached $32.4 billion. A survey by JVCA in May estimated the total funds managed by Japanese VCs at approximately 3.3 trillion yen, a figure dwarfed by a single firm like Andreessen Horowitz.
Entrepreneurs seeking funding flock to Sand Hill Road to efficiently find investors interested in their ventures. From this fertile environment emerged companies like OpenAI, developer of the conversational AI ‘ChatGPT,’ and the homestay brokerage giant Airbnb.
The congregation of vibrant young companies enhances the area’s allure and generates buzz. The real estate giants see startups as key clients due to their burgeoning demand for expanding office space. Several clusters have emerged in Tokyo’s urban core, including Shibuya and Nihonbashi. However, large-scale accumulations of VCs remain rare.
Whether Azabudai Hills can catalyze a virtuous cycle, where startups expand their businesses on abundant risk money, drawing more investment to their growth potential, remains to be seen. If Azabudai Hills can fulfill the role of “Japan’s Sand Hill Road,” it may bring Japan a step closer to the distant global vanguard.
(By Minako Yamashita, Takeshi Hashimoto, SME Editors Keijiro Suzuki)