Sleekr, an Indonesian HR and accounting management platform, has secured funding from Tokyo-based fintech firm Money Forward in its first investment outside of Japan.
The partnership is representative of growing interest in the region from a newer generation of Japanese tech businesses, as they seek new opportunities for growth beyond home shores.
Sleekr started out providing personnel management software as a service, diversifying into cloud accounting services after acquiring fellow Indonesian startup Kiper in November 2016. It now has around 80 employees.
Sleekr’s only disclosed fundraise to date was a US$35,000 seed round in December 2014.
The amount raised from Money Forward has not been disclosed, though the Japanese company’s chief financial officer Naoya Kanesaka told Tech in Asia that it is significant given the size of the parties and the extent of their partnership.
“Including Sleekr, we have invested between US$2 million and US$3 million into five companies so far. Sleekr is of a comparably larger size,” he said.
Beyond the investment, Money Forward will share knowhow with Sleekr. Money Forward’s co-founder and CEO Yosuke Tsuji has been appointed to the startup’s board of directors.
Money Forward – which went public in a US$25 million Tokyo IPO last October – walks the line between fintech and enterprise software, offering a range of financial management products aimed at businesses and individuals.
These include cloud-based accounts, payroll, invoice, and expenses processing features, and Money Forward is the number one software choice among Japanese accounting firms with 60 percent market share, according to Kanesaka.
Close to 90 percent of small and medium enterprises in Japan use Money Forward’s services, he added.
There is clear overlap with Sleekr’s offering, which Money Forward sees as synergistic and a route to tap the potentially highly lucrative Southeast Asian market.
“In Japan, we already have an accounting and payroll product, so we don’t expect to bring [Sleekr’s] to Japan,” said Kanesaka. “But in Japan there are a lot of things we can learn about product strategy and marketing strategy.”
Partnering with a local player can also help Money Forward to better understand the market. “There is a basic difference about culture [in Southeast Asia], it’s different in terms of environment, but also there is a fundamental similarity [to Japan] in terms of how to be successful.”
The deal with Sleekr is part of the company’s “Money Forward Fund” program. It isn’t a separate, VC-style investment vehicle as the name may suggest, but rather a strategic initiative aimed at enhancing the company’s offerings through M&A activity.
Under Money Forward Fund, the company pledges to offer financial support, knowhow sharing, network support with partners, investors, and service providers, and tech support in areas such as APIs in return for equity.
Prior to making its first overseas investment with Sleekr, the Money Forward Fund backed Japanese robo-advisor Money Design in December 2015, crowdfunding platforms Campfire and LIFULL Social Funding in October last year, and ecommerce platform developer BASE earlier this month.
Kanesaka said that he expects Money Forward to make further strategic investments in Indonesia and the wider Southeast Asian region, and could invest more than US$10 million given the right prospect.
They saw potential where hardly anyone else was looking.
Japanese tech investors have been attracted to Southeast Asia partly because of proximity – in both geographic and cultural terms – and Japan’s soft power in the region, says 500 Startups Japan head James Riney.
“Japanese VCs and corporates were one of the first groups to aggressively invest in Southeast Asian startups. The region is also experiencing strong GDP growth overall, and the mobile revolution is turning more people into accessible customers,” he adds.
However, another important factor is that Southeast Asia has been largely eschewed by US and European investors until recently.
“The primary reason [for Japanese investor interest] is lack of competition compared to Silicon Valley,” says Riney. “They saw potential where hardly anyone else was looking, and local sources of capital were not as open-minded or sophisticated at the time to compete.”
While Southeast Asia accounts for a seemingly small portion of overall Japanese VC investment – at around 2.9 percent in Q3 2017, according to research from Japan’s Venture Enterprise Center – it is notable how this is not too far from matching the figure for North America.
But this state of affairs is undergoing rapid change, with the entry of increasingly well capitalized Chinese players on the scene.
“The region has matured quite a bit. There are much more local sources of capital, and my impression is that China is more aggressive than Japan these days,” Riney suggests. “Many in Japan still see potential in Southeast Asia, but it is less appealing than it used to be because it is becoming more competitive.”
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