Article from the Australian newspaper 2 Feb 2023 by Joyce Moullakis
MUFG bank has struck an alliance with Australian firm artesian venture partners, as it seeks to boost the presence of its corporate customers in the industry and align with Japan's goal to achieve a ten-fold increase in the number of start-ups over five years.
Artesian Venture Partners’ Japan adviser, Stephen Good, Ashurst partner Natsuko Ogawa, MUFG’s Kazuki Kodera and Artesian’s Gilles Planté. Picture: Dempster Jane
The open-ended memorandum of understanding, being announced on Thursday, was led by the Japanese banking giant’s corporate investment banking division in Oceania.
It is aimed at helping MUFG provide its corporate customers opportunities to collaborate with, and invest in, Australian start-ups.
Alternative investment manager Artesian, founded in 2004, has funds under management of more than $1bn spanning areas such as venture capital, fixed income and impact investing, with a focus in the Asia Pacific region.
It has backed more than 500 companies including Sydney-based food marketplace firm ChefPrep (CoLab) and clean technology group 5B – in the latter alongside investors which include bp and former Prime Minister Malcolm Turnbull.
The MOU comes, though, amid a turbulent environment for technology start-ups, digital lenders and fintechs as investors have started demanding a quicker path to profitability, fund raising has been challenged and valuations have plummeted.
Gilles Planté of alternative investment manager Artesian. Picture: Dempster Jane
Artesian partner GillesPplanté said the firm looked through peaks and troughs in the investment and valuation cycles.
“The cycle of valuation, up and down, of contraction of the number of investments being made around the world is actually quite independent of that strategy,” he said.
“Those cycles in terms of innovation are very long and it’s not unusual from ideation to maturation of a start-up to take 10 to 12 years.
“We feel that (Australia Japan) corridor of investment and interest in innovation is probably under represented and this MOU hopefully is one step in the right direction for better co-operation.”
MUFG’s corporate banking vice president, Kazuki Kodera, said of the MOU: “we drive to support Japanese companies with artesian to accelerate start-up corroboration with our customers.”
The bank also hopes to facilitate Japanese start-ups expanding into Australia and raise capital from venture funds outside of their country.
The tie-up comes as Australia and Japan have forged a closer political and economic relationship in the past two years, which was earlier reinforced by the signing of a free-trade pact in 2015.
MUFG and Artesian are mindful of the Japanese government’s edict to ramp up innovation and instil a start-up and venture capital culture there, after announcing a mega funding package and a target to boost by ten-fold the number of start-ups over five years.
“They are looking to grow the external economy of Japan. The connection between the innovation ecosystem makes a great deal of sense,” said Stephen Good, Artesian’s Japan adviser.
“The actual size of that investment is going to be around $70bn and it’s really the catch-up that Japan is trying to make.”
Ashurst partner Natsuko Ogawa, who leads the firm’s Japan practice in Australia, said the MOU reflected an increasing interest from Japanese investors in the local start-up industry over the past 12 months. Ashurst advised on the firms’ alliance.
“The opportunities here are not well-known compared to Silicon Valley and Israel, but Australia is starting to attract interest. What is needed is better information flow to our Japanese colleagues and a willingness to learn to work together effectively in this space,” she said.
“We’d obviously like to see some real transactions flowing from this MOU, as we’ve all said is a great step in the right direction, but it’s just a starting point for growth in the actual business that is done between the two countries in this space.”
Artesian — like other venture capital firms — expects some of its bets to fail both locally and through the Asia Pacific region, given the nature of the start-up space.
“Start-up and early stage innovation (investing) is risky in nature regardless of the provenance of that innovation,” Mr Planté said.
“Because we start investing in those companies in the early stage and following on throughout their life … We are a lot less exposed to later stage, high failure with high capital involved.
“We do expect some of our companies to fail throughout their life cycle but it’s mostly because of product-market fit not being appropriate.”
On-demand grocery start-up Voly, of which Artesian was one of several venture backers, collapsed late last year.
MUFG — and its parent entity Mitsubishi UFJ Financial Group — have more broadly accelerated its investment in start-ups around the world in recent years.
Mitsubishi UFJ Innovation Partners, the group’s corporate venture capital arm which can make equity investments, was established in 2019. MUFG and Israeli fintech liquidity capital in 2020 formed a venture to provide debt financing to Asia pacific start-ups.
The bank will, however, be keeping a close eye on how other Japanese players are faring in the market. Softbank last year booked substantial write downs and realised losses in its venture capital-style vision funds.
MUFG’s few MOUs in Australia include a 2021 tie-up with western Australia's department of jobs, tourism, science and innovation, based around facilitating engagement with Japanese companies seeking business opportunities in the state.
The bank has a longstanding presence in Australia, having established a local business in 1915.
Artesian also has a VentureCcapital as a Service (VCaaS) unit, with its website noting mandates for companies including GrainCorp and Invocare.
In 2020, it was appointed by the South Australian government as the venture capital fund manager to oversee the $50m SA Venture Capital fund.
Artificial intelligence is among the investment areas Artesian has been interested in. “We’ve been investing in AI for the past three years so we are expecting this to accelerate,” Mr Planté said.