In 2019, Mitsubishi UFJ Financial Group (MUFG) established its corporate venture capital arm, Innovation Partners (MUIP), with the ambition to fold startups into MUFG’s ecosystem. As MUIP cultivates a collaborative framework, MUFG can adapt to rapid changes in the fintech market and foster open innovation. MUFG appointed Nobutake Suzuki to lead the CVC firm, tapping his extensive experience in banking and investments.
“MUFG has made many investments in the past few years, including in one of the biggest cryptocurrency startups in America, Coinbase. However, the bank didn’t have enough resources as most investments were made by bankers and executed by a few people. So, MUFG decided to create a separate entity dedicated to startup investment,” MUIP’s president and CEO, Nobutake Suzuki, told KrASIA in an interview.
Suzuki has spent around 16 years working as a venture capitalist. Before MUIP, he was a partner at Global Brains, where he led investments in various companies in Japan and Southeast Asia. Even years ago, he had close ties with MUFG, as Suzuki started his career at Bank of Tokyo-Mitsubishi UFJ in 1991 and remained there until 2002. In July 2018, he rejoined MUFG as head of the corporate planning and digital transformation divisions.
MUIP currently manages a USD 180 million fund for fintech startups based all around the world, and Suzuki believes that Southeast Asia is an important market for the firm. In December last year, the firm participated in Malaysian auto marketplace Carcome’s USD 50 million Series C funding round. More recently, MUIP took part in a USD 23.5 million investment in Indonesia’s peer-to-peer fintech lending platform Investree.
“Southeast Asia is a very important market for us for many reasons. The region has unique proposition as we’re seeing a leapfrog phenomenon in financial services happening here,” said Suzuki. “Many countries in Southeast Asia don’t have a mature network or infrastructure for their financial system, but they have high smartphone penetration, leaving huge potential for fintech startups to fill this gap.”
MUFG is affiliated with a number of banks in the region, such as Bank Danamon in Indonesia, Bank of Ayudhya in Thailand, Vietin Bank in Vietnam, and Security Bank in the Philippines. Therefore, MUIP supports investments for startups that can build strategic partnerships with its bank partners. “Since our bank partners are generally conventional, they need to update and acquire new technology, and partnering with fintech companies can be one way to do it. Through these partnerships, these banks can provide a comprehensive range of services and reach more consumers,” he continued.
For example, as part of MUIP’s investment strategy with Carsome, the company is now collaborating with MUFG and its subsidiaries, Indonesia’s Bank Danamon, and Thailand’s Krungsri Bank to provide integrated financing access to dealers and consumers. Meanwhile, Investree has worked closely with Bank Danamon since 2016, with the latter providing loans through Investree, giving MUIP a reason to be confident in the new investment.
Suzuki said that MUIP wants to explore more opportunities where its bank partners can work with fintech startups to improve financial inclusion in the region. Earlier this year, MUFG made headlines when it invested USD 706 million in Grab. The investment is said to fund Grab’s moves to bring new financial services to Southeast Asia’s consumers. “The basic idea is that MUFG wants to be the ‘first choice bank’ for Grab and its consumers,” said Suzuki.
He didn’t elaborate on the details of the deal with Grab, but said, “Grab has tremendous data and transaction capabilities, so we believe it can bring the right services that meet the needs of their customers.”
The challenge of being an investor during a pandemic
The COVID-19 pandemic is putting a damper on MUIP’s strategy, especially since the firm’s personnel cannot perform due diligence in person due to travel restrictions. “We usually invest between one to ten million [US dollars] per company, but now it’s hard to tell how many companies we’ll invest in this year,” said Suzuki. He believes that making an investment in startups is like a marriage; you should know your partner well before tying the knot. “Of course, we can have video or web conferences, but we still need to visit the company to really understand its products, tech capabilities, and team.”
The crisis has hit many startups in different ways. As an investor, Suzuki said that MUIP needs to be more risk-averse before deciding to make a new investment. There are two factors that he takes into account when assessing startups and their business agility during the pandemic.
“First is business continuity. As most companies are required to work from home now, we can find out if a company is digitally resilient or not by looking at how this new arrangement is affecting their daily operations and execution,” he said. “Secondly, we need to find out whether the companies can keep their clients and customers, especially for consumer-focused business whose sales are highly affected by the crisis.”
Suzuki pointed out that this is a tough time for startups, especially those that have only recently began raise funds, as many investors feel more comfortable to invest in their existing portfolio companies for the time being. However, since valuations might be lower now, there are investors and big companies that may find this to be a good time to acquire startups at discounted prices.
“Obviously, the majority of investors are in risk-off mode, and I’ve seen delays or devaluations of startup financing. Some VC firms are still aggressive in early-stage investments because valuations are cheaper, while some CVC firms and strategic investors have chosen to freeze investments until the pandemic is over,” Suzuki said.
However, he believes that financial institutions are in better shape than they were during the financial crisis of 2008. Now, conventional financial institutions need to transform themselves digitally, and fintech startups can be part of that change.
“We are aware that the COVID-19 pandemic is creating financial uncertainty for both SMEs in Indonesia and abroad, but fintech is set up for this sort of condition. With remote work capabilities and systems to innovate and respond, fintech lending platforms are in a place to support customers,” Suzuki said.
Nevertheless, fintech lenders need to adjust their credit scoring models to take into account the current conditions. It is important for companies to actively monitor the situation and implement appropriate measures quickly. Anything can happen in this uncertain time. Opportunities are abundant, but not everyone is capable of optimizing it, Suzuki said.