Entrepia Ventures has raised two funds, which are both designed to bring technology from around the world to Japan.
The firm closed two side-by-side funds, the Entrepia Fund II L.P., and the Le Fonds Entrepia Nord S.E.C., based in Montreal, on Feb. 11 for a total of $50 million. The two funds will be invested together in the same companies at the same pace. Entrepia decided to raised two funds so one could be Canadian, which allows the LPs located in Montreal to reap the benefits of Canadian tax laws that reward citizens for investing in Canadian entities.
The funds look to invest in expansion-stage companies that have strong IT, communications or electronic technology.
As a firm, Entrepia’s goal is to support companies, which will bring their technologies to the Japanese markets where there is a demand for innovation. Additionally, the funds will look for innovators that have potential synergies with Japanese technologies.
“It’s very difficult for American technology companies to do business in Japan,” says S. Gene Kawaratani, Entrepia’s chairman. “Standards for telecommunications equipment in Japan are very different from those in the United States, and there are language and cultural barriers. We can bring our Japanese connections and our experience to our portfolio companies while we support them in expanding to Japanese markets.”
Entrepia’s first fund, totaling $30 million, was closed in 1999. By the end of 2002, it managed investments in 20 North American companies and generated an average rate of return for investors of 153%. One Boston-based, telecommunications equipment manufacturer in its portfolio, Sonus Networks, developed a Japanese partnership through Entrepia, which helped it customize its products for the Japanese markets. The partnership generated $50 million worth of revenue from Japanese customers. When Sonus went public in 2000, it earned 30% of its revenue from Japan.
Entrepia began raising the two new funds just before Sept. 11, 2001. Emboldened by early successes, it set out to raise $100 million. Later, the target amount was lowered to $50 million.
“It was a difficult environment to raise money in,” says Kawaratani. “It took a long time to reach our target, but some investors appreciated our experience in Japan. This strength adds a lot of value to our offerings.”
Most of Entrepia’s backers are institutional or financial investors. The Nissho Iwai Corp. of Japan, where Kawaratani worked for 17 years in business development, was the only institutional investor in its first fund. Kawaratani declined to provide any further information about the firm’s LPs.
Entrepia plans to spend four years making initial investments in 20 companies at an average amount of $3 million to $4 million apiece. After that time, it will begin to consider follow-on investments. As opposed to its first fund, which was limited to investing in North American companies, the firm plans to invest 30% of its new funds in Europe and Asia. Based in New York, the firm also has offices in Silicon Valley, Calif., and Tokyo. It plans to open an office in Montreal in April.