Akatsuki's VC arm adopts co-investment model in India for media start-ups

Akatsuki Entertainment Technology Fund, a venture capital (VC) entity from Japanese mobile gaming firm Akatsuki, is co-investing with local VC entities to invest in Indian start-ups, in its focus areas of content, media and entertainment segments. 

It has invested in 10 start-ups, including Doubtnut, Planet Superheroes, LBB, Mech Mocha, Purplle, ShopKirana and The Wedding Brigade.

In partnership with Accel, Blume Ventures, Sequoia Capital, Chiratae, DSG Consumer Partners, 3one4, InfoEdge and Shunwei Capital.

In November 2018, for instance, it invested in mobile gaming firm Mech Mocha, in tandem with South Korean VC firm Neoplux, Shunwei Capital, Accel and Blume. AET Fund’s principal, Yuki Kawamura, says co-investing has been an important pillar of its strategy in the Indian market. 

‘‘More than minimising risk, it is about working with like-minded partners who understand this market deeply and build a symbiotic relationship. We have had a great partnership with all our partners so far. They each bring a unique set of experiences and perspective to the table. The aim is to continue to work with more such partners and further enable the wonderful eco-system that India has,’’ he said.

This year, Kawamura is looking to invest in five or six more start-ups. In areas such as vernacular video, vertical media, e-sports, mobile gaming, content (IP), fan engagement and live streaming, targeting the next 500 million vernacular internet users. The AET Fund has a $50 million corpus, being deployed in the US and India equally.

In the US, it invests in cutting-edge technology firms. Here, it has now restricted itself to three areas -- content, media and entertainment. This was after initially investing in lifestyle start-ups such as Yulu bikes and beauty products retailer Purpple. Typically, the fund invests $500,000 in start-ups at a Series-A stage, at a valuation of $10-15 million. 

The AET Fund was started in 2017 by Akatsuki (valued at $800 mn, best known for mobile game Dragon Ball Z), to emerge as a global entertainment player. It generates an operating profit of $120 mn annually on revenue of $250 mn, which has to be deployed productively. AET is bullish on vernacular video and mobile gaming, where people may start paying in a year.

‘‘Ùnlike in the US and China, Indian users are not used to paying for in-app purchases. That’s a key challenge. The ad market is limited. So, the gaming company cannot make money through advertising or in-app purchases. But, things are changing. Mobile Premier League introduced real money into mobile gaming,’’ says Kawamura. Real money is a key driver for people to adopt, which should pick up in two to three years. 

The Fund is planning five more early-stage deals in India's vernacular segment. Although the bulk of its investments are in the content and discovery space, the AET fund has also invested in a business-to-business e-commerce start-up, ShopKirana, which leverages gamification in the back-end, says Kawamura.

AET Fund’s India blueprint

| $50-mn fund from Japanese mobile gaming firm

| India focus on content, media and entertainment 

| Co-invests with local VC firms such as Blume, Accel

| Typically invests $500,000 in pre-Series-A stage

| Has invested in 10 start-ups, plans 5 more in 2019

| Looking to invest in vernacular video, media, mobile gaming