Coral Capital Closes $128M Japan Startup Fund - Third Fund

Coral Capital Closes $128 Million Third Fund

Tokyo-based Coral Capital, a venture capital firm, has announced the successful closing of its third investment vehicle, Coral Capital III, with a total of $128 million, equivalent to 14 billion yen. This brings the firm’s total assets under management (AUM) to $275 million.

Fund Investors

The fund attracted a diverse group of limited partners, including prominent institutions such as Mizuho Bank, Mitsubishi Estate, and Shinsei Bank. Pavilion Capital, Founders Fund, and Dai-ichi Life Insurance also participated, alongside GREE and a number of other undisclosed domestic and international investors.

Investment Strategy

Founded by James Riney and Yohei Sawayama, Coral Capital will maintain its focus on providing seed and early-stage funding to companies operating within Japan. Initial investments will range from $500,000 to $5 million, with subsequent follow-on funding opportunities available, as stated by CEO and founding partner Riney in a discussion with TechCrunch.

Significant follow-on investments have already been made, including $20 million in SmartHR and $17 million in Graffer. A substantial portion of the new fund is earmarked for these types of follow-on investments.

Global Reach and Fund Life

Approximately 30% of the third fund originates from global investors spanning the U.S., Asia, and Europe. Coral Capital aims to facilitate connections between its Japanese portfolio companies and the broader international venture capital landscape, enabling them to achieve global expansion.

A distinguishing feature of this latest fund is its extended lifespan, potentially reaching 14 years. Riney explained that this longer timeframe is intended to allow founders to concentrate on long-term growth without the pressure of premature exit expectations.

Firm History

Riney and Sawayama previously served as co-founders of 500 Startups Japan. They launched their inaugural fund in collaboration with 500 Startups in February 2016. Subsequently, in February 2019, Coral Capital established its $45 million second fund, Capital Fund II, operating under its own brand.

Portfolio and Investment Focus

To date, Coral Capital has invested in over 80 Japanese companies and successfully exited seven investments. Notable portfolio companies include SmartHR, Graffer, GITAI, and Kyoto Fusioneering.

The firm’s investment strategy centers on companies driving digital transformation across sectors such as SaaS, insurance, fintech, healthcare, deep tech, fusion engineering, and robotics.

The Evolving Japanese Startup Ecosystem

Riney observes that the Japanese startup ecosystem has matured considerably over the past nine years. When he and Sawayama began investing in seed and early-stage ventures in 2012, the startup environment was largely opaque. Annual investment totaled less than $1 billion, and the number of unicorns in Japan was minimal.

Currently, Japan’s annual startup investment is estimated at $5 billion, with the emergence of six unicorns, including a company within Coral Capital’s portfolio. This represents a significant increase from the approximately $600 million invested in 2012.

Future Outlook

While the $5 billion figure is substantial, Riney notes that it pales in comparison to the tens of billions attracted by the U.S. and China, and even the $4 billion seen in neighboring Korea, which produced the decacorn Coupang. He expresses confidence in further growth, stating, “We can do better, and we will,” and reaffirms Coral Capital’s commitment to supporting and advancing the Japanese ecosystem.

Community Building and Media

Coral Capital also intends to expand its media platform, Coral Insights, and increase staffing to strengthen its community engagement. The increasing contribution of content from startup founders, employees, and investors is elevating standards within the ecosystem, and Japan is increasingly resembling Silicon Valley.