#Japan #Tokyo #Incubate Fund #IF Growth #Startup Capital

Incubate Fund Introduces IF Growth Fund

Incubate Fund, a prominent player in Japan's venture capital landscape, has officially announced the formation of a significant growth fund named "IF Growth". With a targeted capital of ¥30 billion (approximately $275 million), the fund aims to provide crucial support to non-listed growth-stage companies, thereby bolstering the country's burgeoning startup ecosystem.

Background of IF Growth

The establishment of the IF Growth fund comes at a pivotal moment for the Japanese startup landscape, characterized by a series of market reforms and a growing demand for mergers and acquisitions as well as secondary transactions. The startup capital environment is undergoing a significant transformation, yet there remains a limited number of players in Japan capable of providing continuous capital to private growth-stage enterprises.

To address these challenges, Incubate Fund is leveraging its extensive expertise nurtured since its inception in 2010 as a seed-stage focused venture capital entity. With the launch of the "IF Growth 1st Investment Business Limited Partnership," the fund aims to introduce new capital circulatory options for non-listed growth markets to facilitate sustainable growth of Japanese startups.

Moreover, the fund received recognition as an operating entity for the "Public-Private Partnership Impact Growth Fund" managed by Tokyo's Startup Strategy Promotion Headquarters, which provided additional investment to further enhance the fund's capabilities.

Market Conditions

On April 22, 2025, the Tokyo Stock Exchange announced updates regarding the maintenance criteria for companies listed on its growth market. This decision is expected to clarify the characteristics that institutional investors look for, placing a greater emphasis on liquidity, growth potential, and the quality of performance.

Incubate Fund views this movement as a positive reform that will strengthen the framework for selecting and supporting startups that drive industry growth. It recognizes the necessity of solid growth capital and flexible capital liquidity to bolster growth in the non-listed phases of startups. As such, the formation of the IF Growth fund is intended to play a pivotal role in leading this evolution in the domestic startup market.

The Team Behind IF Growth

Incubate Fund has thus far focused on building frameworks alongside entrepreneurs for early-stage ventures. In launching this new fund, it aims to enhance its strategic dialogue with capital markets, thereby advancing the continuous growth of companies before and after their listing. To this end, they have appointed Masashi Ihara, formerly of SMBC Nikko Securities, as the dedicated general partner for the fund, bringing his wealth of experience in investment banking.

Incubate Fund is committed to continuously recruiting professionals with expertise to ensure the effective management of the fund, while also seeking to foster ecosystem-wide value creation in collaboration with diverse stakeholders.

Profile of Masashi Ihara

Masashi Ihara joined Nikko Securities (currently SMBC Nikko Securities) in 1990, embarking on a decade-long career in IPO consulting within the Public Offering Department. In the year 2000, he shifted to Nikko Solomon Smith Barney Securities (later named Nikko Citi Group Securities), where he focused on IPOs and various fundraising projects for listed companies until 2009. With 35 years of experience in corporate finance and IPOs, he has led numerous projects, including many involving Incubate Fund's portfolio companies, before joining Incubate Fund in March 2025 as the general partner of the growth fund.

Investment Strategy of IF Growth

The fund will selectively invest in domestic startups that can maximize their corporate value during their pre and post-listing phases through growth capital and liquidity. The investment strategy focuses on three key sectors:

1. Deep Tech: Emphasizing highly public-interest technologies that have become strategically crucial due to geopolitical factors.
2. Creative Industry: Investing in the creation of new intellectual property (IP) or enhancing existing Japanese IP, thereby fostering a new culture.
3. Business Solution: Providing digital solutions aimed at enhancing productivity across Japanese industries, potentially revolutionizing various sectors through M&A and evolving business models.

Seed-Stage Fund Update

In tandem, Incubate Fund has successfully closed its sixth seed-stage-focused fund, "Incubate Fund VI L.P.,” raising approximately ¥20.5 billion (around $180 million). Emphasizing its investment philosophy of "Zero to Impact" and "First Round, Lead Position, Build Industries," the firm has consistently invested in early-stage startups since its inception.

This fund focuses on four main investment areas:

• - Japan to Global: Targeting global opportunities in Deep Tech, Entertainment, and Consumer Services.
• - Green Innovation: Supporting technologies that promote decarbonization, energy efficiency, and regenerative innovations.
• - National Security Tech: Investing in technologies related to national and economic security, considering supply chain transformations driven by geopolitical risks.
• - Large Domestic Digital/AI Transformation: Focusing on opportunities for digital transformation in significant domestic industries, particularly leveraging LLMs and generative AI.

By fostering innovation and providing essential liquidity and growth capital, Incubate Fund continues to reinforce its commitment to Japan’s startup ecosystem, paving the way for a brighter entrepreneurial future.