Sumitomo Corporation has invested in “Coalis Fund No. 1”, a vehicle established and managed by Coalis Capital. This is Japan’s first specialist fund to acquire unlisted growth-stage startups using buyout methods. The Coalis Fund totals JPY 20 billion, of which Sumitomo Corporation will contribute up to JPY 5 billion as a principal limited partner investor.
Background and Purpose
In Japan, compared with Europe and the United States, initial public offerings (IPOs) overwhelmingly dominate as the means for startup founders and investors to liquidate their shareholdings, while M&A-driven exits remain limited. At the same time, most of these IPOs are “small IPOs” with market capitalizations in the range of a few billion to about JPY 10 billion. In 2023, roughly 80% of newly listed companies had valuations under JPY 20 billion, and unlike in the U.S., many relatively small startups go public before they have achieved sufficient growth. As a result of this proliferation of small IPOs, many startups are unable to raise adequate funds at the time of listing, cannot secure the additional investment needed for growth, and find their market valuations stagnating – an issue that has been widely pointed out.
With only about a hundred startups achieving an IPO each year and venture capital funds maturing after 2025 expected to increase, demand for secondary funds is rising as one outlet for selling fund holdings.
Against this background, Sumitomo Corporation has invested in the Coalis Fund to help invigorate startup M&As by large corporations and to channel more risk capital to growth-stage startups.