Why Japanese VCs Are Quietly Shifting Gears Toward Indian Startups

For years, Japan’s venture capital firms looked at Southeast Asia as the most promising neighbourhood. With its youthful population, rapid internet adoption, and proximity to Japan, the region was seen as the next frontier for growth. And in many ways, it did deliver early signs of promise.

But things have changed.

Returns have plateaued. IPOs have slowed. Exits are fewer and far between. And just across the Bay of Bengal, India is quietly scripting a different story—one that’s beginning to command the attention of Japanese VCs who are now recalibrating their compasses.

A new playbook is emerging. Japan is looking at India not just as another market—but as a long-term growth engine for its venture ambitions.

The Turning Point: Southeast Asia’s Slip, India’s Rise

To understand the shift, let’s look at the numbers.

In the first half of 2025, Indian stock exchanges saw 119 companies go public, raising ₹51,150 crore (approx. $6.1 billion). In comparison, Southeast Asia recorded just 53 IPOs, raising only $1.4 billion, as per S&P and Deloitte data.

In all of 2024, India witnessed 268 IPOs amounting to $19.5 billion, dwarfing Southeast Asia’s $3 billion from 122 IPOs.

Even the biggest IPOs tell a story. In India, Hyundai Motor India’s $3.3 billion IPO stood tall, while the largest in Southeast Asia—Malaysia’s 99 Speed Mart Retail Holdings—raised just $531 million.

For global investors focused on liquidity and exit pathways, these numbers aren’t just statistics—they’re signals. And Japanese VCs, known for their cautious yet calculated approach, are paying close attention.

“Japanese investors are realising that the Southeast Asian market is difficult, while India is an emerging market open for everyone,” noted an industry expert.

Who’s Leading Japan’s Pivot to India?

The movement isn’t yet a gold rush—but it’s steadily gaining ground. A handful of Japanese VCs have already put India at the center of their next phase of investments, and more are preparing to follow.

Incubate Fund Asia – Deepening Roots

Perhaps the most vocal and committed among them, Incubate Fund Asia closed a $30-million fund in 2023, with a remarkable 80% of it allocated to Indian startups. Their India portfolio already includes names like:

• Yulu (electric mobility)

• Captain Fresh (B2B seafood supply chain)

• ShopKirana (acquired by Udaan)

• Plum (employee health benefits)

Reports has confirmed that the firm is preparing to launch a much larger $75–$100 million fund later this year, with an India-first thesis.

What’s changing this time?

• The fund will be registered in India (a first for a Japanese VC of its scale).

• Cheque sizes will increase to $1–$1.5 million, with potential follow-ons from the $200M SMBC Asia Rising Fund.

• The firm is building sectoral theses around deeptech, defence, semiconductors, and sustainability.

BeyondNext Ventures – From Experiment to Expansion

When BeyondNext Ventures entered India in 2019, the approach was exploratory. Just a few checks, mostly learning the ground realities. Fast forward to 2025, the firm is now raising a $50 million India-dedicated fund, tapping its LPs back in Japan.

So far, BeyondNext has invested in 14 Indian startups, using capital from Japan-based funds. The decision to double down on India is rooted in long-term belief.

Their India thesis?

• Betting on biotech as India’s next big export.

• Using Japan’s R&D infrastructure to help Indian startups innovate and globalise.

• Leveraging India’s strength in vaccines, APIs, and generic pharma to build a new wave of biotech innovation.

Enrission India Capital – India-Only From Day One

Perhaps the boldest move came from Enrission India Capital, which committed 100% of its $120 million fund raised in Japan to Indian startups.

The logic was simple.

“Our Japanese LPs told us, the domestic market isn’t giving returns. They’re looking at India as a fresh growth story,” said Harsh Deodhar, Principal at Enrission.

Enrission has made 16 investments in India in 2025 alone, including:

• Loopworm – protein synthesis

• Peppermint Robotics – autonomous cleaning robots

• Bambrew – bamboo-based eco packaging

Their funding model ranges from $500K–$1M for early-stage and up to $2M in growth stages. The firm is largely sector-agnostic but increasingly drawn to consumer, deeptech, and climate-focused innovation.

Others Joining the India Ride

• SMBC, one of Japan’s largest banks, has committed to India in a big way. It invested $12 million in Aerem (clean energy) and backed mortgage-tech startup Easy with a $35 million round.

• Suzuki, through a ₹340-crore India-specific fund launched in 2023, is targeting agriculture, financial inclusion, supply chain, and mobility startups.

• Genesia Ventures, currently raising GV-4, has received a $22.5 million commitment from Japan Investment Corporation (JIC), with plans to expand exposure to Indian startups at pre-seed and seed stages.

JIC, Japan’s sovereign wealth fund, believes this will “strengthen partnerships between Japanese companies and local startups,” allowing Japanese firms to innovate and expand globally.

What’s Driving the India Strategy?

Japanese funds are not chasing flashy valuations. Their thesis is grounded in long-term returns, governance comfort, and ecosystem maturity. Several themes are guiding their decisions:

1. Exit Visibility

India’s thriving IPO market is giving investors real exit options. For VCs who play the long game, this is crucial.

2. Early Entry, Bigger Equity

Japanese VCs are entering early and taking meaningful stakes—this aligns with their patient capital model.

3. Globalization via Japan

Startups backed by Japanese VCs can tap into R&D, manufacturing, and business development support in Japan, and use it as a springboard into global markets.

4. Sectoral Maturity

Indian startups are no longer limited to consumer tech or fintech. Sectors like semiconductors, defence, climate tech, biotech, and deeptech are now investment-ready.

A Shift in Motion, But Cautious Still

Not all Japanese VCs have made the leap. Many remain in the wait-and-watch mode—partly because of Japan’s traditionally slow decision-making culture, and partly because the Indian market still presents operational complexities for new foreign entrants.

But as success stories build, that fence is starting to look less comfortable.

For a long time, India wasn’t even on the radar for many Japanese VCs. Now, it’s becoming the centre of their emerging-market strategies. What started as a trickle—cautious cheque-writing and test-the-waters investments—is gradually becoming a clear, calculated pivot.

India’s dynamic startup landscape, robust IPO environment, and deepening sectoral sophistication are combining to offer what every Japanese VC wants: patience-powered returns in a high-growth market.

And this time, they’re here to build, not just bet.