Japanese venture capital targets Thailand (27-080-07)
By Jon Fernquest[Introduction|Vocabulary|Article]
[Reading Questions|Answers]
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The Japanese venture capital firm Japan Asia Investment Co (JAIC) started investing in Thailand nearly 20 years ago.
Once again the firm is on the verge of making a new series of investments in promising Thai start-up companies.
Which companies they are investing in has not been announced yet.
The industries they are investing in have been announced though.
These targeted industries constitute Thailand's competitive advantage from at least one perspective outside of Thailand.
To know how your capabilities are assessed by others is a useful form of business insight.
Today's article is merely the first article in this developing story.
The companies that end up being chosen and why they were chosen will be the next part of the story to follow.
If it was your job to make the choice, what attributes would you be looking for in a company?
For further reading, read JAIC's "solicitation policies" for the investments they make.
Read previous Bangkok Post articles about Foreign Direct Investment and Entrepreneurs.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What kind of business does JAIC do?
2. How long has JAIC been operating in Thailand?
3. How much has JAIC invested in Thailand to date?
4. Have JAIC's operations in Thailand been successful to date?
5. What changes is JAIC making to its Thai operations?
6. What industries and companies is JAIC focusing on in Thailand?
7. When is JAIC planning to make its new investments in Thai companies?
8. How much does JAIC usually invest in firms?
9. What role does JAIC take in the management of start-up firms?
10. How long does JAIC usually hold investments?
11. Why isn't JAIC planning to sell of its Yarnapund Plc (YNC) shares right now? (Requires some outside internet research to pinpoint the exact reason)
Bangkok Post Article August 25, 2007
ASIA FOCUS : JAPAN / INVESTMENT IN THAILANDVenture-capital ambitions
UMESH PANDEYJapan Asia Investment Co (JAIC), a Japanese venture-capital firm that has invested in Thailand for nearly two decades, plans to double its investments in the country and the region due to the growth potential it foresees.
"There is lots of potential for investment in Thailand and the other parts of this region and we would want to participate in their growth," said Nobuyuki Inomata, the president of the newly formed JAIC (Thailand).
JAIC, which has played a key role in developing various projects in Thailand and which has invested successfully in many companies in Thailand since it opened its representative office nearly 20 years ago, has only recently set up a full local office under JAIC (Thailand).
"This move will give us the leverage to do more and it shows how committed we are about this country and its potential," he said, adding that JAIC also had offices in Vietnam and Malaysia.
The Thai office will be for investment in Thailand, although in the future more funds that are focused on specific industries would be launched out of the office that may or may not invest across various regions.
"If you look at Thailand and the region, the areas we would be most interested in would be food, and we are looking to set up a food fund that is going to invest in food related businesses," he said, without giving more details.
Mr Inomata said JAIC was also looking at increasing its investments in Thailand by about $5 million per year. The company currently has $10 million invested in various assets in Thailand, and so far it has invested close to $200 million over nearly two decades.
JAIC invests in small and medium-sized companies that are looking to expand their operations. The key areas it is studying are IT, auto parts and components, electronics, logistics and some other manufacturing sectors.
"We are currently studying projects and over the next month or so we would invest between $1 million and $3 million in three projects in these areas," Mr Inomata said without giving more details.
JAIC, which has recently taken on Japan's Shinsei Bank as a partner after Shinsei participated in the private placement of JAIC's shares, is likely to benefit from the bank's extensive experience in private equity investments.
JAIC, Mr Inomata said, was also looking to divest some of its current portfolio as its aim was always to divest its holdings after a few years, if the price is right.
"Our policy is to divest in a few years and we are looking to do that with a few of our [holdings] but the price does not seem right, especially companies such as Yarnapund Plc," he said.
JAIC holds just over 5% in SET-listed YNP but a sharp decline in its share prices has put a sale plan on hold.
He added that the export-oriented companies were also off his company's radar screens because the strengthening Thai baht that has put a dent in earnings.
JAIC, which usually buys stakes of between 5% and 30% in firms, does not get involved in the management of day-to-day operations although it provides members on the board of directors.
"Companies in Thailand can use our expertise if they so require as we have invested in countries across the world and we can share our experience from all parts of the world, and Thai companies can adapt it and use it according to their own needs," Mr Inomata said.
Vocabulary (in discussion above)
Japan Asia Investment Co (JAIC) - a Japanese venture capital firm founded in 1981 (See website)
private equity - investment companies that hold a company's stock privately without it being traded in public markets, venture capital is private equity in newly started businesses, public companies are sometimes bought and delisted making them private equity (See Economist and Wikipedia)
venture-capital - funds new and slightly risky start-up businesses in exchange for part equity ownership (See Economist and Wikipedia and a list of related topics)
on the verge of - about to
solicit - requesting something
solicitation policies - rules for requesting funding
target, targeted - what you aim to reach or achieve (See glossary)
leverage - using some tool or technique to get larger returns or greater production than normal (See glossary)
ambitions - goals you want to achieve
foresees - predict, see ahead in time, know what will happen in the future
* give us the leverage to do more
Shinsei Bank [Reborn Bank] - Japanese bank restructured after the 1989 collapse of the Japanese real estate bubble, sold to foreign investors, and reopened in 2000, with an IPO in 2004 (See website and Wikipedia)
divest - sell off
* divest some of its current portfolio -
* divest its holdings - sell off the shares of a company that it owns
put a sale plan on hold - postpone sale, delay sale, reschedule sale for the future
off his company's radar screens - not thinking about, not making any future plans for
put a dent in earnings - hurt earnings, reduce earnings (a "dent" in a car means the surface has been hit and damaged)
day-to-day operations - daily operations, involved in what the business does everyday to earn money (e.g. sell products) rather than involved at a high management and conceptual level
Answer Key:
1. What kind of business does JAIC do?
JAIC is in the venture-capital business. This means it funds small risky start-up companies in exchange for an equity stake in the company.
2. How long has JAIC been operating in Thailand?
For almost 20 years.
3. How much has JAIC invested in Thailand to date?
Nearly $200 million.
4. Have JAIC's operations in Thailand been successful to date?
Yes, the company has "invested successfully in many companies in Thailand."
5. What changes is JAIC making to its Thai operations?
a. JAIC is setting up a full local office in Thailand.
b. It is doubling its investments in Thailand from $5 million to $10 million.
6. What industries and companies is JAIC focusing on in Thailand?
a. Small and medium-sized companies expanding their operations.
b. Non-export because of the appreciating baht.
c. Food (especially).
d. IT (especially).
e. auto parts and components
f. electronics
f. logistics
7. When is JAIC planning to make its new investments in Thai companies?
Over the next month it will invest a total of $1-$3 million in three projects.
8. How much does JAIC usually invest in firms?
From 5% to 30% of a firm.
9. What role does JAIC take in the management of start-up firms?
It only takes a high level management role providing members to the board of directors. It does not get involved in the day-to-day operations of firms.
10. How long does JAIC usually hold investments?
For a few years.
("JAIC, Mr Inomata said, was also looking to divest some of its current portfolio as its aim was always to divest its holding after a few years, if the price is right.
"Our policy is to divest in a few years and we are looking to do that with a few of our [holdings] but the price does not seem right, especially companies such as Yarnapund Plc," he said.")
11. Why isn't JAIC planning to sell of its Yarnapund Plc (YNC) shares right now? (Requires some outside internet research to pinpoint the exact reason)
