Dear reader,
Today we publish the third and final installment of our RO Long Read: the Africa-Japan bridge series.
While not obligatory, we recommend you read Part I & Part II before diving into Part III.
This final episode explores how Japanese investors blur the lines between GP/LP on the continent, the role of Japan's government in financing African tech, and our conclusion about the Africa-Japan bridge's future.
This RO Long Read series was written by RO Correspondent James Mahon.
If you'd like to probe James further on this topic or just want to chat with him, he can be reached at james@realisticoptimist.io or through his LinkedIn profile.
Enjoy.
Blurred Lines
It’s relatively unusual for an LP to co-invest with the same VC it funds. In Japan this is normal behaviour, a byproduct of the LP base being different to that of the proverbial “West”.
LPs in the West are commonly institutional investors such as pension funds, university endowments, and family offices. Their mandate is, more often than not, to simply maximise financial returns. It makes little sense for Yale’s endowment to operationally involve itself with the portcos of the VCs it’s an LP in.
In Japan, LPs lean towards being corporations with an interest in both financial returns and ‘strategic value’. The latter often refers to new business development opportunities.
For these corporations, VC funds are scouts for such opportunities. The price is the fund’s management fee. Co-investing separately allows these corporate LPs to put more capital to work without the management fee tax. It also provides greater leverage to build one-to-one partnerships with the portcos that receive the co-investment.