Sleekr’s latest funding signifies Japanese appetite for Southeast Asian startups

Money Forward team at the company’s October 2017 Tokyo IPO / Photo credit: Money Forward

n n

Sleekr, an Indonesian HR and accounting management platform, has secured funding from Tokyo-based fintech firm Money Forward in its first investment outside of Japan.

The partnership is representative of growing interest in Southeast Asia from a newer generation of Japanese tech businesses, as they seek opportunities for growth beyond home shores – though this could change as more Chinese capital flows into the region.

Sleekr started out by providing personnel management software as a service, and then diversified into cloud accounting services after acquiring fellow Indonesian startup Kiper in November 2016. It now has around 80 employees.

Sleekr’s only disclosed fundraise to date was a US$35,000 seed round in December 2014.

The size of the investment hasn’t been revealed, but Naoya Kanesaka, the Japanese company’s chief financial officer, told Tech in Asia that the amount is significant given the size of the parties and the extent of their partnership.

“Including Sleekr, we have invested between US$2 million and US$3 million into five companies so far. Sleekr is of a comparably larger size,” he said.

Aside from the investment, Money Forward will share know-how with Sleekr. Money Forward co-founder and CEO Yosuke Tsuji has also been appointed to the startup’s board of directors.

Money Forward, which went public in a US$25 million Tokyo IPO last October, walks the line between fintech and enterprise software. It offers a range of financial management products that include cloud-based accounts as well as payroll, invoice, and expenses processing features.

According to Kanesaka, Money Forward has a 60 percent market share and is the number one software choice among Japanese accounting firms.

Photo credit: Money Forward

There is clear overlap with Sleekr’s offering, but Money Forward sees this as an opportunity for synergy and a way to tap into the potentially lucrative Southeast Asian market.

Kanesaka noted that Money Forward already has an accounting and payroll product in Japan, so they don’t expect to bring Sleekr there. But, as he pointed out, “there are a lot of things we can learn about product strategy and marketing strategy.”

Partnering with a local player can also help Money Forward to better understand the market. While “in terms of environment,” there’s a basic difference between the culture in Southeast Asia and Japan, Kanesaka said there’s “a fundamental similarity in terms of how to be successful.”

nGoing southn

The deal with Sleekr is part of the company’s “Money Forward Fund” program. It isn’t a separate, VC-style investment vehicle as the name may suggest, but rather a strategic initiative aimed at enhancing the company’s offerings through M&A activity.

Under Money Forward Fund, the company pledges to offer financial backing and know-how sharing, as well as tech assistance in areas such as APIs and network support with partners, investors, and service providers in return for equity.

Prior to making its first overseas investment with Sleekr, the program backed Japanese robo-advisor Money Design in December 2015, crowdfunding platforms Campfire and LIFULL Social Funding in October last year, and ecommerce platform developer BASE earlier this month.

Kanesaka said that he expects Money Forward to make further strategic investments in Indonesia and the wider Southeast Asian region, and could invest more than US$10 million given the right prospect.

They saw potential where hardly anyone else was looking.

Japanese tech investors have been attracted to Southeast Asia partly because of proximity – in both geographic and cultural terms – and Japan’s soft power in the region, explained James Riney, who heads 500 Startups in Japan.

“Japanese VCs and corporates were one of the first groups to aggressively invest in Southeast Asian startups. The region is also experiencing strong GDP growth overall, and the mobile revolution is turning more people into accessible customers,” he adds.

Another important factor is that until recently, Southeast Asia has been largely overlooked by US and European investors.

Japanese investors are interested primarily because the region is not as competitive as Silicon Valley, observed Riney. “They saw potential where hardly anyone else was looking, and local sources of capital were not as open-minded or sophisticated at the time to compete.”

While Southeast Asia accounts for a seemingly small portion of overall Japanese VC investment – at around 2.9 percent in Q3 2017, according to research from Japan’s Venture Enterprise Center – it is notable how this is not too far from matching the figure for North America, while it beats that for the rest of Asia, including India and the Middle East.

But this state of affairs is undergoing rapid change, as increasingly well-capitalized Chinese players enter the scene.

“The region has matured quite a bit. There are much more local sources of capital, and my impression is that China is more aggressive than Japan these days,” said Riney. “Many in Japan still see potential in Southeast Asia, but it is less appealing than it used to be because it is becoming more competitive.”