Fund Profile: JAFCO Ventures –

The best-known venture firm in the land of the rising sun is betting on an early investor in Sun Microsystems.

JAFCO, a publicly traded venture capital firm in Japan, has hired Joe Horowitz to run a new $100 million fund for JAFCO Ventures in Palo Alto, Calif.

Horowitz, the managing general partner of the new firm, started his venture capital career in 1978 with Exxon Enterprises. The bulk of his experience comes from his time at U.S. Venture Partners (USVP), which he joined in 1982. He hit the jackpot on his very first deal, making a seed investment in Sun.

Continuing with the sun theme, Tsunesaburo “Sunny” Sugaya is the general partner and president of operations for JAFCO Ventures. He is the former general manager of business development for parent company JAFCO Co. and also served as an executive of Motorola.

JAFCO Ventures officially launched in mid-2003. That’s when Horowitz started mapping out ideas for how it would take shape. “I intentionally wanted to spend a number of months focusing on the internal issues of putting together the team and thinking through our processes,” he says. “Before you open your doors in a new store you want to make sure the shelves are clean and the cash register works and everything is in place. Once word gets out that you have capital and a mandate, the deal flow comes fairly quickly.”

Green Light

Horowitz had general autonomy in assembling his team and set about “looking for investors to join our team who understand the whole venture capital process from both an entrepreneur and investor perspective.” His first hire was Associate Ben Shih, formerly an associate with Crystal Ventures. Horowitz had worked with Shih informally on past deals and trusted his judgement. While JAFCO Ventures plans to add more investment professionals in the near future, it stresses that it is already overrun with unsolicited resumes and does not care for more.

JAFCO Ventures plans to invest in early expansion-stage technology companies that have already received venture backing. “It’s not our job to invest at the stage that the technology challenges are significant, but when the challenge becomes building the business,” Horowitz says. “In most of these cases, the Asia markets are very important and are significant customers of these technologies.”

One of JAFCO’s strengths is its ability to use business development staff in Asia to help gauge the markets in both Asia and the United States and help portfolio companies break into the Asian markets.

Asian Focus

“In Asia and particularly in Japan there are many large companies that are huge buyers of technology,” Horowitz says. “China is a very fast growing market and we have a presence there, as well.”

In addition to its headquarters in Palo Alto, Calif., JAFCO Ventures has an office in Boston and business development staff in Tokyo.

While seeing his investment mandate as broad and agnostic, Horowitz does see a significant interest in semiconductor investment taking shape, related to demand for the technology in Asia. “We are probably seeing more deals in the semiconductor space with large markets available,” he says. “We’re finding things that can enter the market with some bona fide breakthrough technology.”

JAFCO Ventures will likely invest between $2 million and $6 million per deal. “We have no defined limit per se other than the test of reasonableness,” Horowitz says. “Being a $100 million fund affords us a tremendous amount of flexibility in terms of the post Internet bubble marketplace. People have become very sensitive to not overcapitalizing companies. Having a smaller fund is an advantage.”

The firm had not yet made its first investment as of early December, but Horowitz said he expected to close on one or two deals by the end of the year.

JAFCO Ventures isn’t JAFCO’s first effort in the United States. It launched a firm with the same name in 1994; it spun out of JAFCO and became Globespan Capital Partners earlier this year. Other past affiliates that have spun out include Worldview Technology Partners.

The limited partners in JAFCO Venture are JAFCO and its affiliates, but a source at the company says it has had “very open discussions” about opening future funds to U.S.-based LPs.