Newly launched Sony, Daiwa fund will not take U.S. LP money … for now

Sony Innovation Fund, the venture arm of Sony Corp, and Daiwa Capital have partnered to launch a $185 million investment vehicle that is open to outside LPs.

However, LPs for the recently launched effort, called the Innovation Growth Fund, will not be based in the United States. At least not yet, according to Gen Tsuchikawa, CEO and chief investment officer at Sony.

Tsuchikawa told VCJ that the two corporate partners wanted to keep things simple with their first co-branded fund.

He said they received interest from U.S.-based LPs, which he declined to identify, but they include family offices.

“We could’ve raised the fund from our own balance sheets, too,” said Tsuchikawa, from Sony’s San Francisco office. “But we want to be making investments for the long-term and work with other investors and make this a transparent fund.”

Tsuchikawa said that Sony and Daiwa will each contribute 10 percent of the fund, and each corporation will have two partners managing the Innovation Growth Fund, with Tsuchikawa serving as one of the four GPs.

Sony declined to discuss the structure of the fund regarding fees and expenses.

LPs joining Sony and Daiwa at the first close, announced in early July, include Sumitomo Mitsui Banking Corp, Osaka Shoko Shinkin Bank, Mitsubishi UFJ Lease & Finance Company Limited and others. Tsuchikawa would not say when the firm expects to close on the $185 million, which is equivalent to 20 billion yen.

Tsuchikawa said the Sony Innovation Fund will continue to manage its investments. That fund launched in 2016 and has backed 46 companies, many beginning at the seed stage, from a $100 million fund that is entirely funded by Sony.

Tsuchikawa said the Sony Innovation Fund portfolio is evenly split between Japan, North America, and Europe/Israel. The sector focus includes a mix of AI and robotics in the medical device, consumer and related fields. The new fund will similarly target AI and robotics companies in those same geographies.

Among Sony’s portfolio companies is New York-based Shimmur, which operates a social engagement platform for influencers and their fans. The company came out of TechStars, and seed backers include Greycroft. Another portfolio company is DigiLens, based in Sunnyvale, California.  The company makes AR displays and has now raised more than $110 million in funding.

The Sony Innovation Fund portfolio has not yet realized any exits.

Tsuchikawa said that none of the Sony Innovation Fund portfolio companies have folded and 13, or nearly one-third, have gone on to raise up-rounds.

Tsuchikawa said he is confident the structure of the new fund with Daiwa will work. “Our LPs know we have a global network and what our tech capabilities are,” he said.