Mizuho Financial Group Inc. is planning to launch a debt fund targeting Japan’s startups, digging deeper into an area where the nation’s megabanks are warming up to.
(Bloomberg) — Mizuho Financial Group Inc. is planning to launch a debt fund targeting Japan’s startups, digging deeper into an area where the nation’s megabanks are warming up to.
The 10 billion yen ($72 million) fund will launch this month, financed entirely by Mizuho and seek to invest in mid to late-stage startups, according to Kazutoshi Isogai, its retail and business head. He said there is strong demand for debt from startups, and more of these firms now prefer loans to equity financing that dilutes ownership stakes.
“Startup business has been our forte,” Isogai said in an interview. “Other megabanks are also very active in this field. We don’t want to get beaten.”
The move by Japan’s third-largest bank comes on the back of the country’s drive to expand startup financing, seen as key to its goal to nurture more unicorns. More recently, rival Sumitomo Mitsui Financial Group Inc.’s banking unit set up a 30 billion yen fund with partners to also tap into that ambition.
With little track record and many yet to make money, startups have traditionally found it hard to secure loans, though this is changing with the megabanks starting to increase lending to them. These new funds are another avenue to boost funding for the firms.
Isogai said the fund’s main focus is likely to be startups in deep tech fields such as bio and renewable energy, as well as those that need to spend a lot on research and development before being able to turn a profit.
Mizuho’s fund will mainly look to buy bonds with stock options, so that the lender can share in any upside if the borrower pulls off an initial public offering later, he said. More of these funds may be set up depending on the performance of the first one, he added.
Wealth Management
For Mizuho, courting future unicorns serves another purpose of building up its pipeline of wealth management clients.
Most of its private banking customers in Japan are business owners and the bank wants to lock in a relationship with future IPO millionaires through approaching startup founders at earlier stages, according to Isogai. Business succession planning and execution are among the most popular services sought by Japan’s wealthy, and the bank is boosting efforts to tap on these needs, he said.
“Businesses for the ultra-rich and IPO companies are connected,” he said. “We are advancing these together.”
Mizuho struck a business alliance with Swiss wealth firm Lombard Odier in February. “Our biggest expectation from the alliance is train up private bankers. We would like to use their programs to beef up our bankers,” Isogai said.
–With assistance from Kevin Dharmawan.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.