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Case Studies

Case Studies

Case Studies (Minerva Growth Partners) March 2022

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(Right)Kei Nagasawa (Left)Kensuke Murashima Minerva Growth Partners, Inc.
Representative Director, Co-Founder & Managing Partner

Interviewer: Financial Services Agency (March 2022)

Company Profile
Company: Minerva Growth Partners, Inc.
Established: November 2021
Main Business: Financial Instruments Business (Investment Advisory and Agency Business)
Financial Instruments Business Operator: The Director–General of Kanto Local Finance (FIBO) No. 3316
Website: https://minerva-growth.com/

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Minerva Growth Partners, Inc. (“MGP”) was established by Pleiad Investment Advisors Limited * under the leadership of Kei Nagasawa, former Mercari CFO, and Kensuke Murashima, former Head of Japan for Global Internet Banking/Global Software Banking Group at Morgan Stanley.

*Pleiad Investment Advisors Limited (“Pleiad”) is an independent asset management company established in Hong Kong in 2014 and is an asset management company licensed by the Securities Futures and Exchange Commission (SFC) of Hong Kong. It provides investment management services focused on investments in public companies in the Asia Pacific region (mainly Japan, China, and South Korea) through in-depth and extensive research, and specializes in a long-term, fundamental investment approach characterized by a relatively small number of concentrated holdings. As of the end of December 2021, it managed approximately 360 billion JPY (3.1 billion USD) and it also has a track record of investing in a variety of newly-listed growth stocks among the Japanese start-ups.
Website: http://pleiadadvisors.com/

1. Pleiad's entry into Japan - Minerva Growth Partners' IAA registration

Congratulations on your completion of the Investment Advisory and Agency Business Registration. Could you give us an overview of MGP’s business?

MGP provides start-ups with the option to raise sizable capital not only through IPOs, but also through private capital raising which allows them to aggressively invest capital and to manage resources for the growth of their businesses. By doing so, we believe that Japanese start-ups will continue to invest boldly based on a long-term strategic vision, rather than simply focusing on short-term profit, and that this will lead in to greater competitive advantages and vitality across these industries in Japan.

MGP can invest from pre-IPO and continue to hold in post-IPO stages, which means investing across the company’s entire lifecycle. Pleiad can also invest at and post IPO and build large positions in the public markets in the longer term. MGP and Pleiad together intends to establish a private-to-public crossover investment style.

Why did you decide to newly start an IAA business in Japan?

Our sole shareholder, Pleiad, is a Hong Kong based independent investment management company which manages absolute-return oriented equity investment strategies focused on the Asia-Pacific region. Their main investment target is public equities, including Japanese public equities. However, they did not initially have any intension to establish a Japan entity, since Japanese listed companies’ research is largely based on public information which are available online.

However, Pleiad subsequently saw opportunities to invest in private Japanese companies, and started to consider developing a new business in Japan. At this opportune timing, Pleiad met Nagasawa and Murashima, who all had the same ideas about the Japanese private equity market, and decided to start a new business together in Japan. The parties initially started its Japan business by launching a fund as a notifier of Specially Permitted Businesses for Qualified Institutional Investors, etc. under Article 63 of the Financial Instruments and Exchange Act. However, as the number of staffs in Japan has increased, and in order to build a sustainable business based in Japan, we came to the decision that we should establish and register as an Investment Advisory and Agency Business Operator.

MGP became the 6th successful registrant to obtain a financial license by using the Financial Market Entry Office. What was your impression about this English registration process?

Our law firm informed us that there is an option to go through the IAA registration all in English. Taniguchi of Pleiad is Japanese, but the other staff cannot read or write Japanese, so we thought that English registration could shorten the registration process by eliminating the burden of translation work. It could be possible for Taniguchi to do the documents in Japanese with the lawyer’s support, but since various non-Japanese employees were involved, it was very advantageous that all communication with the regulator could be done in English.

We did not have any particular concerns about registering in English since our lawyer informed us that the Financial Market Entry Office will support us throughout the registration process. After actually experiencing the process, we felt that the support by the Office was more substantial than expected. We are satisfied with the English registration process because it was carried out smoothly and the registration was completed earlier than we had expected.

MGP was the 2nd registered company accepted to Financial Start-up Support Program which was newly started by JFSA and Tricor Japan. What is your impression of using this Program?

Since our company has Japanese staffs, we did not need language support through this program. But I think that for most foreign asset managers who don’t speak Japanese or are unfamiliar with Japanese business practices, support from such a Program through Tricor Japan is very useful. It is good to know that now there are such outsourcing companies in Japan that we can rely on when we need advice.

Overall, we think that the establishment of Financial Market Entry Office, one-stop all-in-English office for foreign asset managers’ considering new business in Japan, is really a big step.

2. Connection with Pleiad - Birth of Minerva Growth Partners

When did Mr. Nagasawa and Mr. Murashima realize the attractiveness of Japanese private equity? How did they meet Pleiad and how was MGP born?

Pleiad and MGP have been connected by fate.
After graduating from University, Nagasawa and Murashima were colleagues at Mitsubishi Corporation. They have experienced a few career changes including investment banks, and they worked in the U.S. west coast offices of Goldman Sachs and Morgan Stanley, respectively, in 2010. Silicon Valley was at the height of the IPO boom, but soon we saw an acceleration by U.S. mutual funds and pension funds investing in the pre-IPO stage, which is shortly before going public.

After a while, Nagasawa, who became Mercari's CFO, and Murashima, as a banker, worked together on Mercari's pre-IPO financing and global IPO. This led the two to start discussing what they should do to attract more foreign institutional investors to Japanese start-ups' private equity investments. What they were aiming was a unique "crossover investment", to invest in start-ups before and after IPO. They thought they would need 1) a dedicated private equity team that could invest from private equity to public assets, and also 2) a good partnership with listed equity investors so that they could continue to invest in the company after IPO.

In the meantime, Pleiad became interested in expanding their business to the Japanese private equity market. So when Pleiad had the opportunity to meet Nagasawa and Murashima, it was natural for them to agree on their visions, and to start a partnership. During his investment banking career, Murashima had known Pleiad as a leading Institutional investor in Asia. Pleiad was a stockholder of Mercari. You could say that Mercari's global IPO and post-IPO IR activities tied us all together.

For Nagasawa and Murashima, in addition to create a “crossover investment” business scheme, this meet-up with Pleiad was also very attractive since this would enable them to use Pleiad's fund management function and infrastructure, rather than building them up from scratch.

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Pictured, from left to right: Kei Nagasawa (Representative Director, Co-Founder & Managing Partner, Minerva Growth Partners, Inc.), Masaki Taniguchi (Representative Director, Minerva Growth Partners, Inc. / COO, Pleiad Investment Advisors), Kensuke Murashima (Representative Director, Co-Founder & Managing Partner, Minerva Growth Partners, Inc.)

3. Expectations for the Japanese market - MGP’s Future Vision

What do you expect from the Japanese private equity market?

Japanese private equity is attracting attention from overseas institutional investors as an asset class with high potential. We are beginning to see more institutional investors in later stage private equity (or pre-IPO) investment. If such cases increase, the bridge from private to public will become more smooth, and more institutional investors will consider investing in Japanese private equity.

In Japan, venture capitalists tend to invest at a very early stage of start-ups, and those start-ups choose to go public even when they are not ready because there are no other options for them to raise more money they need to expand their business. We think it would be great to have an eco-system in Japan where growth investors can engage from the pre-IPO stage and also continue to invest in the company after IPO. We aim to play this role by our crossover investment business scheme; MGP investing in private equity and Pleiad investing after IPO, and together creating a picture of start-ups’ future visions instead of exiting from the investment at the timing of IPO. If we can make this happen, it will be encouraging for many startups, and we are very happy to play an important role of this investment flow.

So we hope that the legal system in Japan will further promote smooth flow of money to start-ups transitioning from private to public entities as well as smooth change of owners best suited to each stage of their growth, which would be welcomed from all start-ups.

What are your plans or visions for the future of MGP?

Our first fund invests in companies in the later stage of private equity, or pre-IPO stage, which is quite easy to understand the investment opportunity, compared to investment for early stage PE’s. This is the area we can directly leverage our experience and strengths.

We have not yet decided the policy for our following funds, but we also see exciting opportunities in post-IPO investment and/or private equity investment outside of Japan.

Can you share your story about your company names?

Pleiad was named after the Pleiades star cluster (Pleiades: the word originated from the seven daughters of Atlas in Greek mythology). We chose this name as we wanted to shine brightly as a team, in contrast to many other funds often founded and operated by one star player.

Minerva was named from the goddess of Roman mythology (the god of art, music, medical and education). This matched our company vision that we want to “partner” through, starting from art (qualitative elements such as vision in the early stage) then leading them to the right direction by science (quantitative elements such as execution of strategy in the “growth” stage and determination of investment results).

Both Pleiad and Minerva are derived from mythology, and we think they are a good combination.

Kei Nagasawa
Minerva Growth Partners, Inc.
Representative Director, Co-Founder & Managing Partner

After working in the investment/M&A advisory division mainly in energy, retail, and food sector at Mitsubishi Corporation, he joined Goldman Sachs Investment Banking Department in 2007 where he was responsible for financial advisory services including M&A and IPOs, mainly in the technology sector in Tokyo and San Francisco. Nagasawa became CFO at Mercari, Japan’s first private unicorn to raise private capital twice, and took the company public in June 2018. He resigned as CFO in September 2020. Graduated from Keio University, and an MBA from University of Chicago.

Kensuke Murashima
Minerva Growth Partners, Inc.
Representative Director, Co-Founder & Managing Partner

After engaging in new business development and corporate venture capital focused in the technology sector in Japan and overseas at Mitsubishi Corporation, Ken joined Morgan Stanley in 2007. Since then, he had been solely in the technology investment banking in its Tokyo and Silicon Valley (Menlo Park) offices with a focus on financing of public and private companies, IPO, and on M&A and strategic investment advisory. He led a series of landmark IPO transactions including LINE, Mercari, Raksul and freee as Head of Japan for Morgan Stanley's Global Internet Banking and Global Software Banking Group. Graduated from Keio University, and an MBA from Duke University.

Masaki Taniguchi
Minerva Growth Partners, Inc.
Representative Director
(Founding Partner and COO for Pleiad)

After his career at Goldman Sachs Asset Management (GSAM), SPARX Group (Group Chief Operating Officer), and lastly as head of product development for Asia Pacific at GSAM (Managing Director) in Hong Kong, he founded Pleiad in 2014 and became its Chief Operating Officer. He has over 20 years of experience in the asset management industry both in Japan and in Hong Kong, and is fluent in English, Japanese and Mandarin Chinese. Graduated from University of Kyoto, and holds a Masters degree in Law from the University of Tokyo.