DCM set for partial exit from Japan's Freee

Overseas investors will be offered 4.6 million new shares, while 481,800 existing shares will be sold. The company's stock fell 11% following the announcement to as low as JPY9,090 before closing on March 23 at JPY9,110. This gave Freee a market capitalization of JPY452.8 billion.

DCM accounts for all of the existing shares being sold, according to a filing, with 303,600 coming from its $400 million Fund VI and 178,200 coming from a $65 million Pacific Rim-focused vehicle called A-Fund. Fund VI backed Freee as early as 2013, when it provided JPY270 million in Series A funding. The VC firm has participated in at least three rounds for the start-up.

DCM held 8.8 million shares in Freee - an 18.5% stake - prior to the company's $320 million IPO in late 2019. It exited 3.9 million shares through the offering.

Freee was founded in 2012 by Daisuke Sasaki, who previously led Google’s Asia Pacific marketing efforts targeting small and medium-sized enterprises (SMEs). Its core business entails a cloud-based accounting platform and a suite of payroll software products for entrepreneurs and SMEs. It operates as a monthly subscription service, but most clients pay annually to receive a cheaper rate.

This model is said to have buffered the business against pandemic-related dislocations in recent months, with some investors having provided emergency funding to help the company meet rapidly increasing demand for virtual infrastructure. Earlier this month, Freee agreed to acquire Sight Visit, a specialist in electronic contract singing.

Proceeds from the planned share offering will be used primarily to finance the Sight Visit deal and develop new B2B services through in-house R&D or further acquisitions. There will also be a smaller allocation for advertising and marketing activities, acquiring new customers, and efforts related to upselling and cross-selling products to existing customers.

Freee raised $230 million across nine private funding rounds prior to its IPO. Investors included Infinity Venture Partners, Pavilion Capital, SBI Investment, Sparx Group, Chibagin Capital, Sumitomo Mitsui Trust Investment, Recruit Incubation Partners, and Salesforce Ventures. In 2018, Line Corporation, MUFJ Bank, and credit card issuer Lifecard provided a JPY6.5 billion growth round.

The company generated JPY6.98 billion in revenue for the 12 months ended June 2020, up from JPY54.52 billion the previous year. Its net loss widened from JPY2.78 billion to JPY2.97 billion.

DCM has about $4.2 billion in assets under management with bases in Silicon Valley, Beijing, and Tokyo. Standout Japanese investments include Sansan, a human resources software provider that listed in 2019. Last year, DCM raised $880 million across two global funds focused largely on China.

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• Topics
• North Asia
• Financials
• Technology
• Open market
• Japan
• DCM-Doll Capital Management
• enterprise software
• Financial Services