Japan’s D Capital nears target for debut PE fund

It follows a first close of undisclosed size in October 2021 and a second close of JPY 20bn last April. LPs include Development Bank of Japan, Sumitomo Mitsui Banking Corp, Shinsei Bank, Aozora Bank, and SMRJ, a government investor for the small business sector.

Strategic support came from tech companies KDDI, SCSK Corporation, and smart camera maker Safie, as well as Japan Data Science Consortium (JDSC). Growing regional bank appetite for private equity was also on display with contributions from Kiraboshi Bank, KitaiseUeno Shinkin Bank, and Osaka Shoko Shinkin Bank.

“Some regional banks don’t invest in first funds, but they think our strategy is very interesting and necessary for SMEs [small to medium-sized enterprises],” Koichi Kibata, a co-founder and partner at D Capital, said. “As for being digital or the younger generation – we’re around 40 – I think it’s been more of a positive.”

Kibata began his career as a physician, served as a consultant at McKinsey & Company, and launched a health-tech start-up called Medical Note before joining Unison in 2012 and rising to management advisor by the time of his departure last January. During his time with the firm, he also served as an executive at JDSC, focusing on digital transformation.

He is joined by fellow co-founders and partners Naoto Umezu, also previously of Unison, and Jun Niki, formerly of Goldman Sachs. Umezu, who also worked at Citigroup and SMBC Nikko Securities, focused on healthcare investments as a director at Unison. Other Unison alumni on the team include partners Koji Shigemitsu and Kenichi Miyasaka.

D Capital is positioning itself as Japan’s first private equity firm headed by both investment professionals and operationally active digital transformation specialists. It has plans to establish a special advisory board composed of academics and business professionals involved in digital transformation.

Cheque sizes will be in the JPY 3bn range, while targets - in areas like healthcare, consumer, and manufacturing - will have enterprise valuations around USD 100m. Control transactions are preferred because management buy-in is often required for comprehensive digital upgrades, but the first two investments are minority deals.

The portfolio includes multimodal transport provider FC Standard Logistics and furniture retailer Francfranc. Fellow Unison spinout JGIA acquired 51% of Francfranc last year, leaving prior owner Seven & I with 23.5% and an entity called Bais International with 25.5%. D Capital declined to comment on details.

LP demand for Japan’s middle market has prompted some GP formation, but significant deterrents around competition for deals, talent, and culture have limited ecosystem expansion. Spinouts are not uncommon among corporate and captive managers but relatively rare among the leading cohort of independent private equity firms.

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• Topics
• North Asia
• GPs
• Buyout
• Fundraising
• Healthcare
• Consumer
• Industrials
• Japan
• Unison Capital
• The Development Bank of Japan (DBJ)
• Sumitomo Mitsui
• Organization for Small & Medium Enterprises and Regional Innovation, Japan (SMRJ)
• digitalization
• D Capital