Yet2.com, a U.S. patent distributor headed by Benjamin duPont, raised $100 million for a fund to invest in startup companies and is using some of the financing to tie up with venture capital firm Japan Asia Investment Co.
Under the agreement, yet2.com will help the Japanese firm, also known as JAIC, raise funds and will share returns on investments made through the new fund, said duPont, a direct descendant of the founder of U.S. chemical maker, DuPont Co. Tokyo-based JAIC will help the U.S. firm find potential investments, he said.
Yet2.com raised funds from wealthy individuals including the duPont family and aims to mainly invest in U.S.-based electronics, medical device and environmental technology developers. JAIC is seeking new funding from high-net worth individuals and families after the worst financial crisis since the 1930s sapped demand from institutional investors, said Kazuhiro Umeda, a Tokyo-based senior manager at the firm.
“Some billionaires are keen to invest in patents and technologies even at a time when venture capitalists are going through a tough time to raise funds,” Umeda said. “Yet2.com’s Fortune 500 network and the sort of connections that Mr. duPont has in the elite society are something we hope to benefit through this partnership.”
U.S. venture fundraising fell 56 percent in the second quarter from a year earlier to $1.9 billion, according to the National Venture Capital Association.
The increasing use of so-called pay-to-play practices, where existing investors are required to give provisions to participate in subsequent investment rounds, has made funding more urgent at a time when institutional investors have shied away from the venture capital market, said Umeda.
JAIC had investments worth 6.2 billion yen ($74 million) at the end of June in 72 startup companies in North America, according to the firm. Investments included Burlingame, California-based A-Cube Inc., which develops antibody drugs for cancer, and Sunnyvale, California-based Avantis Medical Systems Inc., which makes devices used for colonoscopies.
The venture firm’s shares dropped 1.9 percent to 52 yen at the 3 p.m. close on the Tokyo Stock Exchange. They have fallen 13 percent in the past year, compared with an 8 percent decline by the benchmark Topix index.
Yet2.com has already provided capital to JAIC through the fund so that the Japanese company can keep its preferred shareholder status, duPont said. Boston-based yet2.com will utilize its connection with executives of Fortune 500 firms in matching potential investors to startup companies, duPont said.
Yet2.com will start investing this year and expand for the first time into Asia including Japan, South Korea, China and Taiwan, duPont said. It will have a four-year investment period and a six-year period to exit the investments, duPont said.
“Because so many people are getting out of venture, this is a good time to get in,” said duPont, 46, in a telephone interview on Sept. 21 from Wilmington, Delaware. “But you need to make investments where you have exit opportunities identified early in the process.”
The new fund follows yet2.com’s first $10 million venture- capital fund, which made seven investments including a Florida- based Watermark Medical Inc., a medical device maker which sells home diagnostics for sleep, and NanoPack Inc. based in Wayne, Pennsylvania, a maker of clear-film packaging, duPont said.