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Japan’s INCJ Said to Plan Buying Stake in Tech Startup Midokura

State-backed investment fund Innovation Network Corp. of Japan is planning to buy a minority stake in three-year-old network software developer Midokura, two people with knowledge of the matter said.

The fund intends to invest $12 million in Midokura, which is developing technology to help networks run more efficiently, said the people, who asked not to be named because the plan has yet to be completed. Midokura may receive another $5.3 million from local investors, they said.

The use of smartphones and cloud computing is increasing demands on networks that link computer systems, and in turn the value of the technology aimed at helping these systems operate better. Palo Alto, California-based VMware Inc. (VMW) last July agreed to pay about $1.26 billion for network software developer Nicira Inc. At the time of the deal, Nicira had only recently shipped its first production-ready systems.

Spokesmen at INCJ and Midokura declined to comment on the planned investment.

Co-founded by Tatsuya Kato and Dan Mihai Dumitriu, a former engineer at Amazon.com Inc. (AMZN), in January 2010, Midokura has offices in Tokyo, San Francisco and Barcelona, according to its website. It raised 113 million yen ($1.2 million) in 2011 in a seed-funding round from investors including Bit-isle Inc. (3811), a Japanese independent data center provider.

Midokura plans to double the headcount of its engineers to 50 as it seeks to develop and commercialize the software, one of the people said.

With investment capacity totaling about 2 trillion yen, INCJ was formed in 2009 to invest in technology that would make Japan more competitive globally, according to its website. In December, the fund said it would invest 138 billion yen in Renesas Electronics Corp. (6723), the ailing Japanese chipmaker that supplies Apple Inc. and Nintendo Co.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net

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