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Singapore’s Vertex Growth Fund is keen on investing in Japanese software developers, recognizing an under-tapped potential in the country’s Software-as-a-Service (SaaS) sector. This comes as Japan’s industries continue to shift from legacy systems to efficient, cloud-based services.

Key points from the discussion with Vertex Growth’s general partner, Tam Hock Chuan, in an interview with Nikkei Asia are:

  • Japan’s industrial history has left a legacy of systems that are now outdated compared to emerging Asian economies.
  • Adopting cloud services is often more cost-effective for companies than creating proprietary data and software infrastructure. This transition drives significant growth, particularly in the context of digital transformation.
  • Major acquisitions by Singapore’s GIC and KKR signal a growing interest in Japanese software providers.
  • Japan’s SaaS market is predicted to grow to 1.67 trillion yen ($11 billion), up 53% from 2022. However, SaaS only accounts for about 4% of the country’s enterprise software market.

Vertex Growth, part of Vertex Holdings under Singapore’s Temasek Holdings, has invested in over 300 startups globally. Vertex Growth is managing a second fund of $470 million after closing its first $290 million fund in 2019. In leading investment rounds, the company usually enters with about $15 million.

The fund made its first Japanese investment in 2022, into AI startup Alt, and plans to invest more in growth-stage startups. 

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