"can tokyo become japan's silicon valley?: views from the vc trenches in japan.”

2016 NTT DOCOMO, INC. All rights reserved.

Mick Etoh

@mickbean, 9/15/2016

NTT DOCOMO1

"Can Tokyo Become Japan's Silicon Valley?: Views from the VC Trenches in Japan.

2016 NTT DOCOMO, INC. All rights reserved.2

http://www.slideshare.net/apglo/presentation-for-decoded-fashion


Top Venture Capital

3


Cooperate Venture Capital

4http://www.slideshare.net/apglo/presentation-for-decoded-fashion

terminated


50 : 5 : 1

US Annual financing to VC-backed companies(start-ups) = $57 and $72B in 2014 and 2015 while Japanese VCs financing still remained about $1B(2015).


Source: NVCA YEARBOOK 2015Source: Venture Hakusho 2015

00s M 00s M$

2500

3000

3500

4000

4500

150

237.5

325

412.5

500

2010 2011 2012 2013 2014

Total Investments per Year (00s M$) Number of Investments

43614238

39644039

3667 493.1

300.6275.8298.8234.4

366736673667

403940394039 39643964423842384238

436143614361

0

1000

2000

3000

4000

0

500

1000

1500

2000

2007 2008 2009 2010 2011 2012 2013 2014

Total Investments per Year (00s M)Number of Investments

969100082410179159911294

2579

1171

1818

1026124011328751366

199325792579257925792579257925792579

129412941294129412941294129412941294991991875991875991991 915915915 10171017101710171017 824824824 1000100010001000 969969969

Changes in VC Investment in US and Japan


0

300

600

900

1200

2013 2014

588.6

381.9

176.3158.4 167.5117.1

159.5114.5

Products/ServicesIndustrial/Energy/OtherBiotech/Medical/ HealthcareIT-related

VC Investments by Sector


Venture Capital Financing in the US and Japan

17%

7%

17%

2%2%2%2%10% 6% 2%

4%8%

25%

Public Pension FundsCorporate Pension FundsBank/Financial ServicesCorporationsInsurance CompaniesEndowments/FoundationsWealthy Investors/Feeder FundsGP ContributionFOFSovereign Wealth FundsOther

7%

17%CorporationsBank/Financial ServicesInsurance CompaniesOther VCs/FOFGovernmental/Regional OrganizationsUnlimited Liability Partners/Managing PartnersForeignOther DomesticIndividual/FamilyStock Brokerage Firms

Sources for U.S. VC Fundraising Venture Capital Fund Commitments (2012/2013)


In Million of US$

Amount of VC investment

Amount of VC investment ratio to GDP

US France

UK Germany

Japan A

ustralia

Canada

Switzerland

Sweden

Israel

Belgium

South Korea

Norway

Holland

Spain

Denmark

Finland

Ireland

Austria

Italia

Portugal

Czech Republic

Greek

Estonia

Luxembourg

Slovakia

Poland

Hungary

VC Investments by Country


Innovation Ecosystem in EU

International Journal of Technology Management vol. 66, num. 2/3

key individuals are in blue, companies in red and financial firms in green.


Can Tokyo become Japans Silicon Valley?


No.


Startups in Tokyo has two options:

Come to the Bay Area, or

Stay in Tokyo but focus the unique product.

No.


Market VCEcosystem

Talent

Source:2016 Silicon Valley Index

Interlock of investment, talent, and market creates an unsurmountable barrier for others.

2016 NTT DOCOMO, INC. All rights reserved.14https://www.cbinsights.com/blog/increasingly-crowded-unicorn-club/

The Crowded Unicorn($1B+) Club (as of August, 2016)

171

2016 NTT DOCOMO, INC. All rights reserved.15Source: SparkLabs Global Ventures

Start-up/VC Ecosystem1. Funding & Exits2. Engineering Talent3. Active Mentoring4. Tech Infrastructure5. Startup Culture6. Legal & Policy Infrastructure7. Economic Foundation8. Government Policy & Program


6. Boston7. LA8. Beijing9. London10. Berlin

Source: SparkLabs Global Ventures

10 Hottest start-up Ecosystem

1. Silicon Valley

2. Stockholm

3. Tel Aviv

4. NY

5. Seoul


India China Japan Israel Bay AreaMarket size " ! ! Language " !

Regulation/Market fairness "

Excellence or Uniqueness of

Talent" " " "

Life/Weather* ! ! Overall !

*Dont laugh. It DOES matter.

India and China receive large amounts of VC money due to their market size. However, there are only a few

companies in those countries that succeed globally.

Which countries are best for startups?

Can Tokyo become Japans Silicon Valley?


Startup NationAdvantage

Strong relationship to Military and Defense Industry (AI, Communication, Security, Devices) Famous Startups

Waze, Viber, FiverrVC circumstances

20-30 VCs, 4000-5000 startups, 6B exit in 2015,Chinese-backed VCs(40%?)


London as Gateway

AdvantageLondon as Gateway to EU and USFin Tech demandsFamous StartupsShazam, Powa, SkyscannerVC circumstances>1000 Fin Tech companies with GBP20B size revenue3200-5400 start ups in UKTech City in London


The Nordic countries

AdvantageSocial Demands by Low Carbon, Medical Care, Digital Government. Famous StartupsSpotify, SupercellVC circumstances

Stockholm Innovation & Growth(STING), Governmental Agency for Innovation Systems - VINNOVA


Tokyo & JapanAdvantage

Animation, Media Contents(e.g., PockemonGo), Gaming, Bio & DevicesFamous StartupsGumi, Mercari, Cyberdyne, EuglenaVC circumstancesRising CVC money into AI, IoT, Robotics, etc. $1B (2015) -> $1.6B (2016)


Gaming/Net Media

Biotechnology, Device


First Nippon Venture Awards(2015)First Nippon Venture Awards

Prime Ministers Award euglena Co., Ltd.

METI Ministers AwardsCyberdyne Inc. andDiawa House Industry Co., Ltd.

METI Ministers Award(Female Entrepreneur) Coiney Inc

Special Jury Award(Encouragement of Regional Economies) Spiber Inc.

Special Jury Award (Work-Style Innovation) CrowdWorks Inc.


Second Nippon Venture Awards(2016)

Special Jury Award(Intrapreneur) Sony Corporation

Prime Ministers Award PeptiDream Inc.

METI Ministers AwardsZMP Inc. DeNA Co., Ltd. Sony Mobile Communications Inc.

METI Ministers Award(Female Entrepreneur) Genequest Inc.

Special Jury Award(Global Expansion) Mercari, Inc.

Special Jury Award(Resolution of Social Challenges) SuRaLa Net Co., Ltd.


25

M&AIPO &Partnership

Tokyo Stock Exchange:the Mothers (Market of the high-growth and emerging stocks) section for high-growth startup companies. See also JASDAQ.

Market Capitalization > $10 Milion

average: $26.5M


http://www.jpx.co.jp/english/derivatives/products/domestic/mothers-futures/index.html


Way Forward


Innovation Engine of Bay Area

Talent

Market VCEcosystem


Innovation Engine of ChinaManufacturing

Market

Manufacturing

ProductionEcosystem

suggested by H.Tamura@Re:Public


Shenzhen Tianjinsuggested by H.Tamura@Re:Public


Innovation Engine of the Nordic Countries

Society

Citizen Experimentssuggested by H.Tamura@Re:Public


Innovation Engine of Israel(Joking Version)

Hungry

Drought Resilience


Innovation Engine of Tokyo

Skill

Urban Infra-structure

QualityConsciousMarket


A Possible Innovation Engine of Tokyo

Partnershipwithout M&A

SteadyBusiness Model

Engineering


Another Possible Innovation Engine of Tokyo

Small-Scale Manufacturing

New IoTMarket

Small-Scale ManufacturingSmall-Scale Manufacturing

NetworkedProductionEcosystem


Hardware Startups in IoT Era


Hardware Startup Accelerators

Creation

From Prototypingto Mass Production

ShenzhenSan Francisco


SourcemakersMicro-Production in Japan, IBM

+Large scale production+Requires high management skills-High RISKS; -Language barrier -Quality management -Exchange disadvantage -Higher Labor costs -Increasing Tax

EMS companies : High tech subcontractors -have sustained Japanese manufacturing -decreasing orders from existing makers

Middle size EMS accepts from 100 lots of manufacturing

1,00010,000100

Q

31thousand

17thousand

9thousand


China

Japan

Unit Labor Costs (i.e., normalized payment by GDP)

http://www.nikkei.com/article/DGXLASDZ05H7B_V01C15A2MM8000/

Labor Cost increase:10%/yearMonth Payment $566/month in Beijing, $474/month in ShanghaiJapan > $2000/month


39 Meisters:

NetworkedProductionEcosystem


!"


Less spent on essentials, more for luxuries or unique ones

http://www.scootman.bike/

https://39meister.jp/selection/selection005/

http://www.scootman.bike/http://www.scootman.bike/http://www.blincam.co/


IP: Japanese companies share 40% of top 100 patent owners worldwide. (Thomson Reuters).As such, Japan has the underlying strength in the production innovation.

Fund: Japanese private financial asset totals \1,700 tril. ($17 tril) and over 50% is held in the bank savings and cash. can we unlock the funds to more risk asset? It is worth noting that more than half of those assets that held tightly in the bank savings account and cash.

VC $80B worldwide, there is a big gap in size for risk money.

Can we unlock the funds towards the riskier asset such as venture investment? Potentially, the funding is not an issue for Japans Start-up, if only we can change the risk-averse investment policy and mentality.

Innovation only happens where the money is.


Take Aways

Startups in Tokyo have two options: 1. Come to Bay Area, and 2. Stay there for own unique products.VC financing is raising from $1B(2015) -> $1.6B.Hot Trends: Connecting tech start-ups to large companies, and Hardware startups in IoT Segment.

50