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Chronicles of the Silicon Valley - Japan

Relationship and Lessons Learned

(or not Learned?)

An insider's view of large firms, startup firms, and

entrepreneurs since the 1970s

Stanford Silicon Valley - New Japan (SV-NJ) Project

Public Forum Series

February 3, 2016

Masa Ishii

Managing Director – AZCA, Inc.

Visiting Professor – Waseda University Business School

Visiting Professor – Shizuoka University Graduate School of Engineering0

Silicon Valley’s Geography

*- The term “Silicon Valley” was coined in 1971 by Don Hoefler in the column articles ”Silicon Valley in the USA” in the magazine Electronic News.

50 Miles

Waves of High-technology

1950 1960 1970 1980 1990 2000 2005 2010

Telecommunications, Internet

IoT

Semiconductor, IC

Robotics, IoT

Computer Systems, Peripherals

Big Data, AI

Software

Healthcare 1.0

Nanotechnology

Genentech

World’s Defacto

Standards

1939

Healthcare

2.0

Pre-Internet age Internet age

Silicon Valley Mechanism (… in essence)

More Money

• More people• More information• More technology

Accumulation of Knowledge

VC Investments by State

Source: NVCA

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

100% ($Billion) =

8.0 105.0 23.2 27.6 32.1 30.4 20.4 23.4 29.9 27.6 30.1 49.3

CaliforniaSilicon Valley

Other California

New England

Other Region

Midwest

Texas

NY Metro

Northwest

Notable Players in Silicon Valley

AZCA

William Hewlett &David Packard

Elon Musk

Andy Grove(3rd employee)

Pierre Omidyar(French-born Iranian-American )

Larry Ellison

Steven Jobs

Bill Gates

William Shockley

Sergey Brin

Jerry Yang

Mark ZuckerbergReid Hoffman

Source: AZCA

Brief Background

1964 AFS Program (Pennsylvania)

(1972 Tokyo University)

1972 Marubeni Electronics

1973 IBM Japan

(1978 Stanford University)

1981 McKinsey & Company

1985 AZCA, Inc.

1985 Logitech Board

1987 Pacific Technology Ventures

2002 Noventi

2006 PARC Senior Executive Advisor

2014 AZCA Venture Partners

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1960s

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1970s

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1970s

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1980s

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Sendoff for Galvez House: 9/23/98

Galvez House: A sentimental send-off

The home since 1976 to Stanford's

Help Center and since 1979 to the

Center for International Security

and Arms Control (CISAC), Galvez

House will be torn down this fall,

along with the Band Shak next door

to make room for a new Alumni

Center next to Frost Amphitheater.

1980s

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1980s

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1988

1987

1989

1988

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1990s

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1990

1991

1997

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JPY/USD

14

Nixon Shock

Carter Shock

Plaza Accord

EU Crisis

Lehman Shock

Asia Crisis

Euro Crisis

Source: fxciao.com

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GDP Growth (% p.a.)

15Source: ecodb.net

US Japan

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Characteristics of SV-Japan Relationship

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SV(towards

Japan)

• Lots of opportunities for SV high-tech ventures to alliance with deep pocketed LECs in Japan

• SV ventures continued to try to alliance with Japanese LECs

• Internet age;Silicon Valley boom; net bubble

• SV ventures started goingto Taiwan, Korea, China, etc. directly -“Japan Passing”

• Net bubblecrashes; VC investments bottom in 2003

• SV ventures little interest in deals with Japanese companies

• Lehman shock• Helped by

strong ecosystem, SV companies continue to grow

• Bubbly again?• Renewed

interest in Japan

Japan(towards SV)

• High Yen/USD

• LECs started investing in SV to diversify into new businesses

• Many LECs were burned by deals with SV ventures

• Japan’s bubble economy crashed; little money to invest in SV/US

• Japan enters a long darkeconomic tunnel

• LECs try to diversify into new businesses, but their financial situation is prohibitive

• Japan continues to suffer from economic downturn

• Japanese management very conservative and defensive

• LECs struggle to recover, but many of them lose their positions to Korea, Taiwan, and some to China

• Wave of Japanese entrepreneurs to SV

• Abenomicsencourages networkwith SV and investments

• LECs desperate to find ways to grow

• Renewed interest in SV

1985 - 1990 1990 -1995 1995 - 2000 2000 - 2007 2007 - 2014 2014 -

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Japanese Companies in the Bay Area

17Source: JETRO

377

422466

497

680

614

528 543587

547

630

719

0

100

200

300

400

500

600

700

800

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

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AZCA’s Client Base (relative)

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1985 1990 1995 2000 2005 2010 2015

US SMEs (high-tech ventures)

US LECs

Japanese LECs

Japanese SMEs

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Select List of Presentations

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Year Title

1991 Perspectives on US-Japan Corporate Partnership

1992 US-Japan Technology Relations: Where Are We Now and Where Are We Going After the Trade Talks?

1993 A Perspective on North America- Japan Corporate Partnership: Critical Success Factors – International Investment

1996 21世紀の成長戦略：シリコンバレーからのメッセージ

1999 シリコンバレーに学ぶ企業家精神: 日本へのメッセージ

2001 ベンチャー企業との連携によるニュービジネス創造

2005 アライアンスに見る日本企業の課題

2013 シリコンバレーのエコシステムの活用：事業拡大および新規事業開拓のために

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• Approach to Innovation

• Attitude towards Risk

• Decision Making Process and Timing

• Organizational Skills for Alliance

• Management and Organization for SV – Japan HQ

Chronic Issues Facing Japanese Companies

in Capitalizing on SV’s Ecosystem

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• Continued commitment in SV Ecosystem

• Top-down decision making

• Decisions only top management can make:

– New Organization

– Allocating Human resource

– Investment in Future

Strong Top Management Leadership

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Discussion

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