potential growth and its attraction in japan innovative ... · potential growth and its attraction...

17~18 January 2011Hong Kong

Potential Growth and Its Attraction in Japan Innovative Ventures

Masatoshi GoChairman

Japan Venture Capital Association

Japan Session @ AFF Workshop

22

1.about JVCA

2.Venture Capital Investment

3.Venture Capital Fund

4.VC Market Summary in Japan

5.VC Market Outlook

Appendix : Venture policy in Japan

Contents

3

Profile Established in 2002 The only association for Venture Capital firms

and Venture business supporters in Japan. Over 100 members

Mission Contribution to the innovation in Japan and global society Advancement of VC industry

about JVCAProfile and Mission

copyright©JVCA2011

4

Major activities Survey and research on VC and venture business

Proposal for policy, regulation and accounting matters

Public relations

Conference for members and others

Collaboration with venture support organizations

(governments, capital market related, academia, e.g.)

Education programs for Capitalists, Entrepreneurs

Cooperation with foreign VC associations

about JVCAObjectives

copyright©JVCA2011

5

about JVCADirectors in 2010-2011

Chairman Masatoshi Go (TSUNAMI Network Partners Corporation. President)

Vice ChairmanToshihisa Adachi (ItochuTechnology Ventures, Inc. President)

Senior Managing Director Ryuji Ichikawa (Venture Enterprise Center. Chairman)

Managing Director Tsuneo Fujii (Yasuda Enterprise Development Co., Ltd. President)Michitaka Mukouhara (Mitsubishi UFJ Capital Co., Ltd . President)

DirectorKazunori Ozaki (Ant Capital Partners Co., Ltd. President)Yusuke Sasaki (Nissay Capital Co., Ltd. President)Ikkei Matsuda (Hokkaido Venture Capital Inc. President)Shohei Ikebuchi (The Gogin Capital Co., Ltd. President)Shigeki Saitoh (Strategic Investment Partners Inc. President)Moriyoshi Matsumoto (Japan Asia Investment Co., Ltd. President)Naoki Maruyama (Neostella Capital Co.,Ltd. President) Ken Yasunaga (Entrepia Japan Inc. President)Teruaki Ueda (Daiwa Corporate Investment Co., Ltd. President)

Auditor Nobuyoshi Hosokawa (Angel Capital Co., Ltd. . President)Tadashi Takiguchi (WERU Investment Co., Ltd . President)

*The Number of members:114（54 VC Members and 60 Supporting Partners）

copyright©JVCA2011

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General Assembly

Board of Directors

AdministrationDept

Planning Dept.

Chairman’s Office

Accounting Committee

Taxation Committee

Legal Affairs Committee

Research Committee

Public Relations Committee

about JVCAOrganization

copyright©JVCA2011

7

Angel Securities Co., Ltd.Aozora Investment Co., Ltd.AC Ventures Co., Ltd.Ant Capital Partners Co., Ltd. Asahi Life Capital Co., Ltd.bhp Bio-Sight Capital, Inc.Daiwa Corporate Investment Co., Ltd. DBJ Capital Co.,Ltd.Entrepia Japan, Inc.Future Venture Capital Co., Ltd. Globis Capital Partners Inc.Hiroshima Venture Capital Co., Ltd.Hokkaido Venture Capital Inc.Hurray Trust Inc.IKEGIN CAPITAL CO., LTD. ITOCHU Technology Ventures, Inc.Iyogin Capital Co., Ltd. iSigma Capital CorporationJapan Asia Investment Co., Ltd. Japan Private Equity Co., Ltd. Kagawagin Capital Co., Ltd.KNOWLEDGE COMPANY INC.KSP Inc.Kyushu Venture Partners Co., Ltd.Mitsubishi UFJ Capital Co., Ltd.Mitsui & Co. Global Investment,LtdMITSUI SUMITOMO INSURANCE Venture Capital C0.,Ltd.

Mobile Internet Capital Inc. MU Hands-on Capital LtdNEOSTELLA CAPITAL CO.,LTDNISSAY CAPITAL CO., LTD.Nippon Venture Capital Co., Ltd. OGI Venture Capital CorporationORIX Capital CorporationPRIVATE EQUITY JAPAN CO., LTD.Resona Capital Co., Ltd.SANSEI CAPITAL INVESTMENT CO., LTD.Shinkin Capital Co., Ltd.SHIZUOKA CAPITAL CO., LTDSojitz Private Equity, Inc.Strategic Investment Partners Inc.SunBridge Corp.Techno-Venture Co., Ltd.The Future International Ltd.The Gogin Capital Co., Ltd.THE TOTTORI CAPITAL CO., LTD.Toa Capital Corporation.Toyo Capital Co., Ltd.TSUNAMI Network Partners CorporationThe University of Tokyo Edge Capital Co., Ltd.WERU INVESTMENT Co., LTD.YAMAGUCHI Capital CO., LTD.Yasuda Enterprise Development Co., Ltd.

about JVCAVC members (54 VC firms)

copyright©JVCA2011

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AZX Professionals GroupBDO Sanyu & Co.Clifford Chance LLPColler Capital Ltd.D.Brain Securities Co., Ltd. Deloitte Touche TohmatsuErnest&Young ShinnihonJapan Securities Dealers AssociationJMA Consultants Inc.JONES DAYKansai Urban Banking CorporationKPMG AZSA & Co.Kyosei International Patent OfficeMirai Securities Co., Ltd.Mizuho Information & Research Institute, Inc.MOMIJI CONSULTING CORPORATIONNishimura & AsahiNPO Japan Venture ResearchPRONEXUS INC.

Leading Securities Co., Ltd. SK Ventures Co., Ltd.Sumitomo CorporationTakara Printing Co., Ltd.The Japan Academic Society for Ventures and EntrepreneursTMI Associates Tokyo Small and Medium Business Investment &

Consultation Co., LtdTokyo Stock Exchange, Inc.TOYO & HorwathUCHIDA &SAMEJIMA LAW FIRM Venture Enterprise Center

Individual members: 21 peopleVenture capitalist members: 10 people

about JVCASupporting members (60 entities)

copyright©JVCA2011

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1.about JVCA




5.VC Market Outlook


Contents

11 9 10 7 6 3 3

3092 2960 2675 2946 2570 2241 2031

5240 56257202 7158 7829

72546677

0

2000

4000

6000

8000

10000

12000

2004 2005 2006 2007 2008 2009 2010March

laon principal investment fund investment

10

VC Investment

VC Investments balance(accumulated value)

9,498(¥949bil.)

10,406(¥1.04tri.)

10,111 9,887

8,594 8,343

(note) the above is the fiscal year base ~ ex:”2010” means “April 2009 to March 2010”

main source: VEC VC survey 2010 [for the year ending Mar. 2010]copyright©JVCA2011

8,710(¥871bil.)

1111

VC Investment VC Investment amount (annual value)

1 7 4 2 1 0 3241

419 436688

267 292 133

1216

15421905

2186

1665

1073

740

0

500

1000

1500

2000

2500

3000

3500

2004 2005 2006 2007 2008 2009 2010

\100

mil

loan principal investment fund investment

copyright©JVCA2011

1,366(=¥136bil.)

1,458

1,968

2,345

2,876

1,933(=¥193bil.)

875(=¥87.5bil.)

main source: VEC VC survey 2010 [for the year ending Mar. 2010]


Number of companies received V C inves tment

& V C inves tment amount (annual)

0

500

1000

1500

2000

2500

3000

2005 2006 2007 2008 2009 2010March

number of VC backed companies VC investment annual amount(\bil)

1294co,

2774 co,

991 co,

12

¥136.6bil

¥196.8bil

¥234.5bil

¥279.0bil

¥193.3bil

2579 co,

2834 co,2759 co,

VC Investment Portfolio Companies and amount

copyright©JVCA2011

¥87.5bil



1313

VC InvestmentVC Investment by company stage

note : Initial investment for the year ending March 2009,2010Percentage by Investment Value

copyright©JVCA2011

2009 Investment stage

14.90%

31.00%

22.30%

31.80%

2010 Inves tment s tage

8.00%

35.70%

30.80%

25.50%

seed

early

expansion

later


1414

VC InvestmentVC Investment by industrial sector

2009 Investment sector

40.50%

17.70%

15.40%

26.30%

note : Initial investment for the year ending March 2009,2010Percentage by Investment Value

copyright©JVCA2011

2010 Investment sector

35.20%

13.20%

28.60%

21.70%

IT re lated

Bio/Life sc ience

Industr ial/Energy

Service/finance/realty


1515

VC Investment VC Investment by geographic area

2009 Global Investment

76.60%

11.40%

2.80%

9.20% 0.40%

note : VC Investment balance(accumulated value) as of March 2009,2010 Percentage by Investment Value

copyright©JVCA2011

2010 Global Investment

75.90%

12.71%

3.07%

7.99% 0.24%

Japan

Asia/Pacific

Europe

U.S

Other area


5.00% 2.00% 3.40%11.80% 6.60%

41.40%

29.80%38.10%

48.20% 56.60%

15.20%

23.30%

23.40%

30.10% 23.90%38.10%

44.90%35.10%

9.90% 12.90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010March

IPO

Dep.Bankrupcy

M&A,TradeSale

Others

16

VC Investment Exit Strategy

Definition : Percentage by the number of portfolio company

copyright©JVCA2011

Type of Exit



17

VC Investment Exit Strategy ~ VC-backed IPOs

copyright©JVCA2011

(note) the above is the calendar-year base.


1818

1.about JVCA




5.VC Market Outlook


Contents

VC FundFundraising

1969718899 19293

18454

16807

28161980

2740

848 474

70

44

39

23

15

0

5000

10000

15000

20000

25000

2006 2007 2008 2009 2010 March

0

10

20

30

40

50

60

70

80

Total Fund Commitment Annual Fund Commitment Number of Fund

the n

um

ber

of fu

nds

¥100m

il

(note) Fundraising by fiscal year base(April-March)

19copyright©JVCA2011


20

VC Fund VC Funds under management

Mar/2008 Mar/2009 Mar/2010

The Number of Funds

under management466 461 435

The Number of LPs(total) 2878 3356 3294

*average No. of LP 10.5 11.6 11.9

Total fund commitment ¥1.863tri. ¥1.770tri ¥1.6807tri.

*average fund commitment ¥4.04bil. ¥3.85bil. ¥3.86bil.

VC Funds summary(as of Mar.2010)

copyright©JVCA2011


2121

1.about JVCA




5.VC Market Outlook


Contents

Stable growth

Technology

Sustainable growth

Knowledge

1960～1975 1976～1995 1996～2020

Market creation

High growth

Infrastructure, Large capital

Large CompanySME,Venture Company

Equity finance-oriented.

Venture Capital system

Reference : S.Sugita & Prof. Kondo JAIST MOT

Management

for Quantity

Market expanding Market maturing

Innovation finance in Japan

VC Market SummaryVC Finance for Venture and SME Expectation on Entrepreneur, Venture

Loan finance-centered system

strategy


23

EquityFinance

DebtFinance

Loan balance to SME ¥252tril.

*by Private sector (Bank etc.) about ¥227tril.*by Public sector( Government related Banks etc.)

about ¥25tril.(*Public credit guarantee system about ¥25tril.)

VC Investment balance about ¥0.98tril.

source : Data as of 2005 Masato ONO [Practical Knowledge of Venture and Investment]

VC Market SummaryVC Finance for Venture and SMESME Finance in Japan

copyright©JVCA2011

2424

Listed company on stock Exchange(Public equity)VC and public Stock Market

Early IPOLater

(Steady Growth)MBOExpansion

Restructuring/Turnaround

Startup/Seeds

De-Listed

Company Life cycle

VC Market SummaryVC Finance for Venture and SMEVC and Stock Market in Japan

big

(Mark

et s

ize) s

mall

Venture CapitalInvestment

Tokyo Stock Market (as of April 2010)Market Value ¥338tri.

(*1st¥330tri, 2nd¥4tri, Mothers¥2tri.)Listed Companies, 2300 companies

(*1st1685, 2nd441, Mothers,186) VC Investment Outstanding¥0.9tri.

VC Funds commitment¥1.68tri. (as of Mar.2010)

copyright©JVCA2011

First govern-

mental VC Firms

in Japan(‟63)

Policy for Venture Business

1998 Act for TLO (Technology Licensing Organization)

1998 SMRJ* VC Fund investment project

1999 Act of Japanese version „Bayh/Dole‟

1999 Act of Japanese version „SBIR‟

2001 Plan for 1000 of University Spinoff Ventures

2003 Act of National University to Corporation

Emerging Stock Market for VC Exit

1999 Oct. Centrex (Nagoya Stock Ex.)

1999 Nov. Mothers (Tokyo Stock Ex.)

2000 Apr. Ambitious (Sapporo Ex. )

2000 May Hercules (Osaka Ex.)

2000 may Q-Board (Fukuoka Ex.)

2004 Dec. JASDAQ Ex.(OTC since1963)

VC Market SummaryRegulatory treatment for VC businessa)Brief history on Venture policy

First Private

VC Firms in

Japan („70s)

NASDAQ

US („71)

UK AIM(„95)

KOSDAQ(‟96)

HK GEM(‟99)

19801970 1990 2000

Legislation

1998 „Venture Fund Act‟(L.P. Act for SME)

2004 „Fund Act‟ (L.P. Act for Investment)

2007 Financial Instrument and Exchange Law

copyright©JVCA2011

(note)*SMRJ=Organization for Small & Medium Enterprises and Regional Innovation, JAPAN 25

2626

1.Fund law: Limited Partnership Act for Investment (1998,2004)

2.Fund : Partnership(Investment LPS)

3.General Partner~ unlimited liability• VC/PE firm• manage the operation of a Partnership• execute day-to-day investment activity • prepare Financial Statements

4.Limited Partner~ limited liability• Investor(Institutional, Corporate, Individuals)

5.Fund Registration 6.Duration(Expiration) 7.Voluntary Withdrawal is not allowed8.Dissolution• The expiration of the term of the Partnership• Achievement of its business purposes

formed by Partnership Agreement

Investmentto

Companies

Fund<Partnership>Partnership agreement

Limited Partner

(LP)

General Partner(GP)

Limited Partner

(LP)

Venture Companies/Portfolio

Investment

VC Market SummaryRegulatory treatment for VC businessb) Limited Partnership Act for Investment

pro

fit

copyright©JVCA2011

Fund Law(1998,2004)

27

Financial Instrument and Exchange Law (FIEL; effective Sept.2007)

VC Market Summary Regulatory treatment for VC businessc) Collective Investment Scheme(CIS)

1.Collect capital or contribution in monetary or similar properties from two or more persons

2.Conduct investment using the money

3.Disribute profits or properties to investors

4.Including any forms of funds such as

partnership in Civil Law and Limited partnership

Act for Investment.Fund<Partnership>

contribution

Investor

Object of investment/Businesses

Investment

dis

tributio

n/p

rofit

[1] Regulation on Fund

(a) Definition: Collective Investment Scheme(CIS)

(b) Interests in CIS(funds) as “Securities”

<CIS>

<note>The name of the Securities and Exchange Law was amended to the Financial Instrument and Exchange Law in 2007.It is for comprehensive and cross-sectional rules for user protection and develop an environment where users can invest with confidence.Regulatory treatment is made on Funds business for further development.

Reference: Financial Service Agency, Japan(2006)

Investor Investor

copyright©JVCA2011

VC Market Summary Regulatory treatment for VC businessd) Legal background for VC/PE Fund Firm

[2] Regulation on Financial Instrument Business Firm (GP Firm of Fund)(a)Regulation on sales and solicitations business by members of funds themselves

(b)Regulation on investment management business by members of funds themselves

(c)Funds for professionals is notification requirement.

28

Financial Instrument and Exchange Law (FIEL; effective Sept.2007)

*QII: Qualified Institutional Investor

RegistrationRequirement

NotificationRequirement

Type Ⅱ(2nd) Financial

InstrumentBusiness

InvestmentManagement

Business

Regulation :minimum capital requirement

Regulation: minimum capital, net asset requirement

<Type of business>sales and solicitation of securities with lower liquidity and market derivatives

<Disclosure requirement >Filing of securitiesRegistration statementinterest of CIS‟s offering for over 500 persons

<Type of business>investment managementincluding discretionaryinvestment business(Notified firm

=„Todokede‟ firm)

Type of VC Firms under the Law

(Registered firm=„Touroku‟ firm)

Reference: Financial Service Agency, Japan(2006)copyright©JVCA2011

(a)(b)Funds for general Investor

(c)Funds for professionals(QIIs*+49 general

Investor)

VC Market Summary Venture Capital Firm in JapanCharacteristics by related entities

Bank related

21.90%

Investment

Bank related

31.20%

Insurance

co,related

7.10%

Corporate

related

18.50%

Independent

12.90%

Public related

8.00%

Others,

0.40%

29

84%

9%6%

1%

US VC Firm

by related entity

Independent

Financial

related

Corporate

related

Others

source: METI [Final Report of Study group for Venture creation](Apr.2008)

VC firm by related entities

The number of VC Firms :about 150~200 (unconfirmed)

copyright©JVCA2011

ref: U.S VC firm

3030

1.about JVCA




5.VC Market Outlook


Contents

VC Market OutlookVC Investment amount (US,EU,JPN)

VC Investment amount (annual value)-US,EU,JPN



32

Percentageof GDP

Israel (1)

United States

Iceland

Canada

OECD19 (2)

OECD23 (4)

Korea (3)

Sweden

United Kingdom

Netherlands

Finland

European Union

Europe

Australia (5)

Norway

Spain

Denmark

France

Belgium

Ireland

Euro area

Germany

New Zealand (5)

Italy

Portugal

Switzerland

Czech Republic

Austria

Poland

Greece

Hungary

Japan (5)

Slovak Republic

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

2000年～2003年の平均投資額

がＧＤＰに占める割合

Notes： (1) 2000-2002; (2) Europe, Canada and United States; (3) 1998-2001; (4) Europe, Czech Republic, Hungary, Poland, Slovak Republic, Canada, and United States; (5) 1998-2001.

Percentage

Israel (1)

United States

Iceland

Canada

OECD19 (2)

OECD23 (4)

Korea (3)

Sweden

United Kingdom

Netherlands

Finland

European Union

Europe

Australia (5)

Norway

Spain

Denmark

France

Belgium

Ireland

Euro area

Germany

New Zealand (5)

Italy

Portugal

Switzerland

Czech Republic

Austria

Poland

Greece

Hungary

Japan (5)

Slovak Republic

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Israel (1)

United States

Iceland

Canada

OECD19 (2)

OECD23 (4)

Korea (3)

Sweden

United Kingdom

Netherlands

Finland

European Union

Europe

Australia (5)

Norway

Spain

Denmark

France

Belgium

Ireland

Euro area

Germany

New Zealand (5)

Italy

Portugal

Switzerland

Czech Republic

Austria

Poland

Greece

Hungary

Japan (5)

Slovak Republic

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Notes： (1) 2000-2002; (2) Europe, Canada and United States; (3) 1998-2001; (4) Europe, Czech Republic, Hungary, Poland, Slovak Republic, Canada, and United States; (5) 1998-2001.

The Percentage of annual VC Investment Value to GDP

VC Market OutlookVC Investment in GDP

USA

EU

OECD

UK

Japan

source: OECD „The SME Financing GAP(2006)‟copyright©JVCA2011

VC Market Outlook Recent trends

Historical Background1.Bank-loan centered finance system 2.Established-business centered in the economy

~NIH, stability, credibility, employee‟s quality3.Limited Equity Money to Ventures

Recent stagnant trends since the world financial crisis1.Divestment waysa) IPO at Emerging Stock Markets b) M&A

2.Venture business creation in matured economya) Entrepreneurs b) University Spinoffs, Carve-out


VC Market Outlook Developing industry

1. IPO Stock markets2. Risk money from financial asset

a) Financial Instrument and Exchange Lawb) Permanent Establishment Tax for Foreign risk takerc) Public Pension Fund

3. Corporate Tax 4. Open innovation5. support for Entrepreneurs*


*ref: Appendix：Venture Policy in Japan(1)~(3)

Reforming on Venture Circumstances

VC Market Outlook Developing industry

VC as Developing Industry


1.Educate entrepreneurs and Activate Alternative Fund Investors

2.Training on Venture Capitalist

3.Necessity for VC infrastructurea) Concept for Venture businessb) Databasec) Tax and legal treatment for Venture-oriented society, etc.

VC Market Outlook What to be achieved

High technology

Reliable business & financial center

Gateway to Asian growing economy

at Japan

More Cross-border opportunity

with Asian Countries


37

Business for incubating entrepreneurs

Dream Gate business (VEC : Venture Enterprise Center/Project Nippon)

Training school for entrepreneurs (“Sogyo Juku”)

(Societies of Commerce and Industry and Chambers of Commerce and Industry)

Business for establishing network environment to support entrepreneurs VEC)

Business for promoting to incubate young entrepreneurs (JST : Japan Science and Technology Agency)

National forum for entrepreneurship and venture business (SMRJ : Organization for Small & Medium Enterprises and Regional Innovation, Japan)

Incubation business (SMRJ)

Venture incubation in USA/UK (JETRO)

[VBL] Venture Business Laboratory (national university)

1.Incubating and fostering entrepreneurs

2.Providing business base for start-ups

Appendix：Venture Policy in Japan(1)

main source: Office for New Business METI, Japan 2010

(note)*SMRJ=Organization for Small & Medium Enterprises and Regional Innovation, JAPAN

http://j-venture.smrj.go.jp/jva/index.html

http://www.jetro.go.jp/mail/list/

38

[Start-up period] [Fostering period]Business start-ups fund

(Japan Finance Corporation: “JFC”)Women, youth and senior entrepreneurs fund

(JFC)Fresh start (“Challenge Again”) assistance fund

(JFC)New start-up loan program (JFC)

Subordinated loan (JFC)

Angel investor tax program(charitable income tax deduction system)

Investment

Start-ups related guarantee/ Guarantee of starts-up related businesses (National Federation of Credit Guarantee Corporations)

Guarantee

facility

Subsidy program to support start-ups of eligible person for employment insurance (Hello Work)

Subsidy

Loan

Investment

Supplying funds by Industrial Innovation Organization[Promotion of Open Innovation] Investment

New business nurturing loans (JFC)

Venture loan with new share reservation rights (JFC)

Business invested by venture capital funds (SMRJ*)

Special rule for tax on the first type of permanent

establishment (branch PE) (Corporate tax)

Business for establishing database of venture capital

investment

Venture Plaza (SMRJ)

3．Support for Raising Funds For Start-ups and fostering businesses



Loan

Research and development program for putting academia-oriented business to practical use (New Energy and Industrial Technology Development Organization: “NEDO”)

SBIR technology innovation program (NEDO)

New energy venture technology innovation program (NEDO)

Support program for practical use of innovation technology (NEDO)

Finding and supporting “super creators” (Information-Technology Promotion Agency: “IPA”)

Subsidy for information and communication technology venture companies (National Institute of Information and Communications Technology)

Evaluation program for product

capability made by small and

medium companies (National

research institutes)

Support program for

establishing distribution

navigator with incentive fee

(SMRJ)

Venture Fair Japan/

Event for presenting

SME businesses (SMRJ)

Support program for utilizing senior and retired person for SMEs (SMRJ)

4.Support for technology development and manufacturing trial products

5.Support for enhancing distribution channel

6.Suppor for recruiting



(note) NEDO=New Energy and Industrial Technology Development Organization

39

Contact us

40

Address:Hibiya Bldg. 1-1-1, Shinbashi, Minato-ku, Tokyo

105-0004, Japan

Phone: +81-3-3595-6616

Fax: +81-3-3595-6617

E-mail: [email protected]

URL: http://www.jvca.jp/en/index.html

Japan Venture Capital Association

copyright©JVCA2011

Planning DepartmentShinji UEHARA.mrMasako YAGUCHI.ms

potential growth and its attraction in japan innovative ... · potential growth and its attraction...

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