An Overview of the Japanese Investor Market.
Globally there has been a boom in activity by corporate venture capital (CVC) funds with 3,234 transactions recorded in FY19 across US$57.1bn in transactions (up from 1494 transaction on US$17.9bn of value five years earlier). Please see the chart below.
But more than ever, now is the time to pursue that “Pot of Gold” in Japan. Japanese companies have emerged from, the COVID-19 Pandemic, stronger than ever, with 52% of the TOPIX Index (2161 listed companies) trading on net cash. This compares very favorably with only 14% of the S&P Index. Indeed, over 300 Japanese listed companies have set up corporate venture capital (CVC) funds looking for investment opportunities both onshore and offshore, to complement existing businesses. Cash has indeed swelled on corporate balance sheets over the last 50 years – see attached chart. Looking at the list of Top 10 CVC funds by size of transactions last year, both SBI Investment and MUFG Capital are Japanese. Please see the table below.
Investment in start-up companies in Japan is not just confined to cash-rich corporations and specific VC funds. Universities have also been increasing their investments as well. According to the attached METI survey, there were a staggering 2566 Venture Businesses (VB) in September 2019 in Japan, +288 on the previous year.
As of last year, Asia surpassed the US in terms of global VC deals. Please see the chart below.
These CVC funds are not just confined to new economy, fast growth companies, but also to companies in more traditional industries. 30 years ago Japan was by far the global number one player in semiconductors; as we all know it is that no more. Global competition has driven the former Big 5 Japan players (Hitachi, Toshiba, Mitsubishi Electric, NEC and Fujitsu) out of this business, but just look at how they have all evolved into very different companies over that time.
Japan is the top investor for VC’s in Asia. Please see the chart below.
However, as the population ages (27% of Japan’s population is over 65 years old – the highest in the world), many of these corporates are being forced to confront reality and make changes to their business, to survive. Of course, those changes involve investing in start-up businesses the world over.
A charge is often made that Japan is long capital, but short opportunity. While there may be some truth in that statement, it seems somewhat unfair given that Japan already has a vibrant start-up industry. A fairer comment would surely be that with the world’s third largest pension pot and a super cash rich corporate sector, there may not be enough opportunities in Japan to satisfy that demand. The attached chart shows the growth in listings on the Mothers Market over the last 20 years. From just 2 listings in FY99, this grew to over 300 last FY19.
At Waporta we aim to change that by providing you with a wide variety of top-quality introductions to corporate venture capital funds. An opportunity to present your business to multiple new counterparties looking to make both strategic and financial investments. We are in contact with 100s of such CVC funds, through our network of staff.
Our website operates in both English and Japanese and aims to introduce a wide selection of potential strategic investors, to companies’ off-shore looking to build relationships in Japan. Given our longstanding career backgrounds in Japan, we have significant connections with corporate Japan and can make the very best introductions appropriate to you and your business.