On Worldwide VC Rankings February 28, 2007Posted by fukumimi in Japan, VC.
The FT published a story (15th Feb) noting that the UK tops Euro VC deals, based on VC investment data for 2006.
Library House’s blog noted that it missed signficant countries “such as South Korea, Japan, South Africa” citing their inability to find public data.
I thought I might help them out and point them to the source of Japanese data. The Venture Enterprise Center compiles the annual Japanese VC investment data. Unfortunately, the data is compiled by financial year (ending March), and it apparently takes them the better part of a year after the year close to compile the report. The latest report for the year ending March 2006, was made available on 5th February 2007. Should it really take this long to compile the report?
Anyhow, this is the best we have to work with. The report is here, but you’ll need to be able to read Japanese (and you probably need Japanese fonts for Acrobat installed too).
Given the promise to blog more about VC related issues this year, this seemed like a good an opportunity as any take some data out of the report and make it more widely available, and give the wider world a better idea of the VC scene in Japan. It is already the last day of February and I don’t think I’ve been doing many VC related topics. I think I’ll target once a month at the very minimum, and this is my February contribution. Having said that, I don’t have much time this evening so this is a teaser post outlining the headline numbers, with a promise to present more detailed analysis at a later date.
I’ll use the current Euro/Yen exchange rate rounded to an easy number (1Euro=160Yen, because I’m lazy) on all conversions to allow easier comparison with the Library House report statistics.
VC Investments by Japanese VC firms for FY2005 (April 2005-March 2006) totaled 234.5billion yen, which is 1.47 billion euro. That would put Japan below the UK but above Texas which was 4th on the list as far as investment sums were concerned.
Total number of deals was 2,834, which is more than double the number of deals done in California (1,367). The number of deals is broken down into principal investments(787) and fund investments(2,047). (But see below about overseas investments)
Historically, in Japan, it has not been uncommon for VC firms to make principal investments alongside fund investments (though not all firms do this – clearly there are potential conflict issues, and our firm no longer makes principal investments because of this), so there might be some overlap in the investments quoted above. Even if there was perfect overlap (with principal investments only ever occuring alongside fund investments – this certainly is not the case in reality) that would still mean 2,047 deals, assuming each VC fund was putting up only cash from one fund
at a time – again not a certainty by any means, but I don’t think the numbers would be impacted greatly and I don’t doubt that in terms of deal numbers, Japan is roughly on a par with the top 5 US states combined.
New investments accounted for approximately 80% of investment, with 20% being follow-on investments. A start contrast to the US scenario where new deals account for 25%(by sum) and 35%(by # of companies) according to the NVCA yearbook for 2006.
50% of invesments were made to companies within 5 years of founding, 20% made to companies within 2 years of founding.
IT related sectors accounted for 35%, bio/medical/healthcare for 18% (still down 5% from the previous year, but mainly due to the rise in investment in other sectors), the 3rd most active sector was in consumer related goods and services.
Investment amounts showed little industry-to-industry variation, and the average was around JPY50million, or Euro310,000.
For new deals, overseas investments were 20% of the total by investment sum(total of JPY24B or Euro150M), but just 6.7% by number of deals(127). This translates to a larger deal size for overseas investments, which averaged JPY189M, or a little under Euro1.2M.
That leaves the domestic component – 1,781 new deals (for companies who responded to this survey), totalling JPY102B, or Euro0.6B.
Those are the headline numbers, more next month….