Japan’s venture capital industry is in a very difficult situation. That’s, in a nutshell, the result of a recent Nikkei survey. According to the paper, investments from the nation’s top 20 VC firms dropped a whopping 40% in fiscal 2009 to $711 million. Compared to 2007, that’s even 50% less.
To be more concrete, the Nikkei says that Japan’s biggest VC firm, SBI Holdings, just invested $300 million last fiscal, down 27% year-on-year. Investments from the number two (JAFCO) and number three (Mizuho Capital) even fell 44% and 43%, respectively.
In a separate survey, Japan’s Ministry of Economy, Trade and Industry found out that at $1.1. billion in 2009, total investments of national VCs were the lowest since 1995 (when the ministry began conducting its survey). In fiscal 2006, the number stood at $2.2 billion.
What’s more, IPOs in Japan dropped to just 19 last year – the lowest number in decades. TOKYO AIM, a new equity market for startups and a joint venture between the Tokyo and London Stock Exchange established last year, hasn’t listed a single company yet.
IPOs can be considered a “standard” exit for tech startups in this country and account for up to 90 percent of yearly profits for Japanese VCs – so that’s really bad news for everyone involved. The VCs, for one, seem to increasingly set their sights overseas. According to the Nikkei, the top 20 firms have pumped 40% of their investments last year into foreign markets, up from 30% in 2007.
Here’s a column I wrote about Japan’s VC industry earlier this year for the Journal of The American Chamber of Commerce in Japan; it might be of interest, too.
Serkan Toto