Stages of commercialization

Back to startup VCs, we must consider whether they have

enough resource and ability to develop early start-ups.
Industrialization

Phase I

Phase II

Public offering/
capital markets
M&A market
Major corporations,
financial institutions

Non-profit funding
(Govt, foundations,
and contributions)

Growth VCs

Govt. subsidy
Startup VCs

Universities/
public institutions

Time
R&D
(core: basic research)

R&D (application)

Commercialization
(product)

Commercialization (business)

Financing Bodies that Support Academic Start-ups

As we have already seen, venture capital investment in Japan is
the lowest in the OECD countries
Total Annual Venture Capital Investment by Developed Countries as a Percentage
of GDP (2006)

As a percentage of GDP

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0

0.49

0.11

0.13
0.007

OECD countries United Kingdom

United States

Japan

Source: A Survey about Mobility of Researchers and Diversity of Research Organizations

(March 2009, National Institute of Science and Technology Policy)

Investments by Investee Stage

Certainly, the amount of investment at seed and early stages has increased.

Investments by Investee Stage

However, the field is limited to ICT-related. ICT field is a field of, so
called, high rates of birth and mortality.
So, private money increases in ICT because VCs can know the investment
result soon and easily.

Success Rate of R&D for New Drug

Fields such as drug and material development have difficulty in attracting
private investment due to taking long time .

Basic
Research

Non-Clinical
Test

Clinical Test

2~3 years

3 ~ 5 years

3 ~7 years

Application for
Approval
and Review
1 ~2 years

No. of Chemical
Compounds

535,049

203

73

43

27

Accumulated
Success Rate

12,636

17,329

112,443

119,817

Approval
and Selling

Over 20 years
Source: Data book 2008 from Japan Pharmaceutical Manufacturers Association

Annual Investment Amount by VCs

The amount of Japans VCs investment has not been enhanced

Capital Commitments to funds in the US

On the other hand, capital commitment to funds in the US is gradually
recovered after so called the Lehman Brothers Collapse

Quantitative Difference of VC investment

Japan and the US
We must say that there is a huge gap of VCs investment between Japan
and the U.S.
Billion Yen

VC- Quantitative Difference

3500
3000

2940
2560

2500

2010

1930

2000

U.S.
Japan

1620
1350

1500
1000
500

193

137

88

113

0
2007

2008

2009

2010

124

2011

103

2012

Source: VEC & PWC

Comparison of VCs culture

Also, the culture of Japans VC is different from that of the US.
In Japan, the culture influences negatively to the development of academic
start-ups
Japan

USA

Organization

Banker, Securities
Salesperson
Temporary transfer
No Carried Interest
LP (short Liquidity)

Independent
Business Experience
No personnel rotation
Carried Interest
LP (long investment)

EXIT

Institutional investor
Low market price at IPO
A few M&A

Individuals
High market price at IPO
Many M&A

Investment

Distributed investment on
many target
Short-term holding
R&D oriented

Concentrated Investment on a
few target
Long-term holding
Shortly-profitable oriented
(Service)