SoftBank Investment Fund of US $ 100 billion Vision Fund of Japan (SoftBank) has invested in 75 “unicorn” startups (valued at US $ 1 billion or more) worldwide. However, none of these Japanese startups.
According to Bloomberg, the reason may be because Vision Fund does not have many options in Japan. While the US has 179 “unicorns”, China has 93, India has 18, Japan has only 2, according to CB Insights. So, why does a country pioneering Walkman music players, robots … do not have high-value startups?
The listing rules for the Tokyo Stock Exchange Mothers Index are low. To join Nasdaq in the US, companies need to issue a minimum of 1.25 million shares, while Mothers only requires 2,000 shares. This means that young, thirsty companies can still raise capital in the mass market easily, instead of going through the process of attracting investment through multiple rounds of funding.
The problem lies with the size of the companies listed. The bigger the company is, the greater the ability to attract investment from larger organizations. Because of their young age and small size, 96% of the 283 Mothers companies have market capitalization of less than US $ 1 billion, compared to about 30% of the Nasdaq.
Over the past 2 years, only two “unicorns” of Japan have been listed on the stock market with mixed results
Over the past 2 years, only two “unicorns” of Japan have been listed on the stock market with mixed results. Shares of e-commerce company Mercari Inc. 4% discount since raising 1.2 billion USD in the first public offering (IPO) in June 2018. And Sansan Inc., an enterprise management solution company. up 33% from listing last month. Two unlisted “unicorns” include 4-year-old startup Preferred Networks Inc., a company that uses artificial intelligence to automatically color cartoon characters and Liquid Group Inc., a virtual currency trading platform based. based in Tokyo.
Because there are not many attractive options in Japan, billionaires like Masayoshi Son, CEO of SoftBank, diverted venture capital to other countries. As more and more venture capital is scarce, Japanese startups start listing sooner than they are small. This vicious cycle goes on and on.
Besides, innovation in Japan also faces cultural challenges. Attracting talent is difficult when new graduates choose to join big and famous companies instead of starting a startup. Japanese startup founders are also known to be quite shy in raising capital, unlike startups in Silicon Valley in the US. However, this does not mean that the startup activity in Japan is underdeveloped.
Last year, venture capital poured into startups in the country hit a record $ 3.5 billion. Since the beginning of the year, the Mothers index has increased by about 20%, surpassing the 9% increase of Topix. The amount of capital poured into IPOs in Japan also reached a high level last year.
Besides, attitudes towards startups are also changing. According to Yoshito Hori, managing partner at Japanese venture capital firm Globis Capital Partners, stigma towards startups is gradually being phased out and they attract more graduates. Even so, Hori said Japanese startup startups were still modest.
The real opportunity in Japan lies in investing in private equity
According to Bloomberg, the real opportunity in Japan lies in private equity investment, when many large companies want to innovate, and long-term startups want to seek an acquisition. Last year, a group of investors led by Bain Capital acquired Toshiba Corp.’s memory chip company. for $ 18 billion. This week, KKR & Co. sold semiconductor equipment division of Hitachi Kokusai Electric to Applied Materials Inc., based in the US, for US $ 2.2 billion. 18 months ago, the company also paid the same amount to acquire a wireless equipment manufacturing company from Hitachi Ltd.
Even Japan Post Bank Co., one of the largest banks in the world, and the Japanese Government Pension Fund are turning to pouring capital into private equity.
* Source: BizLive