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AY2012 RCAPS Seminar
Asia Pacific University
October 25th, 2012
Masa Ishii Managing Director – AZCA, Inc.
Venture Partner - Noventi
Visiting Professor – Waseda University Business School
Visiting Professor – Shizuoka University Graduate School of Engineering
Revitalizing Venture Ecosystem
in Japan
A Perspective from Silicon Valley
Silicon Valley’s Geography
1 *- The term “Silicon Valley” was coined in 1971 by Don Hoefler in the column articles ”Silicon Valley in the USA” in the magazine Electronic
News.
50 Miles
Bay Area before Becoming “Silicon Valley”
2
A Few Memorable Photos
3
Waves of High-technology
4
1950 1960 1970 1980 1990 2000 2005
Telecommunications, Internet
Semiconductor, IC
Computer Systems, Peripherals
Software
Life Science
Nanotechnology
Greentech
World’s Defacto
Standard
1939
Silicon Valley Today
5
People with diverse Cucltural background • 36% of the people are foreign born
• 48% of the people speak languages other than English at home
• 55% of engineering professional are foreign born
High education level • Universities and research institutions such as Stanford University, UC Berkeley,
PARC, SRI International, Lawrence Berkeley National Labs, etc.
• 44% of people have bachelor or higher degrees (US average 27%)
Mecca of high-tech industries • 15,000 high-tech companies (2007)
• 450,000 people working in high-tech out of 1.7 million working force (total
population 2.6 million)
• 1% of the US population, 12% of patents applications
Abundant financial source to back venture activity • $12B VC money invested in 2011 - 41% of US total ($28.7 B)
• Over 300 VC firms – 842 VC firms in total US in 2011
Source： NVCA; Joint Venture Silicon Valley “The 2012Silicon Valley Index”
Graduate School
Location
State
Score*
Biological
Scienc
es Chemistry
Computer
Scienc
e Physics Total Score
Stanford University Stanford CA 4.9 4.9 5.0 5.0 19.8
Massachusetts Institute of Technology Cambridge MA 4.8 4.9 5.0 5.0 19.7
University of California--Berkeley Berkeley CA 4.8 4.9 5.0 4.9 19.6
California Institute of Technology Pasadena CA 4.7 4.9 4.2 4.9 18.7
Harvard University Boston MA 4.7 4.8 3.9 4.9 18.3
Cornell University Ithaca NY 4.4 4.4 4.5 4.7 18.0
Princeton University Princeton NJ 4.4 4.0 4.5 4.9 17.8
Columbia University New York NY 4.3 4.3 3.9 4.3 16.8
University of Michigan--Ann Arbor Ann Arbor MI 4.3 4.0 4.0 4.2 16.5
University of California--San Diego La Jolla CA 4.2 3.9 3.9 4.1 16.1
University of Illinois--Urbana-Champaign Urbana IL 4.5 4.6 4.6 13.7
University of Chicago Chicago IL 4.2 4.2 4.6 13.0
University of Wisconsin--Madison Madison WI 4.5 4.2 4.1 12.8
Yale University New Haven CT 4.5 4.1 4.1 12.7
University of Texas--Austin Austin TX 4.2 4.3 4.1 12.6
University of California--Los Angeles Los Angeles CA 4.2 4.0 4.1 12.3
Scripps Research Institute La Jolla CA 4.5 4.6 9.1
University of Washington Seattle WA 4.2 4.5 8.7
Johns Hopkins University Baltimore MD 4.6 4.0 8.6
University of Pennsylvania Philadelphia PA 4.3 4.2 8.5
University of Maryland--College Park College Park MD 4.0 4.2 8.2
Carnegie Mellon University Pittsburgh PA 4.9 4.9
University of California--San Francisco San Francisco CA 4.5 4.5
University of California--Santa Barbara Santa Barbara CA 4.5 4.5
Washington University in St. Louis St. Louis MO 4.5 4.5
Rockefeller University New York NY 4.5 4.5
Northwestern University Evanston IL 4.4 4.4
Duke University Durham NC 4.4 4.4
Georgia Institute of Technology Atlanta GA 4.3 4.3
University of North Carolina--Chapel Hill Chapel Hill NC 4.0 4.0
Pennsylvania State University--University Park University Park PA 4.0 4.0
Purdue University--West Lafayette West Lafayette IN 3.8 3.8
Brown University Providence RI 3.7 3.7
US Graduate School Ranking
6 Source: US News & World Report
80% of Innovation
11% of Private Sector Jobs (11.9 Million) 90% of Software jobs
74% of Biotechnology jobs
72% of Semiconductor/Electronics jobs
54% of Computer jobs
48% of Telecommunication jobs
21% of US GDP ($3.08Trillion) 88% of Semiconductor/Electronics revenue
67% of Biotechnology revenue
46% of Computer revenue
40% of Software revenue
39% of IT services revenue
Impact of VC-backed Companies
on the US Economy (2010)
7 Source: Venture Impact by HIS Global Insight
VC Investments by Region
8 Source: NVCA
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
100% ($Billion) = 7.3 10.6 14.1 19.8 51.3 99.1 38.0 20.4 18.6 22.4 23.0 26.6 30.9 30.6 19.8 23.3 28.7
California Silicon Valley
Other California
New England
Other Region
Mid West
Texas
NY Metro
Innovation Ecosystem of Silicon Valley
9
起業家
VC 優れた大学・研究機関
弁護士事務所
会計事務所
コンサルタント
ヘッドハンター
投資銀行
調査会社
etc.
Entrepreneurs
VCs
Universities,
Research
Institutions
Lawyer
Accountant
Consultant
Executive Search
Investment Bank
Research Firm
etc.
Network of Innovation
Key Components of Venture Company
10
Venture Company
High-growth Target
Market
Serial Entrepreneur
Spin-off (Universities, Companies)
Risk and Reward
Openness, Tolerance for Failure Culture to Implement Ideas
Other Support Structure Venture Capital
Disruptive Technology, Solution
Strong Management
Strong Board
AZCA
William Hewlett & David Packard
Elon Musk
Andy Grove (3rd employee)
Pierre Omidyar (French-born Iranian-American )
Larry Ellison
Steven Jobs
Notable Players in Silicon Valley
11
Bill Gates
William Shockley
Sergey Brin
Jerry Yang
Mark Zuckerberg
Silicon Valley Route 128
Open, Flexible Conservative, Secretive
Collaboration, Alliance Self-contained, Vertically Integrated
Faithful to your own Capability Faithful to Company
Objective: Self-realization Objective: Reputation of Company
High Mobility of People Long-term Employment
Open Systems Architecture Proprietary Architecture
Incubators (“Silicon Valley in a Box”) (nothing equivalent)
Cultural Differences: Silicon Valley vs. Route 128
12 Source: Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Harvard, 1994) by AnnaLee Saxenian
Key Word 1: Openness
Openness to people with diverse background, strangers (regardless of
the affiliation, title)
Openness to new ideas (technology, solution, business model)
“Out of the Box Thinking”
Key Word 2: Tolerance for Failure
Failure = Opportunity to learn
Many, many attempts behind a few success
Low risk high return for entrepreneurs
Keys to Continued Innovation
13
Open Innovation
14
Venture Ecosystem
15
Universities
Research
Institutions
Companies
Venture
Venture
Capital
IPO
M&A
Liquidation
投資家 投資家 Investors
VC
Investment
LP
Investment
Capital gains
Capital Gains
Spin-out
Spin-out
0
100
200
300
400
500
600
700
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
IPO M&A
VC Investments and Exits in the US
16 Source: NVCA
0.0
20.0
40.0
60.0
80.0
100.0
120.0
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
VC Investments
Black
Monday
Silicon Valley
Boom
Net Bubbles
Collapse of
Net Bubbles
Venture Exits
Billion
Lehman
Shock
The Sarbanes-
Oxley Act of
2002
Burst of Net
Bubble
VC Investment Amounts by Region
17 Note: Fiscal Year (April – March, next year) for Japan; Calendar Year for US and Europe Source： NVCA ($1,00=¥90); EVCA; VEC
23.2
21.1
24.4
22.4
14.2
17.6 18.6 18.1
6.7 7.1
4.3 3.9 2.6 2.8
1.9 1.4 0.9 1.1
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010
US
Europe
Japan
¥1,000 Oku
VC Exits
18 Source： VEC
Number of Exits
345 249
66 106 56
128
135
103
197
175
179
166
202
197
120
101
135
220
304 621
15
24
79
54
71
0
200
400
600
800
1000
1200
2006/4 - 2007/3 2007/4 - 2008/3 2008/4 - 2009/3 2009/4 - 2010/3 2010/4 - 2011/3
Other
Buy-back by Founder
Write-off
M&A
IPO
188
230
252
231
181
94
54
4 12 9
15
47
63
162
0
50
100
150
200
250
300
2002 2003 2004 2005 2006 2007 2008
# of University Ventures Started
# of University Ventures Dissolved
Ventures Started at Universities
19
Establishment and Close-down of University Ventures
Source: VEC
Bottlenecks of Venture Ecosystem
20
Universities
Research
Institutions
Companies
Venture
Venture
Capital
IPO
M&A
Liquidation
投資家 投資家 Investors
VC
Investment
LP
Investment
Capital gains
Capital Gains
Spin-out
Spin-out
?
?
? ?
： Not functioning
well in Japan?? ?
Issues for Fostering Venture Ecosystem
21
Environment fostered by
History and Culture
Demographics
• Japan: Homogeneous;
rapidly aging
• US: Global immigrants
nation
Culture
• Japan: “Nail that
sticks out gets struck;
Punitive for failures
• US: Success brings
both reputation and
wealth; Generous to
failures
Changes that can be Made
with Efforts
Enhancement of
university business
school, and corporate
training programs
Enhancement of
professionals – lawyers,
accountants, and
consultants
Fostering of venture
capitalists capable of
hands-on investment
Promotion of industry-
academic collaboration
Legal, Financial, Tax
Measures
Deregulation to
encourage/ease
university endowment
and pension money to be
invested in VCs
Enhancement of Angel
Investors through tax
deregulation
Expansion of stock
options, preferred stock,
and other instrument
Enhanced portability of
pension plans
Large Established Corporation
Grew big during the high economic growth era
Stagnant since 2000
Extrapolation of the past growth in planning the future growth
Tend to look down upon small companies
3 Types of Japanese Companies
22
“New Breed”
Entrepreneurial management foundation
Continued to grow through economic slowdown
Clear growth vision involving structural changes
Global business model
“Would be New Breed”
Globally competitive technology
May lack management skills to grow into big business
May lack financial and human resources
VC should be able to add value (supposedly)
Large established corporations do not pay attention
Future Growth
?
?
? ?
大学・研究機関 大学・研究機関 Large
Established
Companies
Institutions (e.g., AIST, RIKEN) should hold technology show-case and exhibits technologies that
would attract large corporations.
MEXT and METI should provide opportunities for large corporations to meet with small companies
and ventures.
The Government should provide legal and tax incentives to encourage large corporations to
acquire small companies and ventures.
Increase M&A of Ventures by LECs
23
Venture
Venture Capital
IPO
M&A
Liquidation
投資家 投資家 Government/Instit
utional Investors
VC Investment
Capital Gains
Capital Gains
Spin-out
Spinout
Coinvestment
Strategic LP Investment
Capital Gains
LP Investment
大学・研究機関 大学・研究機関
Universities
Research
Institutions
Strategic Alliance, M&A
“Brain Circulation”
24
Footprints of Asian Students (Today)
METI: Program to send professionals to VCs in Silicon Valley
INCJ*: Strengthen Network with Silicon Valley – establish INCJ-SV
Large companies：Promote CVC、Global Human Resource Training in SV, Hire Global personnel
Small companies and ventures：Capitalize on the support systems (e.g., JETRO BIC**)
Promote Brain Circulation by capitalizing on SV
innovation ecosystem
25
Japanese
Professionals
(e.g., VC)
Small
companies
and Ventures
Japan Universities,
Research
Institutions
Venture
Capital Firms
Corporations
Japanese
Professional
Network
Support programs for Japanese companies
（e.g., JETRO BIC）
Silicon Valley
*- Innovation Network Corporation of Japan
**- Business Innovation Center
We have never done that before.
Has anyone else ever tried it?
We tried that before, and it didn’t work.
If it was good -- we’d already be doing it.
It’s too radical a change.
That will make other equipment (or
service) obsolete.
Why change it, it’s still working O.K.
We did all right without it.
We’re doing the best we can.
We are not ready for that.
You’re two years ahead of your time.
We don’t have the time.
How to Kill Ideas
26
We are too small for it.
That’s not our problem.
Too hard to sell.
It costs too much.
It’s too hard, and it can’t be done.
That’s beyond ou responsibility.
It isn’t in the budget.
Can’t teach an old dog new tricks.
Let’s form a committee.
We’ll be the laughing stock.
That doesn’t apply to us.
It doesn’t work in our industry.
