Overview of Japanese Venture Capital and Tech Landscape produced by White Star Capital

1. JAPANESE VENTURE CAPITAL
LANDSCAPE
H1 2018

2. TABLE OF CONTENTS
2
1. Evolution of the Japanese VC Market Page 3-12
2. The Challenges of the Japanese Market Page 13-15
3. Government Policies & Support Page 16-19
4. Venture Beyond
Why White Star Capital is Enthusiastic about the Japanese Market
Page 20-26

3. EVOLUTION OF THE JAPANESE
VENTURE CAPITAL MARKET

4. VC FUNDING CONTINUES TO GROW, AND DEAL
SIZE INCREASING
4Source : Entrepedia
1,104
669 632
749
581
762
1,313
1,657
2,085
2,537738
585
642 636 634
696
829
872
925
882
-
200
400
600
800
1,000
-
500
1,000
1,500
2,000
2,500
3,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
#ofDeals
US$Millions
Funding Amt. # of Deals
VC funding has been growing steadily, and while there
was a dip during the most recent financial crisis, funding
has doubled during the last decade implying
sophistication of market leading to investor appetite.
For the first time in the post-financial crisis era, deal
count has dropped meaning an increase in average deal
size. A positive phenomenon we’ve observed in our
other hubs such as Canada and France.
(US$ Millions) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average
Deal Size 1.50 1.14 0.98 1.18 0.92 1.09 1.58 1.90 2.25 2.88
Median
Size 0.29 0.18 0.14 0.15 0.16 0.27 0.36 0.45 0.61 0.91
Note: Assumed ¥110 = US$1

5. TOP 10 FUNDED JAPANESE COMPANIES IN 2017
BY DEAL SIZE
5
Company
Total Funding
(US$ Millions)
Founded Industry Sub-Industry
1 Preferred Networks 117.2 Mar-14
Big Data /
Machine Learning
2 Scohia Pharma 90.9 Mar-17 Healthcare Drug Discovery
3 ispace 89.6 Sep-10 Space Exploration
4 Inagora 69.6 Dec-14 E-Commerce Cross border EC
5 dely 57.8 Apr-14 Media and Contents
6 Bonac 43.6 Feb-10 Healthcare
Drug Discovery,
Genomics
7 Every 43.3 Sep-15 Media and Contents
8 GROOVE X 39.6 Nov-15 Robotics
9 Sansan 38.4 Jun-07 B2B SaaS
Cloud solution for
Business Cards
10 One Tap BUY 36.4 Oct-13 Fintech Trading & Investing
Source : Entrepedia
Note: Assumed ¥110 = US$1

6. EXITS STEADILY INCREASING, WITH LANDMARK
DEALS CREATING POSITIVE SENTIMENT
6Source : Entrepedia
36
8 9
22
30
34
40
55
30
36
29
36
42 42
73
81
78
90
63
95
4 5
10 8 9
19 17
23 24
11
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
IPO Strategic Acquisition Transfer of Business
Exits through acquisition are the most popular, which
will continue with corporate eager to take advantage of
the loose monetary policy. Transfer of businesses saw a
decrease most possibly due to the health of economy.
While the number of IPOs hasn’t dramatically increased,
the recent announcement of Japanese unicorn Mercari
will most possibly bring renewed interest to IPOs from
startups. IPO scheduled in June 2018.
Notable Acquisition Deals Notable IPOs
Note 2: Only counting VC backed IPOs (roughly 1/3 of all IPOs)
$182m $499m
Note 1: Assumed ¥110 = US$1
$64m $3bn
(estimate)

7. ACTIVE JAPANESE CORPORATE INVESTORS
Notable Corporate Investors
Corporate VC Market Cap* # of Deals
7
Notable Portfolio Company
Venture investment in Japan is dominated by CVCs, with upwards of 80% of deals being done
through corporate or banking venture arms.
Nissay Capital
119
Mitsubishi UFJ Capital
80
77
61
CyberAgent Ventures
59
Source : CB Insights
Mitsui & Co. Global
Investment
MoneyForward, NxThera, Change Healthcare
Corporation, A10 Networks
Twitter, Crowdworks, Voyagin, MoneyTree,
Tokyo Otaku Mode
SmartNews, ChatWork, WealthNavi,
MoneyTree, BitFlyer
Cogent Labs, WealthNavi, Exchange
Corporation, SOMA Networks
AnyPerk, MaterialWorld, SanSan, FlyData,
Raksul
146
280
Coinbase, MoneyForward, Uzabase, WHILL,
Tokyo Otaku Mode
DG Incubation
SMBC Venture Capital
SBI Investment
Foody, FlyData, CrowdWorks, AnyPerk, Tudou
Note 1: Assumed ¥110 = US$1
Note 2: Life Insurance Company and no available market cap data as they are not traded therefore amount denotes AUM
$31bn
$91bn
$7bn
$2bn
$60bn
$7bn
$500m**

8. ACTIVE JAPANESE INDEPENDENT INVESTORS
Notable Independent Investors
AUM # of Deals
Source: CB Insights, SVOD
Global Brain $425m 47
8
Notable Portfolio
Few independent VC investors, but recent acceleration of fund raising for Japan
independent investors.
World Innovation Lab $736m 19
East Ventures $58m 111
JAFCO $1bn 46
Globis Capital Partners $450m 24
Draper Nexus Ventures $284m 52
B-Dash Ventures $85m 24
Mercari, Raksul, Origami, August,
Jibo, VentureBeat
Mercari, Raksul, Survios, Soracom,
Gumi
Mercari, Gumi, Bizreach
Bizreach, Cyberdyne, Recruit,
Colopl, Spiber, Gumi, Mujin
Mercari, Uzabase, Gree,
SmartNews
vARMOUR, Sight Machine, Peatix
Gumi, Gunosy, Oh My Glasses
Fund Size / Vintage
$650m / 2016
$500m / 2017
$160m / 2016
$200m / 2016
$175m / 2016
$28m / 2017
$50m /2016
VC Firms

9. NOTABLE JAPANESE STARTUPS
9
Colopl is a gaming company focused
on location-based games. They are
now investing heavily in VR games.
• Founded:
2008
• Market Cap (IPO in 2012)
US$1.0B
• Institutional Investors:
BizReach is an HR technology
provider focused on executive
recruitment. They offer software for
both job seeking exeuctives and
executive recruiters.
• Founded:
2009
• Total Funding to Date:
US$39M
• Institutional Investors:
Uzabase is a software company
operating two main businesses,
NewsPicks (a news aggregation
platform) and Speeda (a BI platform
for enterprise).
• Founded:
2008
• Market Cap (IPO in 2016)
US$743M
• Institutional Investors:

10. NOTABLE JAPANESE STARTUPS (CONT.)
10
Smart news is an intelligent news
discovery and aggregation platform
that mines relevant social media
streams for content.
• Founded:
2012
• Total Funding to Date:
US$82.9M
• Institutional Investors:
Raksul is a fabless printing company
that works in partnership with over
2000 printing shops in Japan. Users
can take advantage of printer
downtime for better rates.
• Founded:
2009
• Total Funding to Date:
US$73.8M
• Institutional Investors:
Mercari is a mobile flea market app.
Users take a picture of items for sale
and are connected with buyers. In
2017, they hired John Lagerling from
Facebook to lead US Expansion.
• Founded:
2013
• Total Funding to Date:
US$160M
• Institutional Investors:

11. MAPPING PROMINENT ECOSYSTEM PLAYERS
Independent VC CVC
Financial Institutions University / Academic Government
Accelerator / Incubator
11Source : https://keiei.freee.co.jp/2014/09/09/vc/

12. FOREIGN VC (NON-CORPORATE) IN JAPAN
12
Invested LP Base (not investing)
Trans-Pacific
(West Coast + Japan Portfolio)

13. THE CHALLENGES AND OPPORTUNITIES
OF THE JAPANESE MARKET

14. THE CHALLENGES AND OPPORTUNITIES
14
Lack of International VCs
Limited Access
Outside of the SV
Need for Proactive
Gov’t Policies
Japanese startups often
focus on local market
limiting interest for
international VCs to
consider investing
o Only a handful of global
VCs have entered this
market to back
international projects
o Cultural and language
barrier remain an issue
for most VCs
Silicon Valley on the surface
looks as an attracting
location
o Historically SF and LA
have many Japanese-
Americans
o These have pushed
forward the doubling-
down on SV and haven’t
developed public and
private resources in other
Western hubs
Lack of public funding into the
entire eco-system, and too
much involvement
o Public investment funds are
looking at deals, rather than
providing liquidity to entire
eco-system
o More “Fund of Funds” style
approach necessary from
the government and public
finance institutions into
local and international VCs

15. THE CHALLENGES AND OPPORTUNITIES
15
IPO market luring entrepreneurs
toward quick monetisation
Limited Labor Mobility
Low hurdle for IPO lead to
competition with VC funding
as early as on Series A and B
rounds
o VCs need to prove the
value of staying private
longer for startups to
internationalize and
accelerate growth
o Startups with Enterprise
Value as low as $10 m
valuation can IPO (no
specific limits posed on
financials) pushing for
quick gain
Fast growing companies have
trouble recruiting talent that can
execute at scale
o Similarly to Western Europe or
Canada few years ago, corporate
executives are still reluctant to
risk joining high potential
startups in leadership positions
o New wave of foreign educated
and trained Japanese are
moving back with ambition to
build international companies
(but still early days)
Lack of Role Models and
Virtuous Cycle Investment
In Japan, entrepreneurship is still
regarded as a challenging route to
success
o Founders such as Monex’s Oki
Matsumoto, Uzabase’s Yusuke
Umeda or Mercari’s Shintaro
Yamada, who venture into new
business domains or expand
aggressively abroad, are only
starting to emerge
o The most promising young
Japanese students still join blue-
chip companies, due to the
limited number of inspiring
startup cases

16. POSITIVE GOVERNMENT POLICIES TO PROMOTE
THE STARTUP ECOSYSTEM

17. GOVERNMENT POLICIES AND INITIATIVES AIMED AT
STIMULATING THE STARTUP ECOSYSTEM
1990 2000
17
2010 2015
1995
Introduction of Stock
Options
1997
Angel Investing Tax
Break
1998
Introduction of LLC /
Fund Laws
2006
Abolishment of Minimum
Capitalization for Incorporation
2009
Government starts VC
Investments – TOTAL $6bn in 14
Funds
2015
Entrepreneur training
program in SV (METI)
2015
Tokyo / SV Startup
Business Matching
Trade Show
2016
Japanese SME
Acceleration Program in
SV
• Innovation Network of
Corporation Japan(INCJ) – 3bn
• Cool Japan Fund – 407m
• Regional Economy Vitalization
Corp of Japan(REVIC) – 260m

18. PM ABE’S “VENTURE CHALLENGE 2020”
18
Local Govt. Consortium Global
Entrepreneurs
Startups
Deal
Sourcing
Venture
Capital
RI, Academia
Advisory
Board
Going Global
Knowledge / Experience
Feedback
Proactively seek
Entrepreneurs and Startups
in the suburban / rural areas
Bridging the Local and Global Ecosystem
Govt. Consortium
Intra-ministry, intra-org
collaboration and information
sharing of VCs, Accelerators,
Lawyers, Accountants
Advisory Board
Seek advisor from private
sector who can help
globalization of local startups
and cultivate foreign network
Silicon Valley “Kakehashi” Project
Extend Bridge to Asia, Israel,
Europe and organize a Global
Venture Summit in 2020

19. • The Japan Post Bank (AUM $ 1.9 trillion), the Government Pension Investment
Fund ($ 1.2 trillion) and the Japan Post Insurance ($ 1 trillion) are the largest
public institutional investors.
• While they have been traditionally conservative, they have recently increased
their alternative asset investments (GPIF, JP Bank and JP Insurance), with an
appetite to either directly or indirectly invest in venture capital.
• Traditionally seed-stage technology-based startups (STSs) have faced an uphill
battle when securing funding.
• The New Energy and Industrial Technology Department Organization (NEDO), a
national research and development agency, is working with some 20 plus VCs to
match STSs and funding.
• While the Japanese Visa process is not the most easy one to manage, Fukuoka
City has introduced the nation’s first “Startup Visa” in December 2017, as part of
its National Strategic Special Zone Initiatives. If managed well, we expect to see
rollouts in other Special Zones in the mid-term.
• There are a number of tax-breaks, subsidies, regulation-related consulting
services, at the national and the municipal level. The Japan External Trade
Organization serves as a one-stop shop for those enquiries.
19
PUBLIC SECTOR CAPITAL AND INCENTIVES TO
PROMOTE INNOVATION & ATTRACT TALENT
Streamlined Skilled-Visa Process
Research and Development Funding
Public Funds Expanding Alternative Investments
Incentives to Usher Foreign Investment

20. VENTURE BEYOND
WHY WHITE STAR CAPITAL IS
ENTHUSIASTIC ABOUT
THE JAPANESE MARKET?

21. FIRST MOVER’S ADVANTAGE FOR A CANADIAN
AND A WESTERN EUROPEAN VC
21
Business community’s emphasis still
in US and Asia
PM Abe’s Silicon Valley visit in 2015, where he visited
Tesla, FB, Twitter, has been a further push for the
business community to look to the West for tech
innovation
This exacerbated the already clear
bias of Asia + US > Europe and Canada
Historically, Japanese overseas travel to Europe has
been limited, same with Canada
However, companies are starting to
realize that Asia and US are crowded
markets
The timing is ripe to sell the idea of a trans-Atlantic
focus involving Canada, the North East and Europe,
especially given the crowded nature of Asia and US
West Coast.
Ministry of Justice, 2012
2,710,149
520,945
423,359
280,702
82,225 69,581 60,672 24,028
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Total US China Taiwan Germany UK France Canada
Japanese Overseas Business Travel
(short + long-term)

22. WHAT OUR PORTFOLIO COMPANY MNUBO’S
SUCCESSFUL ENTRY IN JAPAN TELLS US
22
Facilitating marriage between software
and hardware
While Japanese Companies have a solid foothold in the
hardware space, they benefit from innovative software. As
it is an island nation, fresh perspective on their business
model / customer base / supply chain also a plus
Intros by trusted partners are very
important for Asian markets
Especially when there is a limited track record, intros are
very important. It is a culture based on relationship, rather
than on transactions
Rapid cycle of NDA – Feasibility Study -
PDCA
IoT / AI / Big Data / Machine Learning are such buzzwords,
people are overwhelmed. There is a need to shorten the
lead-time for Japanese companies to test / feel /
appreciate the technology developed by portfolio
companies

23. OUR JAPAN STRATEGY
23
OPPORTUNISTIC INVESTMENTSPORTFOLIO EXPANSIONLP & IR SUPPORT

24. LP & IR SUPPORT
24
Championing non-SV investment
strategy necessary, capitalizing on
recent focus (Canada AI, UK and French
tech)
While there is clear business reason to look beyond SV,
entrepreneurs need to be more exposed to non-US /
non-Asia markets as they are relatively new eco-systems
for them
Necessary to accompany LPs to
different markets to help them navigate
Many domestic VCs take LP’s money and do little follow
up. Local support as well as overseas IR support is crucial
for differentiating and attracting further investment
Replicating the early success of mnubo
While there has been interest for mnubo from a number
of large corporates, it is still early days and we need to
bring more of our companies to Japan and strive toward
building bridges with all major actors in this market

25. PORTFOLIO EXPANSION
25
Build relationships with local corporate
/ government players
Replicate our approach in Canada, the U.K., France and
other European countries, where we have built
extensive network with key stakeholders to give market
entry assistance to our portfolio companies
Expand our unique Trans-Atlantic
model to include a Pacific angle
We are the only early stage investor based in the North
East of the US, Canada, the UK and France, equipped to
provide such international support to the East Asian eco-
system
Generate M&A Possibilities
Work with LPs (banking/consulting/corporate) to create
unique funding, merger and exit opportunities for our
portfolio companies

26. OPPORTUNISTIC INVESTMENTS
26
Work with other VCs to identify most
promising opportunities
Our investment strategy is to co-invest at the Series A
and B level to bring greater value to the startups we
work with. We love to learn and to share. We seek to
invest initially between $3-6m and up to $12-18m over
the life of an investment into the local champions aiming
to extend and expand their products and solutions for
the North American and Western European markets
Solving “glocal” issues
With an ever-connected world, startups are not only
optimizing solutions locally, but regionally and globally.
We like to put our acumen to work to help startups grow
beyond their home-grown market
Get in touch with White Star Capital!

27. About white star capital
White Star Capital is an early-stage venture capital firm that invests in exceptional
entrepreneurs building ambitious, data-driven businesses. Based out of London, New York,
Montreal, Paris and Tokyo, our international presence, perspective and people enable us to
partner closely with our founders to help them scale internationally from series A onwards.
Find out more about how we venture beyond at
http://www.whitestarvc.com