JIN-171 -- Japan's Venture Capital Firms Looking Beyond Clouds

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business and Technology News
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Issue No. 171
Wednesday March 6, 2002
Tokyo

CONTENTS

++ Viewpoint: Japan's Venture Capital Firms Looking Beyond Clouds
++ Noteworthy News
- Microsoft Bluetooth Boost
- Uniqlo Sales Dip 36 percent
- Japanese Firms Join Enron Class Action
++ Events

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++ VIEWPOINT: Japan's Venture Capital Firms Looking Beyond Clouds

Japan's macro-economy may be adrift in the doldrums, but venture
capitalists seem to feel they may be heading for fairer winds. With
the unemployment rate staying at historically high levels, "Japan
cannot revive its economy without the emergence of new businesses,"
said NIF Ventures president and CEO Shinichi Horii, Tuesday, as he
spoke at '2002 Asian Venture Forum/Japan (AVFJ)' in Tokyo.

No one can deny that Japan's VC activity is far behind that of both
the US and Europe. According to the semi-governmental Venture
Enterprise Center, VC firms invested a total of 230 billion yen in
2001, compared to 12.5 trillion yen ($103 billion) in 2000. The year
2001 was by no means a good year for VCs, with Japan groping its way
through the continued recession.

Horii agrees that any current enthusiasm surrounding Japanese VCs is
still "premature." Yet, he states that the market "will post a rapid
growth starting from this year." NIF Ventures, a venture capital arm
of Daiwa Securities Group and the second largest Japanese venture
capital company, is going public (JASDAQ) next week, "with the
expectation that the venture market will grow significantly in the
near future."

Although some may see Horii's optimism as a bit of pre-IPO
hype, his looking-forward sentiment was shared by other venture
capital companies at AVFJ. The feeling is to do with a series of
reforms of the Commercial Code that made it easier for VC firms to get
more involved in managing those firms they invest in.

In other words, Japanese VCs are moving toward global standards,
leading to more involvement in management, either by increasing
investment in the early stages or by 'hands-on investment' (VCs taking
board seats and getting more involved in management).

"Most managers of venture firms are first-time-entrepreneurs and most
SMEs don't even have CFOs" says Soichi Kariyazono, founding partner of
independent VC Apax Globis Partners & Co. The lack of experienced
managers in venture firms makes it important for VCs to be more
involved in the management. "Five years from now, there may be more
qualified managers, but we plan to stay (involved in management) until
then."

Another element that may boost Japan's venture businesses is
university-industry cooperation, a scheme heavily subsidized by the
government. The Hiramuma Plan (announced last year and named after the
former education minister) is aimed at creating 1,000
university-originated venture firms within three years.

A thousand venture firms require a thousand CEOs, so one problem is
how universities can educate professors or students to become
entrepreneurs. Ikkei Matsuda, managing director at Hokkaido Venture
Capital, doesn't think Japan can achieve that target, but he feels
changes are coming. As talks on privatizing national universities
continue among politicians, professors are more aware of changes to
come. He said that resources for venture CEOs or CFOs are definitely
scarce, but that there are many potential CEOs and CFOs. "We may see a
completely different picture (as manpower grows) in the next three to
five years, but we will get involved in management (by sending outside
board members) by then," he says. Matsui himself is living proof,
sitting as CFO of a newly created university-originated bio venture in
which his company has a stake.

-- Sumie Kawakami

Sources:
NIF:
http://www.nif.co.jp/main.html

"Special Report: TLOs" J@pan Inc, 08/01
http://www.japaninc.net/mag/comp/2001/08/aug01_investor_tlo.html

Ikkei Matsuda Profile, J@pan Inc, 05/01
http://www.japaninc.net/mag/comp/2001/05/may01_people_matsuda.html

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy and paste to your browser.)

** Microsoft Bluetooth Boost

Much media attention has been given to the rise of wireless LANs
but Bloothtooth technology is back again. In Japan sales of
Bluetooth-enabled mobile phones (which have been available for almost
a year) are expected to receive a boost this summer when Windows XP
finally ships with Bluetooth drivers. Fujitsu, Mitsubishi and Sharp
will market their new FOMA 3G phones as Bluetooth ready.

From Asia Biztech
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/fw/172746

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** Uniqlo Sales Dip 36 percent

Extract: The Uniqlo brand, once thought to be the king of venture
firms, continues to suffer from declining sales. Fast Retailing Co.,
which operates the Uniqlo chain, said Tuesday its sales decreased in
February by a record 36 percent on a same-store basis from a year
earlier. This marks the fifth consecutive monthly fall.

From Japan Times
http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20020306a9.htm

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** Japanese Firms Join Enron Class Action

Extract: Since the price tumble of bonds issued by Enron after its
collapse, Daiwa Asset Management is considering joining a class action
suit against Enron and its auditor Andersen to claim damages. Japan's
Nikko Asset Management, a unit of Nikko Cordial Corp, also said on
Tuesday it would join a US class action suit seeking damages from the
failed Enron Corp and its auditor Andersen.

"Nikko unit to seek damages from Enron, Andersen" (From Reuters)
http://biz.yahoo.com/rf/020305/t54303_2.html

Daiwa Securities Press Release
http://www.ir.daiwa.co.jp/default.asp

"Nikko joins US lawsuit against Enron" (From FT.com)
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3EJR8JF
YC&live=true&useoverridetemplate=ZZZ99ZVV70C&tagid=FTDO9DHMZJC

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STAFF
Written by Sumie Kawakami (sumie@japaninc.com)
Edited by J Mark Lytle (mark@japaninc.com)

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