0910 Osaka / Mitsubishi Visit

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A call to action for Osaka to not allow Silicon Valley to supplant Kansai Areas global leadership in Energy Efficiency, Environmental and Industrial Electronics Cleantech markets. A presentation made 10/27/2009 at Plug and Play Sunnyvale to visitors from Osaka government, Osaka University and Mitsubishi Estate

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0910 Osaka / Mitsubishi Visit

  1. 1. Helping Japanese Startups Realize their Global Potential Allen Miner Founder and Sponsor, Global Venture Habitat Founder and General Partner, SunBridge Group www.sunbridge.com www.sunbridgepartners.com [email_address] [email_address]
  2. 2. SunBridge Founding Goals (2000) <ul><li>Create a Dynamic Venture Habitat that combines the best features of Silicon Valley and Japan </li></ul><ul><li>to influence and improve Japan’s Venture Ecosystem, helping to create </li></ul><ul><li>World-class Global Ventures, and </li></ul><ul><li>World-class (top-quartile) investment returns </li></ul>
  3. 4. Incubator Habitat <ul><li>The most suitable environment in which to naturally grow and thrive </li></ul><ul><li>A complex ecosystem </li></ul>                                       <ul><li>Intensive care, or </li></ul><ul><li>Mass production </li></ul>
  4. 5. Silicon Valley as Venture Habitat <ul><li>Area: 4801km2 </li></ul><ul><li>Pop: 2.52 million </li></ul><ul><li>Jobs: 1.41 million </li></ul><ul><li>Avg. Income: $79K (vs. $50K US) </li></ul><ul><li>Pop: 0.8% of US </li></ul><ul><li>GDP: 2.1% of US </li></ul><ul><li>VC: 29% of US </li></ul><ul><li>18% hold graduate degrees (10% in US) </li></ul><ul><li>36% are foreign-born (57% of those from Asia) </li></ul>
  5. 6. Silicon Valley as Venture Habitat <ul><ul><li>日本 </li></ul></ul><ul><li>Favorable Rules of the Game ×->△ </li></ul><ul><li>Knowledge Intensity ◎->◎ </li></ul><ul><li>Open Business Environment ○->○ </li></ul><ul><li>High Quality ◎->◎ Mobile Workforce ×->△ </li></ul><ul><li>Results-oriented Meritocracy ×->△ </li></ul><ul><li>Climate that Rewards Risk-taking ×->× and Tolerates Failure </li></ul><ul><li>Collaborations among Universities, ×->△ Business, government, NPOs </li></ul><ul><li>High Quality of Life △->× </li></ul><ul><li>Specialized Business Infrastructure ×->△ </li></ul>
  6. 7. SunBridge Venture Habitat Affiliated Venture Sales & Marketing Solutions Technology Services Affiliated Venture Unrelated Venture Established Enterprise Alliance Information exchange and collaboration Human Resource Services Alliance Alliance Established Enterprise Venture Capital and Strategic Support Information exchange and collaboration IT Vendors Integrators ISPs End Users Consultants PR Firms   Designers Agencies VCs 、 Banks Accountants Lawyers Incubators Recruiters Universities NPOs Etc.
  7. 8. High-Potential Venture Ecosystems Have Rich Services & Tight Focus Industry- focused Rich Services Broad Services Bus. Mgt. Strategy Sales Mktg. Tech. Finance Legal Acctg Admin. Facilities and Deep Out Source Support Intro. Relevant Experience and Industry Focus Added Value of The Ecosystem (or Incubator) All Industries Few Services None Narrow
  8. 9. Why Japan?
  9. 10. Tokyo and Osaka as leaders of the “Spiky World” <ul><li>#1 and #9: World’s largest metropolitan areas </li></ul><ul><li>Fortune 500 Headquarters #1 Tokyo: 51 #8 Osaka: 7 </li></ul><ul><li>Global patent leaders </li></ul><ul><li>Leading per capita GDP </li></ul>
  10. 11. Japan is a Technology Superpower Contrary to popular myths, in Japan, as everywhere else, innovation is driven by individual ‘heroes’ – not by industry associations or government. Increasingly, these ‘heroes’ are innovating in entrepreneurial settings rather than corporate or government laboratories. <ul><li>Creators of next-generation IT </li></ul><ul><ul><li>Consumer lifestyle IT (not enterprise-productivity) drives global tech innovation and growth today </li></ul></ul><ul><li>and an endless list of key enabling component technologies </li></ul><ul><li>A rich technology ecosystem </li></ul><ul><li>World-class talent in corporate labs </li></ul><ul><li>DISPROPORTIANTELY IN KANSAI! </li></ul>Japan R&D Investment: 3.3% and growing 2004 patents Japan: 342,726 vs. US: 167,183 (Source: Eurostat, OECD) R&D Intensity (%) R&D Intensity AAGR (%) R&D Intensity (R&D expenditure as a % of GDP) in 2004 and average annual growth rate (AAGR) of R&D Intensity (’99-’04)
  11. 12. Japan’s entreprenurial Habitat Has Undergone Dramatic Improvement From the perspective of entrepreneurs starting companies and the Venture firms backing them, Japan’s regulatory environment, capital markets, labor mobility and social attitudes have changed so dramatically in the past 6 or 7 years as to be nearly unrecognizable to someone who’s knowledge of Japan is rooted in the common sense of the 1980s bubble era or 1990s lost decade. <ul><li>2000-04 Dramatic structural change </li></ul><ul><li>Commercial code and IPO rule changes </li></ul><ul><li>Shift in domestic VC focus from very late stage to very early stage </li></ul><ul><li>University TLOs, spinouts encouraged </li></ul><ul><li>Restructurings, Layoffs - end of lifetime employment </li></ul><ul><li>2004-6 Recovery </li></ul><ul><li>Economy, Nikkei </li></ul><ul><li>Emergence of “Serial Entrepreneurs” </li></ul><ul><li>2008-09 Collapse of IPO markets </li></ul><ul><li>- J-Sox, Global Financial Crisis </li></ul>Over 20,000 1-yen companies registered in first two years after regulation changes allowed them. Quicker exits on new markets. Better IRRs for VCs & LPs New access to World-class R&D Dramatic regulatory changes Top 5 Waseda 65 Osaka 46 Keio 43 Kyoto 37 Tokyo 33 Entrepreneurial Renaissance?
  12. 13. Where High Growth Companies are Being Formed Today Because of the world-famous examples of such companies as Oracle, Cisco, Google, and Salesforce.com, it is widely believed that Silicon Valley creates more high-growth companies than any other region in the world. It may create the biggest and most famous but Tokyo actually produces more. <ul><li>Number of public companies formed after 1997 which had sales greater than $50M in 2007 and three consecutive years of growth above 50% from 2005-2007. </li></ul><ul><li>(source: SunBridge analysis of Bloomberg data) </li></ul><ul><li>By Country: </li></ul><ul><li>China 27 </li></ul><ul><li>US 22 </li></ul><ul><li>Japan 12 </li></ul><ul><li>India 10 </li></ul><ul><li>By Region: </li></ul><ul><li>Tokyo 10 </li></ul><ul><li>Silicon Valley 6 </li></ul><ul><li>Shanghai 4 </li></ul>
  13. 14. SunBridge Results to date <ul><li>Founded 1999 by former Oracle Japan execs </li></ul><ul><li>Team of 150+ VC and Service Professionals </li></ul><ul><li>44 Japanese, 19 US companies in portfolio </li></ul><ul><li>Key Successes: </li></ul><ul><ul><li>High success ratio (7 IPOs to date) </li></ul></ul><ul><ul><li>Repeated Japan Market Entry successes </li></ul></ul><ul><ul><li>Industry-leading VC investment returns </li></ul></ul><ul><ul><li>#40 on 2007 Forbes “Midas List” </li></ul></ul><ul><ul><li>Reputation for value above and beyond capital </li></ul></ul>Shicoh 3.9x net to date 1.3x net to date 1.3x net to date                             IT Media Japan
  14. 15. How Am I doing on My Goals? <ul><li>A Dynamic Venture Habitat that borrows best practices from both Silicon Valley and Japan </li></ul><ul><li>to influence and improve Japan’s Venture Ecosystem, helping to create </li></ul><ul><li>World-class Global Ventures, and </li></ul><ul><li>World-class (top-quartile) investment returns </li></ul>×
  15. 16. Why did I move back to Silicon Valley? <ul><li>To help Japanese startups go global </li></ul><ul><li>Domestically oriented, IPO-focused startups </li></ul><ul><ul><li>Japanese markets are big enough to support creation of substantial domestic businesses </li></ul></ul><ul><ul><li>Excessive focus on IPO as a goal and pressure to go public too quickly </li></ul></ul><ul><ul><li>Public market expectations preclude investment in rapid growth </li></ul></ul><ul><ul><li>Result: higher probability of smaller successes </li></ul></ul><ul><li>Lack of recent globalization success stories </li></ul><ul><ul><li>Most Japanese VCs and entrepreneurs lack the skills and network to create global companies </li></ul></ul><ul><ul><li>Most common causes of failure – Wrong leader, underinvestment. </li></ul></ul>
  16. 17. Why I Chose to Locate in Plug & Play ? <ul><li>The most active, dynamic hub for startup activity and related industry interaction in Silicon Valley. </li></ul><ul><li>Continuous flow of local and international visitors that provides high-value networking opportunities </li></ul><ul><li>Enough capacity to host multiple Japanese market entrants </li></ul>
  17. 18. More Japanese companies in Silicon Valley than from any other country
  18. 20. Change Brings Opportunity (For Osaka) Footnote:
  19. 21. Industry Focus of Silicon Valley Through the 1950s, Silicon Valley was the 10 th largest AGRICUTURAL region in the US.
  20. 22. Industry Focus of Silicon Valley Today, employment is concentrated (about 30%) in IT and Venture services
  21. 23. Silicon Valley – Now attempting to lead the Next Big Thing – “Cleantech”
  22. 24. Battling for Global CleanTech leadership Shouldn’t this industry be emerging in the greater Osaka area instead? <ul><li>Tradition of energy efficiency </li></ul><ul><li>Leadership in </li></ul><ul><ul><li>Photovoltaics </li></ul></ul><ul><ul><li>Batteries </li></ul></ul><ul><ul><li>LED lighting </li></ul></ul><ul><ul><li>Advanced Materials, etc. </li></ul></ul>
  23. 25. More Japanese companies in Silicon Valley than from any other country

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