With SuperReturn Japan now only a few weeks away, we take a look at some of the talking points that our speakers will be discussing at this year’s event.
It’s an exciting time for Japanese private equity, with a growing acceptance of the benefits of PE, numerous carve out opportunities and many family owned companies ripe for succession. With more regional and global funds entering the market, fundraising, dry powder, valuations and competition are all increasing, and this presents both benefits and challenges.
Talent and operational value-add
Private equity has a growing but shallow history in Japan, and as a result, one of the main challenges facing private equity managers is recruitment and retention. Not only does the industry need experienced and long-term professionals but there is also a need for an understanding and appreciation of Japanese language and culture – firms can’t simply fill out a new Tokyo office with expats. There aren’t many professionals that fit the bill and with more firms entering the Japanese market and setting up shop in Tokyo, there is a stiff competition for the top talent. There isn’t just competition amongst private equity firms, but also with other industries, as the roles that junior finance professionals now go into are much more varied. Investment banks and consultant firms once provided a promising pool of talent for the private equity firms to recruit their more junior roles, but now many of these professionals are looking at other options with lots choosing to opt for roles in startup companies.
Part and parcel of the talent dilemma is finding experienced operating partners to provide value-add capabilities. With the limited history of private equity this is one way in which Japanese GPs lag behind the US and Europe as operating teams are much smaller. Value-add is one way in which LPs can identify potential star performers during their due diligence so it’s something that a number of Japanese GPs are really focusing on and developing. Strong value-add doesn’t just help fund managers to stand out to investors: it can also be beneficial when competing for deals. Boasting unique skills suited to hot sectors, such as healthcare and consumer, is one way to position your team in the negotiation process and individual family owners are known to pay attention to the manager’s skill set.
At this year’s event, we host a panel on optimising value-add in which GPs share their experiences when it comes to leveraging industry expertise and creating a strong portfolio support team:
What different strategies are generating results when it comes to value-add? How big should the operational and portfolio support teams be to really demonstrate quantifiable value-add and how can you leverage industry experts within the management teams? How can new technology be utilised as a value-add tool and to move portfolio companies into the digital age?
- Hiroshi Aikawa, Head of Japan, StepStone Global
- Megumi Kiyozuka, President & Representative Director, CLSA Capital Partners
- Tomoya Sugimoto, Partner, Longreach Group Inc.
A question still hangs over the venture ecosystem. With only 3 unicorns, Japan is still lagging behind its neighbours as well as tech hubs that are further afield. But venture activity is increasing in Japan, with IPOs, fund sizes and international appetite all on the rise. Startups are showing real ambition and a determination to scale quickly and move to global markets. This attitude is infectious as entrepreneurs and VCs alike demonstrate their success and inspire others to follow similar models. Will this result in a turning point for Japanese VC? Only time will tell. A lot of Japanese LPs are risk-averse and the high risk, high return nature of venture capital can be off-putting. That said, success breeds success, and as LPs start to see startups with global ambitions and VCs making strong returns, it’s only natural that they would want a piece of the action.
On Day 2 of SuperReturn we have a series of sessions dedicated to venture capital in Japan and beyond. Don’t miss a data-rich presentation from Preqin and LP/VC panels such as an in-depth look at the early stage ecosystem:
Are we starting to see more momentum in Japan’s startup environment and are companies starting to show more ambition, prove their scalability and even go global? How is VC developing in other hubs around the world? And how can LPs get comfortable with the risk associated with venture capital and technology investments?
- Jerry Yang, General Partner, Hardware Club
- Masashi Kataoka, General Manager, Venture and Innovation Investment Group, Alternative Investment Department, The Dai-ichi Life Insurance Company, Limited
- Eriko Suzuki, General Partner, Fresco Capital