Operational Challenges Faced by CVCs

The findings of the JAPAN CVC SURVEY 2023 reveal the specific operational challenges faced by Japanese CVCs. Notably, practical issues such as valuation and speed are among the top challenges.

Key Operational Challenges Faced by CVCs

1. Challenges in Investment Execution
According to the survey, the most reported issue is that "valuations or ticket sizes are too large to invest in" (53%). This has become a significant factor in missing investment opportunities.

2. Difficulty in Deal Sourcing
Another serious challenge is "too few startups that meet the investment criteria or are difficult to find" (47%). This suggests a gap between the investment criteria and the reality of the market.

3. Lack of Evaluation Expertise
The challenge of "insufficient know-how to evaluate startups and being unable to independently assess them" (45%) is also noteworthy. This can directly impact the quality of investment decisions.

4. Speed Issues
Some respondents pointed out "the speed of internal discussions does not match the speed demanded by startups, resulting in missed rounds" (43%). This reflects the mismatch between the decision-making processes of large corporations and the agility of startups.

5. Networking Challenges
Another issue is "being unable to integrate into networks with other investors or entrepreneurs, resulting in few deal introductions" (24%).

6. Other Challenges

- "Low recognition of CVC activities, hindering sourcing" (15%)
- "Weak differentiation in terms of value offered to startups, leading to not being chosen" (14%)
- "Poor collaboration with VCs involved as syndicate partners or LPs" (5%)

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Summary

The operational challenges faced by Japanese CVCs can mainly be categorized into three areas:

1. Practical Issues in Investment Execution

- Valuation and ticket size issues
- Improving investment decision-making capabilities

2. Deal Sourcing and Selection Challenges

- Finding appropriate investment targets
- Strengthening networking efforts

3. Organizational Responsiveness

- Enhancing decision-making speed
- Clarifying the value proposition

To address these challenges, the following actions are essential:

• Flexibly reviewing investment criteria
• Developing talent to enhance evaluation capabilities
• Streamlining decision-making processes
• Improving presence within the ecosystem

For sustained growth as a CVC, it is crucial to implement planned and practical solutions to these operational challenges.

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