CVC's Equity Stake

In the investment strategy of corporate venture capital (CVC), setting the equity stake ratio is an important consideration. The JAPAN CVC SURVEY 2023 reveals the latest trends regarding the equity stakes of Japanese CVCs.

Current Equity Stake Ratios

【Overall Trends】
・1-3% or lower: 38%
・3-5% or lower: 30%
・1% or lower: 22%
・5-10%: 10%

The majority of CVCs target equity stakes of 5% or lower, with a notable concentration of CVCs aiming for the 1-3% range.

Factors Behind Equity Stake Ratio Setting

1. Emphasis on Minority Investments
・Ensuring startup autonomy
・Maintaining founders' motivation
・Guaranteeing agile decision-making

2. Risk Management Considerations
・Diversification of investment risks
・Efficient portfolio management
・Proper control of financial impacts

3. Building Collaborative Relationships
・Establishing equal partnerships
・Maintaining good relations with startups
・Creating flexible collaboration structures

Characteristics by Equity Stake Ratio

【1-3% or lower (38%)】
・The most common equity stake ratio
・Focus on balanced relationship building
・Easier collaboration with other investors

【3-5% or lower (30%)】
・Aims for slightly stronger involvement
・Secures strategic influence
・Builds closer collaborative relationships

【1% or lower (22%)】
・Purely investment-focused approach
・Secures a wide range of investment opportunities
・Emphasis on information gathering strategies

【5% or higher (10%)】
・Aims for stronger involvement
・Strategically significant projects
・Seeks close business collaboration

Summary

The equity stake strategy of Japanese CVCs emphasizes building appropriate relationships while respecting the autonomy of startups. The fact that 90% of CVCs target equity stakes of 5% or lower, particularly with the majority aiming for the 1-3% range, clearly reflects this approach.

This conservative equity stake setting is a practical approach to balancing the creation of healthy partnerships with startups and effective risk management. Going forward, CVCs are expected to continue exploring equity stake ratios that enable effective collaboration while leveraging the dynamics of startups.