[August 2023] FIRST CVC Meetup! Report #2

The "FIRST CVC" community has started a new event series called "FIRST CVC Meetup!" to deepen interaction and share knowledge among CVC members. These events will be held every two months!

Thanks to your support, the community now has over 230 companies and 400 members. This is the second installment of our new event series, offering a regular opportunity for CVC members to casually exchange information and learn from each other in person.

On August 30, 2023, we were thrilled to host over 70 participants from 44 CVC companies and 7 supporting member companies, who gathered for lively discussions.

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The event was once again generously hosted by Tokyu Corporation at their open innovation facility "SOIL (Shibuya Open Innovation Lab)" in Shibuya. This space, dedicated to "social implementation," was the perfect setting for discussions between CVCs and startups. We sincerely thank everyone at Tokyu for their support.

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Event Report

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This event aimed to foster collaboration between CVCs, leading to in-depth conversations that are often hard to come by. In this report, we'll share the highlights of the event and some feedback from participants.

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‍The program for the event was as follows:

• 1) CVC Real Talk!
• 2) Mini Seminar
• 3) Networking

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1) CVC Real Talk!

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This time, we held a panel discussion on the theme "The Reality of Launching New Businesses through Startup M&A."

As the representative of an acquired startup, Mr. Hattori, President of Connecti Inc., and Mr. Kato, CEO of JDSC Inc., joined us as panelists. The discussion was moderated by Mr. Matsui from Finance Produce (a supporting member of FIRST CVC), who guided the conversation on the realities of M&A!

The key questions for the discussion were as follows. The panelists discussed the disconnect between expectations and reality, as well as the gritty details of the M&A process from both the acquired and investment sides:

Q1. As a startup, when and how did you start thinking about IPO and M&A?

Q2. After being acquired, were there any real returns?

Q3. As an investor, what were the things that went as expected, and what were the surprises?

Q4. What are the gritty realities of post-merger integration (PMI) for each side?

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While the detailed discussions were exclusive to the event, here are a few insights:

• While aiming for an IPO, the experience gained in management during the M&A process, beyond just the financial aspects, turned out to be a valuable asset for the company.
• (Using Pokémon evolution as a metaphor) organic efforts alone can only bring about limited growth, whereas M&A presents an excellent opportunity for substantial growth.
• While business synergies may not always align with expectations, considering the organizational and cultural growth, the overall results have been significant.
• The risk-return perspective between a listed company and a startup is obviously different. Through this experience, we came to appreciate the fun and significance of reconciling these differences in approach.

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These insightful discussions from those with real-world experience were inspiring and educational for many of the participants. Going forward, we will continue to organize panel discussions focusing on the practical aspects of 【business companies】 x 【investment】, featuring frontline professionals, so please stay tuned for future events.

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2) Mini Seminar

In this event, a mini-seminar was held for CVCs, sponsored by our supporting members. This time, PREQIN presented on the theme "Global VC Market Trends and Domestic VC Performance Report."

They provided an insightful explanation of VC trends both domestically and internationally, using data to highlight key points in a clear and accessible way.

• Globally, the fundraising environment is at its lowest point in the last five years.
• On the other hand, investments into domestic VC funds have hit record highs, with continued activity in the establishment of new funds and investments in startups.
• With regard to accounting and market valuation standards, the adoption of fair value accounting has increased to 46%, improving transparency.
• Distributions from vintage years 2011–2013 are progressing. Over time, net IRR has shown a downward trend.

In the context of pursuing business synergies as a CVC, some attendees mentioned they rarely have the opportunity to focus on metrics such as returns, making the detailed data-driven explanation particularly valuable and educational.

The data used for this presentation is based on PREQIN's annual performance benchmark survey, conducted in collaboration with the Japan Venture Capital Association (JVCA).

You can download the research results and the presentation materials from the link below for free:

https://go.preqin.com/firstcvc-august-2023-slides-form-jp

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3) Networking

After the panel discussion and seminar, we entered a networking session for about an hour.

This was a great opportunity for CVC representatives working in similar fields to directly exchange ideas, leading to vibrant discussions across industries.

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Feedback from Participating CVCs

Mizuho Capital Corporation
Ryota Kobayashi

Considering the value chain, there seemed to be synergies, but in practice, there were challenges due to differences in customer attributes and sales styles, making collaboration difficult. The discussions on how the executive teams and employees have different views on cultural fit after an M&A were very insightful and helpful. Thank you!

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AIX Tech Ventures
Hideto Uesugi

As the M&A person in charge, the comments from the listed companies' investment side were highly persuasive. The reality of the differences between initial expectations and PMI has to be worked through carefully, and that was very convincing.

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Aflac Ventures Japan
Mitsuto Kudo

I always look forward to participating. During the panel discussion, it was particularly interesting and reassuring to hear that the acquired startup makes decisions while balancing business synergies, something we, as investors, are always mindful of.

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Financial CVC Participant

This was my first time participating, and honestly, I didn’t realize there were so many CVCs and business companies interested in investment. It was a valuable opportunity to meet with CVCs from business companies, something I don't often get to do. The seminar was very educational, especially the discussion on the acquired startup, which was useful from an investor's perspective.

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FFG Venture Business Partners
Miruto Ohara

M&A cases involving startups are rare, so hearing about PMI points and cultural development was a great learning experience. With so many CVC professionals attending, it was a great opportunity for sharing challenges and exchanging information about potential investments. I hope this community continues to thrive!

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Thank you to all the participating CVCs! We will continue to host various events to further develop the CVC industry in the coming months.

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September: CVC Office Hours - "AI Focus"

October: FIRST CVC Meetup! #3

November: CVC Office Hours (Theme TBD)

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You can apply for the office hours through the form below:

Startups: https://zfrmz.com/BoBasvRmrSzpb3rQqRfj

CVCs: