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Stimulating entrepreneurial spirit in Japan

Posted: 01 Jun 2001 ?? ?Print Version ?Bookmark and Share

Keywords:jasva? japanese semiconductor startups? fabless companies? venture capital in japan? times people?

Entrepreneurship is a major contributing factor to a country's economic well-being, both in terms of economic growth and job creation. Suffering from an economic slump, Japan is beginning to realize the true nature of change.

Looking to provide guidance and support to startup companies in a country that has long been a desert of new ventures, the Japan Semiconductor Venture Association (JASVA) began operations in an attempt to form a Japanese counterpart to the Fabless Semiconductor Association. The group, which serves as a "middleman" between its members and venture capitalists (VCs), has gathered semiconductor and display startups and other interested parties as members, and has just held its first convention in January in Tokyo.

"A country which cannot foster venture companies will be a loser," said Tetsuya Iizuka, president of JASVA and founder of Thine Electronics Inc., a 10-year-old fabless supplier of mixed-signal ICs.

Started in October as an association for startup companies and new ventures, JASVA has already accepted 75 regular members and 70 associate members. The regular members are startups, and associate members are venture capitalists, industry organizations, government organizations, entrepreneurs, members of the academe, and other supporters. Individuals who plan to start their own businesses within one year may also join as special members. JASVA hopes to get at least 100 regular members doing business in semiconductor and display-related industries. The association has three committees, for semiconductor, display and investor relations/management operations.

"Semiconductor ventures said that they wanted to have an association to have solidarity with other venture companies," said Wataru Izumiya, chief editor of Semiconductor Industry News, published by Sangyo Times Inc. Izumiya acted as coordinator to establish the association. "In the United States, there are 400 to 500 semiconductor startups, but here in Japan there were almost none. But just in the last two-to-three years, startups began to rise in Japan, too, and spinouts from large manufacturers and universities started new venture businesses," he said.

Helping hand

Startups in Japan, even those with an outstanding technology, often have little idea how to present their technology to potential customers or investors. JASVA intends to support such companies by providing them with opportunities to meet investors and customers.

"We have been talking on and on about the slumps in the '90s, but it is time to take action," said Iizuka. "We want to change the atmosphere in Japan."

JASVA's first conference on January 25 attracted more than 150 participants, who exchanged views, discussed business plans and explored opportunities. The event was attended by Akira Kubota, manager of the IT development group of the Ministry of Economy, Trade and Industry (METI). "METI will support JASVA through every possible means," Kubota said. JASVA also has the support of NEC Corp. and Itochu Corp., which are the major players in the industry.

An investor relations conference was also held on April 17, during which 10 venture capital members representing fabless manufacturers, silicon manufacturing system makers, IP providers, and control software makers, among others, presented their respective business plans before more than 140 participants.

The association has been running monthly "action" seminars on such topics as silicon, LCD, electronics, and technical and market trends, for its members.

While venture capitalists in Japan have been criticized for an inability to assess technology, JASVA will not "provide some kind of official guarantee to certain technologies," said Wataru Sato, assistant manager of Nippon Venture Capital Co. Ltd, a JASVA member. "Asessment and fostering of venture companies' technology is our business. We expect that JASVA will provide us with wide opportunity to encounter new companies."

That is a significant break from the past, according to JASVA's president Iizuka. "In Japan, the system follows the reality by a half step," he said. "Though the environment is still harsh to venture companies, it is changing toward a better direction. We want to pile up successes to make an impact on Japanese society and to invite individuals to invest in venture businesses."

Traditional resistance

Part of the traditional resistance to entrepreneurship is Japan's reluctance to change, according to Iizuka, but there are financial factors as well. "In the past, venture companies could raise money only from banks. The founders of [startups] had to take big risks [to obtain funding]. And once the founders fail, they are killed socially. There is no possibility of a second chance for them."

But there are signs of change in Japan. The recently launched Mothers (market of the high-growth and emerging stocks) and NASDAQ Japan stock markets have eased the previously tough listing requirements. For example, for a company to retain its listing, it had to keep profits above 200 million yen ($1.7 million) for years?a requirement that a startup can hardly satisfy.

These changes open the possibility of raising money on the stock market, and amendments to Japan's tax system will allow venture capitalists to invest in a new company more freely.

Japan's strict tax system imposes a tax on profit gained when a company goes public. This provides little incentive for venture capitalists and dampens the possibility of investing in new ventures.

To improve this situation and to encourage investors in young companies, some amendments are being made to the Japanese tax system. Last April, the so-called "Angel tax system" was introduced; it exempts three-quarters of the profit gained from going public from taxation. But some complain that the tax break is still too strict and not easily applied to new companies.

Setsuo Yamamoto, president of M&S Fintech Corp., said harshly, "Japan is a terrible country. Venture companies cannot grow. We have to change it." M&S Fintech has a highly evaluated grinding/polishing technology for wafers and glass substrates, but Yamamoto said his company cannot get a tax break because the Japanese tax system does not have a classification for grinding/polishing technology. Yamamoto said he hopes that the activity of JASVA will help improve this situation.

Teruto Okimoto, president of Sumcon Co. Ltd, said his company is "a successful case of raising money from a venture capital, but even for us, it took a long time to get through." Unless a startup has a certain scale and ability to prepare troublesome documentation, it is difficult to raise money from venture capitalists, he said. "For smaller-scale startups, the situation is much harder," he said. "Through the activity of JASVA, we hope the situation will be improved."

"This kind of association is necessary. After the last 10 years [of Japan's semiconductor industry slump], this kind of venture activity is essential to vitalize the industry," said Akira Minamikawa, senior analyst at West LB Securities Pacific Ltd., and an individual supporting member of JASVA.

Government entities such as the METI are also watching JASVA's activity, so the overall atmosphere is growing favorable for the association, he said.

? Yoshiko Hara

EE Times

With reports from Malou Buenconsejo

Electronic Engineering Times ? Asia

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