In concluding this study, we would like to make some remarks on the differences found in VEC’s and our studies.
First of all, in the study by VEC, the number of cases choosing IPO as their exit gate was 265 out of 537 cases, or approximately 50%, which was extremely high. In comparison to that, the numbers in our study were lower at only 29% for VCFs and 25% for VCists. The two studies were carried out roughly one and a half year difference in time span. However, IPO atmosphere was fairly similar during these periods of time (between 2004 and the middle of 2006). The numbers of IPO were 175 cases in 2004, 158 cases in 2005, and 200 cases in 2006, showing no significant difference as well. It is, therefore, difficult to mark time as a crucial cause of this discrepancy.
As a consequent, it can possibly be assumed that this large gap of IPO rates was caused by the difference in variety of samples used in the two studies. The companies we conducted this research with were relatively younger than those in VEC’s report. They seemed to still be in the stage of holding their shares, waiting and preparing for IPO. There were also some differences in the ratio of industry breakdown. Although IT field captured the largest share of samples in both reports, it was 28% in VEC’s but 38% in our study. In contrary, the ratio of bio-technology was 22% in VEC’s and 17% in ours. The reason is similar to the one above. It is because our respondents were relatively younger. VCFs with short career path are likely to select IT over bio-technology because of the amount of investment capital required (IT industry requires relatively smaller amount of money). Additionally, because bio-technological industry does not grow as fast as being expected, the gap is then filled by the traditional sector. This implies that our research reflected a more realistic side of the coin.
In reality, there are actually not many investment opportunities in the field of bio-technology. IT field, on the other hand, is growing and increasing in both Nikkei and VEC. The total investment in IT increased to 77.3 billion yen, equivalent to 2.2 times the number in 2004. The amount of bio-technology, in contrary, declined for the first time in seven years at the rate of 7%, to the amount of 19.8 billion yen. This number could reflect the decline in the growth of ventures originated from universities, which is one of the driving forces of bio-technology.
Even though there has nothing to do with the study by VEC, the problem of moral hazard should be touched upon. As being mentioned by Mr.Tetsuo Kadowaki and some others, this problem is known as a problem in the structure of Japanese VCFs . In this study, there were only 2-3 firms that were actually claimed by investors. Despite that, these companies revealed that it was only because of their already established internal standard on how to allocate investments. Considering this fact, it can possibly be stated that there is no particular problem in this respect at the surface.
This analysis still yet needs to be revised using data from follow-up surveys. However, in a lot of cases at this point, it seems that the shareholders of VCFs and their main investors of funds reside in the same persons. If this holds true, it implies that VC has not yet been popularized among public. According to a study by VEC, a ratio of individual investors raised from nearly none to 77 out of 391 persons during one year before 2005. This number is equivalent to 14% of total investment amount at that time. This remarkable increase in the number of individual investor is sufficient to predict more apparent problems of moral hazard in the near future.