Cathleen Lyu’s Post

Continuing our exploration of APAC Web3 markets, we are launching part two of our Japan Web3 long-form research analyzes: the Investment landscape 🔗https://lnkd.in/gC5zucdy To best understand the #Japan #Web3 context, read part one of the report providing background information to Japan's macroeconomy & key #crypto regulations 🔗https://lnkd.in/gQhyYNrq

As Japan continues to relax its cryptocurrency policies, the potential for market expansion could be significant. Notably, in February 2024, the government approved a bill allowing VCs operating in Japan to invest in token rounds. This will inject fresh capital into the ecosystem, benefiting both domestic and overseas startups. #japan #web3 #investment #venturecapital

A shared struggle of global #VC ecosystems: a lack of #venture growth funding In the US: Against the backdrop of market corrections starting from the second half of 2022, LPs slowed down the pace of deployment to #venture, and many VC managers prioritized existing portfolio over making new deals. Dry powder sits at a record high, but remain concentrated in mega funds that have yet to deploy that capital meaningfully. Nontraditional investors such as crossover investors, asset managers, SWFs and hedge funds that used to play a significant role at the venture #growth stage, injecting large swaths of capital to promising mature #startups to capitalize on near term gains, have largely retreated. In Europe: Dry powder in 2023 sits at the second highest level observed in the past 15 years. However, compared to annual deal value from recent years, the amount of dry powder remains low. There's a healthy pipeline of startups in the region, but capital availability presents a real constraint. Government-affiliated investment entities have stepped in to address this challenge. For example, in early 2023, European Investment Fund (EIF) announced the ETCI (European Tech Champions Initiative) that specifically targets startups aiming to raise north of 50M Euro financing. In Southeast Asia: There was hope back between 2019 and 2021 that an influx of large global players will help address a historic lack of late- and growth-stage capital. However, many of these brand name venture funds retreated in 2022, leaving growth-stage financing options even more limited. In China: Amid a series of economic challenges, VC dealmaking activity in Greater China witnesses sharp declines over the past year. Venture growth stage startups in particular face severe headwinds, because financing has become much more challenging and being able to maintain a healthy pace of growth while balancing cash burn becomes a key consideration, similar to the rest of the world. In Japan: Historically, there has been a lack of late- and growth-stage funding. The government of Japan has taken initiatives to pump capital into the startup ecosystem, but most venture funds are limited by their AUM scale to support mature startups. Corporations and financial institutions (banks, insurance companies) in Japan play a key role in venture, being able to deploy capital from a strong balance sheet.

We’re thrilled to announce the launch of Coral Capital IV, a JPY 25 billion (~$160m with the cheap JPY!) fund dedicated to building legendary companies in Japan. Thanks to the unwavering support of our Limited Partners (LPs), we exceeded our JPY 20 billion target in just three months, achieving an oversubscribed close. This fund includes a mix of domestic and international institutional investors, strengthening our global reach. With this fund, we can invest anywhere from JPY 50m to JPY 3 billion in companies from Seed to Series C, bringing our total AUM to approximately JPY 60 billion. When I started my first company in Japan, annual investment in startups was around JPY 100 billion. Today, it's nearing JPY 1 trillion. Inspired by firms like Y Combinator and a16z, we launched our first fund in 2016 to create the firm I wished existed when I was an entrepreneur. We've since invested in over 100 companies, supporting standout names like SmartHR, Kakehashi, and Kyoto Fusioneering. Our "Ecosystem VC" approach focuses on three pillars: Capital, Talent, and Insights, helping startups secure funding, attract top talent, and scale effectively. With increased ambition, talent, and capital flowing into Japan’s ecosystem, we’re excited to see Japan at an inflection point. As the government continues to make progress tearing down red tape and lifting the weights holding startups down, we believe that finding, backing, and supporting smart people aiming to solve hard but important problems is the way to help Japan thrive again.

🇨🇳 𝗜𝘀 𝗖𝗵𝗶𝗻𝗮’𝘀 𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗦𝗲𝗰𝘁𝗼𝗿 𝗼𝗻 𝘁𝗵𝗲 𝗕𝗿𝗶𝗻𝗸 𝗼𝗳 𝗖𝗼𝗹𝗹𝗮𝗽𝘀𝗲? 📉 China’s venture capital market, once a global powerhouse, is in steep decline. Could this be the beginning of the end for its private sector, or is there still hope for revival? 1️⃣ 𝗩𝗖 𝗙𝘂𝗻𝗱𝗶𝗻𝗴 𝗙𝗿𝗲𝗲𝘇𝗲𝘀: Once the second-best destination for venture capital after the U.S., China has seen its VC market dry up. In 2018, over 51,000 startups were founded, but by 2023, that number had plummeted to just 1,202. A direct consequence of China's economic slowdown, post-COVID recovery, and tightened political control. 📉 2️⃣ 𝗣𝗼𝗹𝗶𝘁𝗶𝗰𝗮𝗹 𝗣𝗿𝗲𝘀𝘀𝘂𝗿𝗲: The Chinese government’s crackdown on its technology giants like Alibaba and Tencent, seen as monopolistic, has contributed significantly to the sector's decline. President Xi Jinping's policies have placed immense pressure on private businesses to align with Communist Party values, stifling entrepreneurial spirit and innovation. 🛑 3️⃣ 𝗗𝗲𝗯𝘁 𝗮𝗻𝗱 𝗥𝗲𝗱𝗲𝗺𝗽𝘁𝗶𝗼𝗻 𝗖𝗹𝗮𝘂𝘀𝗲𝘀: Many VC-backed startups are struggling to meet their obligations. With a wave of failures, VC firms are enforcing redemption clauses that force founders to repay investments—often with personal liability, including their homes and cars as collateral. This shift has transformed China’s once-thriving VC ecosystem into what insiders describe as a “debt-chasing monster.” 💼 4️⃣ 𝗟𝗶𝗺𝗶𝘁𝗲𝗱 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗦𝗼𝘂𝗿𝗰𝗲𝘀: Foreign investors, wealthy Chinese, and corporate backers are pulling out of China, leaving state-backed funds to fill the void. Today, 80% of available venture capital comes from the state, putting even more pressure on fund managers to guarantee returns—up to 8% annually. This is fundamentally changing the high-risk, high-reward nature of VC investments in China. 😨 5️⃣ 𝗧𝗵𝗲 𝗙𝘂𝘁𝘂𝗿𝗲 𝗼𝗳 𝗜𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗼𝗻: Experts warn that this shrinking pool of capital, combined with an anti-corruption drive, is curbing China’s innovation. Fewer experiments in cutting-edge science and technology mean the country risks falling behind in key areas like biotech and pharma, where investment has dropped by 60% since 2021. 🧬 As China’s private sector faces unprecedented challenges, is there a way back, or is this a turning point for its global dominance in tech and innovation? 🤔 Interesting! [𝐋𝐢𝐤𝐞] 👍 Helpful? [𝐑𝐞𝐩𝐨𝐬𝐭] ♻ Insights on this subject? [𝐒𝐡𝐚𝐫𝐞 𝐛𝐞𝐥𝐨𝐰] 💬 Do not want to miss the next post? [𝗙𝗼𝗹𝗹𝗼𝘄] 🔔 Nexus Capital Middle East 𝘚𝘰𝘶𝘳𝘤𝘦: Financial Times, Eleanor Olcott, Wang Xueqiao 📢 𝗗𝗶𝘀𝗰𝗹𝗮𝗶𝗺𝗲𝗿: This post is for informational purposes only and reflects personal opinions. It is not intended as investment advice. Always conduct your own research or consult a financial advisor before making investment decisions. #NexusCapitalME #China #VentureCapital #PrivateSector #EconomicSlowdown #MarketTrends #InvestmentStrategy #InnovationCrisis

China's VC Industry is Dying This article by Robert Wu sparked widespread discussion in China's venture capital community, with over 130,000 views and 10,000 shares (Chinese original: https://lnkd.in/guwH6giB and in English: https://lnkd.in/g4HaQ2-8) - **Comparative Analysis with U.S. Venture Capital:** China's venture capital industry originally mirrored the U.S., but now faces a unique crisis as U.S. dollar funds withdraw, revealing a lack of "patient capital" in China necessary to support startups. - **Shift in Investment Source:** With the retreat of U.S. funds, Chinese venture capital increasingly relies on state and local government funding, which demands investments that benefit local economic development, shifting the focus from startup innovation to regional investment promotion. - **Contradictions and Challenges:** The industry faces a dilemma as state-owned capital cannot afford losses typical in venture capital investments, leading to distorted practices like requiring personal liability from startup founders. - **Investment Dynamics Changed:** Venture capital is becoming less about risk and innovation and more akin to banking, with stringent conditions that hinder rather than help startups. - **Economic and Societal Implications:** The transformation within China's venture capital industry may threaten not just startups but broader economic innovation and growth. - **Hope from New Approaches:** Some individuals, such as a person who left a prominent USD VC, are adapting by deeply engaging with startups, offering a hopeful narrative for a reformed venture capital approach centered on partnership and direct support. #thrivetogether #learn #opportunity #china

Norwegian VCs have brought value. This is not opinion. This is academically verified. Kisseleva, Mjøs, and Robinson (2023) People know I am highly skeptical of Norwegian venture capital. The tech due diligence on some recent Norwegian "tech" investments seems a bit suspicious and the "CTOs" are not who they seem. They usually lack the scientific specialty to assess their deal flow in highly technical ventures. They are driven by FOMO to follow what the Swedes do. Given the tiny size of their funds, they do not make enough % on AUM for serious operations and administrations to support their portfolio. BUT-! Norwegian VCs have helped 4x revenue growth rates in their VC-backed portfolio vs bootstrapped Norwegian competitors. And it is NOT because of selection bias. Because many of their investee companies struggled before their investments. And they do not write big cheques either - the revenue growth is not a money multiplier. Norwegian VCs have done good for Norway. Norwegian VCs have helped propel innovation forward in Norway. Norwegian VC achieved the above despite limited resources. Their pricing, their sales, their marketing, and their GTM knowledge is genius. (I know because I attended their amazing workshops.) So ignore what the Nordic and Baltic bootstrappers say here on LinkedIn. You should apply for Norwegian VC investment as a Norwegian tech founder. You should not only chase foreign VCs or local angels as a Norwegian tech founder. It is good for your business. It is good for your team.

🌏 Global investors quietly enter Southeast Asia's startup scene, drawn by saner valuations and growth potential after the initial boom. 📉 Average pre-money valuations at series A and B stages dropped, opening opportunities for new players. 🌍 Middle East funds and South Korean companies increase activity; sovereign wealth funds from the Gulf play a major role. 💡 Despite challenges, Southeast Asia's startup ecosystem aims for self-sufficiency with increased local investments.

🔥 S. Korea's VC Data Clash: Gov't & Private Sectors at Odds South Korea's venture capital landscape shows conflicting data: The Ministry of SMEs and Startups celebrates a record KRW 10.9 trillion (USD 8.18 billion) in 2023 investments, indicating strong market recovery. In stark contrast, Startup Alliance reports a 52% drop to KRW 5.3 trillion (USD 3.9 billion). These discrepancies highlight the urgent need for better data collection methods to accurately reflect Korea's venture ecosystem dynamics. Key Insights: 1️⃣ Gov't vs. Private: A 35% increase per gov't vs. a 52% decrease per Startup Alliance. 2️⃣ Sector Focus: Gov't on tech (AI, semiconductors); Private on healthcare, manufacturing. 3️⃣ Calls for Data Accuracy: Highlighting the need for standardized venture investment data reporting. This comparison underscores the vibrancy and challenges within the Korean VC market, stressing the importance of data transparency for strategic ecosystem support.