VCJ Report: VCs Show a Yen for Japanese M&A

As a venture capitalist with a long list of contacts in Silicon Valley and Tokyo, Gen Isayama is accustomed to introducing startups to strategic partners on opposite sides of the Pacific Ocean.

Never before, however, has he gotten so many requests to do so.

Isayama, a partner at DCM, tells Joanna Glasner of Venture Capital Journal that “it’s just going nuts.”

Among the most common requests he’s fielding are those from U.S.-based social media startups, whose founders are either looking to expand their footprint in Japan or gain the attention of a deep-pocketed acquirer there. But the queries come from those in other sectors, too, including cloud services and areas outside his sphere of expertise, such as the med tech sector.

The influx of inquiries comes amid a busy period for foreign investment by Japanese companies. In recent quarters, Japan-based companies have bankrolled some of the largest U.S. venture exits, including the largest life sciences acquisition so far this year of pharmaceutical giant Daichi-Sankyo’s purchase of Berkeley, Calif.-based Plexxikon, a developer of therapies for advanced skin cancer, in a deal valued at up to $935 million.

Fast-growing Japanese social media companies are also in buy-mode, as evidenced by Tokyo-based mobile gaming leader DeNA’s $400 million purchase of San Francisco-based game developer ngmoco.

It’s much more than a currency play, says Michael Braun, co-chair of the Japan practice group at Morrison Foerster. While the strong yen obviously makes U.S. acquisitions cheaper, he says, it’s a thirst for growth, rather than a bargain-hunting, that’s driving transactions.

“If you look at the Japanese domestic market, it’s a shrinking market. So if you’re a Japanese company, you can’t have your growth strategy based on domestic growth,” Braun tells VCJ.

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If you want to talk more about VC-backed startups and Japan or other markets, send an email to VCJ editor Alastair Goldfisher at alastair.goldfisher@thomsonreuters.com or contact him on Twitter at @agoldfisher.

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