Want to know a little about venture capital in Japan? Read on.....

There are approximately 50 venture capital funds in Japan (a very rough Triangle estimate - because we know personally about 25). The large majority of the organized funds (such as Softbank Investments or Globis Apax, to pick two noteworthy examples) can by mandate only invest in Japanese entities. Don’t bother approaching them. The majority of the remainder, generally wont invest in Israeli ventures since Israel appears risky, or they have never visited Israel - it is a comfort issue (I remember when we helped JAFCO make its first Israeli investments - before that time their comment was "we just have never done it" - this is a typical excuse in Japanese companies for avoiding risk - no one is punished for not doing something novel, no matter how big the missed opportunity).

A few funds (a growing number) will invest in foreign and even (!!!) Israeli companies. CSK Ventures, controlled by the iconoclastic Okawa-san, CEO and Chmn of Sega, has been a pioneer, investing in DSPG, Optibase, Bug-Life, Commtouch, Sphera, and a lengthening list. JAFCO soon followed, investing in JVP (Triangle deal), Radguard, Veon (Triangle deal), PrintLife (Triangle deal), Hypernix (sigh), GlobalLoop, and perhaps 5-6 others. eFund - a new fund set up by Hiro Ikegaya, a JAFCO alumnus and supported by Mitsubishi and GE Private Equity Japan - has made its first Israeli investment, in Bug-Life. Add Yasuda Enterprises, Ignite, Japan Asia Investment (JAIC) to the above, although just starting their Israel interests. Maybe someday Mitsui Venture Capital will "lose its virginity".

There are also some interesting strategic funds and private equity groups - Mitsubishi is noteworthy because it has significantly accelerated its Israel related investments after hiding behind its anonymous Veritas partnership for 5-6 years or so - Trivnet Japan (50-50 which I helped set up), PrintLife Ltd. (Triangle deal), PhoneOr (Triangle deal), and Appstream. A lot of this has been led by MC's merchant banking division, which is a value adding financial investor. Mitsubishi has flipped from being holier than Sadam in adhering to the boycott, to being one of the enthusiastic believers in Israeli technology. Add Sony Strategic Ventures, ITX (Nissho Iwai), Itochu Technology Ventures, and maybe Tokyo Marine Capital.

What is different about Japanese venture investors compared to Israeli/US VC's? Well, quite a lot actually. They tend to be less involved, for one, for better or for worse. They tend to invest small amounts (less than $1 million). They tend to be less sophisticated compared to their western counterparts, something which I find refreshing - personal trust is still an important consideration.

Well already this is too long, but I wanted to open up the window to the VC world a little bit. BTW, our new office in Tokyo - a real delight to visit if you are in the Tokyo area - is in one of the VC districts in Tokyo.

Dan

Reader’s Comments:

Mr. Shaun Jacobs had some additional tips on doing business in Japan. Here are some experts.

I read with interest your report. Some additional comments from my personal business experience in Japan;

Be punctual.

A meeting set at a specific time must be honored. Traffic jams, lost one's way on the metro, etc., simply hold no water in Japan, and tend to show disrespect, whatever the excuse.

Etiquette.

Should the meeting be with you (i.e. an Israeli businessman) and a colleague, have a 'game plan' concerning who says what, who responds to what, and what areas not to get into. It is literally embarrassing when a team enter a meeting/negotiation, and they argue/squabble or do not speak in one voice, when issues are raised. Moreover, it is seen as amateurish.

Commitment.

I know it's an old adage, but 'say what you mean & mean what you say'. Be very precise in what you say, since English is not the mother - tongue of your Japanese host/visitor, and this can and does lead to confusion.

Furthermore, if one commits to do something by a specific date (even something mundane such as a phone call), stick to the commitment; this is seen as professional and is appreciated.

Service.

As has been seen in past failures, do not promise something you cannot properly & efficiently service. If you promise to deliver X product and this requires technical hand-on service, and you cannot provide this, then do not offer the product.

In Japan, it's not only how much product you can sell into the market; it's also how efficiently you can stand behind the sale of that product.

Simply a few thoughts - regards,

Shaun Jacobs

Table of Contents:

• Israel-Japan News
• General Technology News
• New Technologies
• Triangle Technologies News

Exchange Rate as of February 11, 2001

$1 US = 117.52 Yen

***ISRAEL-JAPAN NEWS***

+ITX INVESTS IN VERSAWARE

ITX invested $2 million in ePublishing company Versaware. In July 2000, Versaware announced a $10 million deal with British publisher Taylor & Francis. Versaware was set up in 1997, following a merger between Versabook and CNS.

+PC SHIPMENTS REACH 13 MILLION UNITS IN 2000

Research firm MRI says that domestic PC shipments reached 13.24 million units in 2000, an increase of 32.1% in volume and 13.4% in value over last year. Consumer sales composed 41.6% to 6.3 million units and businesses sales 24.6% to 6.94 million units. By vendor, NEC ranked first with a 24.1% share, down from 26.1% in 1999, followed by Fujitsu (20.4%), IBM (8.8%), Sony (6.9%), Toshiba (6.8%), Compaq (4.8%), and Apple (4.7%).

+DESIGN MOST IMPORTANT FACTOR IN INTERNET ENABLED CELL PHONES

According to GartnerGroup Japan the reasons why consumers select their particular Internet-capable cellular phone, 57.3 % of respondents cited design as a main factor, 45.2 % cited the size of the display and 29.3 % mentioned a color screen.

+SALES OF LSI MANUFACTURING EQUIPMENT INCREASED BY 72.9 %

According to a study done by SEAJ (Semiconductor Equipment Association of Japan) sales of Japanese made LSI (large-scale integration - microchips containing thousands of transistors) manufacturing equipment increased by 72.9 % in 2000 over the previous year to $16.9 billion. The SEAJ attributed the increase in sales in 2000 to the expansion of electronic devices markets, including computer, information devices and digital household appliances markets.

+DOCOMO INTRODUCES ROAMING DUAL STANDARD MOBILE HANDSET

NTT DoCoMo introduced a mobile phone that is designed for use in Japan, Europe, Asia, Africa, and Oceania. With the launch of the new mobile phone, it will begin an international roaming service in the above parts of the world.

+ CATV INTERNET USERS TO REACH 600,000

According to the Ministry of Home Affairs, Posts and Telecommunications the number of CATV Internet users in Japan topped 600,000 in 2000. The number grew 4X in only one year from 154,000 at the end of 1999. The numbers of CATV providers also increased to 188 in 2000 from 84 in 1999. The ministry also says that the number of users of ADSL services provided by NTT reached 9,723 in 2000. The users of dial-up connections numbered 15.8 million, and mobile phone Internet users such as i-mode were 26.87 million.

+B2B MARKET TO REACH $944 BILLION IN 2005

Accenture released on Jan. 31 the results of a survey on e-commerce. It conducted jointly with the Ministry of Economy, Trade and Industry and the Electronic Commerce Promotion Council of Japan (ECOM). The survey found Japan's business-to-business (B2B) and business-to-consumer (B2C) markets in 2000 were worth $181 billion and $7 billion, respectively. The study predicts that by 2005, the B2B market will grow to $944 billion, and the B2C market will increase to $112 billion.

+ INVESTMENT IN INFORMATION SYSTEMS INCREASING

According to Nikkei Market Access 57.6% of major companies in Japan said they would increase their information system investments in fiscal 2001. Internet technology is a major object for investments. Instead of Web server software, companies are more interested in Web application server software for highly sophisticated transaction systems. Companies are also planning on investing in WANs and security tools.

+NTT TO BEGIN 36 MBPS WIRELESS INTERNET SERVICE

NTT will begin providing, on an experimental basis, wireless Internet service using high-speed radio access technology at a transmission speed of 36Mbps. This will be the first case in which the experiment of the wireless Internet service using 5GHz radio frequency band is conducted on such a large scale.

+DIGITAL ONLY TV BY 2011

The government is seeking to enact legislation that will mandate an end to terrestrial analog television broadcasts in 2011 and have the nation shift entirely to digital transmissions. The shift is certain to provide a boon to makers of consumer electronics because a vast number of consumers need to purchase new video recorders and TVs, which is projected to create some $400 billion in demand over the next 10 years.

+NEC DEVELOPS HIGH SPEED SYSTEM CHIP

NEC developed a system chip interface that can send and receive about 10GB of data per second, twice the speed of existing chips. The system chip incorporates NEC's enhanced serial transmission technology, which staggers data received over four signal lines and sends it out over a single line, then converts it back to its original form at the receiving end.

NTT DoCoMo plans to launch the world's first ever Java-based cell phone Internet service. Adopting Java will enable the use of a greater variety of Internet software over cell phones, allowing cell phone users to download software to play games against each other over the Net or to obtain updates of weather, stock prices and traffic conditions.

+GUY SPIGELMAN JOINS TRIANGLE TECHNOLOGIES

Triangle Technologies is happy to announce that Mr. Guy Spigelman has joined our team as Director of Marketing. Mr. Spigelman will be responsible for all of Triangle Technologies sales and marketing activities. Mr. Spigelman has many years experience in marketing and public relations in Israel, Australia and Japan. Prior to joining Triangle Technologies Mr. Spigelman was Director of Global Consumer Marketing at ImageID.