JAFCO Group’s
ValuesVENTUREINVESTMENT

Sustainable
Growth Strategy

JAFCO Group’s
Value Creation

Business Foundationfor Sustainable GrowthHighly Selective Deal Sourcing
Quality deal sourcing and thorough selection by 47 investment professionals who

Keisuke Miyoshi

think through future business opportunities to enable repeated success

PartnerPresident & CEO

Message from the Division Head

Ongoing contact with several hundred startups
Organizational support from the seed stage to ensure thatno promising startups slip throughNew talks

2,193 companies
Referrals from management, conference andpaper research, overseas case study research, media,
angel investors and VC firms, and startup communities

Carefulselection

Partner involvement/
Investment consideration

Carefulselection

184 companies

New investments

31

Thorough due diligence
Formation of teams for each deal

companies

Partners

6

Investment professionals❶ Yutaro Saka, Partner❷ Mizuki Takahara, General Manager ofthe West Japan Branch, Partner❸ Keisuke Miyoshi, President & CEO, Partner
❶

❷

❸

❹

❺

Corporate
Data

47(As of March 31, 2022)(As of March 31, 2022)❹ Atsushi Fujii, Partner

Notes: 1. Results for the fiscal year ended March 31, 2022.
2. Numbers of companies and investment professionals
include those for buyout investments.

❺ Tomotake Kitazawa, Partner❻ Shozo Isaka, Partner❻

Business Environment and Challenges
Strengths and Strategies
Strengths

A startup ecosystem that is developing into a mature market
Strategies• Ability to identify new trends and engage with entrepreneurs who aretackling those trends at an early phase• Experience in building businesses with entrepreneurs and the mindset
of a Co-Founder• Human resources development capabilities to systematically pass onthese strengths• Further pursue highly selective, intensive investment
Expand the investment domain to earlier phases and provide resources
necessary for launching businesses
Follow-on investment to maximize enterprise value and full involvement
in exit• Develop diverse human resources and frameworks for perceiving
diverse changes

The most significant change in the business environment over the past
10 years has been the increase in and diversification of entrepreneurs
in Japan. Startups have become established as a career choice for awide range of people with the rise in the number of serial
entrepreneurs, high-level workers who are starting up companies,
and employees of large companies changing jobs to startups.
In this age of VUCA,* changes that also present opportunities forentrepreneurship are becoming faster and more significant. The
providers of funds to support entrepreneurs and startups are also
becoming increasingly diversified.
While the number of investment opportunities is increasing, we mustbe even more selective and create larger businesses and industries bycollaborating with other fund providers.
* Volatility, uncertainty, complexity, and ambiguity.

Future Strategy
Social Role (Value Creation and Track Record)

Further evolution of highly selective, intensive investment: Faster and with deeper involvement

Perceive changes in society and enhance social evolution
The Venture Investment Division has been the Company’s core businesssince its establishment and has continued to pursue the creation of new
industries together with entrepreneurs. Our division has been investing
primarily in Japan, as well as in the United States since 1984 and in
the rest of Asia since 1986.
Continuation and expansion of venture investment lead to anincrease in the number of entrepreneurs who take on challenges in
response to social changes and to the creation and development ofindustries that will develop a more prosperous society. The experienceof that success leads us to take on the next new challenge.

We are a pioneer in venture capital in Japan and have continued topursue the launch, continuity, and development of venture capital
investment. To date, these efforts have resulted in more than 1,000
company listings. Another feature of our efforts is that we continue toinvest at all times and take social responsibility in expanding theprivate equity market. We believe that continuing to invest in startups
without interruption to the fund, regardless of whether the market isgood or bad, is essential to finding new challenges to pursue. We willcontinue to take on such challenges together with entrepreneurs andthereby contribute to the enhancement of social evolution.

To seize investment opportunities amid diverse changes, our investment
professionals will need to diversify their respective areas of expertiseand interests. Through greater diversity in the development and hiringof investment professionals, we aim to approach a broader range ofinvestment opportunities more quickly. Moreover, in addition to ourexisting outbound approach to candidate companies, we will
strengthen our inbound efforts to attract those that are in the earlystartup and preparation phases.
While a higher growth rate to exit (i.e., ROI) can be expected wheninvesting at an earlier stage, this also carries the risk that the businesswill not take off. We will continue our long-standing efforts to become
closely involved in portfolio companies in order to respond to suchrisks. Leveraging our experience from past successes, we deepen our
involvement in building the business, thereby accumulating even moreexperience. We believe that being deeply involved with the company
from initial investment to exit, with the mindset of a Co-Founder, will
boost the probability of success and help lower downside risks.
One of our strengths is our multi-layered structure of human resources
consisting of those with more than 10 years of experience as
investment professionals, young associates hired as new graduates,
and mid-career professionals with specialized knowledge. We aim toachieve further expansion by sharing and passing on the knowledge
and experience we continue to gain through the evolution of our highly
selective, intensive investment activity.

Emphases in Venture Investment

Our investment policy of “highly selective, intensive investment” and our identity as a Co-FounderHighly selective investment requires pioneering abilities backed by the
curiosity and inquisitiveness to continually pursue the social changes
and investment opportunities that we target. Our emphasis has been
on seizing business opportunities created by changes in society without
limiting ourselves to a specific investment domain. Within that scope,
we carefully select investment candidates, pursuing businesses with ahigh rate of change and a significant impact on society.
Being highly selective on investments enables more intensive

29

JAFCO INTEGRATED REPORT 2022

investment in terms of amount, and deeper involvement in our
portfolio companies. We seek to maximize enterprise value by
providing the necessary resources, including through follow-on
investment, to accelerate business growth.
As an organization, we have also emphasized sharing and passing
on our identity as a Co-Founder to maintain a sense of ownership—
sharing the same perspective as the entrepreneur, from the phase ofdeal sourcing to involvement in the portfolio company.

HIGHLIGHT

Establishment of the West Japan Branch

In September 2021, the Chubu and Kyushu branches were integrated into the Kansai Branch
to become the West Japan Branch. Both branches had been operated by a small number of
personnel, but we decided to integrate them after determining that consolidating personnel
with extensive investment experience outside the Tokyo metropolitan area at the West Japan
Branch would lead to stronger support for local startups.
As communication with portfolio companies is increasingly conducted online due to
COVID-19, we believe that building strong relationships of trust through in-person communication
will help to set us apart from competing venture capital firms. Going forward, we will skillfully
make use of both in-person and online communication with the aim of further enhancing
communication with entrepreneurs and thereby acquiring unique investment opportunities.

Amount of funds raised by startups
outside the Greater Tokyo area
¥106.2 billion¥58.6 billion

2017

2021

Source: INITIAL Inc. (as of July 20, 2022)
Notes: 1. Figures for each year are based on datacollected as of the reference date.
2. Regions excluding Tokyo, Kanagawa,Chiba, and Saitama.

JAFCO INTEGRATED REPORT 2022

30

JAFCO Group’s
ValuesBUYOUTINVESTMENT
Message from the Division HeadJAFCO Group’s
Value Creation

Ko Minamikurosawa

Sourcing

Execution

PMI

Partner (SV6)❶ Keisuke Aoyama, Managing Director

Approach• Continually provide a newperspective and ideas based ona deeper understanding of theportfolio company’s business andtechnology, with unwavering
ambition and commitment❷ Ko Minamikurosawa, Partner, General Manager of Structured Investment,
Managing Director❸ Hirogi Nakayama, Managing Director❸❹

Management
strategy

Strategies• Corporate culture that boldly takes on unprecedented challenges• Utilization of knowledge accumulated in venture investment• Throughout each investment a dedicated team ensuresconsistent responsibility• Create a framework to enhance investment and value-creation
activities for portfolio companies• Establish a strong team that ensures stable performance

Gain control, solve management issues and increase the value of portfolio companies
business models and help them chart a new growth curve.
In Japan, small- and medium-sized enterprises account for the
majority of companies, with top management advancing in age andsuccessors in short supply. As such, addressing the issue of businesssuccession is an urgent matter. The aim of our buyout investments is toserve as a vehicle for the issue of business succession by acquiring
management rights at small- and medium-sized enterprises with nosuccessor and giving them a second start while enhancing theircorporate value.

Values cultivated as a venture capital firm guide us to success in buyout investments

31

JAFCO INTEGRATED REPORT 2022

Operations

Administration

Branding

Active utilization of technology/DX support
JAFCO Business Development Division

JAFCO’s Network• Business development teams established in Japan, North
America, and Asia dedicated to support enhancement ofcorporate value• Extensive network of portfolio companies, fund investors,
and others formed through business activities spanningroughly half a century• Provision of expertise for enhancing management as wellas support for cultivation of sales channels, joint
development of IoT businesses, M&A/business alliances,and global expansion• Utilizing our diverse network that ranges from cutting-edge
startups developing AI-based businesses to large
corporations and educational institutions such asuniversities, we will refer customers, support joint R&D
projects, introduce advanced services to enhance business
operations and service value, and moreinvestment execution, post-investment value enhancement, and the exit,
and they maintain awareness and unwavering ambition as owners of
portfolio companies. Another of our strengths comes from the fact that

we can collaborate with the Business Development Division and withpersonnel possessing many areas of expertise on challenges thatcannot be solved by our division alone.

Business Environment and Challenges

The M&A market for Japanese companies is growing in line with anincreasing number of deals related to business succession of small- andmedium-sized enterprises, coupled with a stable number of carve-outsof subsidiaries/affiliates from large corporations as a consequence ofdigital transformation (DX) and management reforms. In the fiscal year
ended March 31, 2022, the number of M&As in Japan exceeded thatof the previous year. The market for private equity funds in Japan also
continues to expand. Based on the outlook of these market
environments, our division will concentrate management resources onfurther expansion of buyout investments.
One of the key challenges at present is management of the JAFCO
BO7 Investment Limited Partnership (BO7), established in June 2022.
Targeting securities issued by unlisted companies in Japan, the Fundleverages LBO* and other schemes to acquire majority shares with theaim of making buyout investments. Securing and training humanresources is essential for the successful management of dedicated funds.
* Leveraged buyout: Corporate or business acquisition utilizing borrowed funds.

Future Strategy

Achieve stable performance and sustainable growth of buyout funds

Emphases in Buyout Investment

Our track record in buyout investments goes back 24 years, and as of
the fiscal year ended March 31, 2022, we have invested in a total of
52 companies, of which 38 have been successfully exited including
six IPOs. Our strength lies in the knowledge we have acquired throughour extensive track record in venture investments and our businessdevelopment ability based on a strong presence in the industry and oursocial credibility.
The Venture Investment Division has accumulated a wealth of
information on cutting-edge technologies and services of startups andother companies, as well as the management challenges they face.
Moreover, it has built a vast corporate network cultivated over its 49
years in investment and fund management operations. These resources
give us a major advantage in buyout investments.
We also believe that our approach of identifying the true nature of

Finance

Capturing growth markets with our buyout-dedicated fundSocial Role (Value Creation and Track Record)

Buyout investment refers to a type of investment in which a company
acquires more than 50% of the equity share capital of a portfolio
company, takes control of management, and seeks to increase
corporate value by reviewing management strategies and implementing
various measures. Buyout investments executed by our division are very
unique in that we are able to leverage our defining principles andknowledge as a venture capital firm in our collaboration with portfolio
companies. By providing portfolio companies with the knowledge andvalue-adding measures we have accumulated through our extensive
track record in venture investments, we are able to transform theirMarketing❹ Masataka Kobayashi, Managing Director

Strengths and Strategies
Strengths

Exit
JAFCO Buyout: Post-Investment PMI Approach

General Manager of Structured Investment
Managing Director (BO7)• Work closely with management,
especially in the first 1–2 years
after investment❷

Corporate
Data

PMI Utilizing JAFCO’s Strengths

PMI Style❶Business Foundationfor Sustainable Growth

Sustainable
Growth Strategy

risks and boldly pursuing business opportunities gives us the edge overother buyout investment funds, and the mindset that this approachembodies is part of the corporate culture that we have nurtured overmany years as a venture capital firm. We see it as important to execute
management and operations from the same perspective as the
management and employees of the portfolio company. We willemphasize the Three Actuals Principle (the actual place, the actual
goods, and the actual situation) as we move forward with change.
This way of thinking is a distinctive characteristic of the Company,
which has guided many startups to success. It is important to always
approach things with a sense of ownership in order to successfullyreform the management of portfolio companies. Division personnel arein charge of everything from sourcing (identifying investment
opportunities) to investment scheme review, negotiations with sellers,

Our efforts to achieve stable performance and sustainable growth ofbuyout funds consist of (1) creating a framework for the smooth
investment and value-adding of portfolio companies and (2) training
outstanding human resources and establishing a system that ensures
their stable performance.
Our division’s primary focus is on buyout investments in small- andmedium-sized business succession deals with growth potential, but wealso make hybrid investments, combining elements of both venture andbuyout investments, to acquire early-stage companies. Regardless ofindustries or sectors, we will develop companies falling under thefollowing themes.

Investment Targets(1) Companies with competitive brands, intellectual assets, networks, and operational know-how(2) Companies that are starting to become competitive in a growing market(3) Companies that have already established a significant position in a niche market(4) Companies with products and services that have the potential for global expansion(5) Companies with growth potential utilizing JAFCO’s resources

JAFCO INTEGRATED REPORT 2022

32

JAFCO Group’s
ValuesJAFCO Group’s
Value Creation

Sustainable
Growth Strategy

Business Foundationfor Sustainable Growth

Corporate
Data

Portfolio Company Case Studies

Visional, Inc.

Venture Investment (Exited)

Soichiro Minami
Representative Director and CEO
Visional, Inc.
Based on its mission of “Persistent Creation of
New Possibilities,” Visional operates various
businesses that promote industrial DX, includingin the HR tech domain. It aims to build an
ecosystem that supports corporate humancapital management (HCM) strategies mainly
through its high-level job site Bizreach and the
HRMOS Series of human capital utilization
platforms. It is also working to launch new
businesses in the M&A, logistics tech,cybersecurity, and sales tech domains.

Buyout Investment (Exited)

A “comrade-in-arms” who has helped us build a foundation
ever since we were just a small unknown team

“In the end, nothing is more important than people”
provided an impetus

The ¥200 million investment from JAFCO in 2010 was Bizreach’s first financing. At the time, the market
was in a slump following the 2008 financial crisis, so it was very rare for a Japanese startup to raise
funds in excess of ¥100 million. We were turned down by every venture capital firm except for JAFCO.
JAFCO members visited our office, which was a converted studio apartment in a multitenant building,and I still vividly remember them saying, “We want to invest in your team.”
Since then, we have maintained a relationship with JAFCO for more than a decade. In December
2010, JAFCO decided to invest ¥500 million in our newly established subsidiary Luxa, and weworked together until it was sold to a business firm in 2015 (during that time, it had grown into anorganization of about 200 employees).
From a small unknown team, we have grown into a company with annual sales of ¥43.95 billion
and operating income of ¥8.32 billion (in the fiscal year ended July 31, 2022). There are so manystories that cannot be told at once, but JAFCO has been like a “comrade-in-arms,” helping us throughout
the process of foundation building, from making the rounds to customers and investors through tobusiness development and fundraising.
JAFCO has always respected and trusted the approach that our management team and I have taken,
while providing logistical support for our growth. I hope that JAFCO will continue to commit to thecreation of new businesses that have an impact on society and pave the way for the future of Japanand Asia by being an indispensable partner for many startups.

In 2014, we had fallen into difficult circumstances and were looking for a new sponsor to revitalize ourbusiness. This was when JAFCO took an interest in our business. Business assessment is, of course, an
important part of JAFCO’s due diligence, but being presented with the policy of “In the end, nothing ismore important than people” was a major impetus for us.
Immediately following the investment, numerous issues needed to be resolved to ensure business
continuity, so the situation was unpredictable. JAFCO presented us with options and proposals for eachof the issues and worked with us to implement reforms. In particular, they provided strong support forbuilding a foundation for growth across a variety of aspects, including pricing, business restructuring,and promotion of in-house production.
They also accompanied us to exhibitions in Japan and overseas where we showcased our products
and sometimes on visits to overseas customers. It was a huge encouragement to have a partner that
believed in the distinctiveness and growth potential of our business working closely with us.
The results of the structural reforms have provided us with a solid foundation for growth. Since entering
the growth phase, as we have worked to develop new businesses that leverage our strengths, JAFCO
has provided us with wide-ranging support, including the use of its network. We have also realized asolid profit structure that differs completely from the one that existed before JAFCO’s investment.
I believe that the growth of small- and medium-sized manufacturers is essential to boost the Japanesemanufacturing industry. I hope JAFCO continues to support the creation of world-class manufacturing
companies through its investments.

Koichiro Ikeda
President
Isuzu Glass Ltd.
Isuzu Glass is a manufacturer of optical glassparts. Based on its technology in the glass
melting, glass molding, and optical design
fields, it operates the melting business which
manufactures optical filters, the molding
business which manufactures optical lenses,
and the optical design business which offers aone-stop solution encompassing everythingfrom optical design to manufacturing (including
outsourcing) and assessment.

Newly listed (IPO) in April 2021

Venture Investment (Portfolio Company)

33

Isuzu Glass Ltd.

JEPLAN, INC.

Buyout Investment (Portfolio Company)

IZAWA TOWEL Co., Ltd.

JAFCO was the first to acknowledge our idea
and make an investment decision

Creating an environment where roles are clear andwe can focus on business growth strategies and operations

I founded JEPLAN in 2007 with the ideals of giving value to waste as a resource and recycling
everything. At the time, the terms “sustainability,” “circular economy,” and “ESG” were still notcommonly heard, so there were occasions when we received harsh feedback that it would be
impossible to run a profitable environmental business. Nonetheless, we worked to develop a businessand technology that would contribute to the formation of a recycling-oriented society and realize bothprofits and growth. Finally, in 2015, eight years after our foundation, we came up with the idea thatwould serve as a framework for our current business. The first company to acknowledge the value of
our idea and make an investment decision was JAFCO.
Since then, we have overcome a number of challenges to realize that idea, and in the seven years
since the investment from JAFCO, we have contributed to the formation of a recycling-oriented society
and achieved profit growth. Over the next seven years, we hope to expand the scope of ourcontribution to the formation of a recycling-oriented society beyond Japan to the entire world, based on
our track record and technology. It is still too soon to look back, but over the past seven years, JEPLAN
has overcome many challenges that we might have otherwise given up on by ensuring that we adhered
to the purpose of our agreement with JAFCO, our first investor. Demands for change tend to be loud,but of course, there are some things that should not change. I hope that JAFCO will continue to play its
part in adhering to the purpose of the agreement, and I believe that this will serve as a compass to help
many founders navigate the waves of challenges they are sure to face.

The towel industry is still old-fashioned, and many companies focus on reproducing their past successes
or creating hit products. In contrast, we felt that it was important to study the market as a whole andfind out where the industry’s problems were and where end users were not being served.
Fortunately for us, a mass market had not been established in the towel industry. As a result of ourefforts to build it ourselves, we were able to reach a stage where an IPO was in sight. We received
proposals and advice from many stock listing support companies, but JAFCO was the one that provided
us with the clearest strategy for the IPO and beyond. They gave us the strongest sense of commitment togrowth and depth of engagement. The capital alliance further clarified our roles. JAFCO led the way inestablishing a roadmap and hiring human resources for the IPO, while we focused on business growthstrategies and operations.
On a manufacturing cost basis, the size of the global towel market is around ¥1 trillion. If we canachieve sales of ¥200 billion, which represents 20% of this market, we will be able to claim the top
market share. I hope to take advantage of JAFCO’s knowledge and global network as we substantiallyaccelerate the expansion of our market share after the lPO by implementing M&A and other activities.

JAFCO INTEGRATED REPORT 2022

Masaki Takao
CEOJEPLAN, INC.
In pursuit of its vision of “recycling everything,”
JEPLAN is working on horizontal bottle-to-bottle
and clothing-to-clothing recycling, based on its
strength in commercial production of recycled
PET resins using the proprietary chemical
recycling technology BRING Technology™, inaddition to creating supply chain mechanisms.

Shoji Izawa
President
IZAWA TOWEL Co., Ltd.
Izawa Towel manufactures and sells towels.
It provides OEM and ODM products primarily
to major retailers. Based on its mission tocreate mass-market towels that will serve as
the global standard, it is strongly committed to
manufacturing towels that are both reasonably
priced and comfortable to use.

JAFCO INTEGRATED REPORT 2022

34

JAFCO Group’s
ValuesBUSINESSDEVELOPMENT

Sustainable
Growth Strategy

Business Foundationfor Sustainable Growth

Corporate
Data

Bringing Portfolio Companies’ Businesses to the Public Quickly and Widely

Naoki Sato
Partner (SV6)
Corporate Officer
In charge of Business Development

Message from the Division HeadJAFCO Group’s
Value Creation

Support for business development and fundraising through proactive involvement in management decisions
20 business development professionals* support business launches together with investment professionals who create an environment in which
entrepreneurs can focus on their core business* As of April 1, 2022.
Results for the fiscal year ended March 31, 2022

C-level and other executive referrals

Recruitment

MarketingSales support

Organizational development
consulting

Recruited

45 people

Business matching

742 cases

Customer referrals
Tie-up arrangements
PoC project referrals

Strengths and Strategies
Strengths

Strategies• Overwhelming experience and extensive resources for supporting
portfolio companies
More than 20 specialists in recruitment, marketing and sales support,
back-office development, IPO preparation, and other fields
JAFCO’s own unique network and know-how (past results and track record)

Solving challenges in innovation at startups and large companies
Support for new business creation through conferences, community
operations, and more

Adding value to many portfolio companies
companies, those related to sales and marketing, hiring and otherhuman resources tasks, and back-office functions are essential. We
have 20 specialists (as of April 1, 2022) in our division dedicated tovalue-adding activities.
In addition, having assisted with more than 1,000 IPOs, we havecultivated unique know-how in guiding startups to success, support
systems for hiring C-level executives and building an organization
based on growth stages, and a network that includes more than
15,000 large corporations, all of which enable us to contributesignificantly to the value of portfolio companies.

Emphases in Business Development

Tying knowledge cultivated in past venture investments to the success of portfolio companies

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JAFCO INTEGRATED REPORT 2022

Administrative division establishment

IPO consulting

Tool selection

30 companies

Business Environment and Challenges

Differentiation from other investment companies is essential amid heated venture investments

Social Role (Value Creation and Track Record)

The Business Development Division has been accumulating tangible
and intangible knowledge for more than 20 years through its support
activities. One of the things we value is “frontline presence.” In recent
years, many entrepreneurs prioritize approaches and convictions they
can relate to over existing values that have become obsolete. We takean approach of empathizing with such entrepreneurs, which we
describe as “frontline presence.”
Another value we embrace is reproducibility. Portfolio companies
and investors are constantly exposed to the risk of failure. The tangible
and intangible knowledge that the Group has accumulated is precious

IPO consulting• Increase success probability of portfolio companies• Expand the startup market and establish an ecosystem• Support for startup entrepreneurs that emphasizes frontline presence

The support necessary to improve corporate value differs depending on
the growth stage of portfolio companies. According to the growth stage,
the Business Development Division provides the necessary resources to
add value to portfolio companies. For startups whose businesses are at
the conceptual stage, we serve as a reliable advisor when hiring
human resources to support management, expanding sales channels,
or establishing development and marketing strategies for their products
and services. For those businesses that are at the commercialization
stage, we provide support for cultivating business partnerships,
establishing administrative structures, and preparing for listing.
Among activities through which we add value to portfolio

Back-officedevelopment

information for startups as well. We believe it is important to leverage
this knowledge to boost the reproducibility of success. To achieve this,we establish priority areas to address by having entrepreneurs and ourinvestment professionals share knowledge in terms of businessperformance, human resources, and administration. Furthermore, we
promote initiatives for portfolio company growth and the developmentof a startup ecosystem by actively creating community-like forums
among portfolio companies where they can exchange information suchas their successes and failures.

In line with the growing venture capital market in Japan, market players
are diversifying in type. Other than independent venture capital firms(VCs) similar to JAFCO Group, there are VCs affiliated with financial
institutions, government agencies, and universities. In addition, we
have seen the emergence of corporate venture capital (CVC), i.e.,
funds formed primarily by large corporations using their own capital forthe purpose of investing in and providing other support to startups, andan increasing number of large-scale investment funds.
Under such circumstances, our division’s efforts to provide timely
advice and services according to the growth stage of portfolio

companies are vital to differentiating the Company from other sourcesof venture capital.
Furthermore, as sustainability has become the subject of greaterattention in recent years, a growing number of portfolio andcandidate companies are creating business models based on resolvingsocial issues. Recently, the Group has also been assessing businesspotential in addition to risks and social needs in terms of ESG and theSDGs when identifying promising companies in the initial stage ofinvestment activities.

Future Strategy

Building an ecosystem to solve the diverse challenges of portfolio companies
To continuously address the varying needs of portfolio companies, wewill develop ideal forms of support for portfolio companies and help
them evolve in response to the demands of the times. To do that, weneed to respond quickly to the requests of portfolio companies anddevelop, propose, and help implement their growth scenarios.
In sales/marketing and capital/business alliance support, we willcontinue to provide support for business matching between portfolio
companies and large companies to increase the number of business
opportunities and closing rates.
In recruitment support, we will focus on C-level executives andengineers. In addition, we will provide support activities tailored to theorganizational phase of rapidly growing startups and resolve
challenges related to organization development, which are common
among startups.
In IPO support, our staff of certified public accountants and tax

accountants offer support for establishing systems and preparing for an
IPO to portfolio companies that are considering going public.
The challenges faced by portfolio companies are growing more andmore diverse each year, and it may not be possible for JAFCO alone
to help tackle them. For that reason, we must build an ecosystem tocirculate diverse knowledge and rules of thumb and create reproducible
success backed by the firm commitment of our team of professionals.
In addition to addressing the dilemmas and social issues faced bylarge companies that are looking to innovate, we support theirendeavors in new business creation by organizing conferences andcommunities and matching them with startups. We also aim to expand
the operation of our Career Academy targeting individuals who areinterested in startups, as part of our efforts to lay the foundation forincreasing public awareness of startups.

JAFCO INTEGRATED REPORT 2022

36

JAFCO Group’s
ValuesFUND
MANAGEMENT

Sueko Matsumoto
Corporate Officer

JAFCO

Financial
institutions

50%

18%

❷ Sueko Matsumoto, Corporate Officer in charge of Fund Management
and Administration❸ Hitoshi Sawamoto, Principal, Fund Management❷❸

Strengths and Strategies
Strengths

Strategies• Track record of high fund performance• Extensive network of over 300 fund investors• Thorough reporting and accountability to fund investors• Strengthen relationships of trust with existing fund investors• Diversify the fund investor baseSocial Role (Value Creation and Track Record)

Contribute to perpetual growth by raising risk money as a pioneer in investment limited partnerships in Japan
Today, the form of investment known as an investment limited
partnership is utilized by many of Japan’s private equity investment
funds as an investment vehicle (linking assets and investors), but its
origin dates back to 1982, when the Company established the first
venture capital fund under Japanese law. As a pioneer in Japan’s
investment partnership business, we have led the establishment andexpansion of the risk money market by increasing fund size, while
coordinating with the relevant ministries and agencies to develop asystem for ensuring the credibility of fund management on behalf ofinvestors. Legislation on private equity investment management
operations set forth the requirements to allow pension contributions toinvestment funds, and after obtaining registration as a financial
instruments business operator in 2007 when the Financial Instruments
and Exchange Act entered force, we quickly established an operating
structure that allows us to better execute our fiduciary responsibility.
The social role of private equity investment funds is to raise riskmoney from a wide range of investors and allocate such money tocompanies that require growth capital and management support toincrease their corporate value, thereby revitalizing the economy andsociety. While the primary task of our division is to steadily raise riskmoney for new business creation as set forth in JAFCO’s Mission,
we can also deliver higher value by acting as an intermediary toorganically link investors and unlisted companies, thereby generating
business collaborations. Moreover, we can further increase the supplyof risk money by reusing returns. In summary, our division serves as a
hub for risk money, connecting dormant surplus capital held bycompanies and households with growing companies that serve society.
However, in part because risk money as a percentage of GDP is still
small in Japan relative to Europe, the United States, and other countries
in Asia, we believe that it is an important future responsibility of theCompany to further expand the domestic risk money market.

JAFCO INTEGRATED REPORT 2022

Financial
institutions

2%

45%

JAFCO

37%

Established in 2013

Established in 2016

SV6
Established in 2019

Fund size

Fund size

Fund size¥60.0 billion¥75.0 billion¥80.0 billion

March 2013–December 2024
(under management)

Financial institutions¥10.8 billion

Business firms, etc.

¥19.5 billion

JAFCO¥29.7 billion

JAFCO

Business firms, etc.

43%

Management
periodBreakdownof investors

22%

August 2016–December 2026
(under management)

Financial institutions¥24.3 billion

Business firms, etc.

¥18.3 billion

JAFCO¥32.4 billion

management reports.
The primary investors in our funds are financial institutions andbusiness firms. In addition to high expectations for management
performance, fund investors often take an interest in the businesses of
portfolio companies. As such, major functions of the Fund Management
Division include holding post-investment briefings on the businesses of
portfolio companies and matching investors with portfolio companies.
By serving as a reliable advisor to our fund investors, we identify needs
that even they are unaware of and match them with portfolio
companies. These efforts, in return, sometimes lead to business deals.

Business firms, etc.

16%

Management
periodBreakdownof investors

June 2019–December 2029
(currently making new investments)

Financial institutions¥36.2 billion

Business firms, etc.

¥14.7 billion

JAFCO¥29.1 billion

Receiving investment from a fund with diverse investors is also a big
plus for the businesses of portfolio companies. Having a point ofcontact with major corporations that have extensive business experience
helps portfolio companies to gain insights for reflection in their businessstrategies and to expand their sales channels, thereby accelerating
their growth.
The activities of our division serve as a bridge that brings fundinvestors, portfolio companies, and the Company together, which also
helps to create a process for increasing investment value.

Business Environment and Challenges

Our challenge is to develop a new investor base amid the stagnant IPO market
Monetary tightening since around the end of 2021 has largely put thebrakes on heated startup investment in the United States, and the trend
in investment by overseas institutional investors, which had been
flowing and expanding into the Japanese market, has changed.
Currently, the number of IPOs in Japan is on the decline, and theaverage market capitalization at IPO is also shrinking.
We conduct fundraising about once every three years, and the scaleis heavily influenced by the stock market and economic circumstancesat the time. As it takes several years to see results from the investment,a downturn in the stock market will not have an immediate negative

impact on fund performance. However, fund investors’ investment
decisions are impacted by the stock market as the performance ofexisting funds may slacken and our funds are long-term investment
products with low liquidity. The Fund Management Division closely
monitors these changes in the environment and strengthens relationships
with existing investors while continuing to approach new investors.
At present, about two-thirds of our fund investors are financial
institutions and about one-third are business firms. One of our futurechallenges is to cultivate institutional and other new investors.

Identify potential needs among financial institutions and business firms

Deepen relationships of mutual trust as a partner supporting portfolio companies

37

Breakdownof investors

32%

Other

Future Strategy

Emphases in Fund Management

Our responsibility is to do our best to maximize performance to meetthe expectations of our fund investors, who are our customers. In thecase of private equity investment funds, which have no portfolio at thetime of fundraising, investors make investment decisions based on theirassessment of the policy, strategy, and competence of the fundmanager. Because it takes several years to generate investment results,
fund investors are in the insecure position of having difficulty inManagement
periodFinancial
institutions

3%

SV5

32%

❶ Yoshinori Itoh, General Manager of Fund Management

Other

SV4

Business firms, etc.

❶

Corporate
Data

Breakdown of Fund Investors

In charge of Fund Management
and Administration

Message from the Division HeadBusiness Foundationfor Sustainable Growth

Sustainable
Growth Strategy

JAFCO Group’s
Value Creation

obtaining information on portfolio companies until specific results comeout. For that reason, we emphasize transparency and timeliness in ourmanagement reporting and create opportunities for face-to-facereporting whenever possible. Since the dawn of private equity
investment funds, we have worked to provide reporting to meet theneeds of fund investors. This commitment is behind our extensive
reporting that goes beyond the statutory financial statements and fundTo ensure a stable supply of risk money, we will work to maintain andimprove the trust relationships we have built with our existing investors,
including financial institutions and business firms, and further cultivate
new investors to increase diversity among our fund investors.
While our funds are already well understood by major financial
institutions, we will focus on enhancing relationships with small- andmedium-sized financial institutions, among whom recognition of ourfunds is still low, by providing thorough explanations. To enhance ourappeal to regional financial institutions, we will strengthen our

approach to startups with the potential to generate innovations that will
help revitalize regional economies.
As for business firms, we will strengthen our approach to not only
listed companies but also unlisted owner-operated companies withfinancial resources that are interested in investing in funds. Among
unlisted companies, some are considering investing in funds simply asa means of capital management while others hope to find startups thatcan provide them with insights for launching new businesses. We
intend to ensure that these needs are met.

JAFCO INTEGRATED REPORT 2022

38

JAFCO Group’s
ValuesJAFCO Group’s
Value Creation

Business Foundationfor Sustainable Growth

Sustainable
Growth Strategy

Corporate
Data

Global Investment
Tri-polar Structure of the Company Groupand Future Overseas Strategy

At the Company Group, investment teams in Japan, Asia, and the U.S.
operate their own funds based on their respective investment strategies.
We diversify regional risks by pursuing investment opportunities in three
regions: Japan, our home base of operations; fast-growing Asia; andthe United States, a leader in cutting-edge technologies.
The beginning of our overseas investment can be traced back to
1984, when we established a local subsidiary in the United States for
fundraising. We started by co-investing with local funds throughoverseas investors, and in 1986 we established a Japan-based unit
specializing in overseas investments.
Initially, the U.S. subsidiary worked together with the Overseas
Investment Division in Japan to make U.S. investments. After the historic

success of our IT fund in the United States around 2000, we switchedto managing funds in the same style as U.S. venture capital firms, withlocally hired teams making investment decisions. This policy of
entrusting fund management to make full use of the U.S. team’s
capabilities in venture investments, which are highly local in nature,
has been passed on to today’s Silicon Valley-based Icon Ventures.
In Asia, after establishing a joint venture with Nomura Securities in
1990, we started full-scale investment and expanded our investment
activities into Southeast Asia and East Asia. The joint venture wasdissolved in 1999, after which we shifted our investment focus totechnology startups in East Asia. As in the United States, our Asian
funds are managed primarily by local teams.

After 2000, we also established a dedicated business development
team in Japan to provide support to portfolio companies in Asia andthe United States for establishing Japanese subsidiaries, cultivating
sales channels, and forming capital and business alliances. Ourstrength in supporting these portfolio companies in entering theJapanese market has led to the acquisition of promising investment
opportunities in Asia and the United States.

Fiscal Year Ended March 31, 2022

Global balance of unlisted securities¥185.3 billion (236 cos.)
Japan

Asia

United States¥24.8 billion (54 cos.)¥50.3 billion (31 cos.)¥110.2 billion (151 cos.)
Venture: 137 cos.
Buyout: 14 cos.
Venture: 35 members
Buyout: 16 members
BD team: 13 members

Inv. team: 6 members

Inv. team: 10 members

Venture partners: 2

BD team: 2 members

BD team: 2 members

BD: Business Development
Number of personnel is as of April 1, 2022.
(BD team excludes members in charge of investment research and consulting).

JAFCO ASIA

Icon Ventures (United States)

Accelerating investment in cutting-edge domains within emerging markets in
multiple regions where rapid expansion is expected in the medium to long term

Executing investments in the world’s largest and most advanced startup market
and enhancing support for business development in Asia

Private equity markets in Asia, including Greater China (China
and Taiwan), which is the world’s second-largest economy, andIndia, where both population and economic growth areaccelerating, are large and attractive investment targets expected
to continue expanding. Numerous startups responsible fortransforming the social structure have emerged amid fierce
competition, owing in part to the high proportion of young
people in the population, absolute size of demand from the
middle-income consumer segment, and the latecomer’s advantage
in technology, that have led to the rapid development of social
infrastructure. In recent years, Southeast Asian countries such as
Vietnam and Indonesia have also increased their presence as
emerging markets with tremendous latent demand. JAFCO Asia
has remained consistently committed to the Asian market for the
past 30 years. As a local Asian venture capital firm with strong
ties to Japan, we are boldly promoting business development with

JAFCO Asia operating structure

Recognizing the growth potential in the United States—the largest
private equity market in the world—at an early stage, the Company
established JAFCO America Ventures Inc. in 1984. Since 2015,
our U.S. subsidiary has operated under the name Icon Ventures,and it is now known as a local venture capital firm with strength inSeries B and C funding rounds based on its network with top-tierventure capital firms in the United States. It is also promoting
independent management through coordination with JAFCO Groupin Japan, and now manages a cumulative total of US$1.3 billion
in funds. Since making the transition to its current operating
structure, it has successfully completed 34 exits, including eight
IPOs, for a total exit value of more than US$93 billion. Major
portfolio companies include Bill.com, Teledoc, Palo Alto Networks,
FireEye, Proofpoint, and Infinera, which all made successful IPOs,
as well as AsterData (acquired by Teradata), MoPub (acquired by
Twitter), and ClairMail (acquired by Monitise). Icon Ventures also
provides support to portfolio companies for their business

Regions/Industries of portfolio companies (monetary amount)

Sweeting Pan

Yoshiyuki Shibusawa

Managing Director,
Head of China(Shanghai, China)

President & CEO
JAFCO Investment(Asia Pacific) Ltd

John Lin

Melvin Teo

Managing Director,
Head of Taiwan

CFO

3.0%
5.8%
6.3%

27.9%

17.6%

3.6%
3.8%
6.2%
8.0%

14.3%

Icon Ventures operating structure
Joe Horowitz

Tom Mawhinney

Managing General Partner

General Partner

Jeb Miller

Preeti Rathi

General Partner

General Partner

Security

Consumer/SaaS

Data and AI

Digital health20.2%
n IT Services n Peripherals/Devices n Semiconductors
n Wireless/Telco Apps n Software/ASP
n Healthcare/Life Sciences n Materials n Other

Note: Since 2000, including JATF1–JAS8 and JTF (Taiwan fund).

Major portfolio companies

development in Asia in collaboration with Japan-based JAFCOGroup and for recruitment of engineers in Canada. These efforts
set Icon Ventures apart from its competitors and have helped it toacquire promising portfolio companies. Icon Ventures will continue
to put together a solid track record of investment in the UnitedStates with cloud and data services, consumer IT services, fintech,and digital health as priority investment domains.

Major portfolio companies

35.3%

8.7%

39.3%
n Taiwan n China n South Korea n Indian Singapore n Other

expertise in entering both the Asian and Japanese markets basedon independent investment decisions and a hands-on approach
to founders by our local professionals.
Since 2000, we have invested a cumulative total of US$1.3
billion in 300 companies through our Asian funds, of which morethan 200 companies achieved exits, including around 50 IPOs,
building a solid track record and investment management
capabilities with high reproducibility. Major exits include Medical
System’s listing on China’s onshore stock market (11.9x ROI) andSHEIN’s home-run deal (56.5x ROI). Going forward, we will
actively promote investments primarily in domains such as mobile
Internet, healthcare, and deep tech. In addition to Greater China,
where we have a proven track record with significant returns,
we also proactively pursue investments in India and Southeast Asia.

Exits
Supriya Singh
Director, Head of South Asia
Investments

Unicorns

Up-and-comers

39

JAFCO INTEGRATED REPORT 2022

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40

JAFCO Group’s
ValuesJAFCO Group’s
Value Creation

Sustainable
Growth Strategy

Business Foundationfor Sustainable Growth

Corporate
Data

Human Resources Strategy
Messages from Human Resources Group Leaders
Basic Approach

At JAFCO Group, the most important management resource forrealizing Our Purpose and achieving sustainable growth is our humanresources. For 40 years, we have consistently hired new graduates
and worked to train investment professionals. Another major
distinguishing characteristic of our human resources strategy is theemphasis we place on the unique talents of individual professionals andthe organizational structure we have built to support those individuals.
A major challenge for the Company is to adapt flexibly to diverse

entrepreneurs/portfolio companies and markets while maintaining an
unchanging culture of respecting entrepreneurs and portfolio
companies throughout our organization. Toward that end, we support
employees in maximizing their performance and pursuing challenges
as a Co-Founder by respecting the diversity of our employees, providingthem with opportunities for individual growth and achievement, anddeveloping a work style that is conducive to productivity.

Carrying forward human resources that respect entrepreneurs
and a corporate culture that develops people

Diversity of Human Resources

The more diverse and complex social needs become, the greater thediversity required of investment professionals. Human resources withdiverse values and experiences who understand the value of theinvestment business are essential to quickly identify the social values ofthe future and create investment opportunities.
In addition to continually hiring new graduates, we also focus on
mid-career hiring to attract competent human resources regardless ofindustry experience. The percentage of mid-career hires among ourinvestment professionals is increasing each year, and the combinationof training new graduate hires and the expertise of mid-career hires
leads to the creation of additional investment opportunities.
While at present most of our investment team are male, we will stepup our efforts to hire female investment team members as we expand
our workforce. Our company-wide policy is to hire and train diverse
human resources regardless of gender, nationality, or age.

Mid-career hires among our investment professionals(venture and buyout investments)
(%)

41.3
33.3
22.0

2018/3

25.5

2019/3

Group Leader, HR Planning Group
Administration Division

27.9

2020/32021/32022/3

Improving the health of employees andperformance of the entire workplace

Human Resources Development

We have developed a unique training model for investment
professionals based on our many years of experience. We hirehigh-potential new graduates and train them to become strong
individuals capable of continuously producing strong results.
In recent years, in addition to on-the-job training, we have enhanced
our instructor and mentor programs to promote faster growth, while
also ensuring that their mental well-being is supported. Our young
employees regularly meet one on one with instructors and mentors,
as we work to create an environment that facilitates their growthand pursuits. Coaching and feedback training is also provided
to management-level employees to enhance their training ability.
We also encourage our employees to have second jobs. We
believe that promoting opportunities for our employees to take onchallenges and achieve personal growth, and sharing the experience
they gain outside the Company, both internally and with portfolio
companies, allows us to contribute to our own growth as well as thatof portfolio companies.

Well-being Initiatives

We believe that preparing an environment in which employees canwork comfortably and in good health leads to improvements inindividual performance.
Our health management initiatives include regular health checkups
and follow-ups, infection prevention measures, coordination withindustrial physicians and public health nurses, and regularannouncements designed to improve health literacy and awareness.
The uptake rate for health checkups is high, and that of stress checktests has reached 100%.

41

JAFCO INTEGRATED REPORT 2022

Yuichiro Araki

In addition to all operations related to the hiring of human resources, the HR Planning Group supports
on-boarding, training, and success of new recruits. We also promote strategies to maximizeorganizational performance.
In terms of hiring, we focus on high-potential new graduates and carry out a rigorous hiring
process based on multiple rounds of screening, while ensuring that graduates have a deep
understanding of venture investment and providing them with strong incentives.
We have a high retention rate of new graduates due to our unique tradition and culture ofdeveloping young talent into investment professionals. Leaders in the Venture Investment Division,
including partners, are composed of those with extensive experience who started their career at
JAFCO. This is a distinctive characteristic of our human resources, but we also actively carry out
mid-career hiring to diversify our human resources. In times such as these, when there are significant
changes in the social environment and values, diverse human resources with different values are
essential. To ensure the sustainable growth of the Company, we aim to create a fully diverse, highly
autonomous yet organically functioning organization through balanced hiring of carefully selected
high-potential new graduates and mid-career professionals.
In terms of human resources development, in addition to our high level of compliance awarenessand discipline as a professional firm, our major strengths are an organization-wide basic stance ofrespecting entrepreneurs/business leaders as well as a long-cultivated enthusiasm and a high senseof ownership for working closely with them and guiding their businesses to success. Furthermore,in the fund business domain, where individual strengths tend to be highlighted, we are committed tohuman resource and organizational development so that both individuals and the organization as awhole perform at their best.

Remote working is also spreading, and in addition to flexible
working hours through a flextime program, a flexible location work
style is possible depending on the situation, including hybrid home andoffice working. We also have support systems in place for the lifestyles
and life stages of each employee, including for childcare and nursing
care, and the number of employees who take childcare leave for an
extended period is increasing, regardless of gender.

The HR Operations Group handles arrangements for each employee after they join the Company,
including benefits, social insurance, remuneration, and evaluation. We ensure the peace of mind of
every employee by supporting them through administrative procedures as necessary, ensuring a
comfortable work environment, and implementing measures to help them achieve their best
performance. JAFCO’s business has high social value in that it contributes to a more prosperous future
by directly supporting the growth and value creation of portfolio companies, which inspires our
employees to work enthusiastically and earnestly. However, given our perpetual quest to identify
portfolio companies and support their growth, it is vital to prevent employees from overexertingthemselves. As self-discipline and self-management are strongly required, we believe it is important toemphasize the mental and physical health of our employees and promote flexible work styles,
including remote working. Recently, awareness of health management has been rising among
employees, and we see employees working according to their own preferences.
As entrepreneurs and portfolio companies continually change in response to the demands of thetimes, we must also constantly adapt. As such, while continuing to hire new graduates, we are hiring
more mid-career professionals. On-boarding support, including training programs andcommunication measures, must also be devised to ensure that they quickly become accustomed totheir new environment and become a part of our core competence. In terms of the organization, it isimportant that we combine new graduate hires with mid-career professionals to ensure a balanced
personnel structure. The ideal organization is one in which both existing members and newcomers
from diverse backgrounds can leverage their respective experiences to boost synergy.

Noriko UchidaGroup Leader, HR Operations Group
Administration Division

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