TOKYO, 10 September,  Preqin, the global leader in alternative assets data, tools, and insights, today published the 6th edition of its Japanese Venture Capital (VC) Performance Benchmark Survey, conducted in collaboration with the Japan Venture Capital Association (JVCA). Since 2020, Preqin and the JVCA have jointly published performance benchmarks for domestic VC funds, with a view to enhance transparency across the Japanese VC industry. The survey covers funds managing third-party capital for pure investment purposes, calculating their returns by vintage year. 

The 6th edition of the Japanese VC Performance Benchmark Survey saw participation from 62 firms (an increase of 8 firms from the previous survey) and analyzed data from 206 funds (an increase of 29 funds from last year). Since the publication of the first survey in 2019,  the number of participating firms and funds have both doubled, now covering approximately 74% of the entire Japanese VC market in terms of committed capital. 

Promoting fair value assessment  

In Japan, VC funds tend to exhibit slower realization of both realized and unrealized returns, partly due to a lower adoption of early M&A exits and fair value assessments.  The Japanese VC Performance Benchmark Survey aims to promote the adoption of fair value assessment practices within the industry. To monitor progress, the latest edition introduces two key updates: 

1. Chart 11: No. of constituent funds and those that adopt fair market value principle in portfolio valuations  
   This chart tracks changes in the number of funds adopting fair value assessment over time. 

2. Chart 13: Top-performing Japan-focused venture capital funds (liquidated funds or those that adopt fair market value principle in portfolio valuations) 
   The performance league table highlights only those funds that have adopted fair value assessment or have been fully liquidated. 

 Challenging environment for VCs 

2023 continued to present challenges for the VC and growth markets, a trend also seen in 2022. While major indices like the TOPIX and Nikkei 225 posted record highs, the Tokyo Stock Exchange Growth Market 250 Index noted a decrease of 3.3% between the end of 2022 and the end of 2023. Globally, Preqin’s Venture Capital Index noted a decrease of 5.5% for the same period. Despite these difficulties, Japanese VCs demonstrated resilience with an average return of 4.7%, outperforming both the Tokyo Growth Market and global VC markets. However, new capital inflows have slowed, as evidenced by a 30% year-on-year decrease in 2023 vintage funds and a 22% drop in capital calls. 

Steady cash flows  

Despite the challenging market conditions, Japanese VC funds continued to deliver steady cash flows to investors. Globally, the total distributions from VC funds to investors dropped to over 50 billion in 2023, reaching their lowest level since 2017. In contrast, distributions from Japanese VC funds totaled 88.5 billion yen, reflecting a year-on-year increase of 16%, marking the third-highest level in the past decade. These returns are expected to support future VC fundraising efforts. Looking at returns by vintage year, funds launched between 2010 and 2013 maintained strong net multiples, averaging around 2x. Distributions from the 2014 vintage have accelerated, pushing its net multiple above 2x. Notably, the distribution to paid-in capital (DPI) for the 2014 vintage increased from 98.3% in the 5th edition of the survey to 138.6% in 2024. Meanwhile, funds from the 2015-2020 vintages saw limited upside in both distributions and markups.  

Preqin benchmarks 

With private markets being a historically opaque industry, fund and asset-level performance analysis and benchmarking continue to be a challenge for market professionals. This is where Preqin’s private market capital benchmarks make the difference by giving investors, fund managers, and service providers access to independent, reliable, timely, and transparent performance data. Preqin offers one of the world's largest selections of alternatives benchmarks, with over 100,000 available that span 40-plus years of performance data. To learn more about Preqin’s benchmarks, click here. 

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For more information, and to receive a copy of the report, contact Naho Tomioka at naho.tomioka@preqin.com