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FSA & METI — Venture Capital: Recommendations and Expectations
- Following a public consultation, the Expert Panel finalized and published "Venture Capital: Recommendations and Expectations," which outlines recommended and expected practices for Venture Capital firms in Japan.
- The practices suggested in the report are aimed at improving governance standards of VCs seeking funding from institutional investors and also enhancing the overall appeal of VC as a long-term asset class.
- The recommendations and expectations are intended for VCs seeking funding from a broad range of domestic and international institutional investors and represent a principles-based approach rather than imposing strict rules.
- The document emphasizes that implementing these practices is left to the discretion of individual LPs and GPs, and the practices are based on current market practices and the perspectives of institutional investors.
- The recommended strategies aim to enhance VC governance, facilitate smoother capital flow from domestic and international institutional investors, and promote the growth of later-stage investments.
- The primary goal of these practices is to promote the development of a vibrant startup ecosystem in Japan by providing a valuable framework for the maturation and development of the Japanese VC industry.
- The practices highlight the importance of strengthening the investment value chain, where household funds flow to asset management companies, to growth companies via investments, and then back to households as returns.
- The Expert Panel on Venture Capital, hosted jointly by the Financial Services Agency (FSA) and the Ministry of Economy, Trade and Industry (METI), held three meetings before publishing the final version on November 8, 2024.
- The document calls for ongoing monitoring and review by stakeholders to ensure that the recommended practices remain relevant and effective in the ever-evolving market conditions.
- This document provides a much-needed framework for the development of a flourishing startup ecosystem, aiming to attract more institutional capital and promote the growth of the VC industry in Japan.
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