The overall Corporate Venture Capital (CVC) market is shrinking due to economic uncertainty and weak returns, with only 162 new CVCs established in 2023, the fewest in the past six years. However, CVC in Japan has bucked this trend, with Mitsubishi UFJ Capital, SMBC Venture Capital, and Mizuho Capital in particular active and high-profile investors.

CVC investments worldwide in 2023 fell 46% to US$55.1 billion, the lowest since 2019, according to CB Insights. Investments by U.S. CVCs, in particular, declined sharply, contributing significantly to the overall contraction. On the other hand, Japanese megabank-affiliated CVCs were active in their investments, accounting for the top three in terms of number of investments.

Early-stage startups continue to be the focus of CVC investment, accounting for 63% of all investments. The largest investment round was a $500 million investment in Aleph Alpha in the area of generative AI (artificial intelligence), indicating a high level of interest in technological innovation.

The increase in CVC activity in Japan appears to be driven by changes in the business environment and strategic investment decisions both domestically and internationally, and this trend is likely to continue. In the midst of a cooling investment environment, Japanese CVCs are bringing a new dynamic to the startup industry.

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