2004年度（2004.4～2005.3）　ワークショップ講演

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Entrepreneurship Workshop II
(November 18, 2004)

Theme: A Vision of Entrepreneurial Finance in Japan
Guest Speaker: Mr. Kazuhiko Yamamoto, Chief Executive Partner of Classic Capital Corporation

1. Personal profile
Mr. Yamamoto planned a career as a venture capitalist while at Hitotsubashi University. After graduation, he worked for Sumitomo Electric Industries, Ltd., Nomura Research Institute, and then a venture enterprise with a friend, where Mr. Yamamoto exercised his ability as financial manager. In 1998, he set up Classic Capital Corporation, and since then has been practicing traditional American-style venture capitalism.

2. Summary of Mr. Yamamoto’s Speech
(1) 4 Faces
Mr. Yamamoto has four different faces on the business scene. First, he is a hands-on outside investor who participates in the management of the company in which he invests (Chief Executive Partner of Classic Capital Corporation). Second, he is an entrepreneur who creates and manages a venture business that undertakes development of systems related to “IT-driven Digital Marketing” (Chairman & CEO of R2 innovation, Ltd.). Third, he acts as a hands-off outside investor who invests in and incubates bio-related ventures (Outside Director of Trans-Science Inc.). And fourth, he provides consulting services in the field of corporate finance (Chairman & CEO of Corporate Capital Consulting, Inc.). He takes on these different roles as the situation demands. From his experience, however, he came to wonder why his returns from these activities were nearly the same regardless of the risks. While he was of the idea that no talented person would start up a new business in an economic society that did not offer a chance for returns worth the risk involved, he chanced upon a study field (Entrepreneurial Finance) in which he found a theoretical grounding for his thoughts.

(2) Entrepreneurial Finance
The risks in a security portfolio are divided into specific and market risks, collectively termed the total risk. Market risks are unavoidable, but most specific risks can be overcome by diversifying investments. For outside investors, the room for investment diversification differs for hands-on and hands-off investors. The more investors are involved in management, the more this limits the diversification of investments, posing a total risk with higher individual risk elements. In this sense, entrepreneurs have to take the full part of total risk, since they concentrate their investment in one business. However, is it really fair that a high risk-taker deeply involved in a business purchases stock at the same price as anyone else? Seeking an answer to that question, the academic field of Entrepreneurial Finance formulated a theory of the maximization of value for risk-taking entrepreneurs. In the United States, venture capitalists apply this theory to play an active part in the design of sophisticated deal structures. Indicators for competitiveness rank Japanese companies remarkably low in evaluation items related to business start-up. However, if Japanese enterprises were really uncompetitive, companies like Sony Corporation and Honda Motor Co., Ltd. should not have survived. The real problem is that we have no built-in system to reward risk. If we can erase this problem, talented people will be encouraged to start up new businesses and become the world’s top companies. Japanese companies once learned the American QC theory, which enabled them to produce products of high quality. We now need to learn a similar lesson about entrepreneurial finance from the United States.

(3) Comments from minutes taker
Mr. Yamamoto explained the concept of designing returns to match risks that was acceptable to all. His theoretical explanation was clear, and illustrated with real-world examples. We felt strongly that the idea provided an important suggestion for venture creation in Japan, and that everyone should acquire an understanding of it. It was also very interesting that, on the one hand, Mr. Yamamoto himself is an entrepreneur and so bears the highest risk, and on the other he exercises other roles like that of a venture capitalist who practices diversified investment.

Reported by: Masayuki Ohira
Hiroshi Sakamoto
Graduate students in charge of minutes

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