Every year-end at Shizen Capital, we craft a letter to the investors in our Funds. People tell us we should share this letter publicly. So, in a nod to some of this generation’s great fund managers, here is an excerpt of Shizen Capital’s 2024 investor letter. We have removed the confidential bits, but this is 95% intact. Happy holidays to all.

Shizen Capital 2024 Year-end Reflections

Dear Shizen Capital Limited Partners,

As is our habit this time of season, we like to reflect on the past year and share with you our observations and state of mind.

We would like to start by expressing our gratitude to all of you. As members of Shizen Capital’s investor community, you represent not only a source of capital but also of inspiration, and in many cases, direct expertise. This makes you in aggregate our greatest treasure for our firm. Your involvement makes us better investors. We take your confidence in us seriously and endeavour to be good stewards of your capital.

The year of 2024 has proven tumultuous for the world. Things have never felt this non-linear, whether it be toward the upside or toward potential disaster. Simultaneously we are witnessing a rise in global disorder, an international monetary system betraying its fragility, a decline in trust of institutions, yet with galloping innovation in fields as diverse as artificial intelligence, quantum computing, decentralized finance, and materials science. We are truly living in an exponential age.

In our venture ecosystem in Japan, we continue to witness promising signals of progress. The bold initiatives announced by the government three years ago are now finally beginning to propagate through to the implementation stage by the respective ministries and municipalities. The trend of foreign capital flows into Japan has picked up steam. A sentiment shift toward embracing entrepreneurship has become palpable among the next generation of Japanese. Talented foreign founders have increased their migration to Japan as well, perhaps for the country’s appeal as a place to live in a destabilising world, yet perhaps also because Japan represents the first-mover market for several daunting macroeconomic challenges which require sophisticated innovations to solve.

We still believe that the specific segment of early-stage startups in Japan offers one of the most compelling opportunities for financial upside of any asset class worldwide. While increasingly abundant for growth stage startups thanks to the aforementioned government initiatives, foreign interest, and emerging new mindsets, institutional capital for the riskier early stage in Japan remains scarce. Shizen Capital often represents the first institutional capital for a startup. We continue to be creative in crafting deal structures which can provide founders the freedom to launch ambitious gambits while accommodating the higher risk profile to justify the investment case.

We backed 9 new companies in 2024. We also contributed additional follow-on capital to some existing portfolio companies that successfully raised subsequent outside financing. Last but not least, Shizen Capital realized another successful exit of a prior investment, producing a 60% IRR.

In service to our core activity of investment, Shizen Capital also celebrated some of its successful new initiatives, notably:

• the Sprout “GP-in-Training” program for aspiring women in VC [link]
• the Shizen Workshop Series for founders [eg. second, fourth, fifth, sixth, ninth]
• the Global50 Event at Station F in Paris [link]

As the final days of 2024 wind to a close, we reiterate our sincere appreciation to all of you for your commitment and support. Happy holidays from the Shizen Capital team.
—Mayumi, Maya, Matt, Mark