Startup Fundraising in Japan – Live & Unleashed

Disrupting Japan is two years old and ready to party. To celebrate, we gathered the leaders of Tokyo's venture capital community together in front of a live audience of made up of the thought leaders of Japan's startup community. We all had a few drinks and talked about fundraising in Japan, the future of venture capital here, and how startups can best get in touch with and impress VCs.

Our panel included some of the top VC investors in Japan, which naturally led to an amazing discussion.

Shinji Asada (@asada23) - Japan Head, Salesforce Ventures Hiro Maeda (@djtokyo) - Partner at BEENEXT James Riney (@james_riney ) - Head of 500 Startups Japan

We discuss the challenges or fundraising in Japan, growing a Japanese company as a foreigner, what Japanese VCs can learn from their foreign counterparts, and what kind of of pitch mistakes will ruin your funding chances.

On a personal note, it's hard to believe that two years have gone by already. Disrupting Japan has grown larger, faster, and with a more engaged and passionate community than I ever imagined it could.

Today, thousands of people from all over the world listen to each episode, and we are featured regularly in English-language and Japanese-language news and podcasts from all over the world.

And to keep things fresh, I have some big surprises coming up in the next few months, so stay tuned.

I want to offer a sincere thank you to everyone who has pitched in to help make Disrupting Japan a success. There is no way I could have built this by myself. I'm lucky. I have great subject matter to work with. Japanese startups and Japanese startup founders are far more innovative and far more interesting than most in the West give them credit for. I look forward to continuing to bring you their stories.

Thanks for listening!

[shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for coming out tonight. You guys are awesome.

All right, to our listeners at home, or wherever you might be in podcast land, we’ve got a special show for you tonight. We are broadcasting live from Super Deluxe in Roppongi with the most creative and dynamic group of people in the world, which is Tokyo’s start-up community. All right, and we’ve got an astounding panel discussion for you, and before we get to that and our kampai, I’ve got to call out three members of the start-up community who really helped put this together. There is absolutely no way I could have done it without them. They are start-ups themselves and you should know a little bit about them.

So, first is Justa.io and I think Elena is here from Justa. Where are you Elena? Everyone wave at Elena. So, Justa is Japan’s, really, best start-up job board. If you’re an engineer or a programmer looking to work at a start-up, or if you’re a start-up looking to hire engineers or programmers, you want to talk to Elena. Second, I want to introduce Creww, with two W’s. And what Creww, with two W’s, does, is they run open innovation programs for Toyota, and Panasonic, and JTV. And these big companies really want to work with start-ups, but they’re bad at it. So that’s where Creww comes in to help out. They also have a start-up kit, which is a bundle of goodies from IBM and Microsoft and a bunch of big companies, that they give away for free. And Kozue is here from Creww. Kozue, where isKozue? Way in the back over there. Now,Kozue will pretend she doesn’t speak English but her English is really good so don’t be shy. And last, and certainly not least, is Digital Hub. You will see these guys running around with cameras and microphones, documenting this event for all posterity. And you want to talk to Steve, who is over there. So, these guys also do great commercial work. You can see it on the website or you can see it right now. They’re going to be producing this, you might be watching this on YouTube right now, and they do amazing work, don’t they?

All right, so without further ado—is that yours? We seem to be one bottle short. Oh, James got two of them, did he? All right. [JAPANESE] A

nd now, we will go back into English. And I’m going to break with convention here and I’m going to make the introductions because I know you guys and I know if I hand you a microphone and I tell you to talk about yourselves and your portfolio, I would not get that microphone back for a good 30 minutes.

So, on the far left, we have Hiro Maeda, who is currently the head of B-Next. And before that he started Beenoes incubation and acceleration program. Before that, he started one of the very first, and still one of the most successful accelerators in Japan, Digital Garage’s OnLab. And, in the center, James Riney, who is Japan head for 500 Startups. And before that, you put in some time at DeNA as well. And, rounding out our group is Shinji Asada, who is now head of Salesforce Ventures Japan, and before that, you were working at Itochu Techno Ventures and, quite frankly, probably has more years of investing and VC experience than the rest of us here on stage combined. So you can take that either way you like. I meant it as a compliment. So, let’s get started.

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Tim: So, the first question I’ve got for you guys: Now, this is, Hiro, especially for you, but all of you, I think in the last few years there’s been a tremendous interest in investment in Southeast Asia. There has been a lot of funds, both from the U.S., that have focused not so much on Japan but on Chia and Asia, and even a lot of Japan funds that have been seemingly more interested in what’s going on in Southeast Asia rather than what’s happening in Japan. And so I’m wondering, what’s behind this? Why is this happening?

Hiro: Yeah, I think 60% of our fund is allocated outside of Japan actually. Primarily India and Southeast Asia. And the reason why is mainly because of China. Over the last decade you see China’s GDP grow 4x and its rankings go, they were up from like 52nd, surpassing Japan and what’s happened is a lot of the Japanese investors, including ourselves, see that and like, “What the hell just happened and why are we not a part of that party?” And so when you think about where is the next China, where can we find the next Chia, you look at basically the companies with really high GDP growth, which is currently India, Southeast Asia primarily, Jakarta, or Indonesia, right, and that’s the reason why a lot of investors, including ourselves, are looking outside of Japan to invest.

Tim: So do you think it’s mostly—it makes sense on the fundamental level or is this more of a herd behavior?

Hiro: It’s more like fear of missing out. So, I mean, it sucks that we weren’t part of Alibaba, right?

James: Kind of, I mean Japan was, right? SoftBank?

Hiro: Yeah, I guess SoftBank was part of Alibaba, but that was the only Japanese entity that was part of it, right? And so, yeah, we’re looking for the next Alibaba.

Tim: Well, James, your portfolio is only Japan. Are you worried about missing out?

James: Well, actually at DeNA, I was doing investments in Southeast Asia, so I am familiar with Southeast Asia and our Southeast Asia fund has been doing quite well. So I think Southeast Asia is obviously a really important market to be in, but at the same time, I think, at least from the Japan side, part of it is that Japanese just like to be in Southeast Asia. I think there is definitely a little bit of like they just want to travel.

Hiro: It’s fun to party there.

James: But that’s important. I think Southeast Asia has a lot of soft power for VC’s in Japan. However, you don’t really see U.S. money in Southeast Asia and so the only exception is Sequoia and even Sequoia invests from their India fund, right. So it’s not really U.S. money.

Tim: So do you think we’re going to see that kind of growth? Do you think that Japan has the kind of growth potential that Hiro was talking about for Southeast Asia?

James: Well, listen, Southeast Asia is an emerging market, so comparing the macro side, obviously there’s going to be more growth in Southeast Asia, Japan is just a developed market, but there also are going to be other opportunities in Japan that aren’t going to come up in Southeast Asia. More on the technology side, for example, because you have much higher education levels, you have the infrastructure in place, things like that. So yes, maybe you’ll see something similar to what you’ve seen in China. But I think there’s sort of this thinking like, as you mentioned, probably infatuation with Southeast Asia but, I mean, Southeast Asia is a very fragmented market. In particular, when we’re talking about Southeast Asia, maybe it’s Indonesia actually. So, fourth largest country in the world in terms of population, so obviously there is going to be a lot of similarities between that growth that you saw in China, and now we’re seeing something in India, probably the next one is going to be Indonesia as well. And that’s probably getting faster, and faster, and faster, because there’s so much, as you mentioned, on each stage.

Hiro: We are very fear-driven animals.

James: Exactly. VC’s are very emotional, right. The best thing you can tell a VC is, “Oh, yeah, we’re not fundraising. No, we don’t need money.” But, like, “No, no, take our money!”

Tim: So the spreadsheets are all just a front? It’s all a façade?

James: Exactly

Shinji: You know, looking at your question about Southeast Asia, I did some quick research but the facts are wrong actually. So 2014-15, the majority of investments of the VC money was pumped into Japanese start-ups. And for 2016 Q2, if you look at research that’s done by VEC, 67% of the money was invested into Japanese start-ups.