Why Japan is looking to France for startup inspiration

While the rest of the world is copying Silicon Valley, Tokyo is looking at Paris.

Today we sit down with Mark Bivens and Matt Romaine, the co-founders of Shizen Capital to talk about Japan's new startup policies, the changing role of M&A, the main force behind the changing attitudes about startups in Japan.

It's a great conversation, and I think you'll enjoy it.

Show Notes

Why Japanese startups need to start buying other startups The root of Japan's odd attitudes towards M&A and the forces changing it Structuring investments into foreign startups making a Japan market entry Why the Japan's angel investing tax-break is not really about taxes What Japan plans to import from the French startup ecosystem The best way to win the hearts and minds to change startup culture What's driving the recent explosion in startup events, and will it last? The best Japanese startup ecosystems outside of Tokyo Can authenticity scale?

Links from our Guest

Everything you ever wanted to know about Shizen Capital

Connect on LinkedIn Follow Shizen Capital on X @shizencapital

I highly recommend Mark's blog Rude VC Follow Mark on X @markbivens Follow Matt on X @quanza Check out Mark's Nostr https://rude.vc/nostr

Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Everybody wants to be Silicon Valley. Regional and local governments the world over proudly announced that they will be the Silicon Valley of, you know, whatever. We've seen Silicon Glen, Silicon Beach, Silicon Harbor, and countless other less publicized variations. Now, politicians calling out to Silicon Valley works fine as a metaphor, but you know, it's not really a plan. Well, the Japanese government has a plan and they are not looking to San Francisco, but to Paris. And today we're going to talk about that plan and so many other things as well. When we sit down with Mark Bivens and Matt Romaine, the co-founders of Shizen Capital, an early stage fund focused exclusively on Japanese startups. Now, Matt and Mark are both startup founders who became VCs, and that's still pretty rare in Japan. These VCs tend to be overrepresented on disrupting Japan because I don't know, it's a small group and I'm friends with a lot of them. But founders turned, investors are critical to the success of any startup ecosystem, and they're playing an outsized role in shaping what's happening in Japan right now. Mark, Matt and I talk about what's driving the changing attitude around M&A in Japan, which part of the government efforts to support startups are actually working and Japan's potential advantage in becoming a startup powerhouse in the coming years. But you know, Matt and Mark tell that story much better than I can. So, let's get right to the interview.

Interview Tim: We're sitting here with Mark Bivens and Matt Romaine, the two founding partners of Shizen Capital. So, thanks for sitting down with me. Matt: Delighted to be here. Mark: Yeah, pleasure. Tim. I think I mentioned this privately to you before, but I'm pretty still relatively new in Japan. Seven years ago I moved here and you were my first source as I wanted to learn about the Japanese startup ecosystem. Tim: Well, thank you. Mark: Somebody introducing me to your podcast, so thank you. Tim: Well, no, thank you. It's been a great project and I'm glad this has kind of come full circle and I get a chance to sit here and interview you on it. Mark: I also have to say, in a past life I was a radio DJ. You have a great radio voice, Tim. Tim: Thank you. It's funny, people tell me that all the time, but this is just the way I talk, like normally. Well, thank you. So, let's get into it. So, tell me about Shizen Capital. Who are you investing in and why? Matt: Yeah, well, so I first met Mark in 2015 at a conference in Fukuoka. It was the B dash conference. We were introduced by one of Gengo's investors. Mark and I, hit it off and eventually just sort of flying forward a couple years, we reconnected and I was ready to sort of think about post acquisition, a new adventure. Tim: Let's back up a little bit. Long time listeners will know what Gengo is and who you are, Matt because you were on the show seven years ago. Matt: Would've been eight years ago. 2015, yeah soon after we raised our series C. Tim: Wow. That was a while ago. However, some of our newer listeners who have not absorbed the entire back catalog yet could deal with an explanation. So briefly, what was Gengo and what happened to it? Matt: We were a crowdsourced human translation platform, founded in 2009, and over the course of about 10 years we raised $26 million from both local and overseas VCs. And in 2019 we were acquired by a company called Lion Ridge. Tim: After that acquisition, because I remember you and I were talking about this over coffee a couple of times. Did you want to start another startup? Did you know you wanted to get into VC after that exit, or was it just this kind of synchronicity of meeting up with Mark and Fukuoka that led you to this? Matt: Fortunately, I guess the latter half of my time with Gengo, I had a few opportunities to invest in sort of a new generation of founders, both in Japan and overseas. That kind of got me interested. So, I had already basically been dabbling in a little bit of angel investing. So, when Mark approached me with this idea of doing something, scaling it up, doing something a little bigger… Tim: Kind of a natural next step. Well, Mark, I mean, you guys founded Shizen in 2016, but you've run funds for quite a while before that. Mark: Real quick, if I leave out the naughty bits, my background's pretty short. Tim: Oh, don't leave out the naughty bits. Mark: But three startups in the nineties, born in Silicon Valley. My first two startups failed. The third one was acquired in 1999. This was the.com bubble period. Very lucky break in terms of timing. Tim: 99 was a great time to be acquired. Mark: It was a good time to exit. So, I became unemployed. I sold the company. I was unemployed. One of the VCs that had backed us, took me under his wing, hired me, taught me the business of venture capital, and I realized I loved it. So, I've been doing that since then, almost 25 years, I guess now. And approaching Matt with this idea of a fund, actually it was a no-brainer, understands things on the ground, native Japanese speaker. And I tell you, Tim, I would meet star entrepreneurs and maybe midway through the conversation it would come up that my partner is Matt Romaine. And then the tone of the conversation just was transformed. Oh, you know, why didn't you start with that? Suddenly everyone's friendly and nobody's trying to pitch anyone anymore. It's like, how much can you invest? What do we need to do to secure your capital? Tim: So, was that reaction because of Matt specifically, or was it just the fact that there was people with startup experience and that was your differentiator from 99% of the VC firms in Japan? Mark: The answer is the former, and I can confirm that with specific anecdotes. Because usually I would put that upfront that our differentiator is we are former entrepreneurs, we've built companies, and that's at the point where they would say, well, who's your co-founder? I mentioned Matt Romaine and then the conversation reaches this inflection point and suddenly we're talking about a deal. Tim: What types of startups you're looking at? How does that inform your portfolio selection? Matt: We're fairly agnostic, there has to be a tech piece to it. We're investing in companies that we believe can scale. So, we've done everything from FinTech to property tech, some Web3, some education tech. Our backgrounds are primarily in software, and so it's more biased towards those types of investments. But we've done a few in hardware some in medical. They are really early stage. And so a lot of what we look at relies a lot on sort of the team and the interactions that we have with the founders. Tim: Is your value proposition mainly, we've been through the struggle ourselves. We can help you, we're going to help propel you globally. What's the main attraction of Shizen to those ambitious founders who everyone is chasing down? Mark: Obviously it depends on what is appropriate for their business, but indeed, we are often investing in founders who can take a business global. We don't prescribe that every company we back needs to go global. In fact, ironically, many of the foreign founders in Japan that we've backed are focused on the domestic market. Tim: Japanese VCs have a tendency to be very hands off. As former founders, is part of your value add being hands-on? Matt: Maybe you've heard this from at least one other fund out there, but we're more kind of a hands if we don't put together a schedule where we have to be involved on some regular basis. So, for example, we do this Shizen workshop series. Today's was on actually M&A. What's interesting is the founder listening to it might be thinking like is that my exit? But actually it is also a way to think about how to grow, can grow a business organically, or you can also grow a business through acquisitions. Tim: So, like startups acquiring other startups is common in the US where startups tend to be much better funded. I is that something we've seen in Japan? Mark: This is a topic that we speak a lot about. And in our opinion, it is an essential ingredient of a healthy startup ecosystem. Still missing in Japan, improving, but still missing. So, I like to use France as a benchmark because France is an ecosystem that in 2000, it was a country of multinational companies, but very few startups. Entrepreneur is a French word, and the irony is very few of them in France at the time, the good ones would leave and go to Silicon Valley.