What keeps Japanese startups stuck in Japan?

It’s not a lack of opportunity or ambition. It’s not a lack of knowledge or talent. In fact, one of Japan’s most experienced venture capitalists thinks that VCs themselves that are the problem.

Today we sit down with Ken Yasunaga, founder and Managing Partner of Global Hands On VC, a fund focused on finding and supporting the Japanese startups with the highest potential to succeed in the global market.

Before founding GHOVC, Ken was managing director at INCJ (Japan’s public/private $21B venture fund) as well holding multiple leadership positions in the Japan Venture Capital Association.

We talk about the unique opportunities for investment in Japan, the trap of going public here, how some VCs are holding startups back, and why this might be a turning point for Japan’s new global startups.

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

Show Notes

  • The two most pressing needs in Japan’s startup ecosystem
  • What’s driving the increasing quality of Japanese founders
  • Why we are not seeing Japanese unicorns
  • What’s preventing Japanese startups from going global
  • The trap of going pubic in Japan
  • Why Japanese startups struggle to go global
  • The importance of mentors and hands-on support
  • The important role of foreign VCs in Japan
  • The right role government needs to play in supporting innovation in Japan
  • Are Japanese founders becoming more conformist?

Links from our Guest


Welcome to Disrupting Japan. Straight Talk from Japan’s most innovative startups and VCs.

I’m Tim Romero, and thanks for joining me.

Talking about how Japanese startups need to go global is like talking about needing to go to the gym to lose those 10 pounds. I mean, everyone agrees it’s a great idea, a necessary one in fact, everyone is incredibly supportive. There are classes, networking opportunities, a wide and encouraging network.

We all agree that it needs to be done, but somehow very few actually get off their ass and make it happen.

Well, today we sit down with Ken Yasunaga, who is going to explain what he and his team are doing to fix that. The going global part, I mean, getting motivated to go to the gym is a discussion we’ll save for a later time.

Ken is the founder and the managing partner at Global Hands-on VC a fund. He and his partners put together to focus on finding the Japanese startups with the strongest global potential, and then providing them with the resources and guidance they need to actually do so successfully. Before starting his most recent fund, Ken managed one of the largest Japan government VC funds and has advised both METI and the Cabinet Office on startup policy.

So, we also dive deep into the role that government should play in supporting the startup ecosystem here. The IPO trap that many Japanese startups fall into, the unique opportunity for foreign VCs in Japan. And of course just what it’s going to take to get Japanese startups to succeed in global markets.

But, you know, Ken tells that story much better than I can. So, let’s get right to the interview.


Tim: So, we’re sitting here with Ken Yasunaga, the founder and managing partner of Global Hands-on VC. So, thanks for sitting down with us.

Ken: Well, thank you for having me.

Tim: I’ve really been looking forward to this conversation because we’ve known each other for quite some time now through several iterations of our career path. So, let’s talk about your thesis at Global Hands-on VC because I think you’re addressing two really important needs in Japan’s startup ecosystem.

Ken: Yeah. So, let me first tell you what the Global Hands-on VC. We call it the GHOVC. This is a VC fund that invest to the Japanese technology startup. And that provides some hands-on support and including help them going global and established by two Japanese and three Americans. We are currently managing our first one. It’s a very exciting time. We see a lot of great startup in Japan and wanted to go global. So, I mean, the basic thesis is, Japan’s startup market is growing fairly rapidly, especially in the past 10 years. Currently, the money supply has been 10X and also what the biggest difference we see is the type of the entrepreneurs like ex-Google guy or ex-McKinsey guy. They started to get into this entrepreneur field and they play the role as a founder or sort of management. This market is good, but the only challenge is we don’t see any of the unicorn. I mean, there’s some unicorns but we don’t see any of the global startup coming from Japan.

Tim: Let’s break that down. So, let’s talk about the importance of going global and fundamentally, why do you think we’re not seeing these unicorns from Japan?

Ken: I think there’s a lot of great company, but mostly they are playing in the domestic market and unicorn. And you think about what is the ingredients of the valuation. I think it’s a cells much supply by the growth rate. So, can you expect like $200 million revenue from Japan and expect it to grow in the 10% or 20% of KGAR? It’s very hard to have that kind of number with only domestic market. Now you can get like up to a hundred million dollars or so revenue, but it’s very hard to get more than that.

Tim: I agree with that. But what I don’t quite understand is so that it’s common sense at this point that startups need to go global, but it really has become common sense. I mean, METI is pushing this hard. When I was at Google for startups, we ran programs to encourage it. You’ve been talking about it for a decade now. The founders seem to support it. So, what’s the barrier? Everyone’s talking a lot about it, but why aren’t we seeing it in practice more?

Ken: I think one of the big obstacle is how the investor behave. There is some IPO market in Japan. It’s growth market. If you have like $30 million revenue and the 2 million of the net income you can go public and VC investor want the company to go public and get some returns. And that’s how the Japanese VC ecosystem worked. And there’s a lot of VC who has benefit from this early IPO market. But the return itself is mediocre.

Tim: You know, that’s really interesting because I think you’re right. Historically, the Japanese venture industry has been set up almost at the inverse of the US theory. Where in the US you’ll have maybe 20% of your portfolio will do really well and make up for 80% that will go to zero, there’ll be 20% superstars. Where in Japan it’s been more like 80% of your portfolio, you’ll be able to march to a nice, safe kind of low valuation IPO and 20% something will happen and you won’t. So yeah. Clearly, if that’s your model, you don’t want startups taking this big risk of going overseas. Is that changing now or is that still the case with most VCs?

Ken: I think most VCs are changing. They realize that low valuation IPO is not good. But more interestingly more startup entrepreneurs started to think going public in Japan is not the end game. The company has to grow beyond the IPO. IPO is just end of one chapter. And if you go public there, now you got the public company position and you can raise more money or you can hire better people and grow the company more. But historically, all the Japanese startup are satisfied with the being the public positions. And then there’s no further increase of the Japanese startup after going public. And the limitation of how to raise money and how to get some bank financing, and there’s not much secondary public offering from those startup now that will severely limit the growth of the ex-startup when public company. So, it’s not good for the entrepreneur, it’s not good for the employees. I also have a lots of friends who went public, make some money, good money, but that’s it. The growth rate is really low and there’s no further growth. And people are stuck with water report and the investor relationship. And there’s a…

Tim: It’s much harder to run a public company than it is to run a startup.

Ken: Yeah, exactly. Exactly.

Tim: In fact, a lot of my founder friends, when we were discussing their global expansion plans, they were getting pushback from their VCs saying, oh, no, no, go global after UIPO. And no, no, don’t do that.

Ken: Yeah, yeah.

Tim: Go global first. It’ll be a whole lot easier.

Ken: Yeah, exactly. Exactly. Exactly. I mean, especially, you have lots of competitors and these global competitors is gaining the market when you are just playing with this domestic market. So, in order to fight, you have to be there to fight together. And also another point is, if you succeed in Japan that will become the mental obstacle to go global. I think I will call it innovation dilemma caused by the success. So, if you succeed, it’s hard to get out of that model, but if you want to go global, the product offering or service business model can be totally different from the Japanese domestic market.

Tim: Why is it hard to people just become too attached to the way of doing things or too proud of the product or both?

Ken: Yeah, I think people believe even the management people, employee or investor people believe, or if you succeed in Japan that is a success model that that model has to be copied to play in the other market. But reality is you have to change the product. You have to weigh the people work. And mentally people are a little bit afraid of going into the new place, getting into the business model. So, it’s very hard for them to change themselves. It’s on the toll of their existence. So, I think in that sense, the big objective is to fight against your competitor under win the market share and get more revenue and get more profit. That’s the name of the game. So, it’s too late for the market development wise and case study wise, or customer traction wise, you should go sooner than later.

Tim: What Japanese startups do you think are executing well in terms of going global right now?

Ken: I don’t see any.

Tim: I was afraid you were going to say that. I don’t either, sadly.

Ken: Yeah, sadly. Yeah.

Tim: But I mean, there’s attempts being made, things like Mercari, Smart News, Rakuten, although they’re more of a dotcom era, we can’t really call them a startup anymore. They own a baseball team.

Ken: Yeah. Yeah. Smart News is doing a good job, and so was Mercari, but has it become the disruptor in the US market? Can make some huge innovations? If they come before going public. If you go to day one and they get more traction and get more shares in the US market, that’s a disruptive market. Now it’s a pretty old business model. They succeeded in this peer to peer commerce transactions, and that they are very good in bringing it to the mobile, but not a big dramatic change in the business model. So, you are fighting against the other parts. So I mean, they’re doing good but they also struggle with growth in the market.

Tim: Yeah. They’re definitely fighting the good fight. But I take your point, they’re not really dominating the market. They’re more hanging in there.

Ken: But if you look at the Korean company line is one example. If you look at the Chinese company, TikTok, that’s innovative business. They are dominating the market. So, why Japan is not being able to execute the similar situations. I mean, they’re both very smart people, aggressive people, but what’s lacking, I think just one of the reason is the investor behavior. And also if you look at the Korea, they are thinking about globalization from the day one. That’s one of the key reason for their success. If you look at the Israeli company, you have to think about the globalization from the day one. So, I think Japanese companies have to think about the globalization from the day one.

Tim: Well, one important change I’ve seen over the last five or 10 years is that Japanese funds, the fund sizes are getting bigger and bigger. And so you have to deploy that into growth capital. So, this would seem to be something that would be changing Japanese VC behavior.

Ken: Yeah. Yeah. Absolutely.

Tim: Is it, or is that just kind of theoretical at this point?

Ken: Basically, people started to have more money in the asset under management, so they started to deploy more money. Average brown size is getting better and better. And average is still small. I think in the 23 average was 80 million Yen or so. But the median is large, like 230 million Yen or so. I’ll come back to you for the exact numbers. So, that is a huge difference. And if you have more money, you have a luxury of hiring more and better people terms of engineer or management talent, and you can spend more on the product development also, so you can play some bigger game. So,

Tim: So, is that additional money, is it just being used to better prepare the startups for the domestic market? Or are the VCs starting to push their portfolios overseas?

Ken: Currently, they wish they can, but they don’t know how to do it. We do. We know how to do it. That’s the biggest difference and that there’s also huge demand for some startup guys to go global. According to the venture economic center, they’ve done some research last year, and 23% or so of the startups said they already have some offices or some hire some person globally. And on the top of that, 52% of the startup has a plan to hire some person outside of Japan, or planning to establish the office outside of Japan within three years. So, I think their demand is huge. They want to go global.

Tim: And that’s for sales and business development. That’s not just for like programming and software development or that includes both.

Ken: Yeah, yeah. It’s both. I mean, even the like SaaS, enterprise SaaS company, they also want to attack some global market.

Tim: Well, that’s encouraging.

Ken: And I had a chance to talk with the many venture capital. I’m the head of the global committee at the Japan Venture Capital Association. There was an event in March that we gather many of the venture capitalists, the top management of the venture capitalists. And on that day, I was the guy who represent global committee and explained our activities. And there was independent VC and also corporate VC as well as venture capital operated by the regional banks. And I asked this question, who in this room thinks for the Japanese startup going global is too early? You have to think about it after going public and nobody raise hand. So my impression, like, okay, everybody’s is Japanese very shy, so they don’t want to raise hand. So, I ask another question. Who thinks the Japanese startup have to go global early? And everybody raise hands.

Tim: Well, this is what both fascinates and frustrates me, is that everyone agrees that it needs to happen, but it’s not happening yet.

Ken: It’s a how. It’s a how is a big biggest question.

Tim: Well, actually, that brings us really well to the next part of your thesis, which is the hands-on. I think most overseas startups and VCs would be surprised at the makeup of most VCs in Japan. It’s very rare to have ex-founders on investment committees or, or even people with strong operational experience on investment committees. It’s usually really smart finance guys and you’re really changing that.

Ken: Yeah. I mean, I’m just replicating the US venture capital model. And if you go to the US there’s a many entrepreneur, ex-entrepreneur who has a fascinating success or a failure, and that they putting a lot of advice or network to the startup. And that’s what they’re competing each other. Venture capital is a business of how to grow the company, not betting on the company. I’m just replicating and executing the American business model. All of our partners has some operational experience, whether it is managing the company, managing their startups, or product management for the global companies and so on. And ISL was also the managing semiconductor company as a CFO. So, I think that is the key ingredients to become the good venture capitalist.

Tim: Well, I think that while there might be a universal acknowledgement to the importance of going global. The importance of portfolio support and founder support, I think is still not completely accepted in Japan. A lot of VCs still see themselves as primarily check writers.

Ken: I feel still strange why they still keep thinking about the check writer, but after we come into this market, I see more people talking about the hands-on support or operational experience. Some guys started to say hands if that is okay, if they provide some support if the startup needs the support. I think that’s a legitimated one. But basically most of the time it’s a first time entrepreneurs, first time to start a new company hiring the people or managing the people, or facing the customers and they have to do the marketing. It’s not an easy job if you have some people who can guide you or becoming a mentor. And that helps.

Tim: Yeah. Yeah. I think it’s critical. And in fact, that’s one of the things I think that allowed the San Francisco ecosystem to thrive is this pay it forward culture, the availability of mentors. That the fact that there was this big pool of successful people who’d built companies sold it, maybe done that cycle a few times and were willing to help out. And there’s still relatively few of those people in Japan.

Ken: Yeah. But I’m expecting more ex-entrepreneurs coming to the venture capital market. I think there are certainly a demand. I mean, demand from the startup company. People started to appreciate the amount of network and amount of knowledge that that VC can provide. And I’m impressed about our team, to be honest. I mean, every company that we met really impressed about our ability, the level, the question we ask, or the speed of understanding the business model or even the technology. So, I mean, that makes them happy.

Tim: Well, I think your team, it’s different while most other VCs are just looking over the financials with a fine tooth comb. You guys are coming in with a much broader perspective on the potential of the company.

Ken: Yeah. If you resonate startup management as some kind of like, let’s say you are the carpenter. You have to build a house. And that you want to learn from the veteran carpenter. You don’t want to learn from the guy that read the carpenter book a lot.

Tim: Well, this is one of the thing that’s just like deep into Japanese culture. So I mean, the fact is, there just are very few qualified mentors for this kind of thing in Japan. Just not too many people have that experience. We’ve yet more and more every year, but there’s not enough. And so there’s all kinds of training classes and experts, so-called experts that have tried to fill the gap, but they’re also not people with any operating expertise. It’s kind of a strange situation in Japan right now.

Ken: Yeah, it is. I think that is a place we need to improve. And also the other important fact is, okay, there’s a lot of good entrepreneurs in Japan. They can become a good mentor, but they know the domestic business, how to grow the company domestically, how to do the business in the domestic user, but not internationally, not the globally.

Tim: So, what role, if any, do you think foreign VCs and foreign founders or foreign mentors have to play in this ecosystem?

Ken: Yeah, I think that’s very important. If you want to go global and play the game in the US, you want to play the game in the Singapore. You have to have the experts from each of the market. And that’s what we offer. That’s what is necessary. The VC have to be equipped with the talent necessary to help the startup to go global.

Tim: Ken, I want to talk a bit about your background because you’ve been running VC firms for long enough to see quite a transformation in the Japanese market. So, I think when we first met you were the managing director at INCJ which is a big $21 billion-ish Japanese government fund. Even now you work with METI in the cabinet office on innovation strategy and startup strategies. So, what role does the government have or should the government have in fostering innovation and supporting startups in Japan?

Ken: I think Japanese government has played a significant role to grow this ecosystem. Many of the Japanese organization is conservative and it’s managed by the large organization, which involves a lot of people. And if you have a lot of people you have to listen to a lot of people’s opinion. And then you cannot take any bold steps, but the government intervenes and is taking the bold step. I think that really helps to start those rusty wheel. So, what the INCJ role in the venture ecosystem is they started to invest in the large amount of money to the startup. Before INCJ days it’s rare to find the financing ground of $10 million or more, but they started to invest in 10 million year and the 10 million there. So, the size has become different and it becomes sort of norm.

Tim: Why did that have such an impact? Did it cause partners at VC funds to say, okay, rounds of that size have been normalized and it’s okay? Or were they competing with INCJ and had to step up to go with higher valuation? What was the impact?

Ken: Of course the evaluation has increased and also you have to have enough capital to play in this market before that the Japanese VC fund size is very small, so they don’t have any room to invest. Even in late stage company capital they can raise is like 5 million or 7 million or so. It’s rare to find the round, even in the late stage company to exceed. So, it’s hard to deploy some like technology model, manufacturing model. So, it’s always becomes a business model has less capital requirement and the people start to see the bigger round that people started to see more successful. So, okay, people believe that, okay, we should invest more and we should do more on the syndication. We should raise enough capital to let them run and hire so many people. So, I think they started to change the mindset of other VC and also they started to change the mindset of entrepreneurs, they can go after some more capital intensive business or technology business.

Tim: And do you think now that the winds have changed and that Japanese private VCs are deploying much bigger rounds? Do you see INCJ is going to like scale back or change their mission?

Ken: Well, I think there’s another impact that INCJ has done is the fund investment. They have invested enormous amount to the Japanese venture capital and that will help all the VC like WiL or Global Brain and UTEC and Incubate Fund and others, they used to be a very small, but with the support from the INCJ, they could let the fund size larger.

Tim: Those are very big VCs today. Yeah.

Ken: Yeah. So, I think they will not hear without INCJ’s funding investment. And of course there’s SMRJ who can provide some funds and fund support, but they have their maximum, 50% maximum. But INCJ had broken that role. They have invested, like 90% of their fund is governed by the INCJ. That is not the typical for the any LP. So, that was a big change that will change the total dynamic of the Japanese VCs and that they can deploy more money and hence the startup became more successful.

Tim: I think your point before about the importance of government involvement because of Japan just being a very conservative society in general, I think that’s really played out on the startup side as well. Like when Prime Minister Abe, who really supported startups and Kishida has continued that and expanded that support. But there’s a lot of really good programs and incentives that were created. But I think the most powerful thing that the Abe administration did was when Prime Abe got on TV and said, startups are the future of Japan. Startups will be driving innovation in the future. And the next morning, the CEO of every major company in Japan was saying, what are these startup things and why aren’t we working with them?

Ken: I mean, your point is great. And the other thing we have to tackle to really boost the Japanese venture ecosystem is until like 2012 or 2013 or so becoming the entrepreneur is the dangerous thing. And it’s not regarded as the good things in the Japanese market. Everybody talk about Hori-mon, no offense, I like him a lot. He’s very smart person. But it’s very odd to see some ex-startup guy is being arrested and becoming in jail. It was very sad. I mean, Hori-mon is a very smart, good entrepreneur, but the society regarded him differently and he sometimes act as some kind of wild guy. And if you look at the global entrepreneurs Segen Brin or some like Jeff Bezos or everybody is so respected and they behave well, they promote their thinking about business is very respectful. And I read a lot of book, but during maybe 2011 or 2012 Mr. Abe started to have some startup of the year context. And Prime Minister Abe is giving out the trophy to Izumo-san of Euglena. I mean, that’s a fascinating, and Izumo-san is very, really fighting and to raise the money is a great success model. So, he was regarded as a good person and good entrepreneur and really doing the good things for the society. So, the guy like him that become some kind of role model for the entrepreneurs.

Tim: Very much so. He’s done a lot of good, continues to do a lot of good.

Ken: Yeah. Yeah, yeah, yeah.

Tim: But it’s fascinating in that, I mean, I’m an American, but I’ve spent more than half my life in Japan. So, I just end up comparing the two societies constantly. But in this case, the government plays the opposite role. So, the US government plays a tremendously important role in supporting and fostering startups in the US. But they kind of do it in the background, they provide the money, the grants, the loans, and then the founders get up there and say, well, we just want the government to let us run our startups and get out of our hair. And that’s just kind of the way the game is played. But in Japan, the government really does a lot of good by being out in front and saying that no startups are legitimate. We should be working with them. These are important part of the economy.

Ken: Yeah. I think it’s a character of the Japanese people.

Tim: I think so too. And the Americans as well because it’s just two extremes.

Ken: Yes, yes. Probably, it’s go back to the history, we tend to follow what the government do. It’s gained some good trust. This is how he works in Japan.

Tim: On a personal level though, I mean, I find it fascinating. So, you led INCJ for a number of years at Japan Venture Capital Association. You worked with a corporate venture capital group. You led that and…

Ken: And University Venture Capital…

Tim: University Venture Capital. But you went and founded Global Hands-on VC, which is about as far away as you can get thesis wise from government support or big corporate venture capital. Why?

Ken: I mean, it was very natural actually. I started my career at a trading company and I have experience in investing in the US startup company. And as a trading company, we bring some US product to Japan, or we bring Japanese product to US. It’s basically cross border marketing and selling. And I’ve been working for the Japanese VC as the independent VC as well as the government. So, it was very natural. I mean, if you look at what is the challenge, this ecosystem face is a globalizations and who can do that? I was in the best position to execute on business model, and I know the several people that I should partner with and with this team, if you build the right team, we can execute on this model. So, it was very natural. I mean, I always wanted to become independent again.

Tim: Let’s talk a little bit about the Japanese market, the Japanese ecosystem as a whole. We’ve talked a lot about some of the challenges and problems the market’s facing right now, but what recent developments, what recent changes in Japan are you most excited about right now?

Ken: Entrepreneurs, I mean, they’re globalized entrepreneurs. There’s many English speakers, especially the younger generation. Being 18 months after the startup of operations, we studied about like 2,600 companies. We only met around 70 companies so far. But there’s still only three companies that want us to speak in Japanese.

Tim: Really?

Ken: Yeah. Our partner Sri Ani, he cannot speak Japanese. And I want him to be in from the first meeting. So, we always ask the entrepreneur to present your story in English. And of course, there’s some difference. I mean, the CEO cannot speak English, but someone in the management can speak. It’s good enough to communicate in the business relations.

Tim: That really is a positive development, but seems a little unusual in that the newspapers are reporting that fewer and fewer Japanese are interested in going abroad, fewer Japanese are studying abroad. People are always complaining about the level of English language education. But among entrepreneurs, it seems like there’s much stronger.

Ken: Yeah. I see more people going to stay in the foreign country during their young days or in the high school or college. I see more program from the University exchange student program. And as compared to my age, most of the English teacher was Japanese. Now even in the junior high school or in high school, most of the English teacher is a native speaker. I think that is really changing the dynamics. And another dynamic, especially these days is we see more non-Japanese people in the entrepreneur world in Japan. Yesterday I met with one company, there was three founders, and two of them are non-Japanese. They have done in some successful startup in Singapore. And they find some new opportunity in the Japanese financial market. And they decided to come to Japan and start the company here. And the Japanese government is willing to provide the visa to those entrepreneurs.

Tim: It is interesting that foreign residents have a huge impact and a huge contribution to startup ecosystems everywhere in the world, even in San Francisco. Some of the most successful American startups were founded by immigrants, by non-Americans.

Ken: Yeah. Yeah, absolutely. I’m hoping that similar things will happen in Japan. I mean, this is a good country, it’s a safe, food is good.

Tim: The food is delicious. Absolutely.

Ken: Food is delicious. Well, it depends on the age people.

Tim: This week it’s been great.

Ken: Summer is brutal, so I don’t like that. But safe, convenient, and food that is a key factor for the good life and the young rate is very good for the foreign people. Not for me.

Tim: Not for us.

Ken: Japanese population is decreasing, but it cannot be just like us or inviting a lot of immigrants in this place. However, Japanese government is supporting immigrants, especially for the talented people.

Tim: Yeah. That really is encouraging. Well, listen, Ken, before we wrap up, I want to ask you kind of a crystal ball question. So, if I pull out the crystal ball and ask you what does Japan look like in 10 years, what does Global Hands-on VC look like in 10 years? What’s going to change?

Ken: I think there will be more start-up is thinking about going global from the day one and universities or some research institute also think about commercializing the technology in a global scale from the day one. Not just writing the paper, but commercializing the technology.

Tim: That’ll be a big cultural shift, won’t it?

Ken: Yeah, yeah. And also we see more of the foreign GP started to establish the Japanese branch and making started the investment into the Japanese market. And we see more LPs coming, as we see more global startup, especially in a technology wise born in Japan, they will start to penetrate into the Japanese market.

Tim: So, continuing the importance of going global. So, currently there are so many Japanese CVCs that are focused on finding startups from elsewhere in the world and bringing them to Japan. Over the next 10 years, do you think Japanese CVCs will adopt your thesis and start working with Japanese companies to help them go global?

Ken: Japanese corporates, there’s two camps. Global Japanese corporations like Toyota or Nissan or majority of their remedy is coming from outside of Japan. And of course there are some domestic corporates, but if it is Japanese corporation who is a major market, is a global market, they need to think about, there’s no boundary of Japan or the US. They’re looking for some technology that can be successful in the global market. So, currently many of the Japanese startup is thinking only domestically. That is why they only look at the global market. But if the Japanese startup has some technology or business model that can play in the global market, and that can increase this Japanese large corporation’s global revenue, they are looking for some technology. Problem is Japanese market itself is in stable, but it’s not growing. It’s a large market, but it’s not very attractive market. So, you can bring some new technology into the Japanese market, but if the Japanese market itself is stable, you can get some revenue, but not really growing big revenue. So, even the Japanese corporation, big corporation, have to find growing market like India, China, or US.

Tim: That makes sense. So, it gets back to the fact that just the much bigger opportunity is outside of Japan.

Ken: Yeah. Yeah.

Tim: And in the meantime, Global Hands-on VC is going to be helping Japanese startups access that.

Ken: Yeah. Absolutely. Absolutely.

Tim: Fantastic. Well, listen, Ken, thank you so much for sitting down with me.

Ken: Okay. Well thank you for this opportunity. I enjoy it.


And we are back.

Ken makes an important point that the best way to succeed as a VC is not by simply betting on the best startups, but by putting your thumb on the scale and working with those startups to help them succeed.

I mean, this approach is so widely accepted in the US that it’s almost a truism, but it’s still unusual in Japan. And with most Japanese VCs being run exclusively by people from finance, there’s not a lot of internal pressure for that to change. However, there is a lot of market pressure promising startups in Japan have a lot of fundraising options today.

And while there are one or two VCs who could probably continue to thrive based solely on their reputation and connections, the rest of the industry is going to have to figure out how to bring a lot more than just money to the table.

And with more funds and larger funds being spun up each year, this pressure to add hands-on value is only going to increase.

Ken also makes an interesting point about the important role that foreign investors and foreign founders have to play in Japan. And while immigrants seem to have an outsized impact on startup ecosystems everywhere in the world including San Francisco obviously, Japan seems to be working really hard to attract them. Special visas, tax credits, VC roadshows, large government sponsored organizations and programs focused on startups and VCs, and even running a lot of the large events in English.

And just anecdotally, I see a lot more foreigners in the startup community and a lot more VC interest in Japan than ever before. Now, how and if this will contribute to Ken’s vision of Japanese startups aggressively and successfully expanding into global markets remains to be seen.

But the pieces are in place, the talent is here. And with VCs like Ken and firms like Global Hands-on VC, we just might see it happen very soon.



If you want to talk about going global or what VCs can do to support their startups, Ken and I would love to hear from you. So, come by disruptingjapan.com/show218 and let’s talk about it. And hey, if you enjoy disrupting Japan, share a link online or just, you know, tell people about it. Disrupting Japan is free forever, and letting people know about is the absolute best way you can support the podcast.

But most of all, thanks for listening. And thank you for letting people interested in Japanese startups know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.