How startups suddenly became “cool” in Japan (feat. Shin Takamiya of Globis Capital) | E2237

0:00Younger generation is becoming entrepreneurs and startups are becoming cool. so the traditional kind of stereotype image of Japanese wearing suits being what we call salary man yes you know lifetime employment that's totally gone right now totally gone for young people for young people they still have it as an option yes but they're now it's number two on the list number three on the list of possibility yeah maybe so another kind of a showcase it's like a joke but I always tell. Number one job sought after McKinsey is now startups. McKinsey used to be number one? You know it's one of the prestige jobs you can get and you know typically people might join a big Japanese blue chip company to become one of the you know top management or something like that.

0:49That was high status. Yes. And now high status has shifted for young people to being a founder or even joining. Or associated with startups. Yes exactly.

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1:59How do we capture that energy and help founders solve the world's biggest problems or solve the problems that are important to them, maybe you as consumers? So we created this 12-week course where we go over all the basics, how to set up a cap table, how to get product market fit, how to do go-to market strategies, how to find a co-founder, how to present your product, how to understand your total addressable market, maybe find your ideal customer profile, just design, UX, all of it. The founders typically understand about half of what we teach them. For different founders, that 50 % is different.

2:32Some of them are awesome at operations, but their design is terrible. But they're really good at go-to market, or they're absolutely extraordinary at recruiting talent, but they don't even know what the term ICP or customer acquisition costs. They're not familiar with those, and that's okay. Because everybody becomes familiar with these techniques and these strategies over time. So we meet the founders where they are and my team spends time with them. It's incredibly rewarding. It's incredibly hard. Most of the startups fail. But they come back a second or third time. And then sometimes even on the first shot, they make it.

3:07And it's one of the great joys in my life to take Founder University from the United States to my favorite country in the world after the United States. And maybe don't tell anybody, but maybe I like it a little more in the United States. And that's Japan. and it's been the thrill of my life to have the Japanese government, Jetro, ask me to bring Founder University here and we're doing our first cohort. We've had so many of my friends over the years of coming here for 30 years say yes to coming and mentoring the founders here. 30 founders joined the first cohort. Very competitive process to get in.

3:44If you want to learn more about it, just go to founder.university. You can apply to do it in the United States. You can apply to do it in Riyadh, in Saudi Arabia, in the kingdom. We do it there with Sonobo. You can apply to do it here in Japan. But please, no more countries. I'm saying this with peace and love. I'm doing a lot of traveling. Okay, maybe one more country, but that's it. After that, I'm going to say no. Maybe we'll do one more. I don't know. So here we are at Founder University. It's the end of the program, of the first week of the program. It's the third day, and we had an intensive couple days.

4:14but I'm really excited because Shin Takamiya, I met you 20 years ago. 2015 years ago, yeah. 25 years ago? I don't know. Maybe not that bad. 20. 20, yes. We're very old now, you know, Shin. You and I are old. Yeah. And we learned some things. So today we'll talk about what we've learned and how things have changed. I was talking earlier in the program. I got invited to come speak. And back then, I would maybe get invited once in a while. Maybe they'd pay for my flight. Big deal for me back then because I was broke. had no money. So to get a free coach flight and fly here, to me, was like the dream.

4:49And you and I met at a conference. I had sold Weblogs, I was doing Engadget, and I would always go to Akihabara, the electronics here, and I had seen VR and really augmented reality for the first time. It was 20 years back. 20 years ago. And already, Japan was coming up with a VR figure. And Jason was so excited about it. And he was just hanging around this otaku anime kind of figure. What What happened was I was walking through Akihabara and I would go there with my writers from Engadget and they would take me to all the different buildings. In the buildings, there would be 10 stories. So we'd go to the 10th floor, maybe robots, like little miniature robots.

5:28Then the next floor would be robot cars. The next floor would be robots that went in water, each of the different floors. And then I saw this big line with a bunch of salarymen in line after work in their suits that looked pretty tired and they were online to buy something. So I went to the front of the line, and they were buying an action figure and a box of software. And you would take the web camera off the computer. Web cameras were pretty new. They didn't work very well. And then they had a paddle, like a stick with a QR code, and a little box. You put the box down. You have your PC, and you take the image, and you put it on the box.

6:02And pop out of the box would be a little character. And then you would interact with the character. And I said, whoa, that could be the future. It was a little too early. A little bit. Yeah. But they were buying it, and this is one of the great things about Japanese culture. You're always 5, 10, 20 years ahead of everybody else. What do you attribute it to? The creativity and everything. Yeah. I mean, the VR figure back then was already quite advanced in Japan. But, you know, if you look back, you could say we were pretty advanced. And even from a Japanese standpoint, it wasn't a mainstream. It was like a kind of otaku culture.

6:43But now otaku culture is everywhere in the world. Like you see anime. What is otaku culture? Otaku culture is like a Japanese pop culture kind of rooted around anime and manga and things like that. Initially, maybe 30, 40 years back, it was regarded as a kind of geeky hobby. It was a geeky hobby. Yeah, and otaku was kind of, sometimes it was like some kind of bad word to say. Like a nerd. or a geek. Dweeb. I'm not calling you that. I'm an otaku, so it's okay. But now you're cool. Otaku became cool. Yeah, yeah. Very cool. Yeah, exactly. Otaku is highly related to IP business, so it's definitely something we can explore out of Japan.

7:31Yeah, IP, intellectual property, became, I think, a very powerful concept here. And I remember in 1992, I was working for Sony, and they became, the Sony Corporation said, hey, if we can do convergence, we can bring together consumer electronics, music. So they bought Columbia Records and movies. We would buy Paramount, and then we would do convergence, even doing radio. And that was when I first got exposed to the concept of, hey, all of these things are going to come together. And here we are. It's come together. Back then, the CEO Idae-san came up with the concept, Digital Media Kids, which is...

8:11Yes, DMK. Yeah, Digital Media Kids. That was so cool. On a floppy disk. And they would say, here is everything you need to understand the topic. A text file, some pictures, short video clips. All of that then became deliverable on the internet, online services. It's fascinating. So, Shin, you work for Globus Capital Partners. This is one of the largest venture firms here. And so today we're going to talk about your investing here and then just some observations about the global market. Maybe tell us a little bit about what you do, how long you've been a venture capitalist. So we, Global Capital Partners, are one of the biggest VC firms here.

8:49And we are actually one of the oldest VC firms here. So we started out in 1996. Back then. 1996. Yeah. Back then there was no IPO market for tech companies. So NASDAQ Japan and the mother's market of Tokyo Stock Exchange only came in in the early 2000s. We kind of grew together with the Japanese startup ecosystem. So we're kind of like brothers to the Japanese startups. We were a startup incidentally doing VC business back then. And as for myself, I spent like six years of my childhood in Europe and went to US to get my MBA. Where'd you go? MBA. Yeah. Harvard. Oh, okay. Yeah. It's okay, right?

9:35I've never heard of it. Where is it from? It's somewhere cold. It's somewhere cold. Boston, I think. Yeah. You can always know if somebody went to Harvard because they never mention it. They say, I got an MBA. And then I say, where? And they say, oh, Massachusetts. And then I say, oh, where in Massachusetts? They say, Boston. I say, oh, where in Boston? They say, Cambridge. It's because if you say you went to Harvard, everybody says, oh, too smart, whatever. But you went to HBS. Yeah. And you did that in the 90s, late 90s? No, no. I was class of 2008. Of 2008? 2008, yeah. Oh, 2008. Okay, you went later.

10:10And when did you start in venture capital, and why did you decide venture capital? So I joined Globus right after my MBA, so that was 2008. That was like right after the subprime bubble burst. Yes. We had the Great Recession in America. Everybody lost their jobs. the nasdaq went from 5 000 to 1500 and everybody thought it was the end of the technology business but it was actually good timing for you exactly enter low and exit high you know it is paradoxically the best time to get in venture capital is at the down market yeah exactly

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11:24We use Circle here at Launch to keep up with our founder university community. We've done 14 founder universities around the world, and they've helped us grow that from this tiny little program out of our office in Austin to this bona fide international movement. And they can do the same for your startup. Twist listeners can get$1 ,000 off Circle's professional plan by going to circle.so slash twist. That's C-I-R-C-L-E dot S-O slash twist. What stage do you invest in typically? So currently we typically start from pre-A or A kind of stage. Okay, so seed and series A. Pre-A kind of. Oh, okay. So we would like to see a team and a product.

12:12You don't have to have a massive attraction, but enough traction so that we can get a glimpse of PMF. That's like the initial stages we would invest, but we would follow on anything into the late stage. So we say we are the first and first to last. So we are the first institutional VC to back a founder, and the last we would back it to the last round before IPO. Okay. Yeah. So a full life cycle basically. And that means the company's here a little bit too early. so when he finishes, don't rush the stage. You can meet him, but the likelihood of investing in year zero startup or pre-product market fit is too early for you.

12:54A little bit, but probably I should know you guys now because it's a very kind of relation business. You don't want to invest into somebody you don't know, you don't trust. Typically, when I invest, I like to invest into my friends who I know for over two years or something like that So I can trust the person and I know that person from like everyday life rather than knowing him on the cosmetics when he's fundraising. And this is an important lesson for founders is to play the long game. You're going to meet people. You want them to understand what you're building and why you're building it. And then they can put a little checkmark in their journal, in their database.

13:35Okay, I met this founder. They're doing something interesting. So even in series A, you know, I and maybe we believe that the founder is the single most important factor in investing and especially their motivation. You know, we don't want to invest into people whose interest into money or power. You know, we look for some, you know, truly rooted down motivation, why they want to do this business. They would have like a passion for it or they would have like a almost like a karma to do that business or something like that. So we want to know why the founder is doing that business. And if that why is solid, you know, you can, you know, you would have the grit to continue the business when you're even in the hard things.

14:19And in the end, if the founder doesn't give up, the business is still alive. So, you know, you always need that, you know, strong motivation or driver why the founder is doing the business. This is really important for founders to understand that our number one fear, our nightmare as investors, is not that the company runs out of money or they have to pivot. It's that the founder gives up. Exactly. So we don't want founders just fleeing irresponsibly. And of course, sometimes it's important for the founders to rightly give up because after all, if you look at it from the macro perspective, It's a kind of utility business as I look at it.

15:04So the founder is the most precious resource in the startup community, and you want to maximize the utility of the founders. So if the founder picks an idea, they have the karma, they're passionate for it, and they get two, three years into this adventure, and they realize the market isn't ready, the market doesn't want it, they can't force consumers, they can't force a business to want their vision of the world. so yeah sometimes it's the right thing to shut it down yeah so you know it's okay that your hypothesis is wrong you know you know what is not okay is you you just kind of you know be irresponsible or you know you do some kind of immoral things or things like that but you know if your hypothesis does make sense but it doesn't turn out to be right i think it's a nice try and And even from our investor kind of perspective, we'd like to invest into those kind of founders.

16:03You know, it's not the result that which matters. So if founders had a very logical and hypothesis or investment theme, that made sense. But if he fails, it's okay. We want to invest again into that serial entrepreneur. This is also very important. If failure in the United States, we champion it. Yeah, yeah. We are excited to see. It's not what we want to happen. But when we see a founder fail, it's almost universally if they don't give up the precursor to later success. In Japan, the culture, though, of failure comes with shame. It used to. It used to. Yeah. When did it change and why? I think it changed in the last 10 years.

16:49Just to throw out a showcase number, when I joined Globus as a venture capitalist, there was only like 300 million investment per year in all of Japan. But nowadays we have like 10 billion USD. So, you know, it's grown so fast. And one of my portfolio companies, Mercari, was the very first unicorn, Japanese unicorn to go public, which went public in 2018. And only after seven years we had... Mercari. Mercari, yes. Yes, M-E-R-C-A-R-I. It's a marketplace. Yes, exactly. Like Craigslist or eBay? How would Americans think of that? The equivalent is Poshmark. Oh, Poshmark. So designer clothes or designed products.

17:35Initially started out from kind of design clothes for ladies and for kids because it's the same kind of seller. And there was a synergy between different categories. But as they grew, they are dominant kind of second-hand app in Japan. so they kind of went into multi-categories and they're basically all category right now but the point I wanted to make was only after seven years of the first unicorn going public we had 77 startups that was valued over 1 billion Wow The caveat is that includes not only unicorns but also includes those companies that touched down to the 1 billion dollar market cap line after one year of going public so one point I wanted to make is this is how vibrant Japanese startup community is and how much younger generation is becoming entrepreneurs and you know startups are becoming cool so the traditional kind of stereotype image of Japanese wearing suits being what we call salary man yes you know lifetime employment that's totally gone right now totally gone for young people for young people yeah they still have it as an option yes but they're now it's number two on the list number three on the list of possibility yeah maybe so another kind of a showcase it's like a joke but i always tell number one job sought after mckinsey is now startups mckinsey used to be number one uh you know it's one of the prestige you know yes jobs you can get and you know typically people might join a big japanese blue chip company to become one of the you know top management or something like that that was high status yes and now high status has shifted for young people to being a founder or even joining with startups yes exactly this is very interesting for people to understand coming here in it's less transactional it's more character based yes yes honor karma it's cool to be with startup yeah

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20:28That's why more than 37 ,000 startups and fast moving companies are already using deal to accelerate their hiring and growth. Find out more by visiting gill.com slash twist. That's D-E-E-L dot com slash twist. So, Shin, you're at Globus Capital Partners,$500 million fund, new fund coming. You invest Series A, sometimes a little before and in the last round before they go public. We'll talk about going public. But for the founders here, what should this ideal meeting and what is the protocol here in Japan for getting that meeting and what is expected to occur in that meeting? I don't think there's much difference between having an investor meeting in the US.

21:11So to answer your first question about what the founder should do with the first meeting, to be very tactical or like a hacker mind, I think the whole objective of the first meeting is to get the investors interested. You don't have to tell all of the story. You just want to focus on one single value proposition you have and get that investor interested. And then, once you get that investor interested, you would naturally have a follow-up meeting or follow-up question. So a single important thing is to get his interest. That's the only thing you need. Right. You want them to understand what you're doing, understand why you're doing it, understand why you're the right person to do it.

21:57and then you want to get them to ask questions, yeah? Yes. And so what is the best way, sometimes founders get a little nervous, venture capitalists. Oh, they have the money, they anoint me. But you and I know, especially my time as an entrepreneur, I'm not sure, did you spend time as an entrepreneur as well? Not really, not really. As an entrepreneur, when you're first starting out, it's very intimidating. And then later on, you look at venture capitalists, okay, they support my company, but I still have to run it so I could use their capital I could use their advice on the margins so maybe you're not as enamored with it what's the way to answer the questions when you ask you know a very basic question how should the founder respond to it especially if they're a little nervous probably the very basic is I think you should try you're not the person being judged you You should also judge the investor.

22:54After all, especially for the lead investor, you're going to be stuck with that person for like seven years or ten years or even longer. So you want to select the investor who you can get along with, who you have the right chemistry with. So you should take off your mind that you're being judged. You're also judging your opponent. And the game of getting the lead investor is not like the popularity kind of, you know, voting you have to the game is to find only one lead investor the right investor so you know even 99 lead investor potential lead investor says no that's okay if you get one yes right it is a numbers game yes and that i think is very hard for a founder to handle early on rejection and a no is the default.

23:48Right. And when you get the rejection, you shouldn't feel that you or your baby is... Ugly. Ugly or... I said it, not you. Yeah, I know. But it's very objective. So some person might think it's ugly, but it's a hypothesis that you think it's beautiful. And you have to find a person who agrees with you, is reckoning that is beautiful. Yes. Yes. This is, in a way, investor product or investor problem or investor market fit. The investor has to also be excited about it. And when I was early in my career, I had an investor say to me when I was pitching early on, I'm just not so excited about what you're building.

24:35I'm not the right investor. And I was incredibly hurt. And I talked to my wife, who was then, I think, just my girlfriend. and I said, oh man, it's terrible. She says, oh, that was very kind of them. You don't want that person to be your investor if they're not excited about it. Go find one who is excited about it. Yes, yes. This is critical. Yeah, and you only need one, so it's okay. If you're first time, maybe you're nervous, you may think that investors have the right answers, but we don't. Nobody has. This is very important. It's the humility, and sometimes people project into a successful investor.

25:12Oh, you did this incredible company that went public and the biggest IPO, billion-dollar company. Oh, you invested in Uber, Robinhood. You know what's going to work. The answer is we don't. Yes, exactly. So you have to find somebody who believes in your same hypothesis. Funny story. I was training a new VC. Oh, yeah? and I like to have the orchard, not go to the market and get apples. So I go to the orchard and I find talent out of school to train to be venture capitalists in the United States, right out of school. And I have this very smart young man working for me, very analytical, but also very candid, which I like about him.

25:53So he wrote an email and he wrote back, this founder has ugly baby syndrome. They don't know that their product is terrible, their execution is horrible, and they don't even understand the market they're going after. And they sent this email to the team, but they forgot and they didn't take the founder off the email. The founder said, I'm sorry that you think my baby's ugly. I wasn't involved but then my partner who was my first boss who works for me now, Mike Savino called me and he said I've got an interesting situation and he calls me boss now even though he was my boss, he's my big brother and he taught me a lot of what I know in business I said tell me, I love a good situation and he said well you may not like it and he explained to me what happened and I laughed and he said sounds like a mistake you would make when you were young I said yeah it does so should we fire him promote him what do we do and he said let's talk to him so we got the researcher they start as a researcher then they become an analyst then they become associate very hard training program we make them work 60 hours a week like a Goldman Sachs program very hard try to break them we want them to quit this because we want them to work as hard as I do and the rest of my team members.

27:23So I called the founder and I said, well, obviously I'm very embarrassed. I said to the founder, would you like me to fire them for this terrible mistake? Or would you be willing for me to have them apologize to you and make it a learning lesson for them? And the person said, well, I don't want them fired. They made a mistake. Yeah, I'm sorry that this happened. And I said, no, it's not your fault. So then I went to the person and I said, would you like me to fire you? Would you like to apologize to the founder? And he said, if you have to fire me, I understand. But I already apologized to the founder.

28:01And he had already apologized. He took it to himself in between time. So I said, now he's been working for me for two years. I think if I were to rank all of these trainees, and I think there's 10 of them now, I rank him as in the top two. Top two, Bianca, who's here, and Lucas, who wrote The Ugly Baby. I can only say his name now because he's so good. And I always make the joke with him. And now when he trains, the new people coming in, I think he's an associate now or analyst. I don't know. He's doing so well, and his performance is so good. We always have that as a nice joke, a nice thing. But mistakes can happen.

28:42And do you act honorably? And he did. And probably one lesson to the investor side, I always tell myself and also maybe like the younger VCs is that one, I think it's good to be candid. But being candid and being like judgmental or emotional is a different thing. Being objective is very, so, you know, you don't want to say it's ugly. You want to say why you don't think it looks functional or it doesn't look good. So you have to have like a communication protocol where you can actually debate about it with your opponent, the founder. So if you think it's ugly or dysfunctional, you should say why you think this is dysfunctional.

29:33because it's not delivering the right function to fulfill the value proposition or something like that. It's okay.