Richard Chan, Managing Partner at Berkeley Frontier Fund Richard Chan is a serial entrepreneur andRead more...
World Innovation Lab helps link investors and founders in the United States and Japan
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed! While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Gen Isayama is the co-founder and CEO of World Innovation Lab.
Isayama has extensive experience in venture capital, finance, and entrepreneurship. Passionate about unlocking people’s entrepreneurship and creativity, he founded WiL to form a new innovation engine. He currently oversees WiL’s global investment strategy as well as business creation and corporate innovation practices.
Before he co-founded WiL, Isayama was Partner at DCM Ventures, specializing in online media, mobile, and consumer services. He also led strategy and operations across multiple disciplines, including corporate finance and market risk management while with the Industrial Bank of Japan. He co-founded his first company, a web design firm, as a student at Tokyo University.
Isayama is a technology columnist for the Nikkei’s digital edition, Nikkei Industrial Newspaper, and the Toyo Keizai Online. He is also a member of various Japanese government committees including Ministry of Economy, Trade and Industry, Ministry of Education, Culture, Sports, Science and Technology, and Ministry of Internal Affairs and Communications to promote entrepreneurship nationwide.
He holds a BA from the University of Tokyo’s Faculty of Law and an MBA from Stanford Graduate School of Business.
Outside of work, Isayama is an avid educator and enjoys teaching and sports. He also became a zealous golfer as he started teaching all his four children to play.
VatorNews: Tell me about yourself and World Innovation Lab.
Gen Isayama: I started this firm in 2013, so this is my ninth year, but prior to that I worked for a venture capital fund for DCM for 10 years. When I joined DCM it was a very small firm, but eventually it became a very big investor in China, and did quite well; I heard that some of their latest funds did more than 10x through some of their Chinese investments. So, they did quite well and I was one of the younger members of the firm when they were building an office in China. We opened the Beijing office and then I ended up going to Japan, where I’m originally from, so I opened up the Tokyo office. Then I came back to the Menlo Park office, and I was working in both those Asian countries and the US, so I could see technology trends that happened here that would go there; these days, we're seeing new technologies like AI or FinTech emerging from Asia that eventually come to the United States. So, I was trying to understand what kind of technology evolves in each country. Is there any arbitrage opportunity or anything we can learn from different countries and different cultures? Even as a traditional venture capitalist, I was always fascinated by how each country and culture defines how technology is used in a particular way. Sometimes certain technology that we think as a no-brainer in the United States is not necessarily so in Japan, or in some parts of Asia. So, it's always interesting for me, as an investor working closely with entrepreneurs, to see the differences in culture and how the different countries are using the same technologies. How they make that into a business could be quite different. I was always fascinated with the potential of the global market, even the penny stock; you have to start from one location and eventually grow. But my job is always to help these entrepreneurs, people with an entrepreneurial mindset, achieve their goals through my support. I did that at DCM for 10 years and I learned the basics of venture capital.
The discussion we used to have is that, “oh, big companies are going to just die, so we're going to help these new companies and startups to take over and that is necessary in the process of evolution. The average life of a big company is 30 years, or maybe 20 years these days. That's fine, they should die and let the new tech companies take over the market.” That's the fundamental principle of the Sand Hill Road but where I came from, the Japanese actually care about the longevity of corporates, even today. There are a lot of companies that are over 100 years old, some companies are 200 years old, and they evolve on their own and try to keep up with innovation and still figure out how to maintain their business. So, we can’t completely ignore big companies because they have money, they have technology, and they sometimes have the best people. So, why do you want to compete with big companies? Is there a way to have a much more fruitful relationship between entrepreneurs and large companies? As a venture capitalist, can I do better for both worlds? That became my thesis, which is, to put it simply, how can I help these entrepreneurs work with the large corporations or governments, such that both sides would benefit and achieve their goals? That became my ambition for the World Innovation Lab. What I do right now is I go to big corporations, like Sony or Suzuki Motors, various companies in Japan, and say, “I know that you guys want to innovate and come up with new services and new ideas, but you all know that the cool startups are doing it much better, faster, and they scale much faster and bigger. You guys have so many resources, technology, and talent, yet all the startup guys have been beating you for the past three decades. There must be something missing.” And all the CEOs say, “Yes, we just don't know why. A startup with no money, not enough people, lacking resources, somehow they figure it out, come out of nowhere, and they take our share, and we're not happy about it.” And so I said, “Well, I could be the bridge. You guys have money, resources, and technology and my job is to help entrepreneurs who don't have those things. So, I'll set up a fund, you can invest in this pooled fund, and I’ll search for entrepreneurs that could be a good fit for you guys, whether it could be a potential business business collaboration partner, or it could be just CVC investment, so that you can increase your business foundation in case you might want to go into different business arena.” I chose the name Innovation Lab because all of these companies have an R&D center functions, so I said, “I'll focus on the innovation side of your activity. And I'll try to become an effective bridge to you and the startup ecosystem in the US, Japan, China, and India. And let's see what happens.”
So, that happened nine years ago and it went quite well: instead of each corporation trying to set up their own corporate venture capital, and assume their employees can search and hunt for good startups, we have professionals who have been doing venture capital investment for decades and decades, and we are better searchers and hunters for the startup world. And, obviously, we would go to the big company, from time to time, and listen to what they care about. What is the technology they want to understand? What are the startups they care about? And after those discussions, we go out all over the place and find technologies and startups that could be a good fit, and that's how I got started. We kind of look like a consortium of corporate venture capital because all the money comes up from the corporates; we're just closing a third fund, and all of our funds were sponsored by Japanese corporations. Every time we raise a fund, we come up with a mission, what the thesis is for big companies, the technologies they care about, what kind of service business we should be investing in and introducing to big companies, such that both sides benefit. That's always in my mind, how can I bridge both in a way that both sides mutually benefit, not just one or the other. I can’t be too biased for large corporations, I can't be too biased for the startups. So, that's how my firm is structured and how we try to be unique in the world right now.
VN: That’s a very interesting model. You’re called the World Innovation Lab, obviously, so I assume you're investing in markets all around the world, like the US and Asia and Europe, and then you’re introducing them to Japanese companies. Is that how it works? Are there specific markets that you're focusing on right now?
GI: It’s a two way bridge: I’m in Palo Alto, and my team in the US will go to the east coast or Europe and identify these B2B software companies. And then, first of all, our corporate partners could be the first user, so let's bring them in and see whether they’ll become a user. And if they say, “this is great,” then it's like the early days of Salesforce or Oracle; when they went to Japan, some people would say, “Oh, this is great, I've never seen this. This will help me run my business.” Then the next step is, do you want to open an office in Japan? So, my team in Japan would set up an office, hire the country manager, and hire a biz dev team. We have a team dedicated to helping foreign companies and foreign startups enter Japan. That's how my team here pitches the startup. “If we become an investor, we're going to do all that for you. And we have the best team to do it.”
The other activity we do is for Asia, primarily in Japan right now. So, Japanese startups that are growing and doing well domestically want to come to the United States, they want to go to Indonesia, they want to go to India, but they need someone to help. So, that's where we go in and say, “hey, we'll help you enter the US market. We know how to hire people, we know where to set up an office, let us help you.” So, we’re doing a two-way bridge: US and Europe to Japan, Japan to the rest of the world. And we hired a biz dev platform team dedicated to supporting those practices.
VN: What are your categories of interest? From the way you described it, it sounds like you'd be more open to investing whatever your corporate partners want to invest in.
GI: How we select our portfolio company consists of two theses. One is, how can I help a large corporation get business done more efficiently? It could be as simple as, “there's this new CRM software company called Salesforce, do you want to use it? This makes your life easier.” Or it could be, “there's a nice HR management software called Workday, I'll help you install it because everyone in the US seems to like it.” So, it could be as simple as us identifying the next Salesforce and Oracle and helping them use it. In that sense, we have a big portion of our investments going into B2B SaaS companies in the past eight years, because that happens to be a very popular area to invest in and it happens to have the biggest potential for me to introduce into the Japanese market because my clients are big companies and governments.
Another area that we always want to focus on is new technology trends that big companies don't pay attention to. For instance, the concept of a sharing economy, like the Ubers or Airbnbs of the world. It’s all about, how do you not waste stuff? Uber is about mobilizing cars that are not used and Airbnb is about using rooms and houses that are unused. But big companies are the ones that care about selling more stuff, so I had to tell them, “hey, the world is shifting. Younger people care about sustainability and cleantech and all the things, so you can't just mass produce stuff and push it to the consumer. That business model eventually will eventually change over time. There's this business model called Uber and Airbnb and similar models in different verticals. I know that you want to sell more stuff, but I want to make sure you guys understand the world is changing rapidly, in a way where people want to make sure that we don't produce too much stuff, but we utilize what's available already, and try to share it if you're not using it all the time.” That's the kind of paradigm shift we're seeing in the younger generation, so we’ll invest in these so-called sharing economies or sustainable business models, which big companies have no interest in. These days everyone talks about NFTs and crypto and Web 3.0; those are things that are still growing. Some people talk about how much money they made, but it's still very irrelevant to these big companies like Sony and Panasonic and Toyota, but I have to tell them, “hey, this is what's happening in Web 3.0 and here are the ways they're making money. Eventually, this is where they're trying to go. If this happens, this could be a big paradigm change again. So, I'm going to pay attention on your behalf, you don't have to jump in again, because it's a little too risky today, but I'll control my risk and make small bets and try to understand the market and try to tell you what's happening.” So, again, very practical investments that are the majority of our investments, plus these technology-driven, thesis-driven investments, including cleantech, which, as a business, is not proven; a lot of the things are still in the science phase, so I don't encourage the companies to go too crazy on investments, but we will place bets in those areas such I can tell them, “this is a time you should go in and think about being more aggressive.”
Those are the two types of investment we make, and obviously we will choose subcategories within B2B SaaS. Are we going to do security? Are we going to do RPA? Are going to do AI? In the new tech, are we going to go NFT or are going to do quantum computing? There's so many subcategories we have to think through and we have to choose, but we think about what benefits large corporations and governments and then we go into the smaller detail categories to form a portfolio.
VN: What percentage of your firm or your fund goes toward those other non-B2B stuff, the newer technologies?
GI: It's about 70% B2B, and 30% for some of the out of the box, new trends. If it works, it's great, but those are riskier categories.
VN: What is the size of your current fund and how many investments do you typically make in a year? What stage/series do you invest in and how much is that in dollar amount for you?
GI: Fund I was $360 million, Fund II was $521 million, and Fund III will be larger. From those funds, we were investing in mostly Series B, C, and D. That's mid-stage, right before a company typically becomes a unicorn, so a valuation of $300 or $500 million. That's the sweet spot for us because, like I said, we want to act as a bridge to other countries and if the company is too young, it's just too early. I mean, if they have only five employees then I can't bring them to Japan and assume they do business in Japan because it's just not ready yet. But if you go too late, large and active growth funds are pricing companies at ridiculous valuations, and we just cannot do much when there is that kind of irrational valuation; we can't even make money. So, we have to be in the middle.
Obviously, if those entrepreneurs don't care about the global market, I don't have anything to do so I can't go in, but a lot of the software companies want to be global and Japan, from the IT spending point of view, is still the second largest country in the world. So, if I say, “Hey, do you want to go to Japan, and I want to help you,” most people will say, “Yes. I would love to get your help,” because Japan is very difficult. The language is different, the culture is different, so you need a good partner. I come in and I'm more neutral; I can work with Softbank, I can work with Sony, I can work with Toyota, I can work with the Japanese government. I want to be able to give you more choices to enter the market.
So, that's the angle that we use and, therefore, our investments have been mid to late-stage. And because we're going in mid-stage, our average investment is $10 to $30 million in US dollars. It could be smaller, depending on the competitiveness of the deal; we could eventually do more investment in the later rounds, but we try to keep our portfolio around 20 to 30% in the United States because we also do non-US investments as well, and make sure we can manage those companies to go global. So, we can invest in 50 to 60 companies but we want to focus our investment into fewer companies and make sure those companies do well. One of the companies in which we took that approach and invested in is a company called Asana, which was founded by Dustin Moskovitz, who was the co-founder of Facebook with Mark Zuckerberg. That was originally a Facebook internal tool but he spun-out, he made this workflow management tool, he took it public two years ago on a direct listing, and he did quite well. We thought Asana was a very good work management tool for even a small sized company like us and I said, “you know what? This must be a great tool for big companies with multiple divisions and multiple vendors.” So, we introduced this to one of our friends in a relatively big company in Japan, and they loved it. I said, “there must be opportunities in Japan,” so I took Dustin to Japan, I convinced him we should put more resources in, that I could help him hire people, set up an office, and I could introduce him to customers. Their market cap has come down quite a bit but when they went public they were a $15 billion IPL, so I was pleasantly surprised how well they were growing their business in Japan. And that was the iconic, successful case helping us proactively go reach out. They didn't need money, because Dustin could keep writing his own checks, but he valued that we could help with the Japanese market. We made a very big investment and we did quite well through those investments. And we will continue to do the same approach. A similar company is one called Auth0, which was acquired by Okta last for around $7 billion. So, another big successful investment, but my thesis was, “security, online identity management, these are very important. In Japan, there's going to be a big market so let us help you enter the Japanese market." A lot of our limited partners, investors, corporate partners ended up using Auth0, which now became Okta. There's an ongoing thesis around helping good, later stage companies go overseas in Japan or India or Korea, and if we can provide those bridges, there is a value to it.
VN: You said you invest in the B,C, D round. Is that also for the non-B2B companies? What stage are they?
GI: We don't do seed or early stage rounds simply because, again, our mission is to bridge technology or startups to the corporates of a large organization. So, we need to de-risk some of the technology risks. So, the earliest we start is the B stage and a lot of them are in C or D.
VN: For this column, I generally do talk to early stage firms, sometimes pre-seed, seed, or Series A. You're a little bit later on from those, so talk to me about the traction that you're looking for at that point, as obviously it should have numbers by then, especially the C and D stage. What kind of ARR do they need to have? Or is it a certain number of customers? Are there numbers you need to see from those companies at that point?
GI: It's hard to come up with one single formula; obviously, it depends on what category of B2B business you're in. From the revenue point of view, the market was getting crazy here last year, but we were always looking for at least double digit million ARR, like $10 million, at least. A lot of companies we were looking at were about $30 million ARR, growing 3x or 2xish every year, so we can quickly understand, “okay, if we help, this company will get to $100 million ARR very fast.” $100 million is one of those numbers that people could say, “Okay, this company is real,” but if you get to $100, then how do you get to $500? That's a big step. If you're still flattening around $10, or $15, we see so many companies that get stuck around that number, then the global market may not be a good fit. So, we want to make sure we feel comfortable taking the company to Japan, introducing them to these big customers, and making sure that these companies don't go down. That's the nature of a startup; even though we think they're great, some companies disappear after two years. So, those are the basic numbers. Different businesses have different metrics, but on a high level, we would like to see a decent ARR and growth. And, obviously, we care about the issues you're trying to solve; they need to have a certain thesis that resonates. If they're trying to increase the productivity of accounting division in a large corporation, we have to agree that that makes sense: the accounting division of the company sucks because they have to hire so many accountants and they put numbers in manually on the spreadsheet. Those jobs should be automated and I completely agree. So, there has to be a thesis match and certain KPI-based attractions. Like you said, a certain amount of traction has to be there.
Our firm is also a little unique from the venture capital point of view; the reason why I named my firm Lab, and not “whatever capital” or “whatever fund," is that I actually do more than a venture investment. So, one of the areas that I discussed with you is investing into startups, primarily by bridging these startups to different countries. Because we have all of our corporate customers, we also do spin-outs of certain divisions out of those corporations. We have done four spin-outs with Sony. Basically, how it's done is that Sony has a massive R&D facility, and inside of Sony, inside of the R&D division, there are a lot of startup-like projects that are semi cooked; as you can imagine, any company, like if you go to Apple R&D, there’s a lot of stuff that never comes out. One day I went to the CEO of Sony and I said, “I met with your head of R&D and I saw some very interesting products, why are you not financing these?” This is the irony of being a big company: he says, “I cannot finance all these projects, I have to pick one. If I were to pick this product, I have to make sure this product would deliver $1 billion in sales.” I said, “that makes sense, but what happens to the projects that were never picked?” and he said, “well, we keep the patent, and we'll keep it in the closet.” And I said, “that does not make any sense, because these abandoned projects I can see becoming a $100 million business.” But $100 million is too small for Sony, so it's not worth investing in, so that's where my light bulb went off and I'm like, “Okay, can I take over these businesses? I'll form a team because I know there are a lot of entrepreneurs who want to become an entrepreneur, yet have not come up with a great technology or idea yet, so I can do the magic. As a cook, I can create a delicious meal out of this and I'll find people who want to run it.” Technically, what I'm doing is spinning out technology from these large corporations, obviously in exchange for equity, or some time it could be an exclusive license. And then we'll form a corporation, incubating the company from scratch, and we'll fund that through our fund, and then hire the CEO, CTO, COO and see what happens. We have been doing that since I first started my firm, so we have venture investing and we have been investing in the spin-outs throughout the same fund.
It's almost like a seed stage investment. Our fund primarily goes to mid-stage, but we still have this little seed project. And it's part of our uniqueness, simply because we have so many corporate partners who have technologies, and they love it. One of the projects got acquired for a lot of money, so we know that if you do the spin-out, and you can really bring in a good team, there is a value to be made. This is activity that Sand Hill Road VCs would never do, because it just takes so much time and it's much easier just to write a check to a startup and sit on the board, to be honest, but I really like this. The fact is that we have our own thesis, we work with these corporate partners who wrote us a check to invest in startups, but they also can give us technology that is worth experimenting on as a startup.
VN: If those spin-outs are basically like seed investments then there wouldn't be traction, but you probably looking at the team, I would imagine, at that point. So what are you looking for in the team for the spin-out?
GI: After spending a decade on Sand Hill Road, I realized, one, the social issue, or any issue that the team is trying to solve, I care about it a lot. Are they doing this just because the technology is trending or do they just want to make money? I'm not saying that's bad, but that's not what I’m interested in. I care about what entrepreneurs are trying to solve. What are the pain points they care about? What are the social issues they're trying to solve? And I have to really sympathize, or I really need to understand and agree with what they're trying to do. That's not about money, it's about the mission we're trying to assist. And then, obviously, if they're experienced. Do they have a good track record as a business person? If they're a serial entrepreneur, that's a slam dunk. If he or she has done business before, whether it's successful or a failure, that's important. So, if they're business savvy and they know what they're doing, that saves a lot of my time, though that’s not to say that I don't back first time entrepreneurs. So, the mission-driven, the entrepreneur's experience, those are two very important attributes that I look for.
With what's happening in the world with COVID, and now with the war, I care more and more about the social cause of the business. I hope I can continue to invest in companies where I at least feel that these companies are delivering social good. And I'm not saying it in a naive way. I'll just give you a good example: when weed was legalized in California, there are so many online startups that emerged to sell weed online, and a lot of venture capitalists invested in those businesses. I was just completely against it. I mean, I know that it's legal, it's fine, it's legitimate, it's like buying tobacco or alcohol. I get it, but if I don't agree, I don't do it. Even though I might make a lot of return on my investment, I will not do it because I just don't fundamentally agree that promoting it, whether it's tobacco or alcohol or weed, I just don't think it's a good idea for kids. A particular type of game, too, it's just too addictive, and it just makes kids go crazy. It's just a philosophical preference; it’s a not right or wrong thing, I just care more about what they are trying to do. Are they trying to solve an issue that I resonate with? Do I feel it's good for society to support these entrepreneurs? And those things have to really check in my mind.
VN: What do you want to see from the product at that point? Because they are probably pretty early on but they’ve probably been developing this for a while. Do you want to be able to use the product at that point?
GI: Actually, since they call an “incubation spin-out,” you might have an impression that it must be really raw, that it's going to take a lot of time for me to cook. But the nice thing about corporate spin-outs is that they are big companies and when they do R&D seriously, in the startup world view, it's almost like a Series B company already: they have a robust product that's working, it just doesn't meet their quality standards or their scale. So, for me, it's like, “you're already a completed Series A company, and it's just a matter of turning on the engine. Why don't you go sell this product?”
One project that we spun-out from NTT was acquired for a few hundred million less than three years later after it was spun out, so an astonishingly short period. The reason why this company was worth a few hundred million is that when we spun out, it was ready to go; they just didn't have any customers, it was just sitting in the R&D center. So, we turned on the engine and went after sales, and had customers use it; they loved it, so business was growing and, therefore, someone would like to buy it. So, it's much more robust and technically perfected than most spin-out projects. One spin-out company we did last year was a material company out of a utility company called Osaka Gas. It's a gas company, it's a utility, it sounds so boring but, yet, the chemical composition we came up with, basically, reflects all the heat that the object receives. Whatever you wrap in this material, it gets about a five degrees Celsius cooling effect, and it could be used for anything. The guy who was engineering it is like, “Oh, this is a cool material I came up with, it makes objects cooler with no power.” So I said, "this is pretty amazing because if you think about California, we're talking about heat. There are so many electricity boxes sitting outside and everyone's having a heat control issue. Or server rooms, where they need to put in massive air conditioners. If you can reduce five degrees Celsius worth of heat from those in heated locations in Arizona, in California, or the Middle East, that should have some value.” So, we quickly asked the CEO to spin this out and from a startup. The company is now called SPACECOOL and the reason why we named it that is basically it reflects all the heat waves to space. We spun-out, we formed the company last summer, they're already in business this year. So, much faster than traditional spinouts, much faster than typical incubation, because the product is already there.
It's all about how I, as an investor, can come up with a business proposition that can keep things moving. If you're in a big company’s R&D, they care about technology. They know nothing about marketing, they know nothing about business, whereas I care about technology and market fit. So, this is a great combination with our team working with these big companies and their R&D. We can do something more interesting.
VN: There are many venture funds out there today, how do you differentiate yourself to limited partners and to entrepreneurs?
GI: Our LPs, as I said, they're not just financial investors, but they almost act like the users, like consultants, because they want to have the latest technology installed in their headquarters. So, we act almost like an Accenture consultant: we go to them every month, we hear about what they're stressed about, and then we go hunt for the startup. Large corporations are the best source of ideas when we go hunting for startups. So, that's quite different from the traditional venture capital/LP relationship. We love our LPs and our LPS love us.
Another thing is that our LPs send people to our office in Palo Alto. We have about 25 people in our office representing each LP and they act as our allies. If I need to borrow cleantech expertise, I'm going to ask the guy from Osaka Gas, who knows about that technology, rather than me studying cleantech. I feel like I have 20 plus professionals, who are all from LPs, and I can borrow their support, doing technical due diligence. So, that's very different. And LPS love it, because they get to learn how to do venture investment and I get to learn about the technology side of it, so it's like a win-win situation, which I also think is very unique from an LP point of view. So, they're not just pure investors, they get to learn something; they get on the job training, or whatever you call it, knowledge transfer. They get to learn about how you get to know venture. How do you do due diligence on startups? And how do you capture value out of it? They get to learn that through working with me, in my office. That's quite different. And obviously the spin-out part of it is very unique.
For the startup side, I would, again, reiterate the fact that we act as such a strong bridge to these large corporations. And also we do a lot of work with the Japanese government. So, the fact that you get to work with the top tier customer from day one, it's very easy to do business. Once you have Sony as a client, or Toyota as a client, it's very easy to call other corporates because they're like, “Toyota is using them, they must be a good company.” And that's how the Asian culture is formed: when you see a very well known corporate using something, everyone follows. So, I've tried to use that to help startups grow their business at the speed they want to and I focus my effort on being better at doing that than anyone else in Silicon Valley.
VN: What are some of the investments you’ve made that you're super excited about? Why did you want to invest in those companies?
GI: So far, including US and Europe and Asia, we had 15 unicorns and actually two decacorns, which are companies doing over $10 billion in market cap. So, we have a very good, robust portfolio of companies in the US, including companies like Asana or Auth0, which I mentioned. We have DataRobot and Unqork out of New York and we have a French company called Algolia, which is growing like crazy. A Finnish company called Aiven, which we invested in with some European VCs. Those are like the decacorns that are emerging and doing quite well, even under this environment.
We are the largest venture capital in Japan right now. So, we do get a lot of publicity, and government attention, media attention. We’re treated like Sequoia or Andreessen Horowitz here in the United States, whenever I go to Japan. So, we want to make sure we have that brand and awareness in the market. The Japanese venture capital market is growing very fast; it's not as big as United States or China yet, but it did grow 10x these past seven years. So, venture investment in Japan is finally ramping up. People are saying, “why now?” and to date, the innovation scene in Japan was always done inside of big companies like Sony or Panasonic or Toyota and there was not much demand for a startup ecosystem to replace those people because that worked already. So, it's very different from how the US and China think about innovation but, finally, I guess even Sony and Toyota said, “we can't do everything, the technology is changing so fast, and we just cannot adapt to the changes.” So, the government quickly shifting gears and said, “We're going to put more effort, more emphasis around the startup and innovation ecosystem, outside of the large corporations.” And that emphasis happened right around when I started my firm in 2013. The peak was when Prime Minister Abe came to Silicon Valley in 2015, which was the very first Japanese Prime Minister to visit Silicon Valley, which is kind of surprising. From 2015 to now, venture investment in Japan grew more than 10x, and is still growing. So, hopefully we can grow as the market grows, and we can be the dominant player in the Japanese domestic market. And, again, have the best skills to help Japanese companies come overseas and do well in a global market. That will continue to be my core thesis on the Japan side.
VN: What are some lessons you learned?
GI: Because the LPS in traditional ventures are pension funds or endowments or fund of funds, they really care about money. They care about the return, because, for that endowment, that return becomes capital for the campus or the teachers, while for the pension, those returns are important for people who are retiring. So, the returns were everything. So, as a venture capitalist, I was always looking for an investment that would make money. Whether I liked it or not, I sometimes had to work with startups or CEOs or founders who were doing so well in business, even though I personally don't like him or her. I still invested and I got on the board, and I had to work with them and make sure that I made money through those investments. Two decades passed and now I'm at the point where, like I said before, when I started my firm, I said, “I want to be a little bit idealistic," and I meant it in the sense that if I were to support entrepreneurs, I want to feel good about it. I want to feel good about the issues they're trying to solve. And I'm sure I'm going to feel ecstatic when they achieve that goal, so I want to make sure whenever I pick a startup, I really want to understand and sympathize or empathize with what they're trying to do because that is so important to me. I want to be proud about assessing those people.
The second thing is I want to help these first time entrepreneurs, whether they're doctors or they could be school teachers or they could be government officials. I've seen talents coming from all kinds of directions; it’s not only Stanford grads anymore. There are people who want to be entrepreneurs and I want to give a chance to those people, like school teachers who see a humongous issue in the public school system. They know more than we do, so I want to help out somehow empower those people, who never were a main player in the entrepreneur startup ecosystem, to be successful through our help. We do this a lot of this on the Japan side right now, since the US venture market is just too competitive, and when I see success from these non-traditional startup founders, I feel a lot more reward than the monetary reward, to be honest. When I see someone who never thought about running a startup, I provide help, capital, even decent success, they're just so happy and they will never forget the support I provided. Those things are so important to me. Yeah, making money is one thing; I do have to do that as a fund manager, but changing people's lives, getting appreciation, impacting society, empowering people to act and think like an entrepreneur, that is so important to me right now. As a firm, I want to make sure that my firm partners and investment team embraces those elements; not just making money and becoming rich. I'm not saying that's not good, but your life should be more than just making money. And spending those monies to buy houses and cars. There's so much to your life and I hope everyone understands, if you give back to society, and help people, it is much more rewarding than just financial returns. So, maybe I sound naive and idealistic, but since this is my firm, I have the luxury to pursue it. And if people don't like it, don't come to me. I’m just going to keep doing what I want to do. I'm surrounded by my teammates and friends who are passionate about helping entrepreneurs and passionate about doing good for society. So, I just want to keep doing this as long as my corporate sponsors like it.
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