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

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 Saturday men.

0:00

Yes.

0:12

You know, lifetime employment, that's totally gone right now.

0:13

Totally gone. For young people.

0:16

For young people, yeah.

0:18

They still have it as an option.

0:19

Yes.

0:20

But they're now. It's number two on the list. Number three on the list of possibilities.

0:21

Yeah, 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.

0:26

McKinsey used to be number one.

0:36

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.

0:38

That was high status.

0:49

Yes.

0:50

And now high status has shifted for young people to being a founder or.

0:51

Even joining with startups. Yes, exactly.

0:55

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1:03

All right everybody, welcome back to this week in Startups. I'm your host Jason Calacanis. As you know, we have a program called Founder University. Founder University is a 12 week course for people in year zero of startups. People who apply for funding from our venture firm but are too soon for funding. So we said, wow, all this incredible energy, everybody emailing us, applying for funding. Literally over 10,000 people a year. How 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, how to understand your total addressable market, maybe find your ideal customer profile, just design ux, all of it.

1:37

The founders typically understand about half of what we teach them. For different founders, that 50% is different. Some of them are awesome at operations but their design is terrible.

2:26

But they're really good at go to.

2:38

Market or they're absolutely extraordinary at recruiting talent but they don't even know what the term ICP or customer acquisition costs. They don't. 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. And 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 than the United States. And that's Japan. And it's been the thrill of my life to have the Japanese government. Jetro asked 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 since. Yes to coming and mentoring the founders here. 30 founders joined the first cohort. Very competitive process to get in. If you want to learn more about it, just go to Founder University.

2:39

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 Sonabel. 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. But I'm really excited because Shin Takamiya, I met you 20 years ago.

3:47

20. 15 years ago.

4:20

Yeah, 25 years ago.

4:21

I don't know, maybe not that bad.

4:24

20.

4:25

20. Yeah, something.

4:26

We're very old now. You know, Shin, you and I are old.

4:27

Yeah.

4:29

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 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. And you and I met at a Conference had sold weblogs. Inc. Was doing a gadget. And I would always go to Akihabara, the electronics here, and. And I had seen VR and really augmented reality for the first time. We remember years back, 20 years ago.

4:29

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.

5:02

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. And the buildings there would be 10 stories, so we go to the 10th floor. It'd be robots, like little miniature robots. Then 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 action figure in 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 and 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. 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.

5:13

Yep. I mean, the VR figure back then was already quite advanced in Japan. But, you know, if you look back, you know, you could say we were pretty advanced. And even from a Japanese standpoint, it was. It wasn't a mainstream. It was like a, you know, kind of otaku culture. But now otaku culture is everywhere in the world. Like, you see anime.

6:26

What is otaku culture?

6:47

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.

6:49

It was a geeky hobby. Yeah.

7:01

And otaku was kind of. Sometimes it was like some kind of, you know, bad word to say if you told.

7:03

Like a nerd.

7:09

Yeah, yeah.

7:10

Or a geek.

7:10

Yeah. But nowadays dweeb. Yeah, yeah, yeah.

7:11

But nowadays you know, I'm not calling you that.

7:13

I'm otaku, so it's okay.

7:16

Yeah, but now you're cool. Otaku became cool.

7:18

Yeah, yeah, Very cool. Yeah, exactly, exactly. And you know, otaku is highly related to IP business. So, you know, it's definitely something we can export out of Japan.

7:20

Yeah, IP intellectual property became, I think, a very, very powerful concept here. And I remember in 1990, 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 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.

7:30

Back then, Ide San came up with the CEO. Ide san came up with the concept digital media kits, which is.

8:04

Yes, mk.

8:11

Yeah, Digital media kits. That was so cool.

8:13

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.

8:15

It's fascinating.

8:29

So Shin, you work for Globus Capital Partners. This is one of the largest venture firms here.

8:30

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.

8:35

So we, Globus Capital Partners, are one of the biggest VC firms here, and we are actually one of the oldest VC firms here. So we started out in 96 back then.

8:45

1996.

8:56

Yeah. Back then there was no IPO market for tech companies. So NASDAQ Japan and Mother's Market of Tokyo Stock Exchange only came in in the early 2000s. You know, 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.

8:57

Where'd you go?

9:29

Mba?

9:30

Yeah.

9:30

Harvard.

9:31

Oh, okay.

9:32

Yeah. It's okay, right?

9:32

I've never heard of it. Where is it from?

9:35

It's somewhere cold.

9:37

It's somewhere cold. Boston, I think.

9:38

Somewhere in Cambridge.

9:40

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 are Massachusetts? 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.

9:41

Yeah.

10:01

And you did that in the 90s, late 90s.

10:02

No, no, I was class of 08 of 2008. 2008, yeah.

10:04

Oh, 2008, okay. You went later. And when did you start in venture capital and why did you decide venture capital?

10:09

So I joined Globus right after my MBA. So that was 2008. That was like right after the subprime bubble burst.

10:14

Yes. We had the Great Recession in America. Everybody lost their jobs. The nasdaq went from 5000 to 1500 and everybody thought it was the end of the technology business. But it was actually good timing for you.

10:21

Exactly. Enter low and exit high.

10:34

You know, it is paradoxically the best time to get in venture capital is at the Dow market.

10:37

Yeah, yeah, exactly. Foreign.

10:42

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11:09

What stage do you invest in typically?

11:56

So currently we typically start from Pre A or a kind of stage.

11:59

Okay, so seed and series A, Pre A kind of.

12:03

So we would like to see a team and a product. You don't have to have a massive traction, 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.

12:08

Okay.

12:35

Yeah.

12:36

So full life cycle, basically. And that means the company's here a little bit too early.

12:36

So when he finishes, don't rush the stage, you can't meet him. But the likelihood of investing in year zero startup or pre product market fit is too early for you?

12:42

A little bit. But probably I should know you guys now because you know, you know, it's a very kind of relation business. You don't want to invest into somebody you don't know, you don't trust. You know, typically when I invest, I like it invest into my friends who I know for like over two years or something like that.

12:54

Right.

13:11

So I can trust the person and I, I know that person from like everyday life rather than knowing him under cosmetics when he's fundraising.

13:11

And this is an important lesson for founders is to play the long game.

13:21

Yes.

13:25

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 little check mark.

13:25

Yes.

13:32

In their journal, in their database. Okay, I met this founder, they're doing something interesting.

13:32

Yeah.

13:38

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, because 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 glit to continue the business when you're even in the hard things. And in the end if the founder doesn't give up, the business is still alive. So you know, you always need that strong motivation or driver why the founder is doing the business.

13:39

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.

14:31

Exactly. We don't want founders just fleeing irresponsibility irresponsibly. So you know, and of course, you know, 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. So the founder is the most precious resource in the startup community and you want to maximize the utility of the founders.

14:46

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.

15:12

Yeah. So it's okay that your hypothesis is wrong. What is not okay is you just kind of be irresponsible or 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 even from our investor kind of perspective, we'd like to invest into those kind of founders, you 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.

15:32

This is also very important. If failure in the United States, we champion it, 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.

16:19

It used to.

16:44

It used to, yeah. When did it change and why?

16:45

I think it changed in the last 10 years just to throw out a showcase number. When I joined Globis 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 growing 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, yeah.

16:47

Yes. M E R C A R I Sub Marketplace.

17:19

Yes, exactly.

17:22

Like Craigslist or ebay. How would Americans think of it?

17:23

It's the equivalent is Poshmark. Oh, Poshmark.

17:27

So designer clothes or designed products initially.

17:32

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 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.

17:36

Wow.

18:06

The caveat is that includes not only unicorns, but also includes those companies that touch down to the $1 billion 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 Saturday men.

18:08

Yes.

18:41

You know, lifetime employment, that's totally gone right now.

18:41

Totally gone. For young people.

18:45

For young people.

18:46

They still have it as an option.

18:47

Yes.

18:49

But they're now it's number two on the list. Number three on the list of possibilities.

18:50

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.

18:54

McKinsey used to be number one.

19:04

You know, it's one of the prestige, you know, jobs you can get and you know, typically people might go join a big Japanese blue chip company to become one of the, you know, top management or something like that.

19:06

That was high status.

19:18

Yes.

19:19

And now high status has shifted for young people to being a founder or.

19:20

Even joining with startups. Yes, exactly.

19:24

This is very interesting for people to understand coming here, it's less transactional, it's more character based.

19:27

Yes, yes.

19:35

Honor karma.

19:35

It's cool to be with startup. Yeah.

19:37

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19:44

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.

20:44

They go public, we'll talk about going public.

20:53

But for the founders here, what should this ideal meeting and what is the.

20:55

Protocol here in Japan for getting that meeting and what is expected to occur in that meeting?

21:00

I don't think there's much difference between, you know, having an investor meeting in the US So 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 questions. So single important thing is to get his interest. That's the only thing you need.

21:07

Right.

21:49

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. And then you want to get them to ask questions. 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 or not really.

21:50

Not really.

22:16

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?

22:17

Probably the very basic is, I think you should try, you're not the person being judged. You should also judge the investor. After all, especially for the lead investor, you're going to be stuck with that person for like 7 years or 10 years or even longer. Right. 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. Yes. 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.

22:44

Right.

23:35

It is a numbers game.

23:36

Yes.

23:37

And that I think is very hard for a founder to handle early on rejection. And a no is the default.

23:37

Right. And you know, when you get the rejection, you shouldn't feel that you or your baby is, you know, ugly. Ugly.

23:48

Or, you know, I said it, not you.

23:57

Yeah, I know. But like, you know, 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 agree with you. Reckoning that is beautiful. Yes, yes.

23:59

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. I'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, and I said, oh, man, it's terrible. She says, oh, that was like very kind of them.

24:16

You don't want that person to be your investor if they're not excited about it.

24:46

Go find one who is excited about it.

24:52

Yes.

24:54

This is critical.

24:54

Yeah. And you only need one. So it's okay. You know, if you're first time, maybe you're nervous. You may think that investors have the right answers, but we don't. Nobody has.

24:55

This is very important. It's the humility. And sometimes people project into a successful investor. Oh, you did. You know this incredible company that went.

25:07

Public and the biggest ipo billion dollar company.

25:16

Oh, you invested in Uber. Robinhood. You know what's going to work? The answer is we don't.

25:18

Yes, exactly. So you have to find somebody who believes in your same hypothesis.

25:23

Funny story. I was training a new vc.

25:30

Oh, yeah.

25:33

And.

25:34

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 capitalist in the United States.

25:36

Right out of school.

25:44

And I have this very smart young man working for me. Very analytical, but also very candid, which I like about him. So 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 Savina, 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 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 started 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 because we want them to work as hard as I do and the rest of my team members. So I called the founder and I said, well, you know, obviously I'm very embarrassed.

25:46

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.

27:27

They.

27:44

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, and he had already apologized, 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, he's an. I think he's an associate now or analyst.

27:44

I don't know.

28:35

He's doing so well and his performance is so good. We always have that as a nice joke, nice thing, but mistakes can happen. And do you act honorably? And he did.

28:35

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 judgmental or almost rude, 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 program protocol where you can actually debate about it with your opponent, the founder.

28:45

Yeah.

29:26

So if you think it's ugly, dysfunctional, you should say why you think this is dysfunctional because it's not delivering the right function to fulfill the value proposition or something like that. It's okay.

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30:04

What I tell my team is never underestimate anyone. You and I have experienced this. Somebody is very awkward. Maybe they show up at a meeting, there's a stain on their shirt or they're nervous or sweating, or there's some product or they have a misspelling and then that person eventually becomes Mark Zuckerberg. You know, because by the way, we all start out awkward.

30:45

Yes.

31:08

Unsure.

31:08

And quite typically well rounded person is well rounded sus, you know, you don't have that spike in one certain attribute. Sometimes the great founders have the huge spike and the rest of it, he doesn't have anything.

31:09

They have a zone of excellence. They have something that makes them very unique in the world. And there's a way to say it. Some venture capitalists maybe don't have a good bedside manner like a doctor. And so the way to say it would be or the way I say it in the program, since you're here and I'm an investor, you may hear me say to you, I predict when you go to see venture capitalists, these are the things that they're going to be thinking. Would you like to hear those? And can I have your permission to speak candidly? Yes, tell me candidly, Jason. And I say I think they're going to look at the design and they're going to judge a book by its cover. Your design right now in their mind will be a four of 10. And we have some resources to help.

31:27

You get it from a four very quickly to a seven and then getting from seven to eight, eight to nine.

32:14

It'S going to be very hard. But I think with, you know, just.

32:19

Maybe we introduce you to a couple of designers, you read this book and you read these websites and you could really improve it. Kim, would you like us to introduce you to something?

32:23

Yeah, yeah, yeah, please.

32:31

The right founder wants to, you know, have that candidness. So how you say it, super important. And I'll also say these three things I think are great. You love this problem. You've done great research on the customer and then maybe some VCs, when you say you're going to pursue four different business models that will counter their experience, their lived experience, they're signaling will say, I don't know of another startup that had four revenue streams in years one. And they'll look at Amazon and say Amazon added a second revenue stream in year seven and Microsoft added a third one in year 20. And there's a way to communicate in.

32:32

A healthy way, but I think it's how the founders view the world and how you tie the context into the results of the business model. So if you think the external environment is very, very volatile, or if you think you're still in a POC phase, you want to try out different business models and if you can kind of explain why it's volatile, why you think there is different scenarios of potentially having different business model and if you can just logically explain that you are in a testing phase to find the right one, but eventually you might, you know, converge into one business model, then it makes sense. But just kind of like adding different revenue stream just for the sake of making good looking P L. It doesn't make sense. So it really depends on how you see your business context.

33:17

This is why VCs want to talk a lot. They want to understand how you're thinking.

34:13

Yeah, yeah, yeah. So like every other vc, we have a management presentation which is the most important, kind of like investment decision gate, what we look at as a partner, if I'm not in charge of the deal, is the threat of thinking of the entrepreneur. He doesn't have to be right. It's okay if he has kind of the right process of logical way of thinking. And the precondition is in this kind of external environment the logical business model is this. But once you start that business model, you may find out that the recognition of the external environment was different then you would change your business model. But again, the founder is able to come up with the same kind of logical business model. So if the founder has that kind of logical thinking and if he is have that capacity to replicate the same kind of, you know, way of thinking, that's a very good sign. And that's probably what like the IC looks for.

34:16

If they. The investment committee.

35:20

Yes, I see, yeah.

35:22

So this investment committee is going to say, hey, what's the business model they're pursuing? And if you are the partner champion, you say, well, they're considering three different business models. They're leaning towards A, they're testing B, and they've pretty much ruled out C, but they're unsure so they need to do some more thinking on it. I want to talk to you about which business models you think get the.

35:23

Best venture capital results. You don't want to be the sole source of funding. No. You want other investors to help too.

35:47

Yes. So it's the nature of VC business, but you want to get kind of like a additional return compared to your competitor VCs but at the same time you're supporting a very kind of high risk business. So sometimes, well, most of the time the fellow VCs are your kind of collaborators who would support that business together with you. So in a time of hardship, you don't want to. It's quite risky to support let's say a startup in a down round. But if you have co investors and it's the role of the lead investors to syndicate that kind of hard round too.

35:54

So yeah, this is the value that a great investor can provide. They're going to introduce you and explain to other investors when we have lunch or we're talking going skiing or whatever we're doing, VCs do spend time with each other and they say, hey, what are you investing in? What's interesting? And you say, well this is very interesting and here's where it's at. We talk very candidly about it. And you wouldn't want me to invest in something without knowing the complete story. Yes, because we have a relationship based on trust.

36:34

You know, relationship based on trust are kind of social equity is on the stake. So we don't, I don't want to sell you, you know, crappy. Yeah. Companies.

37:02

I want a broken car.

37:13

Yeah, exactly, exactly, exactly.

37:14

Because then I have a problem and then the next time when you have something great, I just say, oh, maybe there's some serious hidden problem with this car, is the transmission's no good.

37:16

And then you would never converse with me. So it's a very long time business. One cycle is long. It takes like, you know, five, 10 years for a result to come out from one company and One fund takes 10 to 15 years and that's like how long the cycle is and we are continuing in that cycle. So it's all about long term relationship with your founders, your startup community, your co investors, your LP investors. So we live in a very kind of long term kind of time horizon.

37:23

Yeah.

37:54

And we have many bets, we place many investments. So we have a built in diversification.

37:55

The founder is all in on one thing.

38:01

So that's also an interesting part of the dynamic. Yeah, yeah.

38:04

The founder could be very high anxiety.

38:07

An investor might be, oh, it's in this fund. We have Uber in this fund.

38:11

You know, so many great companies you've.

38:15

Done, you have kayak in this one, you that fund, you've already returned 3x4x. You feel calm. But sometimes an investor has a fund, it's underwater, their second fund is underwater. First fund is great, third fund they're raising. There are things that we have to deal with on a psychological basis. We'll get into that, I promise the audience. We talk about business models. Take me through what business models really work in 2026 and going forward, which ones are the most investable from a venture capitalist and why?

38:17

On the precognition that I think great business and great investment is two different things and I want to invest in the overlap. So you know, the definition of great business is, you know, you have different perspectives, you know, highly scalable. You know, that's kind of like a typical startup kind of great business. But let's say in actually the longest standing company is actually founded in Japan. It goes on for about 1500 years. It does like traditional kind of carpentry for Japanese shrine and you know, it's not scalable, it's not making huge amount.

38:50

Of wait, this is a real companies.

39:32

Yeah.

39:34

How many years old?

39:35

1500. That's the world's oldest company.

39:36

The oldest company in America is America. 250 years old. Something to think about.

39:40

Yeah, exactly. So you know, if I ask if that, you know, carpentry company for you Know, traditional shrine. Is that a great company? Yes.

39:49

Incredible.

39:57

Yeah, yeah.

39:58

It's not a venture company.

39:58

Yeah, exactly. It doesn't have to have a highly scalable or high speed, but it's a great company.

40:00

Yeah.

40:08

So you mentioned two things there. High speed. I think maybe high margin and scalable. Are these the main circles that we need and the overlapping ones? Is a company that people would take public. It needs to have those components. It can't be low margin, it can't be low scale, it can't. You can't grow slow.

40:08

To put it in other way, VC investable great companies are very niche component of the great companies. And you know, so to break down your perspective on high, high margin scalability and speed, I think it really comes down to exponential top line growth and how do you say it, I forgot the English word. But the other way around of exponential. So the cost is coming down as the scale ups. Not like linear, but in a curve.

40:28

Yes. What's the best way to say it?

40:59

The other way around of explanation.

41:02

Yeah.

41:04

In a fixed cost business, the margin can keep increasing. So if you were to make a piece of software, the incremental customer, if it costs $1 million to make the software a year, spend 1 million to make it the first million dollars, you break even. But then at a certain point, the fixed cost business, everything is very profitable after that. Yeah.

41:06

The point is you have like the unit economics as a snapshot. As you scale that unit, unit economics on the top line side and on the cost side both kind of improve significantly. So. So in the end, your final business model is super, super beautiful.

41:31

Yeah.

41:48

If you were to take the example of Robinhood or Uber, on Robinhood, which we were early investors in, before they even launched the product, they have 11 business units that make $100 million now. And when they started, they had one business unit making no dollars. We could never have predicted that. But when they get a customer for.

41:49

One or two of those services, now they've added prediction markets. Now they add margin loans, now they.

42:09

Add options trading, now they add a retirement savings account, they added a credit card. As they add each one of those, they don't have to acquire the customer because they have the customer ready. When Uber launched, Uber eats on both sides. They have the drivers, so the drivers.

42:14

Get more work in a marketplace dynamic.

42:30

And they already have the customer. So what they've tried to do is create this Uber one where they get people to use both products. And if you do that, oh wow. Yum, yum, yum, yum. Is A technical term, it means lots.

42:33

Of money, yum yum.

42:47

So implication of that to the founders, especially when you're in a very early or seed phase, is that you don't have to have that kind of yum yum unit economics right now. You don't have to realize it, but you have to have a hypothesis to have that five years down the road, right? Yeah.

42:49

And you can model that very simply on the back of an envelope.

43:08

Exactly.

43:13

Okay, we're in one city, we have this many drivers and this many customers. But when we get to six cities and we can launch a city for you know, a tenth of the price and they already know Uber because they used it on their vacation. When Uber finally came to Tokyo, many people had heard of it before so it was easier. Each city became easier on the traditional business models. You have E commerce, you have consumer advertising, consumer subscription, you have marketplaces, you have API charging for consumption type businesses. You have enterprise cost per seat and obviously enterprise costs for utilization. Some people sell data or subscriptions. You know, it's more niche. What, which of these do you like most right now?

43:14

I may not be answering your question directly, but other than the founders single next important thing is having the right market, the big market size, growing market size. If the TAM is growing, only if you grew together with the tam. Even if you don't beat the growth of your market, you're growing. So it's easy. And the next thing you want to do is how you can establish kind of like a exponential top line in that market and improving your margins in the other way curve is you can think about it after you have that exponential top line. So within that growing market, how you can out beat the growth of the huge market and huge market growth, that's next after the market and then after that as you run, you can think about how you can exponentially decrease the cost side. So I think that's the priority order.

44:02

Yeah, it's very interesting when a founder figures this out and first time founders, this is one of the great things.

45:05

A venture capitalist, the right partner can.

45:15

Do is they could say hey, we can tell you some stories. This movie has already happened. Take a look at this company. Here's a marketplace similar to yours. Take a look at this E commerce company. But your point is very important. If you pick a market. I remember people were building tools for newspapers, they were building tools for local television stations. In America we have like very regional television stations in. And they would make these incredible tools because those businesses had lots of problems. So those businesses would embrace it. But because the newspaper business was going like this, you could not solve their problem.

45:17

When in the late 90s there was like a joke, like startup saying, hey, there's a new tech Internet, it's going to revolutionize the facts, right? Yeah.

45:55

Revolutionize it as in kill it?

46:08

No, no, no. It was like a fax over the Internet.

46:10

Yeah, fax over Internet.

46:14

Yeah. So they, they, you know, raised like almost like 100 million, but they went bankrupt.

46:15

Yes. They were literally allowing people to have a phone number that you could fax and it would send you a PDF. Yes, of the fax.

46:21

Exactly. So you know, you're going to be.

46:28

The transitional technology, not a lasting technology.

46:30

Exactly. So I think, you know, what's important is not only looking at the superficial market, but the fundamental needs behind it. And some means like fax or Internet is only the means or the how of delivering that value. So, you know, maybe emails and fax, it provides the same kind of value proposition. Horse and motor cars.

46:33

Yeah. To both transportation, both are for sharing documents, but one is just so much faster you would never use it. And sometimes you have to think at a very fundamental basis, well, what are people faxing? And you have to ask a more basic first principle question. What do people fax? A lot of times they fax a contract. And that's Docusign.

47:00

Exactly, exactly.

47:20

You know, and a calendar is calendly, you know, like.

47:21

So there were some little ideas that became very large businesses, very simple ideas.

47:25

Like DocuSign or HelloSign.

47:31

So I think you have to recognize the market in terms of like, not in terms of like superficial product market. So the failure of the fax Internet company was you recognize the market as the fax market, not like the document kind of sending market. So I think you have to understand the market as in the value proposition, opportunity. And then you come up with a solution, solution that provides the best fit solution to realize that value proposition.

47:33

I want to talk to you about the greatest technological change of our lifetime.

48:01

And I mentioned earlier, you and I are old, but we knew this one was coming. We knew AI was coming for 40 years. And now it's here. Really great to catch up. And AI, we had machine learning. We were watching Big Blue and IBM with a supercomputer beat chess 20 years ago. Slowly, slowly becoming and now all at once it's affecting everything. And maybe you could talk a little bit about the pace and the opportunity.

48:06

Yes. So in terms of pace, it's highly unpredictable. Definitely it's very fast. And you know, it's much, much faster than we anticipated. Or, you know, when, when us older people go and look back at the Internet, it was much slower in diffusing, but AI is much, much faster. But what we know is the direction of the change, but we can't predict the timing. So the way I look at it is I think I would like to look down in the future trying to find the path that would definitely come. But if you can't predict the time, that's okay. It would come eventually. So all you need is enough money so that you can wait for that time to come. But if you're super certain about that coming, you can bet on it and wait for it to come. Sometimes people say when there is a big wave coming, it's too late to go out and paddle. You have to have already paddled and be in the waters to ride that wave. So, but if you know the big wave is coming, you don't know whether it would come in 1 minute, 5 minutes, 1 hour. But if you see it coming, you should wait in the sea already.

48:39

Yes.

49:52

I think the surfers call them sets. Wait for the right set. And if you're in the game, if you're in the ocean, you can take advantage of it. But if you're on the shore, this is why it's important to start. But you're also speaking to being frugal, controlling your burn rate and anticipating, hey, this could take time. If you look at AR and VR, you and I were talking 20 years ago, starting to happen here on desktop computers. Now we finally have actual headsets. Apple is getting closer and closer. With Apple Vision, spectacles are getting better and better. It's close. But AI, my lord, is changing not just what products we're building and the value proposition, but it's also changing how we build companies. What are you seeing? How are founders using AI to build companies faster, better? Do you have insights into it?

49:53

Yeah, definitely. You know, AI has to be integrated into your business model, but again, it's about predicting the time. So what I always like to think when I'm thinking of my investment thesis or even to advise the founders or my portfolio company, is that look at the advanced use cases. So AI is a big word, but there are some advanced use cases, like let's say, for example, autonomous cars. The tech is already ready. Initially, people was in the main driver's seat. AI was just an assisting kind of tool. Then the role of AI became stronger and people just sat on the driver's seat to take take responsibility. Because of the readiness of the society and the legal framework wasn't there. And finally tech and the society is both ready. So there is full autonomous driving and autonomous driving kind of one of the advanced use cases. You already have Waymo and all that already put into use. But if you look at other applications, even like enterprise solution or something like that, you hardly see any autonomous kind of fully agentic product yet. So the way I see it is in analogy to the autonomous driving is that yes, the tech is there, it's possible to build a product. But let's say if it's an enterprise product, your client might be very old, especially in Japan. The big Japanese traditional companies may be very concerned, conservative and they don't want to kind of implement fully blown like a autonomous AI agent. They would say, like who's going to take the responsibility when it fails and things like that.

50:43

Risk is very important here.

52:29

So that means your client, you know, in the analogy of autonomous driving, the society is not ready yet. So what's happening right now is there is like a human account manager and the quality assurance person who is just being there just, just for the sake.

52:32

Of human in the loop monitoring.

52:48

Yeah, monitoring so that the client can feel safe and you know, and the AI agentic kind of product is implemented within the workflow of the provider, not the client internally. So from the client perspective it's just to be, you know, cheaper and more efficient bpo, but internal process. On the supplier side it's fully AI and that's like the stage where there is like a human safety copilot is there. Maybe down the road there's going to come like fully autonomous product where it would be implemented within the client's workflow. But you can't predict the time of readiness of the client side and regulatory issues like security or information, things like that. So in the short term you have to take what is available on the table with a short term business model. But at the same time it's pretty difficult to have a conflicting business model within your company. But it would dominate five years down the road and you don't know when the switching timing would come. So you have to have both business.

52:50

Model embedded and this is where the strategy comes in.

54:03

Yes, yes.

54:07

As a founder you have to figure out how to survive. So if fully autonomous cars aren't here yet, but you can give it to a driver so they're less fatigued, which was the original idea, this will lower fatigue, maybe lower mistakes.

54:08

Okay, great.

54:22

Like adaptive cruise control, I'll keep you in the lane and that's Some value, not the full value.

54:23

And you know, it kind of helps you develop elemental product, elemental technology to feed into the, you know, fully autonomous driving in the end. So it kind of leads the way into the end goal.

54:29

Shin, it's been amazing to spend an hour with you and catch up. Thank you so much for coming on this week in startups and I'm going to be here twice a year so I don't know what your favorite restaurant is or food. Tell me now.

54:42

Actually, you know this, tons of Japanese great restaurants. You know there's been to lots of them. Some restaurant you can't reserve ahead like two years.

54:52

Right.

55:02

So let me know.

55:02

But you're very important.

55:03

Yes.

55:04

And you know everybody and you know.

55:05

As we said we, we live in a longer time horizon. So two years is like, you know, two weeks down there.

55:07

What's your favorite food right now?

55:12

Right now.

55:14

What do you love?

55:15

Maybe there's a restaurant. Well, actually there's a good sushi restaurant in Tokyo. Kyocho. Kyocho Mitani.

55:16

It's Omokase.

55:26

Omokase.

55:28

Michelin star or like more underground.

55:30

It's not underground but it doesn't have a star. But it's super famous. Some of the best restaurants in Japan, they don't have stars.

55:32

They don't want them.

55:40

Exactly. Yeah.

55:41

Because they want to be for their.

55:42

Customers in their community.

55:45

Yeah.

55:46

Loyal customers with long higher LTVs.

55:47

Yeah.

55:50

They're actually thinking correctly. I found an interesting concept.

55:51

I had heard that sushi used to be bar food.

55:56

It was a fast food in Edo period. Yeah, yeah.

55:59

And so having done this research many years ago on the history of it, there used to be stand up sushi bars. And when I came here, I was talking to one of my founders and they said oh yeah, we were going shopping and he said there's a stand up sushi bar I like a lot in the basement of this department store. You should go to it. And I went and you stand up and it's all these incredible cuts. Incredible Otoro, incredible Hokkaido uni. Just all the best pieces. But the price is like half of the normal restaurant in Japan. You get it faster and you stand there and then there's a little hot spigot and you take a little matcha powder and you make your own green tea. No waitresses just order from the chef. Boom, boom, boom. And that is one fourth of the price in the United States. It was so good. So I've been to two stand up sushi places. Have you know about these?

56:01

Yes.

56:59

Are they common or not common.

56:59

Pretty common. You actually have one in Haneda Airport.

57:01

Hanada Airport has one?

57:05

Yeah.

57:06

Really?

57:07

Yes. Now you know where to find Jason.

57:08

We'll be there. All right, let's give it up one more time for Shin Takemiya. Thank you. All right, everybody, we'll have one more episode or two on this week in Startups from Tokyo. And it has been what a thrill.

57:10

And an honor and a privilege to.

57:28

Get to spend time with these founders.

57:30

We'll see you all next time.

57:31

Bye Bye.

57:32