Crossing the Chasm: Funding Asian Successes
Originally published on 8/13/2018
With 60+ team members across 8 countries, and several funds under management, Fenox Venture Capital is certainly no slouch when it comes to investing and nurturing successful startups globally. If you are looking for somebody who understands investment and growth strategy in Asia, Fenox may especially be the first door you knock on, having successfully funded and exited several companies in Japan, and other Southeastern Asian nations.
The founder of Fenox Venture Capital, Anis Uzzaman has found a very specific and growing niche, owing to his student days in Tokyo. The Japanese-English bilingual, Tokyo Institute of Technology grad is our focus of this week’s Weekly Digest feature.
Anis Uzzaman: Founder, Fenox Venture Capital
Born in 1975, the US-born Uzzaman decided to attend the Tokyo Institute of Technology, growing up awestruck by Japanese consumer electronic companies like Sony and Hitachi. He the returned to the US to complete his Masters, and began his technology career at IBM as an engineer. After completing his PhD remotely through the Metropolitan University of Tokyo while working at IBM, he transitioned into a corporate development role, working on strategic investments and acquisitions. With ample experience, he starts his independent venture firm, Fenox Venture Capital.
While Fenox Venture Capital isn’t solely focused on Japan, there’s no denying Uzzaman’s passion to make Japan an innovation powerhouse that it once was. In the following video (in Japanese), Uzzaman discusses the current state of Japanese startups with a mix of realism and altruism. And while recognizing the recent Japanese retreat into deflationary economics and bureaucracy as a fact, he offers several concrete ideas for Japan to pull itself up again.
Let’s take a closer look at some perspectives Uzzaman has for Japanese corporations.
Opportunities:
Uzzaman has identified three key trends that have weakened Japanese brands:
- Difficulties in fostering internal corporate innovation
- Declining global competitiveness
- Lagging global trend discovery and reaction
What is concerning is that, while the years following WW2 saw the rise of current Japanese behemoths like Toyota and Sony, there are very few new entrants on the list. In fact, if you ask anybody on the streets to list Japanese company names, you will still get the names of post-WW2 corporations.
Strategy Differences Compared to the US:
Uzzaman noted that Japanese corporations do not take advantage of M&A strategy as much as their US counterparts. US firms use M&A for a variety of reasons including talent acquisition, outsourced technology R&D, and sales channel growth. Large US firms do not look down on startups, but rather view them as strategic differentiators to be actively tracked and incorporated into mature enterprises. This promotes acquisitions, which promotes entrepreneurship targeted as an acquisition play, creating a positive cycle of capital flows and innovation. On the contrary, the lack of Japanese M&A means fewer entrepreneurs as they do not expect M&A as a viable exit option.
What Exactly Can Japanese Companies Do to Change?
Focusing on the three major themes of Japanese corporate weaknesses, Uzzaman suggests the following as remedies to turn the Japanese innovation scene around:
- Supporting a robust entrepreneurship ecosystem
As discussed above, US corporations have leveraged startup M&A as a strategic differentiator, in addition to taking in new startup methodologies like lean product management. In other words, US corporations are keen on learning startup trends for their benefit. On the other hand, Japanese companies are still working with an older mindset which reveres in-house software instead of 3rd party technology, perfection rather than rapid experimentation, combined with a lack of interest in younger and smaller companies. This creates a negative cycle hurting both larger corporations and startups alike, while chipping away at the foundation of the Japanese entrepreneurship ecosystem. - Actively partner with advisors and companies who understand global startups
Microsoft and Disney have joined forces with TechStar, a Colorado-based incubator, to observe and take advantage of innovative trends and opportunities. Unlike Japanese companies, they are actively leaning into the latest startup methodologies and trends to keep abreast of global competition, whereas Japanese enterprises view these as only applicable to startups. This hurts Japanese enterprises as they continue to work on an anti-lean product development framework (or god forbid, waterfall), to take one example. - Incorporate global trends as fast as countries like the US and Israel
There needs to be a sense of urgency when it comes to upcoming global trends. Japanese companies are known to have the “first to be second” mentality, waiting for somebody else to prove business viability first before making a move. However, if Hitachi, Toshiba, or Sony could have spotted IoT as the next trend and connect their devices to the internet, these would have had the chance to instantly become one of the largest IoT companies. From our reliance to banks shifting to services like PayPal and Visa, and healthcare being disrupted not by hospitals but technology companies, the ability to spot upcoming trends in real time will help position Japanese enterprises as visionaries with deep pockets. - Changing how organizations are structured and incentivized
Japanese organizations are known for seniority-based promotion and pay scale, top-down management, lack of diversity, and a focus on their domestic markets. In order to work well with next-generation startups, they will have to shift to an environment of result orientation, global teams with diverse backgrounds (age, gender, nationality, etc.), and global products for a non-Japanese audience. This forces companies to open up to new ideas and objections, a necessary piece of a constantly innovating organization. Just like Google had their 20% rule, and how Broadcom set up offices in Israel and India to take on new perspectives (which also had the added benefit of creating a round-the-clock product development environment), Japanese companies must be open to listening to understand and act on what is outside of their comfort zone, not stay within it.
What I appreciated about Uzzaman’s talk was that he dug deeper into points that could’ve been generic talking points. From his fluent Japanese he’s retained, and the passion with which he speaks to his audience, it doesn’t seem like he’ll be looking to invest elsewhere any time soon.
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