Le Wagon ApéroTalk: The life of a VC in Japan, with James Riney and Hiro Maeda

A couple of weeks ago, we had a chance to welcome two prominent names of the startup & VC ecosystem in Tokyo: Hiro Maeda, managing partner at BEENEXT, and James Riney, head of 500 Startups in Japan. We initially planned to discuss with them whether investors, to make their decision, were focusing more on the overall vision of founders, or rather on the technology behind a specific product. But with the audience shooting questions after questions, the talk quickly shaped into a view of the life of a VC in Japan.

Here is a short summary of the event!

How do startups in Japan compare to those you find in the Silicon Valley?

Hiro: In the US, the entrepreneur community is strongly linked to the scientist one. Also, the most striking aspect is how much people collaborate in the Valley… That’s a bit more unusual here in Japan.

James: Right, in Japan engineers are in the background serving the interest of the sales guy. Most CEOs here do not seem to have a very technical mindset.

Tokyo’s startup scene is a small village

Hiro: On the other hand, I would say that networking is much smoother here. You can easily get in touch with large companies, since it’s a a small ecosystem, and everyone wants to be seen “hanging out” with startups.

James: Yes, Tokyo is a small village.

Launching a startup, is it easier to be successful as a Japanese or as a foreigner?

Hiro: I’d say it’s much tougher to be successful here as a foreigner. Most people are allergic to English, so a first selection happens based on that.

You have to speak the culture

James: Basically, if you don’t speak Japanese, it will be very tough. You also need to speak the culture. Now when you know that, you just need to play on your strength, the famous “gaijin card”. When we started 500 here I was going straight to the point, and my Japanese partner would smooth it out in the back. Now that’s pretty much true for any venture: you want to find a partner that completes you.

Is there any industry in which you specifically see potential for Japan?

Hiro: I personally love industry-specific SaaS products. The logic behind is, there are so many processes you can simplify in large companies, it is going to happen at some point.

James: I love SaaS too. Fintech is also the big word right now, and for some industries link banking and insurance everything still needs to be done.

What are the specificities of being a VC in Japan?

Hiro: the relative lack of entrepreneurs is great for investors, it basically mean less competition, less capital needed to enter a specific market, and no fight to acquire the best talents.

James: You obviously have less money invested in startups, but again, relatively, you have a higher chance to land a couple hundred thousand dollars investment as an entrepreneur.

The lack of entrepreneurs is great for investors

Hiro: A second point would be, the thought process is different when making investment decisions. If I think the team is good, it’s probably the best team around. Lastly, we don’t have to choose between different companies in a specific industry.

How to find your perfect cofounder?

James: That’s an easy one! We have a monthly nomikai just for that.

What’s the best timing to reach out to VCs?

James: There are two wasy to think about it. Some investors are strongly biased from their first impression, so if you come unprepared, you’re going to be categorized as No-Go. But you can also get in touch early, get to know your potential investors, and regularly share your progress and data points.

Hiro: If you have an idea and you are committed, then the earlier the better. You want to keep the conversation going with them.

Last but not least… What numbers do you look at before investing? And what % of ROI are you looking for?

Hiro: It really depends on your portfolio. Most of the time, we look for homer, i.e. 50x the investment. But you’re already considered a top tier VC if you can do 3x for your entire portfolio. As for numbers I look at, if the product is out, I’ll focus on the engagement with existing users. Basically, are customers happy with your product?

Thanks a lot to Hiro and James for their time and precious insights! And check out our upcoming events here.