Disrupting Japan

Dai Watanabe, Co-founder and managing partner of Delight Ventures, dives into Japan's innovation landscape. With over 25 years of experience, he reflects on how American enterprise innovation outpaces startups and why Japan lost its mobile internet lead. Watanabe discusses the challenges of retaining talent and emphasizes the need for Japanese founders to embrace global opportunities. He also highlights the importance of collaboration between startups and enterprises in Japan's evolving tech ecosystem.

Fifteen years ago, University-run venture funds were all but illegal here in Japan, but today a higher percentage of major Japanese universities have VC funds than in the US or Europe. Today we sit down with Kei Furukawa, a partner at the University of Tokyo IPC, a $300M venture fund, and we talk about the unique role these funds play in Japan, how they drive innovation in rural areas, and why he has to talk professors out of becoming startup CEOs. It's a great conversation, and I think you'll enjoy it. Show Notes UTokyo IPC'a mission and investment strategy How the Japanese government is trying to accelerate university innovation Why the government plans to stop funding university VC funds The unique role of University funds in Japan How IPC is helping startups work with large enterprises Why Japanese CVCs are more founder-friendly than American VCs Why Japanese CVC investment increased during covid How to talk a professor out of being a startup CEO Can startup interaction reform Japan’s universities? The challenge in developing innovators outside of the major cities Which startup sectors are most promising in Japan How senpai culture is holding Japan back Links from our Guest Everything you ever wanted to know about UTokyo IPC IPCs 1st Round program Follow Kei on X @keisukefurukawa Friend him on Facebook Connect on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. University Venture Funds play a much larger role in the startup ecosystem and in startup finance in Japan than they do in the US or Europe. Japanese university funds also operate differently, and  fill a different niche than most of their Western counterparts. Their oversized impact is all the more amazing when you consider that 15 years ago, it was basically illegal for Japanese universities to invest directly in startups, but now they've become a driving force. Well, today we sit down with Kei Furukawa, a partner at the University of Tokyo IPC. A $300 million University fund, and we dive into how Japanese university VCs invest today and how that's going to be changing in the near future. Oh, and for our overseas listeners in this conversation at different times, Kei and I talk about the University of Tokyo and Todai and UTokyo. It's all the same place. It just goes by many names. So Kei and I talk about how you can get investment from IPC, even if you're not a University of Tokyo student or faculty. The single biggest challenge to getting university professors on board with what's required to commercialize their research and how the different investment strategies in Japan are leading to a different kind of startup enterprise collaboration than we see in the rest of the world. But, you know, Kei tells that story much better than I can. So, let's get right to the interview. Interview Tim: We're sitting here with Kei Furukawa, a partner at the UTokyo Innovation Platform or IPC. So, thanks for sitting down with me. Kei: Thank you for having me on. Tim: In the introduction, I gave a brief description of what IPC is and what you're doing, but could you explain a little bit more? So like, what's your thesis? What are you investing in? Kei: So, we are a university of Tokyo Innovation platform company. In short, we are called in Japanese Todai IPC. I think there's three major points in our activities. Number one, we are a hundred percent subsidy of the University of Tokyo, which until a few years ago, it was a pretty rare case because national universities were not allowed to have, let's say, investment companies or let's say companies itself under the organization. But we were created for a more government policy point, we are a hundred percent subsidy, which is pretty, I think, unique model around the world that there's a venture capital right under the organization of university. Point number two is our main activity is investment. So, we have three funds right now. Todai is about 400 million in USD. And we do direct investment into startups, and we actually also do fund funds. So, we actually invest into other venture capital funds. Tim: Well, actually, your three funds, it's really interesting, and I hope we have time to dive into each of them, because each of them kind of represents a different strategic importance for the university. Kei: That's very true. Okay, let's dive into the three funds right now. So, we have three funds IPC one fund, AOI one fund, and ASA fund that we're working on right now. So, the IPC one fund is a fund that we invest into other venture capital funds, and also we do direct investment into startup into a more middle to later stage. ASA fund we invest into more early, let's say, seed round or very early stage funds. And we also do our car out spinouts from large corporations. And this is why we do it. I'll talk later. ASA is a complete fund of funds. It only does fund of funds which we are working together with the Tokyo Metropolitan Government. Tim: So, throughout the course in this interview, let's talk about each one of those individually. Because they're all really interesting to themselves, but focusing on IPC and the direct investments. So, what's your thesis? What kind of startups are you investing in? Kei: The thesis of startup investment for IPC fund and the AOI fund, there's a minor difference, but in general, we invest into startups that are utilizing research coming out from the university. So, that is the investment criteria that we have when we make investment into startups, that they're utilizing the research coming out from university in some way. It can be an IP from the university, or it can be like core research done together with the startup events and the university, which then we can call university related. And then there's other parts where it's like the professor comes in as an advisor. So, there's many ways we can form the way. Tim: Yeah, that's pretty broad. So, it's not necessarily just professors spinning out their research or students forming it. It could be founders with no particular connection to Todai who want to use the IP. Kei: That's exactly right. So, the most beautiful story will be that all startups are using the IP or research coming out from, let's say, just completely done in university. But one thing is that we want startups around the world to utilize the research coming from UTokyo not just the IP. So, we have actually about 10% of our portfolio is global companies. I don't know one about one third of the companies that we invest into is non UTokyo at day one, but we make that UTokyo connection in, let's say, academic or research way. And then they utilizing the UTokyo asset. And then we make investment, which is also a great way, I think, to enlarge the ecosystem around UTokyo. So we welcome other companies coming into UTokyo and utilizing the asset. Number two, if we restrict ourselves to just spin us from, we'll be restricting our investments. And the important thing is that we bring back return to the investors. So we broaden our, let's say, investment thesis so that we have a balanced portfolio in that way. Tim: Yeah. Are you focused on just the initial seed investment, or do you follow on the later stages? Kei: We are a follow on fund. So our fund size for IPC and ASA is both 200 million USD. So, we have a fairly big fund, and of course, it depends on the project itself, but we tend to do all our investments. Tim: So research at the University of Tokyo is really wide ranging. But for the IPC funds, is there a particular sector or a number of sectors that are particularly active, whether it's like healthcare or energy, or… Kei: About one third of our portfolio is healthcare, which is drug discovery, medical devices, and a bit of agritech. We do put a lot of power on biotech because it is important for humanity. We think it's important for investments. So, we do a lot of biotech. About 20 percentish goes into hardware including space, aerospace, materials, semiconductor and robotics. And about, let's say, one rest of the one third 40 percentish goes into AI and IT. We hardly do two consumer because we know in the market there's a lot of venture capitals that do two consumer kind of investment. And we do the more difficult AI and IT related between enterprise related startups in that sense. Tim: There are a huge number of foreign students here at the University of Tokyo. Are there a fair number of foreign founders in the fund? Kei: We have about 80 companies now, and I think we have about three or four companies that are non-Japanese founders of founding companies in Japan. Tim: Excellent. So you mentioned IPC started in 2016, and part of the motivation was the national government trying to get the national universities to be more active in supporting startups. At the time they did provide a lot of funds for that investment. So, who are your LPs? Is it all Todai money? Is it a little external money? Is it…? Kei: Good question. So most of the fund comes from Todai, but it comes from the government. For the first fund most of it comes from the government, but we have a little bit coming from major banks. For the second fund, about 60% comes from the government, but the rest comes from private sector. So that's financial institutions and enterprises. So half and half. Tim: So every fund is more and more private money. Kei: Yes. So, we have to go complete private most probably we are no longer yet, but for the next one, maybe we have to go more complete private on that. Tim: Well, I mean, that's a good trend. I think that was what the government was hoping for, right? Prime the pump and then let private money take it over. So, let's talk about university funds in Japan in general.

(sketch by Kaori Rei)Today we are going to sit down with an old friend. It was over seven years ago when I first had Tim Rowe on the podcast, and we mapped out what we saw as the future of startup innovation in Japan. In today's short episode, we talk about what we got right. what surprised us, and what we think is next for Japanese startup innovation. It's a great conversation, and I think you'll enjoy it. Leave a comment   Transcript Welcome to Disrupting Japan, straight talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. I'd like to share a special short in between episode with you. Last month I had a fireside chat with Tim Rowe, the founder and CEO of the Cambridge Innovation Center at the Global Venture Cafe's anniversary celebration in Tokyo. And I thought I would share it with you just as it happened.  I first had Tim on the show about eight years ago, just before CIC opened their Big Tokyo collaboration space. This time Tim and I talk about the changes to the Japanese startup ecosystem since then, what we are likely to see in the future, and we also discuss what might be a new model for startup ecosystems. As startups have become more and more accepted and more and more common. The old community playbook may not be as effective as it once was. But Tim tells that story much better than I can. So, let's get right to the interview. Interview Romero: All right, Tim, it is great to be sitting down with you again. And as a bit of background for the audience. You and I back in 2017, we were sitting down over coffee in Tokyo and you were telling me about your plans to open Venture Cafe and CIC and I remember asking you like, how the hell are you going to fill 6,000 square meters of co-working space in Tokyo? And here we are. Venture Cafe is one of the driving forces in the startup ecosystem. CIC is over capacity. I have never been so delighted to have my doubts proven wrong, so congratulations on that. Rowe: Thank you, Tim. Glad to be here. Romero: Before we dig in, you've got ties to Japan. You've been working with Japan for a long time, so can you tell us a little bit about what was your involvement in Japan in the 90s and forward? Rowe: Okay, so a bit of background. I'm from Cambridge, Massachusetts. My father was a professor at Harvard. My mother was a professor at MIT, so I'm one of those kids. And I was fortunate to be exposed a bit to the world. My grandmother had spent about a decade in Asia in the 1920s. And she used to teach me kanji when I was little. And so I didn't know much about Asia, but I thought this was really interesting. And I learned later that my great-grandfather arrived in Yokohama in 1919. He was then acting Surgeon General for the United States. And he was on a world trip to kind of build connections and relationships. So, we go back a little ways in Asia. My father, when I was in high school, did something that I think all the parents in the room should do. He said, look you should learn a little bit about the rest of the world. And he said, if you learn Japanese, I'll give you an opportunity to work in my company's Tokyo office for the summer. And I said, okay, deal. And I started studying Japanese. I didn't know the language at all, but it seemed like a cool opportunity. By the way, a generation later, I made the same offer to my oldest child. Actually, I made the offer to all my children, but my oldest child took me up and he came and worked in Tokyo also when he was 16. Kihara-san, I understand that you did something similar. You were in school in Chicago and in Amsterdam when you were young. And clearly your English reflects that experience. I think all of us should have this opportunity to go out of our usual comfort zone and work in another country and learn about other cultures. But that's my background. So, I did a year at Dosha University later as an exchange student from Amherst College. And then I was fortunate to get a job at Mitsubishi Research Institute Mitsubishi Soko for about four years after college. So, I've had time now and then in Japan. Romero: Alright, well, things have changed a lot, both from the 90s when you were first here and in the past seven years or so with the Venture Cafe and CIC experience. So, before we get into the future of Japan, what sticks out as some of the most significant changes you've seen in the startup ecosystem over the last, say seven years? Rowe: Japan as a country, and many of Japanese institutions have really gotten serious about startups I would say the last decade. I think the first wave was a lot of the Japanese corporations starting to really embrace working with startups. Before that it was almost impossible to work with a Japanese company as a startup. If you remember back 15, 20 years doing business in Japan is typically about your experience, your reputation as a business. And startups kind of by definition have none. And there was an awakening to the fact that, well, that's true. Startups are new and don't have this experience. They can also move faster and be agile and sometimes introduce new technologies that the larger companies have trouble introducing. We see this story in the automotive industry where Honda and General Motors and others could make an electric car, but they could never quite figure out how to make a market for electric cars. And then it took a startup Tesla to come in and say, okay, we're going to really seriously make a market. And that happened and later others followed. So, there's this recognition that I think emerged that startups can do things that companies, 10,000 times their size can't. And that's exciting. And so the doors started to open. More recently, I think the Japanese government started to really lean in and say, how can we support? What can we do? How can we support this part of the economy? Hey Michael, how are you? We have an expert in the room. Michael Cusumano, professor at MIT who has been writing and teaching about this for decades longer than I have. So, later you should get a chance to hear from him on this. But, so that started to happen, but I really need to say here, Tim, that there's a history before all this that I don't want us to forget. If you go back to Japan in the post-war era, Japan was one of the most productive startup economies in the world. And if you look at the results of that today, all you need to do is look at the percentage of the Russell 2000, most successful companies in the world that are from Japan. And you'll see that that percentage is roughly tied with the United States when you adjust for population. And all of those successful big companies were startups. These were companies like Sony and Honda and so forth. So, I just need to baseline this. There isn't some difference really, in terms of Japan's potential or capability to build world-leading startups than the United States. Yes, there's a difference in where we are today. Yes, there's a difference today in the amount of venture capital that's flowing. Those are all true, but there isn't some sort of fundamental reason why Japan shouldn't be producing startups of the same size and impact as the ones coming out of the United States or the UK or other leading innovation countries. So, the importance of this is that sometimes people think, well, maybe this is cultural. Maybe there's something about the Japanese culture where it doesn't produce as many startups. No, that's BS I won't say the full word because I'm in a public venue here. But that's BS, there's absolutely no cultural barrier here. There are structural barriers, there are differences. And I was pleased that Kihara-san talked about tax policy. We have policies in the United States, for instance, that make it very attractive to invest in startups. We have policies for our pension funds that make it very attractive for them to invest in venture funds. These policies are not necessarily followed equally everywhere. I know the UK, for instance, doesn't have that same policy, which has made it harder to get venture capital funds out of the pension and similar kinds of institutions. Those are policy changes, the policies, and they can be changed. And so I think what we're seeing now in Japan is this sort of openness to really rethink the structural drivers of innovation and how to move things forward. Romero: I agree. I think probably one of the most significant changes is the willingness of large enterprises to interact with startups. In the dotcom era, it was next to impossible. You get pushed down through four layers of subcontractors, and now almost every large organization to Japan has a team that's dedicated to working with startups. But looking back, and I agree, cultural explanations are kind of hand wavy. So structurally, I mean, is there anything you can particular that you point to and say, ah, that was the triggering event, this was the most important policy, social change, anything that set the wheels in motion? Or do you think it was more of a gradual change of people realizing the opportunities that working with startups presented? Rowe: Japan has a history of embracing things that have high level support. There's a little bit of follow the leader kind of behavior. People say Japan is not a risk taking country, but that's not true at all. Again, if you go back to World War II and look at Japan, there were a lot of risks taken. And if you look at modern, say, extreme sports, you have Japanese contestants that are just as capable as others, and they're taking extreme risks. But what Japan culture, this is a cultural piece. There tends to be a sort of a need for kind of a stamp of approval from someone that it's cool to take these risks. So when the Prime Minister's office launched its startup awards when METI and the cabinet office backed the J startup initiative, which you're probably familiar with that said,

Today we are going to break down some startup stereotypes. I sit down with Kunio Hara, co-founder and CEO of Beatrust and break apart the stereotypes of the uncreative Japanese enterprise and the young startup founder, and Kunio explains how Beatrust is already teaching old dogs new tricks. It's a great conversation, and I think you'll enjoy it. Show Notes How Japanese enterprises are different from their US large counterparts Things to know when starting a company in your late 50s Why older founders lead to more successful outcomes Challenges in breaking the age-hierarchy in Japan Can software actually make people collaborate? What it takes to get Japanese firms to innovate and collaborate freely Does Japan's management style have to change or can innovation happen within it? Why American companies will also soon have to change their work styles What new founders need to keep their eyes on when starting a startup Links from our Guest Everything you ever wanted to know about Beatrust Follow Beatrust on X @jp_beatrust Beatrust on Note Get in touch with Beatrust Connect with Kunio on LinkedIn Friend him on Facebook Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. I didn't really realize what this episode was about until I finished the editing. Oh, don't worry. I'll be introducing you to an innovative founder in just a minute, and we'll dive deep into their business and their market. But this episode is really about stereotypes, how much truth they really have and why they stay with us, and what we can do to change both the perceptions and the realities that underlie them. Today we sit down with Kunio Hara, co-founder and CEO of Beatrust, a startup that's focused on getting Japanese enterprises to break from their hierarchical structures and let their employees collaborate. Listeners who have spent time in Japan know that this is not an easy task, but as we explore this subject, it becomes clear that both the reality and the solutions are not as straightforward as the stereotype suggest. We also explore the stereotype of the young Rebel startup founder, and man that is a pervasive one. In 2007, a 22-year-old, Mark Zuckerberg famously declared that quote, young people are just smarter. Paul Graham explained in 2013 that investors tend to be skeptical of any founder who is over 32 years old. However, if you take the time to look at the real world results, the data actually show that older founders are much more likely to have a large value exit than younger founders. Kunio started Beatrust in his late fifties, and we talk about the positives and the negatives associated with that. But, you know, Kunio tells that story much better than I can. So let's get right to the interview. Interview Tim: So, I'm sitting here with Kunio Hara, the co-founder and CEO of Beatrust, who is modernizing corporate collaboration and culture in Japan. So, thanks for sitting down with me. Kunio: Yeah, thank you, Tim. Long time no see. Tim: Yeah, it has been a while since you're at Google. So Beatrust is focused on helping employees collaborate. This is important. Everyone agrees it's important. But it's hard. So what is Beatrust doing differently in this space? Kunio: We call our service talent collaboration tools because we try to define the new space and compare with other HR tech, especially talent management. What we do is mainly to help large organizations drive and facilitate more autonomous collaboration like cross functions. Tim: Okay. Yeah, that's challenging and in a bit, I want to dive deep into exactly how you do that. But before that, tell me about your customers. So, who's using Beatrust? Kunio: Obviously, large enterprise customers. They want to transform the culture to more innovative oriented, but our uniqueness about the product is we don't always go to one specific divisions. We go to a lot of different organizations such as R&D, Sales or maybe even new business development, because they really need to facilitate those autonomous collaboration across different functions. Tim: Okay. Yeah. Now this is something you and I have talked about before. I mean, we first met back when we were at Google, and you and Masato Kume left Google to start Beatrust in 2020. So why? What was your vision? Kunio: So, when I was at Google, I led a couple interesting projects. One is Olympics and the other one is startups. And the last one is more like DX support for Japanese enterprise. And for the last project, we had a lot of meetings with Japanese executives. And the main theme of those meetings, how they can make more innovations simply. So, Japan lost 30 years for making innovations. And they go far behind US companies such as Google and Microsoft and Amazon, and they want to understand why they were not able to make innovation like those big US IT companies. I realized a couple things because Japanese organization they have a lot of good employees. Many good employees. And sometimes management vision is very good, but why other organization, they cannot make innovation. At that time I was reading Google so I try to understand what's the difference between US IT company like Google and Japanese traditional large enterprise. And then I found maybe two main causes. One is culture, because culture is the essence of the innovation. When I was Google we had about 120 thousand employees. But usually with that size organization become very structured. So, it's very hard to make collaboration those different functions. But Google has preserved good culture, very open communication style. Tim: So, is your goal kind of to bring a Google vibe or Google structure to corporate Japan? Kunio: Of course not. It's not easy to import that kind of culture from a US company to Japanese company, because Japanese company has also good culture. Hundred years, three years, very good culture. But for innovation perspective, maybe they're not so good fit anymore. So, that's why they have to adapt but not easy to transform. Tim: Well, actually that's one thing that's always fascinated me. Because I agree. What you're saying is almost common sense among people who study innovation. But when you look at Japanese companies in the sixties and seventies, they had the same hierarchy. The same rigid structure, but they were incredibly innovative. So, is it just the structure? Is there something else missing? Kunio: I think what the market demands really changing, maybe Japan is good at focusing one thing. So, they want to create some product in a very efficient way, good quality. That's the strength of our Japanese business used to be. But now they need to have more consolidated, more hybrid type business or hybrid type of product and services with technology. So in that case, they have to collaborate more and more across different function because they really need different expertise and skillset. Tim: That's really interesting. And I guess you're right, if you're looking back into like the sixties and seventies, it was definitely innovative, but the product cycles were much longer. These were products that were marketed and the fundamental product would continue for years or decades. And now, especially in the software age, life cycles are a couple of years at most. Kunio: You can imagine three years ago there was no generative AI in the market. So that speed at the Japanese organization was not able to adapt. Tim: Okay. Another thing I think that's very unique about the Beatrust story and your story in particular is that the image we have of founders is always some 20 something new college graduate. But that's not really true. And in your case, especially, I mean, you were a Google exec for about seven years, and you worked at Microsoft for three or four years before that. And you were in your late fifties when you started Beatrust, right? Kunio: Exactly, yes. Tim: So, what were some of the tradeoffs you considered when you were starting? Kunio: Yeah, I think the starting company doesn't matter any ages. And the seniority provides a lot of good things. Because you have no house, you have experience, you have connections. So, we should leverage those assets. But at the same time, senior people don't have more updated sense of the market. And I think I have energy, but of course, younger people have more energy they can really work for 24 hours. But it's kind of a combination. I was able to set up a company because I had a partner Kume San, he's much younger than me, it then can be good synergy. I think more and more Japanese senior people should aim at founding the new business because they have those expertise and background and relationship and young people don't have. So, that could be a good synergy. Tim: I think that's especially true when selling enterprise software. It's incredibly important to understand the problem you're trying to solve, and the people without those experiences won't be able to understand the customer's real problems. I think that kind of interaction is incredibly important for innovation, being able to communicate as peers despite age differences which is hard in Japan. Even back at Google for startups, one of the most common problems was we'd have a 35-year-old founder who had just hired a 55-year-old head of sales. And both sides really had trouble with the management structure, even when they really wanted it to work it was just so much against Japanese culture. And we set up kind of protocols and I worked with them to get them through it, and it worked out great in the end, but it's really challenging in Japan to get past these types of cultural box. Kunio: Yeah. So of course you know that depends on the personality. For senior people, usually they have their own idea, very structured, very solid.

Shota Nakagawa, the founder and CEO of Caster, shares insights into pioneering AI integration in Japan's workforce. He discusses how AI employees are addressing the country's labor shortage and why 90% of Caster's workforce consists of women. The conversation delves into Japan's unique approach to remote work, emphasizing flexibility and trust. Nakagawa also explores the skepticism surrounding AI in Japan and the potential for AI to manage critical tasks, all while providing a pathway for revitalizing rural areas.

Welcome to Disrupting Japan. Straight talk from Japan’s most innovative founders and VCs. I’m Tim Romero, and thanks for joining me. There is so much happening in Japan right now. Startups and innovation are beginning to reshape Japan with the same dynamism we saw during the post-war boom or the Meji-era re-opening. And I’ve been in the middle of this for a long time. I’m now a partner a JERA Ventures, but over the over 30 years that I’ve lived in Japan, I’ve started four startups here, worked at TEPCO Ventures, ran Google for Startups Japan, and, of course, I’ve been running the Disrupting Japan podcast for more than 10 years. Every episode, I sit down with friends, VCs, founders, and leaders who are shaping Japan’s startup ecosystem to give you an inside look at what’s really happening here in Japan. So, please subscribe and join me on this journey. I’m Tim Romero, and thanks for listening to Disrupting Japan.

Join Jumpei Yoshida, CFO of Kaminashi, a leader in SaaS solutions for frontline workers. He discusses Japan's obsession with paper and how it's slow to evolve. The conversation delves into the cultural barriers to digitization, particularly in blue-collar industries, and how foreign workers are spurring change. Jumpei shares insights on the unique sales cycles in Japan and offers advice for selling software to traditional businesses. This transformative journey is not just about technology; it's about reshaping workflows and trust in client relationships.

Most outside of the energy industry are (pleasantly) surprised to learn how aggressively startups and CVCs are pushing decarbonization forward. Decarbonization is a fascinating and incredibly important issue, so please join me on this short but special episode. It's a great conversation, and I think you'll enjoy it. Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. This is a short episode. I wanted to share with you a panel discussion I moderated at the Global Corporate Venturing Asia Congress on the role that CVCs are playing in the green energy transition. It's an inside look at what some of the leaders in the field are thinking. You'll hear from Sophia Nadur, the managing director of APAC and Middle East at BP Ventures. Nicole LeBlanc, partner at Woven Capital, and Jim Aota, chairman of Yamaha Motor Ventures. You know, outside of the industry, a lot of people are surprised to learn just how active and supportive of startups global energy and transport companies can be and how they're working to push meaningful innovations into the marketplace. So here are some quick insights into how some of the world's leading energy related companies are working with startups to green our power system and transition us all to a sustainable future. We talk about the specific kinds of startups we're looking to invest in, the different ways we have to support and work with startups and what we see is the most exciting energy startup trends for the next three to five years. But you know, the panel tells that story much better than I can. So, let's get right to the interview.   Interview Tim: Okay, thank you so much. I am really looking forward. We're going to be talking about how CVCs are supporting and fueling the growth of energy startups all over the world. And to start off, I'd like to do brief, brief introductions because there's four of us here. So I'm Tim Romero, I'm a partner at JERA Ventures. JERA is a Japanese electric utility. We generate about a third of Japan's electricity. We're investing in decarbonization, new business models and energy and looking for the best companies globally to bring to Japan. I also, for the last 10 years, have been running the Disrupting Japan podcast that talks about VCs and startups in Japan. And this is important because this is being recorded to release on the podcast. So, you are all part of the show. Nicole: Hi everybody. Nicole LeBlace. I'm a partner with Woven Capital and longtime listener of Tim's podcast. So, we're the Growth Venture fund for Toyota. So, we look at growth stage companies typically that are able to work with Toyota across a number of different sectors. So energy that we're about to talk about here is certainly one, but also looking at supply chain automation. And if you think about mobility 3.0, connected cars, that sort of thing. Our team is mainly based here in Tokyo, including myself, but we also have people in the US and in the UK. Sophia: Hi, I'm Sophia Nadur, MD for Asia Pacific and Middle East at BP Ventures. BP Ventures is a global energy company. I am delighted to have Masaki Kaison, who's the head of BP Japan with me, such as the importance that we are placing on looking for investments in Japan right now. We have $850 million assets under management. We invest $150 million at least every year from our balance sheet. We invest in series A, series B, potentially series C companies who are scaling up energy transition related offers, which could include battery storage, offshore wind, solar, hydrogen, mobility, even retail and convenience. Even these areas are of interest to us and we are actively looking to invest in in Japan. We have two, nearly three investments in India, two in China, and two in Australia. Just in this region alone. Jim: Right. So, my name is Jim Aota and I am the chairman of the Yamaha Model Ventures, but it's the same as the cause of the Sony Ventures. Talking about, I have a double hat. So one is the Sony one of the Yamaha Motor Corporation of the new Business development head. And also I'm taking care of the Yamaha Motor Ventures chairman's positions. Typically it's a Yamaha Motor Village as chairman's position is taking care of the investment committee, which is a Yamaha Motor Ventures in the Silicon Valley is taking care of it. Lots of the sourcing activity, decision making processes. So we got a setting up for the IC from the LPs point of view, it's a one LP, one GP structure, we have it. And currently we are running the 300 million commitment fund in the United States, which is going to be one fund for the startup side. And the second is a 401 and I got to have the separate fund, which is focused on to the sustainability side. So, the three fund is side by side structures and we got to going to focus on, but the typically it's compared with the size of the Toyota or VPs. My investment theme is a little bit narrower, so I don't know how much can contribute for the energy sector's conversation here, but we'll try. Tim: I think you can contribute quite a bit from our earlier discussions, but one point I want to kick us off on. So, traditionally energy startups have been very capital intensive. It's taken a long time to bring them to an exit. So, it's been an area that CVCs have been playing an active role in. But if you follow GCV research, as I'm sure we all do here, we know that just very recently CVCs are no longer providing the majority of investment capital to energy startups that institutional financial VCs have now taken the lead. So, I want to your thoughts on what is the best role that CVCs can play here? What is the unique value that we add within this ecosystem? And Sophia, I know you've spent a lot of time thinking and working on this, so what are your thoughts here? Sophia: I think if you think about the infrastructure institutional investors, the banks, the financial institutions, they don't want to take any technology risk. They're okay even with a bit of business model risk. But the value that we bring as folks here in this room and many people here is that we can help the companies very early stage overcome some of the technology hurdles using maybe some of the resources within our own company to be able to run pilots and POCs and programs to help ensure that the product service has market fit and then also to overcome business model innovation challenges. And that's still a service that we offer and that's what I think why VCs and CVCs will have an enduring role to play as this energy transition progresses irrespective of how, let's say infra heavy this particular part of the transition will be. Tim: So, is BP pretty hands-on in that respect? Do you actually like pull engineers out of the field and work with the startups and that kind of thing? Sophia: That's a good question. So we invested in a geothermal company a few years ago in Canada. And you might think geothermal is essentially looking at underground heating and then basically pulling that heating to heat homes and businesses above ground. But to get that, you need to drill wells four and a half kilometers below the surface of the earth. To do that it might be useful to have drilling engineering experience. And that's what we found in terms of the real value that BP has offered to this startup. And now this startup has drilled well four and a half kilometers below the surface of the earth in Bavaria in Germany. And a lot of that support and expertise have come from within BP and that helps accelerate the scale up of this young company. Tim: Fantastic. Jim, what are your thoughts? Jim: Probably a little bit different point of view what Sophia is talking about. So for example, Yamaha Motor, we established the company's a 1955 and that is a spin of venture of the Yamaha music. So, we have the music business, but suddenly the top management team decided we got to make motorcycle. So, it's kind of the startup mindset. We started back in 1955 and believe it or not, my city is called as Hamamatsu city. You can take the Shinkansen from here, it's 1.5 hours away from here. We got to have over 80 plus motorcycle company in town. So, it's kind of the expansion of the venture time in that city. And now you can imagine for the Japanese motorcycle company, Honda, Yamaha, Suzuki, Kawasaki, we totally going over for the consolidation phase and we got to making the company as very quality, high quality recognition from the customer side. So, from the company who is building up startup now, probably what we can help is how we can make the company better from the larger corporation point of view. So, we have some history and we got to do something on this so we can tell something to the startup company. So, that is the things we can help them to raising their bar or maybe getting into the market much higher space. But other than that, very difficult like Sophia can tell more about what's kind of your energy transitions. But my job is the people who has a passion, they want to change the world and how we can help. I think that's the only point I can do this in a CVC point of view. Tim: Well, I think Yamaha's in a really interesting position and a lot of people forget that companies like Yamaha and Honda were incredibly disruptive in the fifties and sixties. It was just redefined what a motorcycle was and in the ensuing decades have built up an incredible engineering expertise. So is it really, when you say increasing quality, is it that engineering that suitability for market? What aspect do the startups find most valuable? Jim: I think it's a large manufacturing corporation always compelling with the startup and myself and they are not, we are better and it really true actually. But from the day one, you don't need this kind of level things. You have to kind of step one, step two,

In a captivating discussion with Jad Tarifi, founder of Integral AI and former chief of Google's first Generative AI team, we explore Japan's surprising advantages in the AI race. Jad shares insights on why robotics is crucial for AI advancement, critiques the humanoid robot trend, and offers strategies for startups to effectively compete against major players. He also delves into the philosophical aspects of AGI development, the alignment problem, and the importance of ensuring AI aligns with human values for a benevolent future.

While the rest of the world is copying Silicon Valley, Tokyo is looking at Paris. Today we sit down with Mark Bivens and Matt Romaine, the co-founders of Shizen Capital to talk about Japan's new startup policies, the changing role of M&A, the main force behind the changing attitudes about startups in Japan. It's a great conversation, and I think you'll enjoy it. Show Notes Why Japanese startups need to start buying other startups The root of Japan's odd attitudes towards M&A and the forces changing it Structuring investments into foreign startups making a Japan market entry Why the Japan's angel investing tax-break is not really about taxes What Japan plans to import from the French startup ecosystem The best way to win the hearts and minds to change startup culture What's driving the recent explosion in startup events, and will it last? The best Japanese startup ecosystems outside of Tokyo Can authenticity scale? Links from our Guest Everything you ever wanted to know about Shizen Capital Connect on LinkedIn Follow Shizen Capital on X  @shizencapital I highly recommend Mark's blog Rude VC Follow Mark on X  @markbivens Follow Matt on X  @quanza Check out Mark's Nostr https://rude.vc/nostr Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Everybody wants to be Silicon Valley. Regional and local governments the world over proudly announced that they will be the Silicon Valley of, you know, whatever. We've seen Silicon Glen, Silicon Beach, Silicon Harbor, and countless other less publicized variations. Now, politicians calling out to Silicon Valley works fine as a metaphor, but you know, it's not really a plan. Well, the Japanese government has a plan and they are not looking to San Francisco, but to Paris. And today we're going to talk about that plan and so many other things as well. When we sit down with Mark Bivens and Matt Romaine, the co-founders of Shizen Capital, an early stage fund focused exclusively on Japanese startups. Now, Matt and Mark are both startup founders who became VCs, and that's still pretty rare in Japan. These VCs tend to be overrepresented on disrupting Japan because I don't know, it's a small group and I'm friends with a lot of them. But founders turned, investors are critical to the success of any startup ecosystem, and they're playing an outsized role in shaping what's happening in Japan right now. Mark, Matt and I talk about what's driving the changing attitude around M&A in Japan, which part of the government efforts to support startups are actually working and Japan's potential advantage in becoming a startup powerhouse in the coming years. But you know, Matt and Mark tell that story much better than I can. So, let's get right to the interview. Interview Tim: We're sitting here with Mark Bivens and Matt Romaine, the two founding partners of Shizen Capital. So, thanks for sitting down with me. Matt: Delighted to be here. Mark: Yeah, pleasure. Tim. I think I mentioned this privately to you before, but I'm pretty still relatively new in Japan. Seven years ago I moved here and you were my first source as I wanted to learn about the Japanese startup ecosystem. Tim: Well, thank you. Mark: Somebody introducing me to your podcast, so thank you. Tim: Well, no, thank you. It's been a great project and I'm glad this has kind of come full circle and I get a chance to sit here and interview you on it. Mark: I also have to say, in a past life I was a radio DJ. You have a great radio voice, Tim. Tim: Thank you. It's funny, people tell me that all the time, but this is just the way I talk, like normally. Well, thank you. So, let's get into it. So, tell me about Shizen Capital. Who are you investing in and why? Matt: Yeah, well, so I first met Mark in 2015 at a conference in Fukuoka. It was the B dash conference. We were introduced by one of Gengo's investors. Mark and I, hit it off and eventually just sort of flying forward a couple years, we reconnected and I was ready to sort of think about post acquisition, a new adventure. Tim: Let's back up a little bit. Long time listeners will know what Gengo is and who you are, Matt because you were on the show seven years ago. Matt: Would've been eight years ago. 2015, yeah soon after we raised our series C. Tim: Wow. That was a while ago. However, some of our newer listeners who have not absorbed the entire back catalog yet could deal with an explanation. So briefly, what was Gengo and what happened to it? Matt: We were a crowdsourced human translation platform, founded in 2009, and over the course of about 10 years we raised $26 million from both local and overseas VCs. And in 2019 we were acquired by a company called Lion Ridge. Tim: After that acquisition, because I remember you and I were talking about this over coffee a couple of times. Did you want to start another startup? Did you know you wanted to get into VC after that exit, or was it just this kind of synchronicity of meeting up with Mark and Fukuoka that led you to this? Matt: Fortunately, I guess the latter half of my time with Gengo, I had a few opportunities to invest in sort of a new generation of founders, both in Japan and overseas. That kind of got me interested. So, I had already basically been dabbling in a little bit of angel investing. So, when Mark approached me with this idea of doing something, scaling it up, doing something a little bigger… Tim: Kind of a natural next step. Well, Mark, I mean, you guys founded Shizen in 2016, but you've run funds for quite a while before that. Mark: Real quick, if I leave out the naughty bits, my background's pretty short. Tim: Oh, don't leave out the naughty bits. Mark: But three startups in the nineties, born in Silicon Valley. My first two startups failed. The third one was acquired in 1999. This was the.com bubble period. Very lucky break in terms of timing. Tim: 99 was a great time to be acquired. Mark: It was a good time to exit. So, I became unemployed. I sold the company. I was unemployed. One of the VCs that had backed us, took me under his wing, hired me, taught me the business of venture capital, and I realized I loved it. So, I've been doing that since then, almost 25 years, I guess now. And approaching Matt with this idea of a fund, actually it was a no-brainer, understands things on the ground, native Japanese speaker. And I tell you, Tim, I would meet star entrepreneurs and maybe midway through the conversation it would come up that my partner is Matt Romaine. And then the tone of the conversation just was transformed. Oh, you know, why didn't you start with that? Suddenly everyone's friendly and nobody's trying to pitch anyone anymore. It's like, how much can you invest? What do we need to do to secure your capital? Tim: So, was that reaction because of Matt specifically, or was it just the fact that there was people with startup experience and that was your differentiator from 99% of the VC firms in Japan? Mark: The answer is the former, and I can confirm that with specific anecdotes. Because usually I would put that upfront that our differentiator is we are former entrepreneurs, we've built companies, and that's at the point where they would say, well, who's your co-founder? I mentioned Matt Romaine and then the conversation reaches this inflection point and suddenly we're talking about a deal. Tim: What types of startups you're looking at? How does that inform your portfolio selection? Matt: We're fairly agnostic, there has to be a tech piece to it. We're investing in companies that we believe can scale. So, we've done everything from FinTech to property tech, some Web3, some education tech. Our backgrounds are primarily in software, and so it's more biased towards those types of investments. But we've done a few in hardware some in medical. They are really early stage. And so a lot of what we look at relies a lot on sort of the team and the interactions that we have with the founders. Tim: Is your value proposition mainly, we've been through the struggle ourselves. We can help you, we're going to help propel you globally. What's the main attraction of Shizen to those ambitious founders who everyone is chasing down? Mark: Obviously it depends on what is appropriate for their business, but indeed, we are often investing in founders who can take a business global. We don't prescribe that every company we back needs to go global. In fact, ironically, many of the foreign founders in Japan that we've backed are focused on the domestic market. Tim: Japanese VCs have a tendency to be very hands off. As former founders, is part of your value add being hands-on? Matt: Maybe you've heard this from at least one other fund out there, but we're more kind of a hands if we don't put together a schedule where we have to be involved on some regular basis. So, for example, we do this Shizen workshop series. Today's was on actually M&A. What's interesting is the founder listening to it might be thinking like is that my exit? But actually it is also a way to think about how to grow, can grow a business organically, or you can also grow a business through acquisitions. Tim: So, like startups acquiring other startups is common in the US where startups tend to be much better funded. I is that something we've seen in Japan? Mark: This is a topic that we speak a lot about. And in our opinion, it is an essential ingredient of a healthy startup ecosystem. Still missing in Japan, improving, but still missing. So, I like to use France as a benchmark because France is an ecosystem that in 2000, it was a country of multinational companies, but very few startups. Entrepreneur is a French word, and the irony is very few of them in France at the time, the good ones would leave and go to Silicon Valley.