Disrupting Japan

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,

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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.

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Yuka Hata, Senior Managing Director of the Japan Investment Corporation (JIC), discusses Japan's proactive funding approach for startups. She highlights the challenges new Japanese VCs face, such as low valuations affecting deep tech ventures. The conversation delves into JIC's investment strategies, including support for female VCs and attracting foreign investors. Hata also explains the cultural shift needed in Japan's VC landscape and the importance of global partnerships for enhancing the startup ecosystem.

In this engaging discussion with Makoto Shibata, head of FinoLab and a fintech innovator for over 20 years, listeners explore Japan's unique fintech landscape. He discusses the crucial shift from cash to cashless payments and the startup opportunities that arise. Topics include AI's cautious integration in traditional banks, the importance of corporate support for fintech growth, and hurdles for Japanese startups aiming for global reach. Shibata also sheds light on the potential for fintech innovations and how foreign companies can thrive in Japan's market.

Disrupting Japan is 10 years old today! This is a simple thank you rather than a full episode. Thanks for listening!   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 very short and very special episode. It's not an episode really, more of a personal message. You see, ten years ago today. I released the very first episode of Disrupting Japan. And I just wanted to say thank you. I really mean that. Independent podcasting is an incredibly personal medium and it depends on there being a real connection between the host, and the guests, and the listeners.  Commercial talk shows spend a fortune creating the illusion of that connection. And being in the center of that in real life is an honor and it’s amazing. It’s become a cliche when the host thanks their audience and reminds them that the show would not be possible without them, but it’s different at Disrupting Japan. You really do create a big part of the show’s value.  Let me explain. It’s not about download numbers or affiliate link-clicks. I don’t sell anything and my guests aren’t selling anything on Disrupting Japan, so those metrics don’t matter much to me. However, my guests often comment on the surprisingly high quality of inbound contracts they receive  after appearing on the show. These connections have resulted in a lot of new hires, and a handful of investments have been made as well. That community, the engagement and overall quality of the listeners is a big part of the show’s value. In fact, over the years, four Japanese startup founders have told me that listening to our guests’ tell their stories on Disrupting Japan gave them the confidence to start their own startup, and that’s pretty awesome. So, thank you! Ten years ago I never imagined how big Disrupting Japan would become. Honestly, it kind of freaks me out sometimes. But here we are. Ten years and well over 200 episodes later, and we have over 9,000 listers in more than 150 countries around the world — including one listener from Vatican City. Now, I have no way of knowing for sure exactly who that listener is.  I mean, it could be anybody. But I like to think of it as a testament to the influential nature of Disrupting Japan’s listeners. Building Disrupting Japan is an honor and a joy. I love putting the show together, and despite having a fairly demanding day job, I always make sure Disrupting Japan is released on schedule and is a quality show that woth the time you put into listening to it. The show takes up a lot of weekends and evenings. I’ve done pre-interview research while in the hospital for a minor surgery. I’ve done post production editing in so many different airport lounges, and twice I’ve made a little pillow-fort in my hotel room so I would have decent acoustics to record the intro and outtro. So, whether you are a new lister or have been a part of Disrupting Japan ever since episode 1 was released 10 years ago, thank you for taking this journey with me. Startup innovation is really starting to flourish in Japan, and we have exciting times ahead. And most of all, thanks for listening and thank you for letting people interested in Japanese startups and VCs know about the show. I'm Tim Romero and thanks for listening to Disrupting Japan.

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