Q&A: Globis Capital Partners' Shinichi Takamiya

Q: What key trends do you see in Japanese venture capital right now?

A: There has been a new boom in VC opportunities because a lot of start-ups are being established on the back of the mobile and internet sector trend. Around the time of the internet bubble in 2000 we had this phenomenon called the "76 generation" - young entrepreneurs who were starting companies. They are now in their mid-30s, their companies are well established, and they have become the new role models. New entrepreneurs are now spinning off from those companies and doing their own start-ups. Furthermore, a lot of talented individuals are choosing a career in start-ups. Daisuke Iwase, the founder of online insurer Lifenet - one of our portfolio companies, which recently went public - graduated from Tokyo University, worked at Boston Consulting Group and at a buyout fund, went to Harvard Business School, and then came back to start-ups. Traditionally, someone of his caliber would have gone to an established corporation.

Q: What kind of interaction is there between Japanese start-ups and corporates?

A: Gree - the Japanese equivalent of Facebook - is a good example. Yoshikazu Tanaka, the founder, started out at So-net, a subsidiary of Sony, and went on to Rakuten, which was an early leader in e-commerce. He learnt the business practices at those corporations and started Gree on the side. Globis invested when Gree was just three people and then, before going public, they raised capital from KDDI, Japan's second-biggest mobile carrier. The reason they took the money was more business synergy than financial need: KDDI directs traffic to Gree and Gree helps KDDI monetize it. So the way that start-ups typically interact with big corporations is by creating alliances in order make the growth curve steeper.

Q: How many overseas LPs do you have? To what extent are you competing for capital against VCs in the likes of China and India?

A: Our LPs are 80% overseas. We might be competing with China and India for allocations to a certain extent, but our market is uncorrelated with those two, so it's a diversification opportunity for our LPs. From a macro perspective, Japan's GDP growth is flat, but when you look at the composition of the economy, there are old industries like manufacturing and low value-added services that are shrinking and there are new industries like the internet, mobile and IT that are growing rapidly. As a whole, Japan has been overlooked in recent years. We are like the hidden gem.

Q: Does VC suffer due to wider perception issues of private equity in Japan, driven by the large buyout funds?

A: Maybe we are bundled with the buyout funds in that LPs look at Japan as a whole and want regional diversification, but when we communicate with them they understand there are different dynamics in the VC market. There is a huge gap between demand and supply of venture capital: many great startups are being established yet there is a limited number of VCs investing millions of US dollars. To raise a decent-size fund, you have to approach global LPS, but many Japanese GPs can't do this. We are one of few that does all the IR in English. We had an alliance with Apax Partners in our second fund and through this we became familiar with global standard IR and fund management practices. We continue to adhere to them.

Q: A number of Japanese VCs are looking to invest start-ups overseas. Where does Globis stand on this?

A: A lot of corporate VCs are active overseas because the parent companies want to enter new markets. We aren't too interested. One reason is our LP base is mostly foreign, they already have global diversification, and they want us to focus on Japan. Another reason is we believe our core strength as a VC investor is penetrating the local entrepreneur ecosystem, finding the best deals and adding value on the ground. You need a local presence to do this. However, we do place a strategic emphasis on helping our Japanese portfolio companies grow abroad.

Q: Are you primarily backing entrepreneurs with business plans or proven businesses?

A: We start from somewhere in the middle of that scale. We would back entrepreneurs with service or product that comes with a proof of concept. The point is whether they have identified a key driver to scale their service or product; they do not necessarily need to have a monetizing model. For example, we invested in an internet media company called Nanapi when it had just six staff and 1.8 million monthly users because there was a clear plan for reaching 15 million users. We also invest in later stage deals, typically growth equity and pre-IPO transactions.

Q: What kind of support does the Japanese government provide start-ups?

A: Local and central governments provide a decent amount of support through subsidies and other measures. The basic infrastructure for investment is also well set in Japan. Our stable legal system is a huge advantage over other Asian countries. Additionally, the public markets are good for start-ups because you can do an IPO quite early with a relatively small market capitalization. On NASDAQ the median market cap of a newly listed company is around $300 million whereas in Tokyo it's around $50 million. Globis had two companies go public since March and we are expecting 3-5 more in the next 12 months. Most other IPO markets globally aren't nearly as active at present.

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• Topics
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• Globis Capital Partners