Profile: Globis Capital Partners' Yoshito Hori

Nearly every major city from Tel Aviv to Toronto has, at some point, claimed itself the successor to Silicon Valley.

It is perhaps unsurprising, then, that in July last year Yoshito Hori, CEO and founder of Globis Capital Management and Globis University Graduate School of Management, used his blog to claim Tokyo as the next innovation hub. A record number of IPOs in 2013 plus a forthcoming close on Globis Fund IV has only strengthened his conviction.

"When you consider that the world's youngest billionaire - outside the Facebook four - is Yoshikazu Tanaka, the founder of Tokyo-based mobile social gaming company Gree, and one of the most successful female tech entrepreneurs today is Tomoko Namba, founder of web services company DeNA, you can see that something is happening in Japan," he tells AVCJ.

Tokyo, Hori argues, now has critical mass, with an ecosystem of mentors, venture capitalists and entrepreneurs making it the number one choice for start-ups. But this was not always the case.

In 1992, when Hori was a fresh graduate from Harvard Business School, early-stage VC was all but non-existent in Japan. The macro outlook had been bleak, the asset price bubble had burst and the country was at the start of its lost decade. It was against this backdrop that Hori resolved to start his first business.

"During the period after Black Monday - the days before the internet - the mood at Harvard was that everybody wanted to become an entrepreneur or at least work at a start-up or venture capital firm," says Hori. "I knew then that I wanted to start my own venture fund but I did not have the track record to raise capital, so I decided to build my track record as an entrepreneur."

Education first

Inspired by his experiences at Harvard and identifying the need for an MBA course in Japan, 30-year-old Hori launched the Globis Management School in 1992 - a year after graduation. With an initial intake of just 20 students, he invited Harvard alumni based in Japan to come to his small apartment in central Tokyo to teach classes based on the business school's traditional case studies.

But this was just one part of Hori's ambition. "The idea was to combine a business school with venture capital - and later do publishing and conferences - to create an ecosystem of people, capital and knowledge," he explains.

In 1995, after three years cutting his teeth as an entrepreneur, Hori set out to raise his first fund. Globis Fund I received commitments amounting to $5 million - four Japanese angel investors put in $1 million apiece and an additional $1 million came from the sole institutional investor, Tokyo Primary.

In an ecosystem almost entirely dominated by late-stage venture capital and pre-IPO financing, Globis set out to be the first investor capable of demonstrating a hands-on approach to VC investing. "There really was no one who could provide management support," Hori recalls. "It was mainly financial institutions providing pre-IPO financing with no board seats and no early-stage investment."

In retrospect, he sees the establishment of Globis as part of a broader global trend which saw the Silicon Valley early-stage investment model exported to other parts of the world. Indeed, while Globis Fund I was establishing itself in Japan, Neil Rimer - a section mate of Hori's at Harvard - was in the process of breaking similar ground in Switzerland with Index Ventures.

It was not long before Hori's firm had grabbed the attention of Apax Partners, which was looking for a local partner in Japan. Globis in turn wanted access to institutional investors overseas. This resulted in the birth of Globis' second vehicle in 1999, the JPY20 billion Apax Globis Japan Fund.
"Initially, managing a joint venture fund with Apax posed us with a big challenge as the gap in experience and skill set was wide, but the tie up was quite beneficial for us." says Hori. "We had the opportunity to learn from Alan Patricof and other great people at Apax about the investment process, the due diligence process, fund management and fundraising."

By 2006, Globis was eager to be independent. Globis III - which would eventually close at JPY18 billion ($172 million) - launched just as the business school was granted university status by the government. Meanwhile, the relationship with Apax had come to an end as interests diverged; Apax began to focus more on buyouts, while Globis wanted to remain true to its VC roots. Regardless, the Apax-Globis partnership had been responsible for two of the firm's most successful investments: human resource software firm Works Applications and Gree, which went on to generate cash multiples of 50x and 100x, respectively.

Generation next

Hori says Gree - which went on to establish its own corporate VC arm - is typical of the kind of business that now proliferates in the Japanese VC ecosystem. Unlike the start-ups of 20 years ago, which predominately focused on software and services, the new generation of businesses are less capital intensive and more capable of generating high returns.
"At one time GREE was making $1billion in revenue with $500 million in profit," recalls Hori. "It was like printing cash."

While noting Japan's VC industry still has way to go when compared to that of the US, he maintains the ecosystem is getting stronger and as a result investing has become easier. For Hori, it means his ambition has only expanded.

"I started a business school to educate leaders and a VC fund to create industries; then I went into publishing and conferences to influence people," he says. "I guess the next step is to become an opinion leader and put forward my own vision for Japan's future."

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