TLDR; I had a Japanese cofounder and visited Tokyo, Japan to meet entrepreneurs and investors there. We ended up closing a seed investment and had a very positive experience on our trip. I recommend entrepreneurs in the Bay Area to check out the investment opportunities in Japan for your startup.
As an entrepreneur everyone knows that location is a very important factor for success. That’s why most people try to relocate to the Silicon Valley to benefit from the talent pool, venture capital and entrepreneurial athmosphere. Bay Area is really great for all of these, but there are also other big cities for great opportunities and you don’t neet to relocate there. We already do this when incorporating our startups, over 50% of startups are incorporated in the state of Delaware, because of their business laws. In this blog post, I wanted to talk about another place (Tokyo, Japan) where you can get venture investment and still stay in the Bay Area [1]. I wrote this post as a story of me and my cofounder’s 2 month investment journey from Tokyo, Japan. The story is divided into 3 parts:
Before I started a company, I met my mentor Kiyo Kobayashi. I was working at his startup, Chomp as a full-stack engineer. I joined his company after working at Facebook, mainly to learn entrepreneurship from him. He encouraged me to take the leap and start my own startup. After exploring some ideas, I founded a company named Planogy with my cofounder Kazuki Nakayashiki.
Kiyo has introduced us to each other and we bonded on what we would like to achieve in life through entrepreneurship. So, we started our company in San Francisco, CA and started working on our idea. When we were seeking seed investment for our business, my mentor Kiyo suggested us to explore the venture capital opportunity in Tokyo, Japan. He said that Japan was in fact a very startup friendly place to get funding from. I was a little skeptical at first, in the end we were in Silicon Valley, the capital of investments. When Kiyo had to visit Tokyo, he asked if we could join him and meet some investors and entrepreneurs there just to get a sense of the startup enviroment.
My cofounder and I decided to take the chance to go to Tokyo with his advice first time in December 2018. Granted, I have never been to Japan, nor speak the language or even read the alphabet. But growing up, I always wanted to visit Japan and Australia, so I thought why not. So we went and got connected with VCs and founders there pretty quickly. We were able to meet around 5 VCs and even more startup founders there in just a week. The conversation was great, and their impression of our idea was very positive. I was amazed to see how approachable yet professional the VCs in Tokyo were. On our first trip we got a lot of intros and feedback for our pitch and business idea.
Before we got back from Tokyo, we received conclusive interest from 2 VCs. We had investor meetings here in the Bay Area before and noticed some differences in what VCs and angel investors in Japan look for when seeking for companies to invest. We noticed that, Japanese investors pay close attention to the team especially in the seed stage. They look how the team is compatible and individuals have the skillset to get the work done and build a strong company. In the US the situation is a little different, where investors mainly look for product traction. Of course, it makes sense to have traction. That’s the bread and butter of every startup and what every entrepreneur should focus on. However, when you’re just started and trying to find product-market-fit, you are mostly exploring the problem space. You are also busy working hard to find a cofounder, convince your early users to give your product a try and juggling through coding, business model generation, and perfecting your pitch. You are constantly struggling throughout this journey. Japanese investors really relate to this situation and want to help driven startup founders with seed investment and mentorship along your journey. This has been the experience I’ve had when we visited Japan and talked with investors there.
I should probably talk a little about our product. Planogy is a SaaS product to help software teams write better software plans and documentation. This idea came to me, when I noticed there wasn’t any dedicated tool to write good software plans and share documentation with others. The documentation has the problem of falling behind code, so it gets ignored; however teams know that writing plans and documentation really helps teams work and collaborate better. We want to solve this problem.
We wanted to convince investors that we’re building a valuable product for software teams. And in order to showcase our product, we started building our prototype and talked to potential users from our connections in the Bay Area. From our user surveys, most teams used Wiki for documentation and they were definitelly looking for a solution that’s dedicated for software documentation. This gave us more confidence to convince investors and continue building our product. We updated our pitch from the feedback we got from potential users and built a prototype with core functionality of writing a document and adding diagrams to it. This was a simple product, but it drew a better picture of our solution.
With our prototype and updated pitch, we went for a second trip to Tokyo, Japan. I think I made this sound very simple, because when we went to Tokyo we were actually continuously working on our prototype and adding feature to demo for the next meeting. And we were setting up more and more meetings even once we get there. But this is the startup life, you have to keep going and pick up the pieces as you go. Fortunately my cofounder also works at a fast pace, so we were able to delegate the work and get things done as we went.
This time again, we made sure to connect with the right people and got intros from acquaintances to set up meetings before we took that 11 hour direct flight. We were able to connect with more VCs and angel investors [2] than our first trip. While we were eager to connect and share our idea, we noticed Japanese investors were also very interested in connecting with entrepreneurs to hear their pitches and be part of their journeys. In the end, investors went through this journey before, so they relate and usually want to give back to help other startups and entrepreneurs.
Japanese investors, especially at early stages of a startup, put a lot of care into the team and the capability of the individuals. You might need to reshuffle your pitch deck and go more into the details of your team and the skills each member brings to the table. This is a little different from the typical pitch decks in the US. So, I do recommend meeting some CEOs or founders in Japan before you present your business idea in front of investors to take a close look at your pitch deck and give you constructive feedback. And that’s exactly what we did. Our first meeting in Tokyo was with Hiroshi Asaeda, who is such a great CEO and knows how to pitch so well. I even joked and said he should write a whole book about it. Hiroshi, yes we are waiting for your book :) He gave us amazing feedback about the flow of our story and additional content we needed to really showcase our business. Our meeting was very productive and the feedback was so valuable that our pitch deck got ompletely changed, mostly got simplified in favor of talking more about the story and giving tangible business data.
When we presented our pitch deck, we noticed immediately that investors with engineering backgrounds really related to the problem and wanted to solve it for all. So they were more interested in investing in our company. I can be wrong here, but presenting to an angel investor that is familiar with the problem you are solving makes the deal go a lot faster. However, I would still recommend pitching to investors who aren’t familiar with the problem, because we got an investment from a connection of the angel invester we pitched. I’m not sure about the situation in the US, but in Japan investors try to connect you with other investors that could be interested in your idea. So, I still think it’s worth to pitch your idea to angel investors from different backgrounds.
Our lead investor in Japan helped us raise the main bulk of our investment and 3 angel investers covered the rest. Overall, we were able to get investments from 4 investors and we closed our seed round on our second trip. Once we closed our investments, we were very pleased with the experience and professionalism of Japanese investors. When we asked them if there’s anything we can do in return, most of the time the answer was to connect them with more entrepreneurs. So, I recommend entrepreneurs even in the Bay Area to explore the investment opportunity in Japan. As a bonus, you will make great connections and get a chance to see a beautiful city. I have to say, Tokyo is definitely one of my favorite cities to visit now with lots of great food to try and places to explore.
My initial goal with visiting Tokyo was to get to know entrepreneurs and VCs in Japan and to get a sense of the environment. Once I got there with my cofounder, we got really positive interest from investors that made us visit again to get seed investment for our business idea. Of course there are some differences in the way you pitch your idea and demo your product, but it’s mostly on the positive side for founders. And if you can’t speak the language, I’d recommend connecting with Japanese entrepreneurs or engineers in the Bay Area to build a strong team and then visiting Japan to check out the startup investment opportunity there.
I hope this article helps entrepreneurs who are looking for investment opportunities and thinking outside the box. I shared a link to a list of investors below and best of luck in your entrepreneurial journey.
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[1]
There’s One Place Where VCs Chase Founders to Give Them Money
[2]
List of VCs and Angel investors in Japan