When we were just launching our first fund, as with any new venture, there were skeptics. During fundraising, I remember some people asked us, “how are you different from the other seed funds like East Ventures, Skyland Ventures, or ANRI?” or “Will you really be able to become an insider?” To be honest, we didn’t have strong answers to these questions at the time. We knew we had a different approach and style to investing, but we didn’t have any historical evidence to reference.
Reflecting on it now, it is much more clear. We hardly have any co-investments with those firms. We don’t do any events together and hardly mingle. This is not because we don’t want to, it is just that we have very different investment styles, and we connect with very different types of founders. And yet, we all have good companies in our portfolios. It is not a matter of who is right or wrong. It is a matter of differentiation.
We carved our own path and did things our own way without being too concerned with becoming an “insider” with the incumbents. Our approach resonated with certain founders whose needs were not being fully met by existing venture investors, and as a result our positioning in the market became a lot more apparent.
But more importantly, we had good timing. Three years ago, the market was much smaller. There was only about a billion invested in startups in Japan every year, and very few players were providing that capital. The market has grown 3x since then, and there are many more providers of capital. As markets get bigger, it is only natural that there is more fragmentation. In the early days of automobile production, it was a luxury just to have a car. Ford became everyone’s car. But as the market grew, more options proliferated. The market fragmented into Cadillacs, Chevrolets, Toyotas, Nissans, and many many more. The same has been happening in Japan’s startup market.
This is a good sign. It is a sign of the market maturing. There are many more flavors of investors and founders in the market now, and we all play an important role in advancing innovation through entrepreneurship in Japan.