Lessons from Japan's Venture Capital Guru

Miksalmina . March 20, 2023

Picture: thejapantimes

Techspace - Japan is the world's third largest economy, bigger than Indonesia's. However, Indonesia is winning when it comes to the number of successful startups. Indonesia, to date, has 12 to Japan's 6. Why is that? Very few venture capitals are daring enough to fund startups.

Japan's slowing economy has been the talk of the town since decades ago. We can talk for hours about the reasons why it happened, but the result is the lack of economic growth. Startups might be considered too risky to fund, so no venture capital who are willing to give them the chance.

This phenomenon has been diagnosed since the late 90s by Tomotaka Goji, who is now a seasoned venture capitalist with a ton of know-hows and experience in the field. We can learn a thing or two from him.

How he flourished amidst a slowing economy

Tomotaka Goji graduated from college in the 1990s, just around the time when Japan's economy was on a recession. Right afterwards, he assumed a government office position and became a bureaucrat for the Ministry of International Trade and Industry.

Already interested in the field of venture capital, he co-authored a book on the subject, titled The Limited Partnership Act for Venture Capital Investment. This book would later become the nation's first basis for venture capitalism.

Goji-san aspired to create an ecosystem for venture capital that would help the established industries there, some already obsolete. He also realize that most venture capital funds paid little attention to seeding funds for companies in their early stages.

In 2001-2003, the Japanese government sponsored Goji-san to pursue an MBA at Stanford in the US. There, he would learn more about venture capitalism, startups, and entrepreneurial ecosystems. After his study was finished in 2003, the Japanese government was at work of reforming the national university systems to let them be more independent.

Back home, he decided to resign from his ministry office position, a decision which cost him dearly. On the other hand, he got to establish connections with people from the prestigious University of Tokyo in 2003. This opportunity eventually paved the way for UTEC (University of Tokyo Edge Capital Partners). Backed by the University, he and his small team started to scout potential startups to fund.

The struggles of UTEC

UTEC started small, knocking on the doors of all 140 potential investors, as Goji-san himself have said. Many of them refused, but some of them were in favor. The planning, which was revolutionary atthe time, was to be proactively involved with the portfolio companies in their business planning, IP arrangement, team building, and also governance.

But success never comes easy. UTEC's first succesful investment was Tella, a startup trying to cure and prevent cancer. UTEC first invested in this company in 2005, and had to guide them for four years until they went public in 2009. That's just one example of how UTEC works.

Since its inception, UTEC has mainly focused on funding startups in the field of deep tech and life sciences, among others. Not only local Japanese startups, but also those in foreign countries. Going global, Goji-san said, is critical to gaining real scale and also international success.

Nowadays, UTEC has its eyes set on academic research. The promising ones could get funding and would then be transformed into  commercial businesses.

All these efforts by Goji-san and his peers have turned the public eye. The Japanese government now plans to pour trillions of yens into Japanese startups with the goal of increasing the number of succesful startups by tenfold. It seems that the promise of success is enough to inspire the Japanese government to change its anachronistic views.

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