This is part of our coverage of the Infinity Ventures Summit 2013 in Sapporo, Japan. You can read more of our reports from this event here.
On day one of the Infinity Ventures Summit 2013 in Sapporo Japan, we heard from 500 Startups founding partner Dave McClure as well as Shinya Akamine from Core Ventures Group on a panel entitled ‘Tales from Silicon Valley VCs’. The moderator was venture capitalist Gen Isayama.
Dave started out talking about incremental innovations, noting that people tend to put Silicon Valley up on a pedestal, and they want to copy the sexiest hardest things, when many of those thing are destined for failure.
I’m not saying there won’t be a Japanese Steve Jobs or Mark Zuckerberg – there already are some of those (he mentions Rakuten’s Mikitani and others) but copying 99% of an existing model, and innovating the other 1% may be much easier. ¶
Dave mentions a table top ordering device that 500 Startups invested in. He cites ordering in a restaurant as a big problem, one that people experience everyday. A device that helps you get the waiter’s attention is a great problem to solve, says Dave. “This is not creating rocketships, it’s a very simple thing – but it’s a huge market” He explains that not many startups are attacking this area, and this is particularly true in Japan. “Doing real innovation is incredibly hard, he explains, “but incorporating existing ones and improving them are much easier.”
Everybody eats. Restaurants don’t have customer lists. Retention marketing is the easiest thing, and most restaurants don’t do that. It could be made so much better. ¶
It’s worth mentioning that 500 Startups has invested in about 30 food companies already.
He points to internet marketing as a huge innovation, noting that while there’s lots of amazing tech out there, the greatest opportunity in the time that we live in is the fact that everyone is online. And most businesses are not reaching them.
For most existing companies, their business model works. There is an opportunity to attack their weak points of poor internet marketing and high overhead. You can find some big dumb business that makes money but kind of sucks. You can copy that model, reduce overhead, and improve marketing. ¶
Dave’s slides, which he describes as ‘intentionally bad’ so you’ll remember them, are below . (We don’t think they’re that bad!)
Founder vs Product ¶
Shinya followed Dave’s presention with a little about Core Ventures Group. He noted that the first focus of his fund is seed stage investment, and they also look at people who are developing advanced technologies. They also look at B2B companies, ones that sell products to other companies.
He explains says that many of the founders that he gets behind, he knows them before they leave their company to launch a new startup. He points to Feed.fm as an example of a company with a great founder.
The variable that has the most impact is the quality of the founders. Because I’m a seed investor, I really try to identify great founders, work with them and try to unleash their powers. Of course many VCs try to do this, and it’s not unique to just me. ¶
Dave followed Shinya by noting that 500 Startups doesn’t always know if a founder is amazing, and it might take them six months or so to figure it out. He explains that product is something that his company looks at a little bit more:
We screen based on product. To me the product is the mirror of the soul of that team. The three things we look at are engineering, design, and marketing. Those are the three things that get a team off the ground. We need to see that those things are there somewhere. ¶
Shinya says he is excited that many entrepreneurs in Japan are becoming world class entrepreneurs, and they are actually teaching the VCs. He gives the examples of Gengo and Peatix as world class entrepreneurs, who would be at the top of any startup ecosystem in the world. In addition to attracting world class investors, they are bringing in Japanese investors.
Dave agrees that such local role models are great for the ecosystems. And success stories like Rakuten, GREE, and DeNA are going to inspire more entrepreneurs to take risks.