The partnership between investors and entrepreneurs is an interesting one. In the seed money round, investors not only invest funds, but they cooperate with entrepreneurs on many aspects of the business. But what’s actually going during the very early funding round? We spoke with an investor and an entrepreneur to find out more about this. Kentaro Sakaibara is the CEO of Samurai Incubate, a pioneer among independent incubators in Japan. Naoki Yamada is the CEO of Anydoor, the startup behind crowdsourced translation service Conyac, a portfolio startup of Samurai Incubate.
Anydoor was found in February, 2009. Yamada came up with the idea having been frequently asked to translate short sentences. He won the seed money at a business contest, and launched the startup with his friend, Tomohiro Onuma. His encounter with Samurai Incubate opened the way for them to start their business.
Anydoor raised funds from United (previously known as ngi group) in December 2011, Mitsubishi UFJ Capital, and SMBC Venture Capital in October 2013.
Yamada: It was in 2010 at Tully’s Coffee in Shinjuku when we met for the first time, right?
Sakakibara: Most of the first meetings with startups in the early days at Samurai were at fast food restaurants. I remember, you had only 5000 yen left in your bank account, right?
Yamada: Actually, I had more. I think, a bit more than 10,000 yen.
Sakakibara: In the corporate account, not personal one.
Yamada: We met at a TechCrunch Japan on the previous Friday. The one organized by Hirano-san . After the event I got an e-mail from Sakakibara-san, introducing Samurai Incubate. It seemed dubious and I deleted it right away.
Sakakibara: Wha!? I’ve been saying I want to make something like “Honyaku Konnnyaku” , then someone told me about the event. And you were the only person I contacted after the event.
Sakakibara: Yes. Only you.
Yamada: But you seemed indifferent to our product when I talked about it. And I said I have little money left in my bank account. Then you told me all of a sudden “I’m gonna invest you.”
Sakakibara: Yeah? Was it like that?
Yamada: So, I answered I that I needed time to think. I returned to my office, and asked Onuma if he knew Samurai Incubate. And he said “No." I asked our first investor about Samurai Incubate. It turned out that person knew Taiga-san (Taiga Matsuyama, East Ventures) and Sakakibara-san. That way, I was convinced I could trust you, and I decided to accept the offer.
Sakakibara: I didn’t know that story.
Yamada: At the time, my bank balance was only 5000 yen. And the money was transferred on the following Monday. I was so relieved!
Sakakibara: Sounds like we are a consumer money lender…
Sakakibara: But it was good that you had a corporate account. Some freelance app-developers don’t have one. Sometimes, I accidentally transfer money to them, and ask them to transfer it back.
Yamada: I had part-time jobs back then.
Sakakibara: You worked at a carpet shop, right?
Yamada: Actually, I rented a space at a carpet shop. I sometimes helped them sell Persian carpets. And I worked at a cafe during the day, and at a transportation company at nights. I worked on Conyac in my spare time. I was working like that in the first year. I had decided not to use the money I had raised from Skylight Consulting for salary.
Anyway, I had only 100,000 yen in my bank account at the time when I left my previous workplace. I was quite broke.
The Bridge: What was your first impression on Yamada-san?
Sakakibara: Brown-dyed hair…
Yamada: Ha ha.
Sakakibara: I mean, he looked similar to some people around me. Harada-san (Daisaku Harada, CEO of Zawatt) at Zawatt and I dye our hair brown as well. I also felt Yamada-san was very humble. Before I met him, I thought he might be a bit arrogant, but actually he just seemed pretty broke.
Yamada: Haha. Looking broke is not really good. I expected to meet someone way older than me, so it was surprise that you looked very casual and open-minded. You wore a suit with a tie.
Sakakibara: But with brown-dyed hair.
Yamada: Before I met you, I had visited quite a lot of VCs, about 25. But I was rejected by all of them. Now that I think about it, there were some little known VCs. Then, you, an active and cheerful investor showed up. I was pretty suspicious. Things like “Samurai” sounded quite dubious. But the more I talked with you, the more I realized your personality was very nice. Then I decided to accept the offer.
Sakakibara: I rarely make the move first. But had been just thinking how to collaborate to develop a Honyaku Konnyaku.
Yamada: I searched for Samurai on the internet, but couldn’t find any results but a Wikipedia page.
Sakakibara: We had already made many investments at that time though. Kobayashi-san, (Kiyo Kobayashi, CEO of Nobot, subsequently acquired by KDDI) was the third case. And the first company we invested was Synclogue.
Yamada: We were close to the end of the fiscal term, the end of March. We thought we couldn’t get through the term. We were really on the edge.
The legendary Samurai House
Sakakibara: These things happened quite recently, but I sometimes feel like it was long time ago. You joined Samurai House at the time .
Yamada: Samurai Hause was already open then?
Sakakibara: Yes, we had already opened it.
Yamada: When we got investment in March, we were still using the carpet shop as an office. So we visited Samurai House. Then I thought there’s something wrong with the place. (laughs) I seriously tried to judge which was better — the carpet shop or this messy room at Samurai House.
Yamada: I thought Samurai House was not really very good, but at the same time I thought since you were always there it would be easy to have meetings and I wouldn’t get disturbed by customers like in the carpet shop.
Sakakibara: It was in Kotakemukaihara. Those days were exciting.
Yamada: I was on the upper floor in the house, and we would meet each other two or three times a week. I was a kind of like a leader in this Japanese-style room.
Sakakibara: We had lunch together sometimes. To Ekoda, it was only five minutes to get to Samurai House. When I missed talking to someone, I visited your room.
Yamada: I thought you visited my room when you were really tired.
Sakakibara: We had about 20 residents at our peak. And around five of them actually lived there. Some rooms were not even equipped with an air conditioner.
Yamada: The toughest thing was to bear was the snoring by Haruki-san (Seiha Haruki, the CEO of Joy).
Sakakibara: I know. He snored extremely loud.
Yamada: It was so loud that I couldn’t focus on my work. I could hear his snoring over my headphones.
The Bridge: What are they all doing now?
Sakakibara: Some joined other startups, and some rebuilt their companies. All of them still work in the startups field.
Yamada: We stayed there until SSI (Samurai Startup Island) was founded. Oh yeah, and the earthquake. After the earthquake, I discussed with Onuma and decided to relocate our office to Kanda. Because it might be impossible to return the office in Samurai House when natural disasters occur. So we moved two years ago. Now when I think of that, I can’t believe I lived in Samurai House.
The two went on to discuss how they started growing the translation service “Conyac”. We’ll cover that in the next article.