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Japan VC Radar – A glance of the most active lead VCs in 2023 (Infographic)

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him on Nostr @reggae. The Japanese translation of this article is available here. As is customary, we are publishing once again our annual VC Radar for Japan. The 2023 edition of the VC Radar reflects Japan’s most active Lead VCs in 2023. Specifically, this infographic depicts the number of new investments led by Japan’s independent venture capital funds into domestic startups last year. Only investments in which the VC firm served as Lead investor for a startup that was not already in their portfolio are counted here. We believe this is an important tool for Japan’s growing startup ecosystem. You can read more about our rationale here (special thanks to Mayumi for compiling this data !). (One additional note: we strive for full accuracy on this infographic and apologize for any…

mark-bivens_portraitThis guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him on Nostr @reggae. The Japanese translation of this article is available here.


As is customary, we are publishing once again our annual VC Radar for Japan. The 2023 edition of the VC Radar reflects Japan’s most active Lead VCs in 2023.

Specifically, this infographic depicts the number of new investments led by Japan’s independent venture capital funds into domestic startups last year. Only investments in which the VC firm served as Lead investor for a startup that was not already in their portfolio are counted here.

We believe this is an important tool for Japan’s growing startup ecosystem. You can read more about our rationale here (special thanks to Mayumi for compiling this data !).

(One additional note: we strive for full accuracy on this infographic and apologize for any mistakes. Feel free to direct any requested corrections to infographic@shizen.vc).

(Click to enlarge)

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A massive opportunity still up for grabs in Tokyo’s real estate sector

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him on Nostr @reggae. The Japanese translation of this article is available here. The other day a large growth equity fund in Europe reached out to me. This firm has invested across Europe as well as into North America. They contacted me because they are considering to open an office in Tokyo. This is of course fantastic news and a testament to how some capital allocators globally are waking up to the opportunity of Japan’s digital renaissance for investment. One anecdote that came up in my discussions with this fund relates to their search for Tokyo office space. It is a story that made me realize how Tokyo’s real estate companies are blindly missing a massive opportunity. Apparently, the firm had submitted an inquiry via the contact form on one of…

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him on Nostr @reggae. The Japanese translation of this article is available here.


Azabudail Hills buildings seen from Kamiyacho Trust Tower
Image credit: Masaru Ikeda

The other day a large growth equity fund in Europe reached out to me. This firm has invested across Europe as well as into North America. They contacted me because they are considering to open an office in Tokyo.

This is of course fantastic news and a testament to how some capital allocators globally are waking up to the opportunity of Japan’s digital renaissance for investment.

One anecdote that came up in my discussions with this fund relates to their search for Tokyo office space. It is a story that made me realize how Tokyo’s real estate companies are blindly missing a massive opportunity.

Apparently, the firm had submitted an inquiry via the contact form on one of the websites of a well-known real estate developer. They expressed their inquiry in English, on an English version of the real estate company’s website. Unbeknownst to them, this may have been their first misstep.

Over two months have elapsed, and the fund manager still has not received a response of any kind from the real estate company.

Hello Tokyo, is anyone home ?

Now, this is a fund with over $2 billion in assets under management, and over 100 portfolio companies spanning 10 countries. They intend to use their future Tokyo office as a launch pad both for investing in APAC and for bringing European companies into the Japanese market. Needless to say, this fund’s first interaction with Japan at the operational level has not left a favorable impression.

I’ve been fortunate to meet members of the investment and innovation teams of several real estate firms in Japan. Nearly all of the individuals I have met strike me as incredibly intelligent, open-minded, and innovative. Yet there seems to be a disconnect between the strategies of Japan’s real estate firms on one hand, and with the government’s ambition to transform Japan into a startup nation on the other.

To their credit, the Japanese government has crafted policies which have fostered incredible progress in accelerating Japan’s venture ecosystem in a short time. I tip my cap to the forward-thinking champions in the government who are driving these reforms. True, Japan trails other successful venture ecosystems like North America and Europe, however the benefit of being late is that there are successful models available for Japan to emulate.

When it comes to allocating real estate toward building global innovation hubs, I submit that lessons from the fantastically successful experiences of France, the Netherlands, and the Nordic countries could prove relevant for Japan to consider.

As our friends in Europe discovered, the best innovations tend to arise when there is a density of entrepreneurs working on a diverse array of startups within close physical proximity. This is not only true in theory; there is also empirical evidence to back this up. When the density of founders surpasses a certain threshold, the probability of unique insights and groundbreaking innovations rises exponentially.

Twenty years ago, the aforementioned European countries set out to replicate Silicon Valley in their own geographies. However, they lacked many of the fertile conditions that the San Francisco Bay Area possessed for becoming startup hubs. Following a couple false starts and failed attempts, they eventually cracked the code in creating the necessary critical density of entrepreneurs.

How to cultivate an international startup hub

So how did they do it in Europe ? One key factor is that they found a way to give free office space to startups. Some governments funded initiatives directly, whereas others nudged private sector actors, such as banks and real estate companies, to offer free office space themselves.

From the perspective of a startup founder, every 1€ spent on rent is 1€ deprived from working on innovation. So naturally, startup founders flocked to these free office space offerings: Over a short time; the critical density thresholds were surpassed and the virtuous cycle kicked in.

Moreover, these startup office hubs became some of the most sought after locations in which large enterprises desired to join as tenants. Even from the most narrow financial perspective of the property owner, offering free office space to startups more than paid for itself from the increased appeal of the property.

With Japan increasingly rising onto the radar of international investors, there is a compelling opportunity here for a real estate company to step outside of their conventional business model and become a Tokyo hub for global startups and fund managers.

Forecasts for 2024 from six visionary VCs

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him on Nostr @reggae. The Japanese translation of this article is available here. Years ago I began publishing an annual list of technology predictions in order to provoke constructive dialogue and highlight insightful female VCs globally. In continuity and upon popular demand, here are forecasts from six professionals who are poised to make an outsized positive impact on the venture ecosystem in 2024. Happy year-end festivities to all ! Kathy Matsui – General Partner, MPower Partners 1. Return of ESG: While 2023 saw criticisms such as ‘greenwashing’ negatively impact ESG sentiment around the world, we actually interpret this as a positive development, as greater investor and regulatory scrutiny on ESG substance is likely to result in better-quality disclosures and enhanced value creation over the long-run. 2. Japan’s IPO and M&A market…

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him on Nostr @reggae. The Japanese translation of this article is available here.


Years ago I began publishing an annual list of technology predictions in order to provoke constructive dialogue and highlight insightful female VCs globally.

In continuity and upon popular demand, here are forecasts from six professionals who are poised to make an outsized positive impact on the venture ecosystem in 2024.

Happy year-end festivities to all !

Kathy Matsui – General Partner, MPower Partners

1. Return of ESG: While 2023 saw criticisms such as ‘greenwashing’ negatively impact ESG sentiment around the world, we actually interpret this as a positive development, as greater investor and regulatory scrutiny on ESG substance is likely to result in better-quality disclosures and enhanced value creation over the long-run.

2. Japan’s IPO and M&A market comeback: Similar to other markets, Japan’s IPO market cooled off in 2023, but assuming a global recession can be avoided and inflation/interest rates are under control, the domestic IPO market is well-positioned to recover during 2024. Moreover, with recent acquisitions of Japanese startups, we also see the potential for M&A to become an increasingly popular exit option.

Maria Gutierrez Peñaloza – Co-Founding Partner, Nido Ventures

Nearshoring in Mexico, especially in manufacturing and technology, is set for significant growth. This shift, driven by geographic proximity, cultural ties, time zone alignment, and cost benefits, positions Mexico as an ideal destination for U.S. companies looking to relocate operations nearby.

The technology gap for manufacturing, once seen as a hurdle, now presents a unique opportunity for Mexican companies to develop technologies that enhance quality, efficiency, and innovation. This progress is attracting, and will continue to attract, considerable venture capital investment, with a steady rise in foreign direct investment in Mexico, reflecting confidence in its growth potential.

We expect the impact of nearshoring to be substantial. As local companies bridge the technological gap, they draw more venture capital, spurring innovation and growth. This creates a dynamic ecosystem where technology and manufacturing merge, potentially establishing Mexico as a high-tech manufacturing hub in the Americas.

At Nido Ventures, we are actively investing in this nearshoring wave, targeting companies directly or indirectly enhancing nearshoring efficiency. The upcoming year is likely to witness significant strategic partnerships, increased venture funding, and a rise in tech-driven startups in the B2B realm, further consolidating Mexico’s global economic position.

Yuri Nakayama – Director, Animal Spirits

In 2024, I will continue to focus on the trend in the climate tech sector as in 2023. The Paris Agreement, adopted at COP21 in 2015, has led many countries/companies around the world to declare carbon-neutral objectives. In order to achieve the goals, technological breakthroughs are imperative, thereby founding new startups and investing in these startups is becoming an increasing priority. Moreover many venture capital funds specializing in climate tech have been established.

Following the global trend, attention and funding for the climate tech sector are growing also in Japan. Initially, the software domain was the first to gain momentum, but recently, the Deep Tech sector also seems to raise a lot of money from Japanese VC as well. Given the fact that Japan is one of the major emitters of greenhouse gases, taking measures for decarbonization is crucial, and I expect this trend will continue.

Yoko Gocho – Venture Capitalist / Manager, Capital Medica Ventures

In 2023, impact investment and impact startups attracted more attention than ever in Japan, with the birth of several new impact investment funds and the first impact IPO.

I expect this trend to accelerate in 2024, but as the number of players increases, the value of simply being an “impact investor” or “impact business practitioner” will relatively diminish, and the substance of one’s business will come under greater scrutiny. I believe that the question will be whether or not a company is implementing the PDCA cycle to improve the outcomes it creates through impact measurement and management (IMM), and whether or not it is making a contribution to the impact it creates (would it have been achieved without its own business?).

This applies not only to startups, but also to investors. As a practitioner of impact investing, I will be working even harder to ensure that the contribution of investors will be strongly questioned by both society and entrepreneurs.

Momoka Takahashi – Venture Capitalist, Hakobune

I believe that 2024 will be the year when the evolution and fusion of AI technology and immersive experiences, as well as IP (intellectual property) and UGC (user generated content), will be key to a major breakthroughs in entertainment and purchasing experiences. Immersive experiences where consumers are directly part of the content, be it movies, music, games, or culture, and the UGC that emerges from these experiences will influence each other, and personalization through AI will create more vivid and lively entertainment experiences.

The purchasing experience will also reflect consumer preferences, transforming the buying process itself into a personalized and entertaining experience. The evolution and democratization of AI will provide consumers with unprecedented levels of customization and immersion, and will also open up new dimensions of communication and creativity, leading to a new cultural paradigm that will shape the lifestyles of the future. I look forward to riding this wave of change without fear.

Mayumi Wakebe – Investment Director, Shizen Capital

By 2050, the population of the African continent is expected to reach approximately 2.5 billion (1/4 of the world’s population), which means that it is a large and young market as well as a treasure trove of human resources.

In addition, under the African Continental Free Trade Area concept, the liberalization of intra-regional movement of people and services and the move toward a single market have begun. With this potential, along with various global players, the African diaspora born in Europe and the U.S. are entering the African economy as startups and VCs with funds and networks. African governments are also paying attention to startups as a driver of economic growth, and regulatory reforms and collaborative projects are flourishing.

Compared to the $6.5B investment in Africa as a whole in 2022 (including $1.6B in Debt), venture investment in 2023 has declined considerably. In addition, while there were notable Exits, such as the InstaDeep acquisition ($682m), there were also down rounds and closures of startups that had been talked about in the media. In other words, it was an important year for raising awareness of DD , organizational management and changing economic conditions (e.g., supply cost spikes, currency, etc.), as well as for increasing the number of Exit examples.

In addition, the quantity of existing and new Africa-focused funds, both domestic and international (including some great funds from Japan), continues to increase in pursuit of financial returns and business synergies. Therefore, 2024 will be an active year in which more investments will be made than in 2022, and I would like to get involved in activities to encourage this trend.

Shizen Capital produces first female investor from Sprout GP-in-training initiative

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. Just prior to the summer we announced our new Sprout initiative at Shizen Capital. Our hypothesis was that female venture capitalists were far too scarce in Japan, and not for lack of talent. We believe that diversity in venture capital teams is important for maximizing financial performance of a fund, as well as for identifying and supporting women and minority startup founders, who are also disadvantaged in venture ecosystems worldwide, and by extension funding innovative projects which merit backing yet fall off the conventional radars.  The diversity issue in our view is complex and systemic, and there is no single magic bullet of a solution to address it. However, as active investors in the market, we believe that we hold some…

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.


Mayumi Wakebe (picture from her LinkedIn account)

Just prior to the summer we announced our new Sprout initiative at Shizen Capital.

Our hypothesis was that female venture capitalists were far too scarce in Japan, and not for lack of talent. We believe that diversity in venture capital teams is important for maximizing financial performance of a fund, as well as for identifying and supporting women and minority startup founders, who are also disadvantaged in venture ecosystems worldwide, and by extension funding innovative projects which merit backing yet fall off the conventional radars. 

The diversity issue in our view is complex and systemic, and there is no single magic bullet of a solution to address it. However, as active investors in the market, we believe that we hold some accountability for the problem and hence have a role to play in solving it. Rather than discussing the topic ad infinitum in pursuit of the perfect solution, we chose to act.

Accordingly, we expect that the first incarnation of our Sprout initiative will be imperfect, but we are confident that we can improve and refine it along the way. We’re essentially applying The Lean Startup methodology toward addressing the complex problem of lack of diversity in venture capital. We’ve structured the Shizen Capital Sprout initiative as an apprenticeship program for emerging female VC fund managers. 

Although only a few months in, we’ve already witnessed several market characteristics validating our initial hypothesis. 

Shizen Capital held a gathering on April 26, where the firm’s limited partners listened to some of their several portfolio companies making pitches. The picture above shows Braid Technologies, one of the firm’s portfolio.
Image credit: Braid Technologies

For one, the volume of inbound applicants from truly impressive individuals debunks any myth of a scarcity of female VC talent in Japan. Our single blog post announcing the program — not even in Japanese for a role requiring native fluency — has appeared to tap an artery. As a small team, we regret that we could not hold extensive conversations with every candidate, but among the short list of those with whom we did, we found it difficult to narrow our selection to only one. For the others — and you know who you are — we are deeply grateful for the opportunity to have explored a collaboration with each of you. In our philosophy, there is a non-negligible chance that destiny will bring our professional paths together again in the future.

Another discovery during this preliminary phase: a tendency toward organizational hierarchy pervades the market. An elaborate degree of hierarchy is understandable in large and incumbent corporations. In venture however, our view is that excessive hierarchy serves as an impediment to investing in innovation. In other emerging venture ecosystems, we’ve witnessed how this can contribute to a dearth of early-stage capital, insufferably long due diligence cycles, and a proliferation of unwieldy investment syndicates that eschew stepping outside comfort zones. We respectfully encourage flatter fund organizations before this becomes a problem in Japan.

One final observation: several applicants approached us by leading with an apology that they lacked direct VC experience. This illustrates exactly the vicious cycle we are hoping to break ! The entire raison d’être of Sprout is to enable candidates with the right attitude and aptitude to become VC fund managers, regardless of their prior experience and career background. 

As the inaugural Sprout participant, Mayumi has joined Shizen Capital as a full-time Investment Director on a track to become full GP. Mayumi impressed us with her global mindset as well as her long-term ambition to build a VC fund focused on the African market, in pursuit of financial return and social impact, a commendable aspiration which Shizen endeavours to support in the future.

We are thrilled to count Mayumi as our newest member of the Shizen Capital family! Please feel free to introduce yourselves when you see her out at events. 

Unicorn production in France

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. France shows no signs of throttling back its ambition to maintain one of the world’s most vibrant startup ecosystems. At the VivaTech conference in Paris last week, French president Emmanuel Macron announced an extension of TIBI, an initiative which successfully catalyzed $30 billion of funding into French startups over a three-year period by encouraging financial institution partners to re-orient $6 billion into VC funding. When financial institutions back a venture capital fund as an anchor LP, a virtuous multiplier effect occurs, enabling the VC fund to raise more capital from other LPs. The TIBI extension will mobilize an additional $7 billion to be invested into French VC funds from such government partner institutions, with an increased focus on early-stage venture…

mark-bivens_portrait

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.


Image credit: Viva Technology

France shows no signs of throttling back its ambition to maintain one of the world’s most vibrant startup ecosystems. At the VivaTech conference in Paris last week, French president Emmanuel Macron announced an extension of TIBI, an initiative which successfully catalyzed $30 billion of funding into French startups over a three-year period by encouraging financial institution partners to re-orient $6 billion into VC funding.

When financial institutions back a venture capital fund as an anchor LP, a virtuous multiplier effect occurs, enabling the VC fund to raise more capital from other LPs. The TIBI extension will mobilize an additional $7 billion to be invested into French VC funds from such government partner institutions, with an increased focus on early-stage venture funds in particular.

Whether it be by happy coincidence or direct inspiration, Japan Post Bank just announced today an identical level of funding in Japan for “turning startups into unicorns.” So this strikes me as an opportune time to examine how France produced its 36 unicorns.

36 Unicorns and counting

Through its dedicated efforts over nearly two decades, France has emerged as the leading ecosystem for startups in Europe, and arguably by some metrics third in the world behind the U.S. and China. Several years ago, the French government set out its aspiration to produce 25 tech unicorns by the year 2025. France has already shattered this goal, having already attained 36 unicorns.

The unicorn count is a metric that governments around the world like to use as a proxy to represent the vibrancy of their domestic startup ecosystems. I believe that France represents an interesting case study in a country’s unicorn production, so let’s analyze how France produced its 36 unicorns.

Three primary factors contribute to the successful cultivation of tech unicorns:

  1. Volume of seed stage startups
  2. Time
  3. Capital

As the above funnel illustrates, producing unicorns requires starting with an abundant pool of seed stage startups. At the risk of sounding glaringly obvious, most startups do not become unicorns. In France’s case, approximately 1,000 seed stage startups are necessary to produce one unicorn. Failing to foster a sufficiently large volume of seed stage startups fundamentally tightens the reins on unicorn growth.

Secondly, it takes time. Unicorns do not grow overnight. For France, the average time for a startup to grow from seed stage to unicorn stage has been 8 years.

Finally, it takes capital. Two decades ago, France was not a country with abundant risk capital interested in the VC asset class. Nor was it a country of startups. Sources of capital were conservative in mindset, and French society espoused a culture which encouraged young people to pursue careers of stability rather than entrepreneurship. This is where the French government stepped in with a policy change which catalyzed the flow of capital into startups, and over time, transformed the mindset of French society to embrace entrepreneurship: the Angel Tax program.

Over 17 years, the French Angel Tax program produced the bulk of the 35,000 seed stage startups necessary for the unicorn funnel. Subsequently, initiatives from the BPI (the French Public Investment Bank) and more recently the aforementioned TIBI, provided the additional boost to VC funds to enable them to fill their capital coffers in order to finance the continued growth of the startups as they progress through the unicorn funnel.

The trajectory of France’s startup ecosystem represents an admirable success story. Moreover, the French government is not resting on its laurels by curtailing its ambitions. I submit that France will remain an interesting model to watch.

The trap of superfluous “due diligence”

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. Over the past 6 months we were forced to bow out of an investment in a startup on which we were particularly keen, and we barely averted a similar situation on a second one, both for the same reason. The hang-up came in the due diligence phase of our investment process. The term due diligence can be misleading for founders. VCs employ the term differently amongst themselves. Some venture capital investors use the term due diligence quite broadly, with the scope of their due diligence efforts encompassing nearly their full transaction process. Due diligence can begin shortly after the startup’s initial pitch meeting, and could include the VC’s entire assessment of the company: market analysis, strategic review, business model assessment,…

mark-bivens_portrait

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.


Image credit: Nick Youngson via Pix4free Used under the CC BY-SA 3.0 license.

Over the past 6 months we were forced to bow out of an investment in a startup on which we were particularly keen, and we barely averted a similar situation on a second one, both for the same reason.

The hang-up came in the due diligence phase of our investment process.

The term due diligence can be misleading for founders. VCs employ the term differently amongst themselves. Some venture capital investors use the term due diligence quite broadly, with the scope of their due diligence efforts encompassing nearly their full transaction process. Due diligence can begin shortly after the startup’s initial pitch meeting, and could include the VC’s entire assessment of the company: market analysis, strategic review, business model assessment, valuation benchmarking, full financial and legal audits, reference calls, and interviews with customers prospects and/or partners.

In contrast, I am old-school. I tend to apply a more conventional Silicon Valley view of due diligence, which is much more narrow in scope, essentially limited to the following principle: to verify that what we’ve been led to believe is indeed actually true. Specifically, in my narrow characterization, due diligence is limited to the client and reference calls as well as any detailed audits when necessary (financial/legal/technical). Everything before that is simply part of my job as a VC.

However, I am not writing this to complain about semantics. Either definition is fine, as is anywhere along the spectrum between my narrow usage and some investors’ broad definition of due diligence.

My objective here, rather, is to shed some transparency on the concept so that founders can avoid being misled, however inadvertently. Opacity on the nature and duration of a VC’s due diligence procedure does a disservice to entrepreneurs. It potentially wastes their precious fundraising time, causes them to miss out on investment from another VC fund, or in the worst case jeopardizes their company’s commercial relationships.

To be crystal clear and sidestep any confusion over the word due diligence, I will refrain from using it here. Instead, I will refer to an important milestone in any VC investment process: the VC term sheet.

The VC term sheet is a blueprint for an investment, a non-binding legal document that forms the basis of more enduring and legally binding documents. It establishes the specific conditions, valuation, and rights pertaining to the VC’s investment in the startup.

The term sheet is important for the startup founder because it represents a genuine intent on the part of the VC to invest. True, the term sheet is a non-binding document that subjects the contemplated transaction to certain conditions. For instance, at Shizen Capital our term sheets are conditional upon the satisfactory outcome of my narrow definition of due diligence (i.e. reference calls), as well as approval from our fund’s investment committee.

I submit that VC best practice should be as follows: only after the term sheet is agreed upon should the VC be allowed to perform reference checks with clients/prospects/partners of the startup. Founders may agree to make an exception to this practice, but I believe that this should come at the founder’s prerogative, and that founders should not feel pressure to do this as the norm.

I have witnessed too many startups in Japan fall into a trap while fundraising of overburdening their clients with reference call requests from potential investors. It is perfectly understandable to me now how this situation arose, and I do not condemn the behavior of my VC peers in Japan. The VCs are simply trying to collect as much information as possible to reassure their decision-making process. Especially in hierarchical VC fund structures, the analyst or junior associate evaluating the startup is afraid to make a career-limiting move by presenting an investment case that lacks airtight certainty.

The conundrum, however, is that in early-stage ventures it is impossible to eliminate all uncertainty.

The result is an inherent misalignment which can bring great harm to the founder. It can extend an investment process from what should take weeks into several months. Worse even, it may raise doubts among the startup’s clients, who subsequent to frequent reference calls, may start to wonder:

  • Is this startup having a difficult time fundraising?
  • Is this startup financially stable, or should I consider switching my business to another vendor?
  • Will being a customer of this startup always be so troublesome and time-consuming?

When a prospective investor requests client calls only to decide subsequently not to invest, the startup founder has squandered a bit of their goodwill with their customers. Multiply this by several VCs, and this becomes a burden on the startup’s commercial relationships.

Founders should not feel obligated to grant reference calls to any candidate VC who requests them.

Postponing reference calls until after the term sheet is signed will separate the VCs who are genuinely interested in investing from those who are merely gathering information or embarking on fishing expeditions.

Don’t let automation relegate you to the role of “human router”

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This guest post is authored by Cherubic Ventures. Founded in 2014, they are an early-stage venture capital firm that’s active in both the US and Asia, with a total AUM of 400 million USD. Focusing on seed stage investments, Cherubic aims to be the first institutional investor of the next iconic company and back founders who dare to dream big and change the world. Their team sits across San Francisco, Singapore, and Taipei. The Japanese translation of this article is available here. The global tech industry is seeing wave after wave of layoffs, from the unicorn level to the top internet giants. Statistics from Layoffs.fyi show that in the less than three months since the start of 2023, layoffs have already exceeded 100,000, with Google, Microsoft, and Meta topping the list. It’s easy to write these job cuts off to companies cutting spending during an economic downturn, but take a deeper look. The mainstream adoption of work automation tools coupled with the effects of the pandemic has led to a tremendous shift in how manpower is used and organized. And we need to pay attention to the fact that the target of these layoffs has been in many cases middle…

This guest post is authored by Cherubic Ventures. Founded in 2014, they are an early-stage venture capital firm that’s active in both the US and Asia, with a total AUM of 400 million USD. Focusing on seed stage investments, Cherubic aims to be the first institutional investor of the next iconic company and back founders who dare to dream big and change the world. Their team sits across San Francisco, Singapore, and Taipei.

The Japanese translation of this article is available here.


Middle Management by Paul Hudson via Flickr
Used under the Creative Commons Attribution 2.0 Generic license.

The global tech industry is seeing wave after wave of layoffs, from the unicorn level to the top internet giants. Statistics from Layoffs.fyi show that in the less than three months since the start of 2023, layoffs have already exceeded 100,000, with Google, Microsoft, and Meta topping the list.

It’s easy to write these job cuts off to companies cutting spending during an economic downturn, but take a deeper look. The mainstream adoption of work automation tools coupled with the effects of the pandemic has led to a tremendous shift in how manpower is used and organized. And we need to pay attention to the fact that the target of these layoffs has been in many cases middle management.

A recent Bloomberg report discovered that in its latest wave of job cuts, Google has targeted mid-level managers, of which the company revealed it has over 30,000. At the same time as this news, Meta identified 2023 as its “Year of Efficiency”. Tesla CEO Elon Musk has always been at the front of the “lean and mean” approach to management, so it’s no wonder that when asked about his least favorite part of running Twitter, his answer was that every engineer’s code seems to be managed by ten people.

Managers are supposed to make organizations more efficient in hitting targets, but in the current environment, the word “management” is starting to be seen as the new enemy of workplace efficiency and agility.

When managers become “human routers”

In a tech industry where new technologies can be iterated rapidly and agility is essential to survival, companies are putting more stock in the “lean” mentality. But there’s no getting around the reality that as companies scale, they need to expand their workforce, which is why they need managers to handle communication and make sure all departments are aligned.

However, the result is that managers’ time becomes more and more consumed by managing communication. And when management has no time left for more growth-focused, value-added tasks, companies fall into the trap of organizational hypertrophy. Thus enters the concept of “human routers”, or mid-level managers with little function outside of organizing and disseminating information.

Work automation tools are rewriting the nature of work

The root cause of this trend is that automation and productivity tools are rewriting the nature of work. Today’s software tools can essentially perform the historical functions of mid-level managers, e.g. supervising team productivity, overseeing progress, and document management. At Cherubic Ventures, our productivity tool JANDI solves the interdepartmental communication pain point by letting us create special chat groups based on project, department, task, or topics. It can also assign tasks, monitor progress, and integrate with other apps such as Google Calendar and Salesforce.

A study by a Wharton Business School professor points out that automation in fact creates jobs, referencing how machinery freed past generations of farm workers to take on jobs in the newly created service industry. But when machines can take over tasks like reviewing reports, and perform them without human error, a reduction in the need for managers is inevitable – Gartner predicts that nearly 70% of daily tasks for middle managers will be fully automated by 2024, which will lead to a complete reshaping of this role.

The recent emergence of generative AI like ChatGPT and Midjourney give us a picture of where work automation is heading. All that these tools require is a few keywords or prompts to automatically generate blog posts or design images, with the human user only providing instructions and suggestions for optimization.

This does not, however, signal the end of management. If managers use automation tools to their advantage, more time will be released for high-level tasks such as team building and talent cultivation. And as the 2021 Harvard Business Review article “It’s Time to Free the Middle Manager” emphasizes, companies need to start looking at alternatives to the traditional promotion systems that allow workers to advance without necessarily taking on management responsibilities.

It’s a historical pattern that every new technology results in the replacement of some jobs. The only other constant is that those growth-minded individuals who are not afraid to disrupt the status quo and can coexist with the new technology will always come out on top.

Before jumping on the AI wave, remember these few things

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This guest post is authored by Cherubic Ventures. Founded in 2014, they are an early-stage venture capital firm that’s active in both the US and Asia, with a total AUM of 400 million USD. Focusing on seed stage investments, Cherubic aims to be the first institutional investor of the next iconic company and back founders who dare to dream big and change the world. Their team sits across San Francisco, Singapore, and Taipei. The Japanese translation of this article is available here. ChatGPT has triggered a wave of generative AI products, which is creating huge ripples in the tech space. In just one week, the number of ChatGPT users exceeded one million, making it the fastest growing software in history, surpassing both Twitter and Facebook. New AI tools in areas like copywriting, coding, interior design, are popping up one after another, and generative AI is already the darling of the venture capital world.      According to CBinsight data, the amount of financing related to generative AI in 2022 will exceed 2.6 billion US dollars, almost double the amount of 2021. Tech giants like Microsoft and Google are rolling out new AI products in a display of strength to see who will…

This guest post is authored by Cherubic Ventures. Founded in 2014, they are an early-stage venture capital firm that’s active in both the US and Asia, with a total AUM of 400 million USD. Focusing on seed stage investments, Cherubic aims to be the first institutional investor of the next iconic company and back founders who dare to dream big and change the world. Their team sits across San Francisco, Singapore, and Taipei.

The Japanese translation of this article is available here.


Used under the Creative Commons 0 license via PublicDomainPictures.net.

ChatGPT has triggered a wave of generative AI products, which is creating huge ripples in the tech space. In just one week, the number of ChatGPT users exceeded one million, making it the fastest growing software in history, surpassing both Twitter and Facebook. New AI tools in areas like copywriting, coding, interior design, are popping up one after another, and generative AI is already the darling of the venture capital world.     

According to CBinsight data, the amount of financing related to generative AI in 2022 will exceed 2.6 billion US dollars, almost double the amount of 2021. Tech giants like Microsoft and Google are rolling out new AI products in a display of strength to see who will own the last word in the AI era.  

But this surge in generative AI reminds me of the launch of location-based services 15 years ago. 

Location-based technology dominated the entrepreneurial conversation in those years, propped up by the launch of the iPhone in 2008. New products leveraging the technology in areas such as social media, shopping, and dating emerged one after another, each of them aiming to be the next big platform for the time.   

Let’s look at Foursquare as a prime example of where the “location-based wars” started and how they’re going. We all remember the check-in and location sharing for badges functions, which helped the app break one million users in just one year after its launch, overtaking Twitter, which took two. This led to Foursquare attracting $70 million in VC funding. Internet giants like Facebook, Google, Groupon, and Twitter all followed suit, aggressively acquiring location-based tech startups to offer similar services. Those startups have all since changed their business models or disappeared. And the originally consumer-facing Foursquare is now a data analysis provider for enterprises.    

The lesson is that new tech always creates huge opportunities and triggers entrepreneurship, but only a few startups can survive till the end. So what mindset should we adopt around generative AI?   

As time passes, startups built entirely on new tech will lose their advantage as soon as the barrier to implementing that technology is lowered. So will it be when AI eventually becomes a commodity that any company can integrate into its services with just a few lines of code. That’s exactly what happened with location-based services. At times like these, it’s those startups that can solve the most user pain points and retain those users that will make it through the night.  

In the face of new technologies, founders need to go back to the essentials of entrepreneurship and first ask themselves what pain points they can solve and in which industries. Only after they have taken these first two steps should they ask: “What role can the new tech play in this use case?” Location-based technology enabled Uber and Google Maps to exist, but neither company defined themselves as “location-based services companies”. They started from the perspective of which transportation pain points needed fixing. 

Whether you are a founder or an investor, as long as you can return to the essence of the problem every time a new technology arrives, the answers to these questions will become clear.

Startup M&A in Japan: Fasten your seatbelts

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. One key component of our investment thesis at Shizen Capital is our view on exit opportunities for early-stage startups in Japan. We believe that Japan has now reached an inflection point, and that corporate M&A for Japanese startups is poised to go intergalactic. Historically, an IPO has been the most common and viable way for VC-backed startups in Japan to exit. The Mothers market of the Tokyo Stock Exchange (now re-branded as TSE Growth) functions so well that even microcap companies in the $10 million valuation range could go public. This has proven to be a double-edged sword, a topic on which I should probably elaborate in a longer post. (TL;DR: The main benefit accrues to VC funds by providing…

mark-bivens_portrait

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.


License free image by Steve Bidmead via Pixabay

One key component of our investment thesis at Shizen Capital is our view on exit opportunities for early-stage startups in Japan. We believe that Japan has now reached an inflection point, and that corporate M&A for Japanese startups is poised to go intergalactic.

Historically, an IPO has been the most common and viable way for VC-backed startups in Japan to exit. The Mothers market of the Tokyo Stock Exchange (now re-branded as TSE Growth) functions so well that even microcap companies in the $10 million valuation range could go public. This has proven to be a double-edged sword, a topic on which I should probably elaborate in a longer post.

(TL;DR: The main benefit accrues to VC funds by providing them a convenient path to exit, but not without drawbacks: such as curtailing ambitions of private companies, creating misalignment risk with IPO preparation service providers, forcing a generation of entrepreneurial founders into becoming public company administrators, and depriving Japan‘s VCs of the opportunity to learn one of the most important skills of being a good VC, which is positioning a startup for M&A).

Paradoxically, all of our exits from our Japan funds have been via M&A, including my own personal career high. Although our particular track record in Japan seems to represent an exception, we believe that M&A transactions of Japanese startups is about to increase exponentially. We see three principal drivers at play here:

1. Shift in sentiment among founders

We’re observing an unmistakable shift in perspective among founders in Japan that selling their company via M&A is no longer an admission of failure. If you’re surprised when reading that last bit, I too was surprised myself. One of my innumerable discoveries upon launching my first fund in Japan was how Japanese founders had been educated to view an IPO as their proof of success, and that selling their company to another firm implied that they couldn’t make it. At minimum, M&A was viewed as a Plan B at best.

Fortunately, this attitude is changing. While it’s impossible to pinpoint the specific reasons for this shift in mindset, I suspect a couple of contributing factors. Japan may well have reached a critical mass of startup founders who have pursued the IPO path. These founders now manage listed companies — with all the accompanying obligations of compliance and investor relations that a public listing entails — and they are unhappy in their newfound managerial roles, with daily responsibilities far removed from life as a startup entrepreneur. Anecdotally, we have spoken with a handful of such individuals who have confided in us that they are miserable, that they reminisce nostalgically for the days when they could simply tinker and build in harmony with their intrinsic motivations as “0-to-1” entrepreneurs.

Another potential contributor to the changing perceptions is the increasing number of foreign entrepreneurs in Japan, who do not carry the same emotional baggage related to M&A and are setting the example.

2. A tax break for corporations that acquire domestic startups

As part and parcel of the Japanese government’s startup nation agenda, a new tax policy will grant Japanese corporations a tax break in acquiring domestic startups. Under this new scheme, corporations will be able to deduct 25% of their acquisition price from their taxable income up to ¥5 billion (~ $40 million) per transaction and up to an aggregate of up to ¥12.5 billion (~ $100 million) in tax deductions every year.

This new tax deduction could help surmount the “not-invented-here” syndrome prevalent in many Japanese corporations, who in reality are desperate to complement their laudable in-house innovation efforts with innovation from outside the corporate walls. This has the potential to shake up internal corporate incentives. Once a few initial corporations take advantage of the tax deduction, others will likely follow suit, and increase their own M&A activities in emulation. [Note: there remains a minor issue related to goodwill depreciation but this is under review.]

3. A new macroeconomic paradigm of inflation

Inflation has arrived in Japan too. Although not quite yet as severe as the other G7 countries, Japan has recently printed a 41-year high in inflation at nearly 4.3%. Accordingly, we are detecting a growing sensitivity among corporate executives to this new inflationary environment. With over $3 trillion worth of cash in aggregate on their balance sheets (yes, that’s trillion with a ‘T’), corporate Japan faces an increasingly obvious choice: ramp up investment in long overdue digital transformation, or dither while inflation erodes their capital.

Taken together, we believe that the above factors will drive a virtuous cycle. Increased M&A for early-stage ventures in turn will provide a new generation of founders with a taste of company-building accompanied by modest wealth creation. If the experience of European ecosystems is any guide, this first step will likely motivate a subset of these successful founders to jump back into entrepreneurship and to aim even higher. Others may become early-stage VCs themselves, another boon to a startup ecosystem in which few VCs today possess startup experience.

In our view, this context augurs well for early-stage venture investing in Japan overall.

Japan Lead VC Radar – A glance of the most active lead VCs in 2022 (Infographic)

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. As is customary, we are publishing once again our annual VC Radar for Japan. The VC Radar reflects Japan’s most active Lead VCs. For the 2022 edition, this infographic depicts the number of new investments led by Japan’s independent venture capital funds into domestic startups last year. Only investments in which the VC served as Lead investor for a startup that was not already in their portfolio are counted here. We believe this is an important tool for Japan’s growing startup ecosystem. You can read more about our rationale here (special thanks to Kanako for compiling this data !). [One additional note: we strive for full accuracy on this infographic and apologize for any mistakes. Feel free to direct any…

mark-bivens_portrait

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.


As is customary, we are publishing once again our annual VC Radar for Japan. The VC Radar reflects Japan’s most active Lead VCs.

For the 2022 edition, this infographic depicts the number of new investments led by Japan’s independent venture capital funds into domestic startups last year. Only investments in which the VC served as Lead investor for a startup that was not already in their portfolio are counted here.

We believe this is an important tool for Japan’s growing startup ecosystem. You can read more about our rationale here (special thanks to Kanako for compiling this data !).

[One additional note: we strive for full accuracy on this infographic and apologize for any mistakes. Feel free to direct any requested corrections to [email protected]].

Click to enlarge.