Tokyo Startonomics – Investor Panel

Panel of 4 investors that operate in Tokyo and China talking about investing here.  (didn’t get their names down, sorry)

• Current investment climate is “very difficult” – illiquid capital markets.  Starting to feel some new momentum, though
• Behind the scenes there is a lot of core investment going on for the future
• valuations are a lot lower (just like California)
• Most large VCs in Japan are currently structured in a corporate (bank like) way
• Currently smaller, limited partner model VC firms are being formed to compete with the larger banks
• Targeting mobile social networking in China, mobile MMORPG in China, mobile social applications in Japan
• ValueCommerce – #1 affiliate marketing company in Japan
• 700k websites that drive traffic to the bigger portals
• 38k mobile sites
• 2k advertisers
• 40k transactions per day
• 10b YEN gross revenue ($100m USD)
• Public on Tokyo stock exchange since July 2006
• 17 contracts with Yahoo! Japan – great partnership
• Eminence – iPhone app development company
• Make sure your PE ratio > 60 before going public in Japan
• Process of the IPO can dramatically change the initial value, regardless of earnings and performance
• Mixi is following the strategy of Facebook
• In Japan, VCs like to own about 10% on average of a portfolio company (as opposed to 20-40 in US)
• There is a lot less competition between investors here (except for the exceptional businesses).  This keeps valuations lower (less cash chasing entrepreneurs than in California)

Where they find opportunities to invest in:

• Mobile gaming
• Animation / premium content
• Still lots more progress to be made in search (video search, etc)
• applications and services that are non-language dependant … like graphical things
• Not a lot of angel investing going on here yet (YCombinator model) but they see it working here

Notes from Q&A Session:

• Japanese investors understand that they need to re-tool themselves before they can effectively invest in China.
• Smart.fm – new japanese company that is launching in the US.  http://www.smart.fm
• Japanese secondary market coming into play now that public markets are basically closed.
• Secondary market in Japan fairly diverse, like in the US (PE firms, hedge funds, etc)