The Art of Spotting Giants: Inside Japan’s Top-Ranked VC Fund
GLOBIS Capital Partner‘s Emre Yuasa shares insights on identifying and nurturing the next wave of Japanese unicorns.
In a country known for its corporate titans and lifetime employment, a new breed of entrepreneur is emerging – driven not by youthful exuberance, but by midlife epiphanies.
“Previously, entrepreneurs tended to be young, in their early 20s, and sometimes college dropouts. Now, we see more experienced individuals, often in their thirties or forties, starting their own startups after years of experience in previous companies,” observes Emre Yuasa, Partner at GLOBIS Capital Partners, one of Japan’s leading venture capital firms.
This unexpected catalyst for innovation is just one of the surprising insights Yuasa offers into Japan’s rapidly evolving startup ecosystem. From drones that inspect telecom towers to exoskeletons in nursing homes, Japan’s entrepreneurs are tackling global challenges with a uniquely Japanese, high-tech twist.
These creative founders with proven experience are aiming to build big – and Yuasa couldn’t be more optimistic. “We see more capital flowing into the market, more talented people joining startups, and these startups are achieving bigger outcomes,” he notes.
We sat down with Yuasa to discuss how GLOBIS Capital Partners identifies and incubates the businesses of tomorrow – and what budding entrepreneurs should do before they make the plunge into the exciting world of startups. From his unique vantage point, Yuasa offers insights into Japan’s evolving entrepreneurial landscape and lessons that could shape the future of innovation globally.
The Art of Spotting Tomorrow’s Giants
GLOBIS Capital Partners, which started in 1996 with a modest $5 million fund, raised its 7th fund in 2022 with $500 million USD (¥73 billion JPY) and is Japan’s leading fund in terms of performance according to Preqin, an independent tracker.
Japan’s startup ecosystem has experienced explosive growth over the past decade. “In 2014, startup investment was less than $1 billion USD (JPY 80 billion), but last year it was about $6 billion USD (JPY 850 billion),” Yuasa reveals. This tenfold increase in yen terms represents one of the few high-growth industries in Japan.
As more companies demonstrate the potential of the Japanese dream, more and more innovators start to bet on themselves and work towards building the next big thing in their domain. With so much talent in the market, how does Yuasa spot the needle in the haystack?
“Every year, we meet about 1,000 startups, mostly in Japan, and invest in 10 to 12 of them,” Yuasa explains. This 1% selection rate focuses on three critical factors: the market, the product, and the team.
But it’s not just about the numbers. Yuasa and his team are looking for what he calls “learners” – founders with an insatiable curiosity and the ability to absorb new knowledge at breakneck speed. Over the years, he has met many talented individuals, but one in particular stands out.
“He has a rare talent to absorb new knowledge within just an hour and turn it into his own. He does this continuously, becoming an expert in new fields in a remarkably short time,” Yuasa says.
From Small IPOs to Global Unicorns
Perhaps the most significant shift in Japan’s startup scene is the level of ambition. “Previously, Japanese startups would typically build a business and go public once they hit $10-20 million in revenue, with market caps around $200 million to $300 million USD,” Yuasa explains.
But a watershed moment came in 2018 when Mercari, a GLOBIS portfolio company, went public at a valuation of roughly $6 billion USD.
This success has inspired a new generation of founders to think bigger. Today, Japan boasts over 10 unicorns – startups valued at over $1 billion USD.
The second change is in the profile of entrepreneurs, with more experienced entrepreneurs taking the leap into building their own companies.
“These two changes—more ambitious startups and experienced entrepreneurs—are driving each other. This trend has spurred and inspired others to do more. This phenomenon is not unique to Japan; it’s also seen in other markets. For example, in Sweden, companies like Spotify and Skype inspired other startups to scale bigger. The same is true for countries like Korea and Indonesia. In Japan, we are starting to see similar patterns,” he notes.
The idea of leveraging individuals into communities is foundational for GLOBIS Capital Partners. Like many Japanese companies, they have a set of values that guides business philosophy and decision-making. Among these Twelve Principles of a Venture Capitalist is a directive to become a “venue where talents gather”.
“Our role as a VC is not just to cherry-pick the best talent available, but to create a community that connects and enhances these individuals,” Yuasa notes.
Leveraging Strengths and Weaknesses
The new breed of Japanese startups makes good use of both Japan’s strengths as well as big opportunities emerged to address major societal issues. “In the consumer sector, Japan excels in entertainment and content, such as anime, manga, and movies,” Yuasa points out.
“In the enterprise sector, success often depends on the specific industry, such as manufacturing, where Japan is globally strong.” He also highlights Japan’s strength in deep tech: “Japan has made significant strides in advanced technologies based on substantial scientific or engineering innovation,” referencing Japan’s Nobel Prize-winning work in stem cells and laser technology.
At the same time, Japan’s often-cited challenge of an aging population is not going unaddressed by its ambitious founders.
“Japan often serves as the first market to address issues related to an aging population, generating high demand for innovative solutions,” Yuasa explains. He cites an example of a Japanese robotics company developing exoskeleton devices for nursing homes, highlighting Japan’s strength in healthcare innovation.
Challenges on the Horizon
Despite the positive trends, Japan’s startup ecosystem still faces significant hurdles. Diversity remains a pressing issue, with many startups and VCs still male-dominated. The language barrier also poses challenges for non-Japanese individuals looking to enter the ecosystem.
Moreover, Japan is not yet a byword for startup potential. “The traditional view of Japan is that it is very conservative, a great place to travel and enjoy food, but not necessarily a place to look for technology companies or startups. This perception needs to change,” emphasizes Yuasa.
Working with startups and seeing their growth and performance over the last few decades has raised his optimism. “The Japanese government is very pro-startup,” he says. “They are accelerating deregulation, changing tax policies to favor startups, and implementing various initiatives to support the ecosystem.”
“I am hopeful that we can put Japan on the world map in terms of the startup ecosystem in the next three to five years,” Yuasa states. “We have a chance, but there is still much more work to be done.”
Advice for Budding Entrepreneurs
“Thoroughly research the pain points or issues you’re trying to solve,” Yuasa advises. While some advocate a figure-it-out-as-you-go approach, Yuasa prefers a more deliberate path – guided by firsthand research.
Before you quit your job or drop out of college, make a start by pursuing the idea as a side project. But do so with the same methodical approach you would take if it were full-time.
“Conduct interviews with potential customers, research the market, and create simple mockups. Even a ten-page slide deck can help gauge interest. Try to understand why the problem exists and how you can approach it differently. By deeply understanding the problem and gathering insights from potential customers, you can build a solid foundation for your startup,” he suggests.
Takeaways & Lessons for Global Business Leaders
For C-suite executives and business leaders looking to innovate or tap into new markets, Yuasa’s methodical approach offers valuable lessons:
- Focus on Solving Real Problems: Yuasa advises entrepreneurs to “thoroughly research the pain points or issues you’re trying to solve.” This approach is equally valuable for established businesses looking to innovate.
- Cultivate “Learners”: The ability to learn quickly and adapt is crucial in today’s fast-paced business environment. Foster a culture of continuous learning in your organization.
- Look Beyond Traditional Markets: Japan’s success in leveraging its aging population to drive healthcare innovation demonstrates the potential of turning societal challenges into business opportunities.
- Embrace Global Perspectives: Yuasa’s insights from visiting European startup ecosystems highlight the value of learning from global best practices and adapting them to local contexts.
- Create Venues for Talent: GLOBIS Capital Partners’ approach of creating “a venue where talents gather” can be applied within larger organizations to foster innovation and collaboration.
