Disrupting Japan

Japan has one of the longest lived and healthiest populations in the world, and let Japanese startups are playing a relatively small role in the recent longevity-tech boom. The longevity market includes everything from health-tech wearables, to foods and supplements, to lifestyle coaching, to invasive medical procedures. The offerings themselves range from the incredibly useful and helpful to the wasteful and the outright dangerous. To make sense of all this, today we talk with Bilal Kharouni the CEO of Ekei Labs, who explains his startup's pivots through multiple sectors of the budding longevity market. It's a great conversation, and I think you'll enjoy it. Show Notes What exactly is “biological age” Where health tracking apps are useful and where they are dangerous How to market supplements in Japan's tightly regulated  market The business and medical challenges in direct-to-consumer health tech Pivoting from supplements to consumer test kits to research The path for commercializing  today's university medical research Business models that work for startups in medical research Advice to founders coming to Japan to start a startup How to sell in Japan with limited Japanese abilities How foreign founders can recruit Japanese advisors for their startup How Japan’s new via restrictions will affect foreign entrepreneurs in Japan Links from the Founder Everything you ever wanted to know about Ekei Labs Connect with Bilal The Aging Consortium is work on the clinical translation of the biomarkers of aging Life Biosciences is using Ekei Labs measurement platform to develop epigenetic reprogramming (gene therapy) protocols Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Japan is one of the longest lived populations in the world, and as you get older, well, you start thinking more and more about getting older. Of course, getting older is much better than the alternative, but we all want to slow it down a bit and do it in a healthy way. Now those of you who know me won't be surprised to learn that once I got interested in this topic, I got a little obsessive. I have a smart scale and a smart watch and a smart ring all confidently telling me slightly conflicting things about the state of my health. And anti-aging startups are a mixed bag at best, ranging from difficult, boring, but very effective medical advice about diet and exercise to fund cutting edge wearables and trendy supplements and treatments that are a complete waste of money and everything in between. Well, today we sit down with Bilal Kharouni, the CEO of Ekei Labs, who's going to help us make sense of all this. Now, the Ekei Lab's journey and their pivots while trying to find product market fit in the anti-aging market is really a microcosm of the whole wellness industry from supplements to consumer facing tech to medical research to well, I’ll let Bilal explain where it all ends. Now, interestingly, Bilal and I had this conversation in Okinawa, home of Japan's longest lived population. And we talk about finding product market fit in health tech, how to sell to Japanese enterprises when your Japanese ability is limited, and how Japan's new visa restrictions are going to impact startups here. But, you know, Bilal tells that story much better than I can. So, let's get right to the interview. Interview Tim: I'm sitting here with Bilal Kharouni, the founder and CEO of Ekei Labs, who's selling direct to consumer longevity testing and support services. So thanks for sitting down with us. Bilal: Yeah, thanks for having me. Tim: Now you're based in Tokyo, but we're sitting here in Okinawa today. You've recently joined the OIST incubator, so tell me about that. Bilal: Yes, we work on aging and longevity. So for us, there's not a better place than the blue zone of Okinawa to really sit our lab and working on aging. Actually, we pivoted quite a lot from direct to consumer longevity tests. So we really have a platform that is more intended for joint research. We went much further in terms of research, so having both the lab and the talent and also the perfect location too. Tim: Well, I mean Okinawa famously as one of the longest lived populations in the world. Is that coincidence or does that inform your research in some ways? Bilal: So, it's pretty consciously I will say, the reason why Okinawa and people live the longest are part due to diet or social activities being surrounded by their loved ones, which is great. But what we're investigating is mostly therapeutics to increase healthy lifespan. So, it's a deep tech zone I would say. However, for people who have an interest in longevity and living longer and who wants to work on these topics, it's a very attractive location and it's an attractive location for hiring some of the best people. We had the chance having members quitting the job for Tokyo to join us in Okinawa to work with us. Tim: Well, I can certainly see the appeal of coming to work here. So, let's talk about biological age. Because this is something that fascinates me. But what exactly is it, like my smart scale at home tells me about biological age. I think this wearable also will give me a biological age, but what exactly is it? Bilal: So, it's a very interesting question, and that can be quite confusing for many people because as you're mentioning, you have so many different biological age for one chronological age. So, it's really looking at the spectrum. So that can be, for example, your cardiovascular health, your fitness or any kind of biomarkers and see how you benchmark compared to rest of population. So, you might be 32 years old, but for example, your cardiovascular system might correspond to a healthy individual of 18 years old. So, you could say that your cardiovascular health is of someone of 18 years old and… Tim: But is it something that is scientifically defined? Is there like an accepted way to measure these biomarkers and calculate it this way? Is there an accepted scientific consensus about how to calculate it? Bilal: There is not a scientific consensus yet and that's actually big challenge in our industry. We have different ways of measuring chronological age using, for example, evidence marker, glycome marker proteomics, and the big question in which ones have a clinical translation. Because I can give you a chronological age, but if it doesn't mean anything in terms of risk of the disease or physical conditions, it's frankly huge metrics. Tim: I'm also curious about. Okay, not necessarily the way you calculate it specifically, but industry-wide. So, when biological age is calculated, is the actual chronological age always used as an input or can it be calculated independently or is it more of like an adjustment factor? Bilal: So when you do the algorithm, you have a dataset with the metadata sets with the gender, that helps calibrate the chronological age. And ultimately you would want when you take input from a patient not knowing the chronological age and estimates the biological age independently of the chronological age and industry-wide, there are different clocks. And now there's a huge work for having this clinical and scientific validation. So each year, actually I'm going to Boston in October for the biomarkers of aging symposium that takes place at the Harvard Medical School. So that's really ongoing discussions in the field. Tim: So your offering also involves a mobile app? This app provides insights and advice on how people can improve their biological age. So, what kind of insights and what kind of lifestyle changes does it recommend? Bilal: So for the app, low hanging fruit for someone like the diet, sleep, physical activity, and we put this app for use for clinicians and they can be also very helpful for the clinicians who have both a surgical age metrics as well as information the lifestyle of their patients. Because can be quite difficult for the clinics to know how well the patient eat or sleep. And then the medical doctor can really guide the medical journey to help them in their longevity medical journey. Tim: So, what are the biomarkers you're looking at? I mean, you've recently been selling like a home test kit for that's like a blood sample. So, you've got the blood test and what other information goes into the calculation? Bilal: So we have two type of product services. So, the one actually describes is for our individual use and we use a biomarker called IgG glycome. And what is amazing with this biomarker, it is that is very responsive to interventions, an intervention of eight to 10 weeks and do another test. You can see a data, you can see a difference in this biomarker like, and what is also great with this biomarker that is extremely linked with chronic inflammations and chronic inflammations are linked with a myriad of chronic disease. Tim: So, is that like just a coincident marker or is that actually directly related to biological aging? Bilal: That's a great question. Menopause is probably one of the condition that is the most linked to medical aging. And when we say that so many times it's misdiagnosed and mis-documented. So, having ways of getting the early science through this IgG glycome measurements and then having better medication or better health optimization or better response from the medical doctors, we think is extremely important. And probably the first longevity drugs that we could see on the market will be a drug targeting menopause and perimenopause. That may be one of the first age related condition that we might be able to treat one day. Tim: Excellent. Let's take a step back for a minute and kind of talk about how Ekei Labs came to be and how we ended up in this room having this conversation. So,

In the popular imagination, Japan is almost synonymous with robots. While Japan once dominated cutting-edge robotics, over the past decade she has fallen further and further behind the US and China. Today we sit down with Chiamin Lai of Firstlight Capital, who believes that Japan might just regain that leadership. We talk about the unique opportunity and advantage Japan has in the deployment of practical physical AI, the enterprise culture that is holding it back, and what a handful of innovators are doing about it today. It's a great conversation, and I think you'll enjoy it. Show Notes How starting startups in Japan has changed over the past 20 years -- especially for foreigners How Japan's labor shortage is driving the adoption of physical AI The biggest problem in integrating GenAI and robotics The best use cases for physical AI today and why healthcare is not one of them How secrecy is holding back AI innovation What keeps Japanese enterprise from embracing open innovation Can Japan's VC ecosystem afford to fund AI in the era of massive funding rounds Why physical AI companies should not create their own hardware Why Japanese startups should not look to hardware for competitive advantage The importance of industry cooperation and why it's critical for Japan's AI success What physical AI will look like in Japan in five years Links from the Founder Everything you ever wanted to know about Firstlight Capital Firstlight's thesis on Physical AI Connect with Chiamin on LinkedIn Follow her on Twitter @chiamin_lai Chiamin's excellent series on Physical AI in Japan Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Japan has always had a special and very positive relationship with robots from Astro Boy and Doraemon in the fifties and sixties, to Sony's Asimo in the 2000s to SoftBanks Pepper in the 2010s. It has always felt like Japan was set to create and then to lead a humanoid robot revolution. But that didn't happen. In fact, today, Japan seems to be far behind both China and the US in the development of not just humanoid robots, but intelligent robots in general. Well, today we sit down with Chiamin Lai partner at Firstlight Capital, to discuss how that came to be and what we can do about it. Now, Chiamin's investment interests are deeply focused on physical AI and specifically physical AI startups in Japan. And she remains optimistic about the future of AI and robotics in Japan. We talk about the market and the financial structures pushing Japan to adopt meaningful physical AI before the rest of the world. The technology and social challenges of trying to use AI and robotics and healthcare, and some really great advice for physical AI startups that are planning to raise money. But, you know, Chiamin tells that story much better than I can. So, let's get right to the interview. Interview Tim: So, we're sitting here with Chiamin Lai, the general partner at Firstlight Capital, and a director at Japan Venture Capital Association. So, thanks for sitting down with me. Chiamin: Thank you, Tim. Tim: Before joining Firstlight, you worked in startups and investing in Japan and in China and in the US but you've had ties to Japan for quite a while, haven't you? Chiamin: Yeah, I was born Taiwan, but then I came here when I was teenager, and after that I received education here. I also work in Japan, but then later to Europe and then came back. So I can say this is like my hometown in the way. I have more friends, more connection, and my family here. So yeah, some of my friends said, you are more Japanese than we are. Sometimes I agree. Tim: Yeah, I know the feeling. I've been here over 30 years myself. Yeah, it kind of sneaks up on you. And Japan is a very comfortable place to live once you kind of get used to it all. Chiamin: Yeah. But I would say it actually changed a lot for the past 20 years or 30 years. When I came, Japan is not that open up. Like people sometimes complain about they have a hard time finding apartment and so on. I'm like, okay when I came it was worse. Tim: Yeah, that's for sure. Chiamin: Yeah. Finding a part-time job, finding a job was not that easy at that time because we still have a lot of population. They don't really need a foreigner to work for their company. Tim: Well, I think that's one of the biggest changes is so when I started my first startups back in the dotcom era, a big part of it was that there weren't a lot of options open to foreigners in Japan. Having a regular career track job was exceptionally rare, and now it's almost kind of flipped. Chiamin: Yeah. Yeah. I agree. I think it's good for the country. I think both you and I, we stay here for a long time, so we have a deep understanding about this country and a lot of foreigner like us I think we all wish that we can contribute somehow to this society because it's a good country to live. That's also one of the reason why, even though I left for few years and I decided to come back to Japan and to do some contribution, and that's one of the reason I'm here. Tim: Well, let's talk about that because first slide invests fairly broadly in pre-seed, up to seed, but your own focus and your own passion seems to be in physical AI. So what is physical AI and why is it important now? Chiamin: So as a fund, our investment thesis is how can we actually solve the demographic challenge here in Japan. And if you want to solve that problem, of course you can use AI, we can use software, we can use automation. A lot of solution out there. So for my investment, I also of course invest in AI company, SaaS company. But one of the reason why I have heavily looking into physical AI is because of my background. Before I came back after COVID, I work in China for seven years. So I actually witnessed the heavy growth in China for entrepreneurship from 2011 to 2019. And then I also was working for a DCM, which is a Silicon Valley venture capital. I also was seeing how the Silicon Valley startup was doing. When I came back to this industry, I look in Japan, I think one thing that a lot of entrepreneurs forgot is what is the strength about this society and what is the heavily problem that you solve. For the past five years, SaaS has become a very common platform or common tool for a lot of office worker. But what we’re looking into this social problem right now, we need to urgently solve the problem on the ground, which means that essential worker. If you look at the restaurant, if you look at the construction, we are heavily lacking people, but we don't really have a solution to solve. So, let me come back to your question of physical AI. My definition of physical AI is how can we embed artificial intelligence on the actual physical operation? Tim: I mean, there's a lot in there. So let me try to peel that back a bit. So, could physical AI just be IoT rebranded with some AI, or is it something fundamentally different? Chiamin: I think right now, if you look at the VC, a lot of investment tied to humanoid robotics. If you look at recent fundraise with figure AI, with all those very interesting robotics company, humanoid company, right now, I think US, they are aiming for that. For me, I think it could be robotics, it could be using hardware to embed artificial intelligence. And to go back to you saying, is that a rebounding of IoT? I disagree. Because what we are talking about is how do you distinguish gen AI and AI, that's the discussion we normally have. Tim: Well, I mean, I want to get into that just nailing down what physical AI is before we get into gen AI. So there's AI can be applied to industrial processes, to robotics control, to like I mentioned IoT with a bit of AI shoved in there. But physical AI, does it require robotics? Does it require AI actually controlling something in the environment? Chiamin: I would say physical AI would be the enabler for automation in terms of action. Tim: So, does smart sensors count as physical AI? Chiamin: No. No, I don't count smart sensors as physical AI, it's automation of the procedure or process on the ground. So, let me give you a very easy imagination for physical AI on the construction side. So, if you are building the house here in Japan today, you need to have director checking the progress. So, making sure your house can be built and also making sure it's on time and on quality. Today, how do they do that? Is they will need to visit the site. They will need to use the measure to really measure exactly the length and so on. But Japan, today, we are lacking a lot of experience monitor person because they are retiring. So, what's happening today is the undergrads come to onsite, he's going to check in your house. Are you going to be comfortable for not really experienced person to making sure all the construction is correct. That's going to happen in 10 years, or even in five years. Now, when we say physical AI is if you have a tool there that has intelligence that can actually check what is going on the ground, using the AI to understand your status as well as the lengths because you need to measure what is going on, if that can be automated. And then you can have an agent to tell you, okay, in this case, this is what you need to do. Tim: So, the physical AI is AI that is interacting with the physical world in some… Chiamin: Yeah. And then it can generate action. And that's why I think why people say robotics right now, because you need somebody to do the actual physical world. Tim: Well, yeah. In most cases there would be some sort of an interaction component. Chiamin: Right, exactly. Is that there needs to be action there. Tim: So talking about AGI,

Japanese startups is hot right now, and more and more foreign money is flowing in. But many Japanese VCs remain stubbornly outward-looking. Today we sit down with Shri Dodani, who after a series of highly successful American startups, decided that Japan is the best place to invest right now, and co-founded of Global Hands-On VC, to make those investments. We talk about the unique advantages startups have in Japan and why Japanese founders often have trouble leveraging those advantages. It's a great conversation, and I think you'll enjoy it. Show Notes The unique potential Shri first saw in the Japanese market How Japanese buying patterns help Japanese startups Japan's transition from VC 1.0 to VC 2.0 Are Japanese startups really becoming more globally minded? Why the large global VCs seem to have so little interest in Japan How Japanese VCs and corporates are more supportive of startups than in other markets Why it's important to invest in  Japanese founders "with a bit of an attitude” What's holding Japanese founders back today What actually stops Japanese founders from going global? The importance of role models and for Japanese founders to mentor The most promising startup sectors in Japan How recent immigration tightening will affect innovation in both the US and Japan Links from the Founder Everything you ever wanted to know about GHOVC Follow them on Note Connect with Shri on LinkedIn Check out an interview with him on YouTube Follow (GHOVC co-founder) Ken Yasunaga on Twitter @ken_yasunaga Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Longtime listeners of Disrupting Japan know that I'm extremely bullish about Japanese startups. In fact, most of us on the ground here are pretty optimistic about the whole situation. And yet a surprising number of Japanese LPs and VCs seem to have little interest in investing in Japan preferring to focus on high profile San Francisco. Today we sit down with Shri Dodani and we look into exactly why that is. Now Shri is a successful American founder with multiple exits, totaling well over $1.5 billion. And when he transitioned from startup to VC and put his first fund together, he decided to focus exclusively on Japan in order to take advantage of what he thought Japanese and foreign VCs alike were overlooking. Shri and I talk about Japan's transition from VC 1.0 to VC 2.0, the aspects of the Japanese market that give it a unique advantage over Silicon Valley in some areas, the one thing that's holding Japanese founders back the most and why it's important to invest in founders who have a bit of an attitude. But, you know, Shri tells that story much better than I can. So, let's get right to the interview. Interview Tim: So, I'm sitting here with Shri Ddani of Global Hands-on VC, a serial entrepreneur and founder and managing partner at Global Hands-on VC. So, thanks for sitting down with me. Shri: Thank you, Tim. It’s an honor. Tim: I'm glad we've got a chance to talk because I think you really do have a different perspective on what's going on in the Japanese market today. And just to give our listeners a bit of a background, so before moving into VC, you had a remarkable string of successes. As a founder, as an operator, you had six startups and six exits, including one that was a $550 million acquisition and IPO that was worth over a billion. I don't want to dig too much into that because we could be here all day talking about it and it'd be a worthwhile conversation. But after being such a successful operator for so many different types of startups, why the move to VC? Shri: A good question. So sometime I do one day even after became a VC, that should I continue doing my own companies because I'm good at that. Having done company in different field, you kind of get the nose for the technology. Obviously you have to be technical person, but beyond that, you get nose of different technology, how they relate to the actual product. And how do consumer or the industries benefit out of that? Most of the VCs come from financial world and what we can bring them uniquely is that we give them perspective from development perspective, but we can help the companies from a product development perspective as well. Tim: I can completely understand the value add both to the other partners, to the investors, to the startups you're investing in. But like on a personal level, it's a really different job. So, why did you want to make that jump? Shri: Service time, I've done several companies, as you noted, they've done in different industry. So as you want to get new challenge always right, because that's what keeps you young. Secondly, I've invested in over 25 now 28 companies of my own money and equal number of companies as an advisor as well. So, I've made money as an individual investor, a good rate of return and it was an opportunity for me to work with Ken to sort of make it more formal. Tim: So, this is something you were kind of building up to through personal investments and angel investments over time. And as someone who's also done both VCs and founding startups, the ability to interact with lots of different ideas and ability to support a lot of different bets and interesting markets is exciting, but do you miss the ability to execute your own vision? Shri: Absolutely. Absolutely. I'd be lying if I said that I don't, right? Because I think ultimately, we are wired to drive our own destiny, but all along the way I have an opportunity to be advisors and investors and one of the things you learn is that the way to scale your operation is to other smart people as well. So, the downside, I'm not driving it, but the upside is I'm learning tremendously more from much, much smarter people than I am. Tim: You and Ken together established Global Hands-on what made you decide to join other partners rather than pulling in a fund of your own? Shri: Ken was investor in my company that we eventually exited and Ken and I got along well and he was with INCJ after that fund. And as part of it INCJ, him and I have invested in two Japanese company. So we've been touch, we've been helping companies go global. And even from that perspective, it was a good thing for me. I can't do Japanese company without Ken for sure, because I don't speak Japanese. So you needed a partner in Japan. So, that's one thing. Second thing, the challenge for me was Japan is, I'm trying to figure it out, that Japanese government, Japanese entrepreneur, everyone is doing fantastic job. They're following all the textbook thing of how to do startups, how to invest in startup how to nurture the startup. For some reason they can't break out in terms of the mass scale, a scalable global business. And I'm trying to understand why. Tim: This is something that's puzzled a lot of people, myself included. It's an ongoing theme of Disrupting Japan. So that makes sense to operate in Japan. You definitely won a strong team, people with a track record and the team at Global Hands on, definitely is that. But taking a step back, I mean, why Japan in particular? There's all kinds of things going on all over the world, so why focus on Japan? Shri: Yeah, it's a very good question, why Japan, especially for me, I could do something else in the US or anywhere else. In 2005, I put my first money into a fund in India. It was a small fund for $5 million. I wrote the first check it is now called Excel India. At that time, nobody wanted to invest until Google put last $1 million, the $11 million fund. And then we hit the flip card, the flip card changed the entire India story and they have massive investment, massive capital flow, a lot of startups, a lot of activity, energy and so forth. Japan, to me, because I'm a startup guy, feels like here's a country that had a lot of capital, has a government behind it, and a lot of talent, engineering talent, a lot of core technology on a global basis. It should be right for a disruption from a startup point of view where you could create new startups and hopefully get a competitive advantage from an investment point of view as well, while others are not seeing the same opportunity. So, for me it was no different than me doing a startup looking at where are the opportunities, what can be disrupted? Where can you get unfair advantage before competition discovers that opportunity? That's what interested me in Japan. Tim: So let's talk a bit about your history and connections to Japan. Shri: So back when I was working for another startup, early eighties, I was responsible for Japan joint venture with SIE chemicals. So, I've been exposed then it was obviously in a different time as before the bubble. Since then, I've done my own startups, six of them, almost every one of them had either investor, customer or partner in Japan. The three things that they taught me all along, it's very hard to get into Japanese customer because they're very, very demanding and challenging, but in reverse order, you learn the most from them. They make your product better, they make your technology better, they make you work towards success. Tim: Well, and Japanese customers also tend to be incredibly loyal. Shri: Loyal as well. Tim: Yeah. The upfront effort required in that long sales cycle is probably made up with mathematical identity, with lower churn rates and longer retention on the backend. Shri: Absolutely. Absolutely. And since then, every one of them, there's people still using those products even now, right? Tim: So identifying Japan as an underappreciated opportunity really makes sense. But there's a lot of early stage funds in Japan. So what were you trying to achieve with this one that was different? Shri: Yeah, for me, Tim, we're still learning.

According to Taro, Japan's logistics industry is on the brink of collapse, and it's hard to argue that he's wrong. Taro Sasaki founded Hacobu with the goal of modernizing Japan's logistics industry. He found few takers for the first few years, and then a new law changed everything. We talk about how Japan's demographic and economic challenges, why some industries simply refuse to invest in themselves, and how to sell to them anyway. It's a great conversation, and I think you'll enjoy it. Show Notes Why Japanese logistics is on the brink of collapse The factors pushing demand for trucking higher in Japan What's preventing Japan's logistics industry from modernizing How to sell digital products to skeptical analog industries A new Japanese law mandating business efficiency How to bootstrap a complex application ecosystem from scratch The huge value hiding inside Japanese logistics data Hacobu's global expansion plans Taro’s best advice to founders wanting to sell into traditional, blue collar industries The importance of dreaming big -- even in Japan Links from the Founder Everything you ever wanted to know about Hacobu Keep up with the latest on Hacobu [Japanese] Hacobu's survey of 1271 Japanese truck drivers [Japanese] Friend Taro on Facebook Connect with him on LinkedIn Follow him on Twitter @tarosasaki Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Today we are going to talk about how to drive innovation into traditional, conservative, low margin blue collar industries. Now, that might sound hard to do, but it's actually even harder than it sounds. And, you know, that's why so few startups seriously attempt it and why it's extremely profitable for the few founders who manage to get it right. Today we sit down with Taro Sasaki, the founder of Hacobu, a startup that is finally, finally bringing digital transformation and automation to Japan's logistics industry. Taro’s constant refinement and testing of his ideal customer profile and go to market is a story that all founders can learn a lot from. Taro and I talk about the best path for founders to take when trying to sell to industries that are resisting digitization, how a lack of regulation can sometimes actually lead to less innovation. Why the logistics market is so hard to crack globally, and the two big factors that led to Hacobu’s sudden change of fortune. But, you know, Taro tells that story much better than I can. So, let's get right to the interview. Interview Tim: So, I am sitting here with Taro Sasaki, the founder of Hacobu, who is reinventing Trucking Logistics in Japan. So thanks for sitting down with us Taro: Thank you too. Tim: So, MOVO is a suite of SaaS tools that handle fleet tracking vehicle dispatch loading, unloading.  I gave a brief explanation in the intro, but I think you can explain it much better than I can. So, what is MOVO? Taro: So, Japanese logistics infrastructure is collapsing. Tim: What do you mean collapsing? Taro: So, the number of truck drivers is decreasing. The government estimates that in 2030, 25% of truck driver will short to the demand. Tim: So, what's causing it? It's a lower paying job that younger people just don't want to get into? Taro: Yeah, yeah. That's one of the reasons. And also the business process in the infra is very outdated and very analog, there are many inefficient things going on. So, the demand for the truck driver is increasing, but actually the supply of the truck driver is decreasing. So, the gap is going to increase. Tim: That's interesting. So, the demand for trucking is actually increasing recently? Taro: Yes. Because of the development EC, we want to get things, for example, at the supermarket, we want the commercial goods on demand so that the suppliers have to deliver the products on time that we want to buy it. So, the amount of goods in one truck is decreasing. Tim: So, is this increase in demand, is it mostly that sort of last mile delivery? Is it long haul freight or is it both are increasing? Taro: Both of them. Tim: Wow. Did not expect that. Taro: Yeah, because B2C logistics is easy to understand because, you know… Tim: The whole e-commerce boom is Yeah, Taro: Yeah. But there is a big infra in the back of the EC, which is called B2B logistics. For example, there's a factory, and the factory have to be supplied. So the suppliers have to deliver to the factory by a track. And then after the factory manufacturer, they have to deliver to warehouse. And then the warehouse deliver to the supermarket, the EC in a warehouse. This B2B logistics infra much bigger than the EC infra. The number of the size of the infra is about like 50 cho-yen comparing to EC, which is about three cho-yen. Tim: And so Hacobu's goal, MOVO's goal is to address that 25% shortfall through increases of efficiency. I want to dig into that and the challenges of trying to bring digital transformation to these conservative blue collar industries. But before that, tell me a bit about your customers. So you have 850 or so customers using your products now. So what kind of companies are they? Taro: So there are many stakeholders in this infra, there is manufacturer and then talk warehouse, which is outsourced to large logistics, sample leaf. And then there is distributor, and then there is a retailer. Tim: So in Japan, from the time that Kirin makes that beer in their factory to the time it is sitting in a glass on my kitchen table, how many different warehouses has it been in? How many different trucks has that bottle of beer been on? Taro: At least two or three. And the trucks are not owned by large logistics companies, but by a small truck companies that there are about 60,000 small tracking companies in Japan. And then most of them are, papa, mama tracking companies, and then large logistics companies outsource business to those small tracking companies. So, there are two axis of the complication. Layers, times layers, those are all the stakeholders. And then communication between those stakeholders done fax and phone calls so that the data related to logistics are not connected to each other. Tim: So, in your system, you have different software components that support all of these different. Functions from the drivers themselves to the vehicle dispatch to the loading and unloading. So who's the customer that is paying for the service? Which part of the chain do you identify as like your real customer? Taro: It's by case by case. For example, Aeon the large retailer in Japan, they buy our application by themselves. But for example, 7-11, they outsource a logistics to logistics companies. So they ask the logistics companies to use our system. So, it's case by case up to the power balance between the shippers and logistic companies. Tim: Okay. So that's interesting. So in the case of something like 7-11, you're not actually selling directly to the logistics company. You're selling to the end client who will then go downstream and tell the logistics companies, we want you to use this software. We want you to use MOVO software. Interesting. Taro: So, you have to find a trigger point. So in the case of Aeon, you have to talk to Aeon directly. They directly use our system. But in the case of 7-11, we talk to 7-11. And also we have to talk to the logistics companies that 7-11, outsource their business. So, that's why I was saying case by case. Tim: I want to get back into the go-to market and sales cycle in a minute. But before that, I want to talk a little about you. Taro: Me? Okay. Yeah. Tim: So, you founded Hacobu back in 2015, but you started a number of startups before that, right? Taro: Yeah, yeah. Two startups. So, this is the third startup. Tim: And your previous startups were let's see, there was Glossy Box, which was a beauty e-commerce site and Fresco, which is kind of a food e-commerce site. So, why the change? What drove the move from like this very marketing intensive B2C e-commerce to a pure B2B pledge? Taro: So, my entrepreneurial life started from Glossy Box which was backed by Rocket Internet. Do you remember that? Rocket internet? Tim: A lot of Japanese founders today have a bit of a rocket internet story. Taro: Yes. They are not, superhero in the entrepreneurial in a scene, kind of heal. Tim: But I understand it can be a great learning experience. Taro: Yes, that's right. So, a friend of mine at the business school, his Korean guy, he first started Glossy Box back up by Rocket Internet in Korea. And then he successfully launched the business in 2011 something. And then he came to Japan. He was in charge of rolling out the business to APAC. He came to Japan and was looking for a CEO of Japanese business. And he asked me to take that role. And that was my entry to this entrepreneurial role scene. And then not so long one year and a half, but it was successful. In nine month, the business got profitable. I thought, oh, starting business is my calling. The pressure from Rocket Internet is very tough. But I kind of enjoyed it. But Glossy Box, the business model was given by Rocket Internet. So, I wanted to start a business from really scratch, and then I started Fresca. I thought e-commerce business is very easy because Glossy Box was successful in the short term. I thought I hacked online marketing, and then I found that Rocket Internet started HelloFresh. So, I thought I brought it to Japan. I copied the business model in Japan, but it didn't go well because the logistics was very difficult. So, I changed the business model to like online mall of high-end food, which was not successful at all because online marketing at Glossy Box was successful. But it is very different from online marketing for high-end products. Tim: E-Commerce has always been fiercely,

Last month I gave lecture at Globis University on what it takes to build an AI startup today. It's no longer early days for AI, and most founders don't have the connections and resources that drive toady's multi-billion dollar seed rounds. However, as I detail, they still have several paths to success. After the lecture I am joined on stage for a panel discussion by Reiji Yamanaka, the managing director of the Kibo Impact Investment Fund, and Kelvin Song, the program director of the Globis MBA program. It's a fascinating discussion, and I think you'll enjoy it. Leave a comment   Transcript Welcome to Disrupting Japan, straight talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. I have a special in-between episode for you today. A few weeks back at Globis University, I gave a lecture to aspiring founders on the best way to start a generative AI startup right now in this time of intense AI competition and funding levels. I cover the different AI business models, promising application spaces, and how to know if you've got an AI startup idea with a good chance of success. Now, the first 30 minutes of this episode is the lecture itself, and then I'm joined on stage by Reiji Yamanaka, the managing director of the Kibo Impact Investment Fund, and Kelvin Song, the program director of the Globis MBA program. And we dive even deeper into these ideas and also talk about how generative AI is likely to affect us all. I hope you enjoy it. So let's get right to the presentation.   Presentation Today we're going to talk about how to build a generative AI startup and some important things to keep in mind if you actually decide to do that. Now, before I tell you what we're going to cover, I want to kind of tell you what we are explicitly not going to cover. So first, we're not going to talk about the transformative nature of AI in general, the explosive growth of the market. There's already way too much chatter about that, and I assume if you're even thinking about starting an AI startup, you already know it. Second, I'm not going to offer general advice about starting and growing a startups, although this is a topic that's very close to my heart. I want to focus on what can add the most value to you in this particular seminar. If you want to talk about general start advice, talk to me later. I'll point you in the right direction or ask questions afterwards or during the panel discussion. We'll begin today by talking about four common exit and growth strategies. This is a bit unusual. I don't normally recommend that seed or pre-seed companies focus too much on exit strategy, but these are not normal times. With generative AI, you need to plan your end game from the very beginning. We'll spend the bulk of our time talking about actually building your AI startup. We'll cover some key strategic considerations, and also talk about a few of the most promising targets for AI disruption. Does that sound good? Well, before we get to it, why should you listen to me? And that's a totally reasonable question. So, I've been in Japan for, wow, over 30 years now. Currently a partner at Jira Ventures. It's $300 million corporate venture capital firm that invests in green energy, next generation energy, generation technologies. But in my time here, I've started four of my own startups I've sold two, bankrupted two. So, 50 50, not too bad as far as startups go. I've done a lot of angel investing. I've taught entrepreneurship and corporate innovation at New York University's, Tokyo Campus. I've brought foreign startups into Japan as a country manager. I was tapped by TEPCO to come in and help them spin up TEPCO Ventures. I left TEPCO to run Google for Startups, Japan, swearing I would never go back to energy CVC. After four years at Google, I decided to go back to energy CVC because right now what's happening in energy is just fantastically exciting. Oh, and I also run a podcast called Disrupting Japan, where we sit down and we talk with Japanese startup founders and VCs, not so much about their specific company or portfolio, but what it's like to be an innovator in a culture that really prizes, conformity and what problems these startups are trying to solve. So, you know, please like, and subscribe and all that. Okay, let's get into it. Let's talk about your exit strategy and the possible business models that stem from it. Now, as I mentioned before, this is not the usual way of doing things. At seed stage, founders don't normally need to think too deeply about the exit strategy. If you build a rapidly scaling business that adds value to your customers, M&As IPOs, both paths remain open to you and it'll eventually become clear to you which is your best option. It's not something you normally try to optimize for, not at seed anyway. However, these are not normal times, and if you're building a generative AI startup, your exit strategy will greatly influence how you run your business. So, the four exit and growth models in increasing order of complexity are the Peter Pan, riding the hype, rapid customer growth and sustainable revenue growth. Now, we're going to move really quickly through the Peter Pan and riding the hype, since they don't really require growth at all. And honestly, only sustainable revenue growth needs a path to profitability. So we'll be spending by far the most time on that one because sustainable revenue growth, it's the most flexible, it's the most complex, and in most cases, it'll give you the greatest chance for success. Now, as a founder, you need to understand your options and consciously make a choice of what your goal is. And on the other hand, if you're thinking of joining a startup, you need to make sure that you're a hundred percent aligned with the strategy that startups actually executing. Not just the one they're saying they're executing. Now, before we get into the details, I need to point out that, that even if you fully embrace the potential of AI, and it's transformative nature, the VC market has never seen anything like this level of hype and focus. We're already way beyond what we saw during the dotcom area. So, just how hot is the AI market right now? Well, it's stupidly hot right now. Between 60 and 70% of all VC investment is flowing into AI startups. In fact, if you remove the AI investments, VC investment is actually down sharply. So yeah, these are not normal times. So, let's talk about exit and growth strategies. First, the Peter Pan, also known as I'll Never Grow Up. Now this is not a serious strategy, but sadly, it's the one that most startups are executing either consciously or unconsciously. They raise some pre-seed, maybe some seed money. They play with some cool AI tools, they ship a me too product, and then they disappear in a year or two when they can't raise a Series A. Now I include this for two reasons. One, because like a surprising number of founders seem to be fine doing this. Some people just seem to want to have a founder experience and run what I've heard called a starter startup, which I mean, if that's what you want to do, fine. But it seems like kind of a waste of everyone's time. We are here at the beginning of what might be one of the most important transformative shifts in technology. And man, it makes sense to swing for the fences. Don't waste your time chasing small dreams on this. And two, I include the Peter Pan model for those that are thinking of joining an AI startup. If you're thinking of joining a team that is not clearly executing one of these other strategies, they're probably never going to grow up and you're probably wasting your time with them. Okay, let's move on to more profitable strategies. Our second strategy is to ride the hype. Now, I mean, all startups need to do this to some extent. We see hype driven business plans in every hot startup sector, but I mean, AI has everything dialed up to 11. Riding the hype is a pure play. This is pure marketing. Your product is your stock. It's a very good play for the right kind of team. So, what do I mean? We saw safe super intelligence raise a pre-seed round at a $5 billion valuation. They got a nice step up to a $30 billion valuation at seed. Thinking machines just raised 12 billion. Open AI acquired Johnny Ivey’s IO for 6.5 billion on the promise that they would eventually build something cool. Now, these are obviously really big numbers, but if you haven't worked in VC or startups for a while, it might not be apparent just how bonkers these numbers really are. So, when investors invest in seed startups, they're generally looking for a path to a hundred times return. They're not expecting a hundred times return, but they need a path to it. Now, even assuming these are somehow special, they're only looking for 50 times return or 30 times return. This is implying a trillion dollar exit, which would make it not only the biggest startup exit in all history, not only twice as big as the biggest startup exit in all history, but twice as big as the next five biggest startup exits in history combined. And that's not, keep in mind, this is not a bet on the technology. This is a bet on one particular company. So, yeah, thing things are things are a little frothy. Now, these valuations are based on the star power of the founders, and that's important to note that none of these companies have an actual product or even a prototype yet. So, shipping a product is actually a very dangerous step for hype driven companies because that's when people are able to compare the hype and the reality, and very often the reality just doesn't live up to the hype. But anyway, if you are extremely well known in the industry and you can line up an A-list VC to give you that credibility with other investors and to help you exit when the time comes, this could work for you, ride that hype as far as it'll take you. Generally however,

Japan's declining birth rate makes global headlines, but most of the developed world will soon be facing the same problem. The real solution involves a lot of social and economic changes, but as you'll see, technology has a huge role to play as well. Today we sit down and talk with Kaz Kishida, CEO of Dioseve, about how their technology promises to transform IVF, the rapid timeline for global rollout, and safety issues and ethnical questions involved. It's a great conversation, and I think you'll enjoy it. Show Notes How Dioseve will make IVF far more successful Why over 7% of all babies born in Japan are from IVF Bio tech CEOs don’t need life science degrees Safety concerns Applications to rejuvenation and ani-aging Ethical questions around this kind of reseach Japan’s policies towards stem cell and genetic research Roadmap and go-to-market Why some babies will have three parents, and what that’s good How Dioseve's ovarian cell technology will change IVF Why Japan’s bio tech ecosystem remains under-developed It's not harder to build a bio tech startup in Japan, but it is different Links from our Guest Everything you ever wanted to know about Dioseve Friend Kaz on Facebook Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Today we're going to talk about making babies. Now, this is not something that startups or startup podcasts normally weighed into, but as you'll see in this case, it makes a lot of sense. Today we sit down with Kaz Kishida, co-founder and CEO of Dioseve. And Dioseve has developed a technique for growing mature human eggs from IPS cells. Now, this technology represents a huge step forward for IVF and for human fertility in general. Some parts of Dioseve’s technology could be in commercial use as soon as next year. Now, kaz, I dive deep into Dioseve's technology and the potential good it can do and why some future babies will have three parents. We also cover the tricky ethical and safety issues involved, and we explore exactly why that, in spite of all Japan has going for it. The biotech startup ecosystem here is still facing challenges. But, you know, Kaz, tells that story much better than I can. So, let's get right to the interview. Interview Tim: So, we're sitting here with Kaz Kishida of Dioseve who's helping to address fertility by using stem cells to create fertilizer eggs. So, thanks for sitting down with us. Kaz: Thank you very much for having me. Tim: Now I gave a very high level description of what you do in the intro, but can you explain it a little better than I can? Kaz: Okay. So, our company has technology to induce IPS cells and to another types of cells, including eggs and ovarian cells. Most of their cells are related to germ cells and reproduction. Tim: Well, this technique's not yet used in fertility treatments. But it's something in the future that holds a lot of potential. Kaz: Right, right. Currently, like In Vitro fertilization, the success rate is still remarkably low. And sometimes that vitamin journey is tough. But if we can deliver our products, say IPS cell derived ovarian cells, then the IVFs will be more accessible and the success rate will be enhanced so many women and can have their children using our technology. Tim: So why would the success rate be enhanced from using these eggs produced from stem cells as opposed to eggs harvested from the women directly? Kaz: So, in the standard protocol of In Vitro fertilization, the first step is to retrieve eggs from women. And then in many cases, those eggs are immature and immature eggs can't be fertilized with sperm. So, we can mature those immature eggs and we can make mature eggs, which can be used for fertilization. So, it directly enhance their success rate of IVF. Let me clarify that. And we have two technologies. The first one is create egg itself, but the other one is create ovaries, ovarian cells from IPS cells. Of course, if we create eggs, we can use those eggs for fertilization directly. But the other product, IPS cell derived ovarian cells that can support current In vitro fertilization procedure. Tim: And actually I was surprised at how common IVF is in Japan. Kaz: Yes, yes. Tim: 7% of all babies are born from IVF now. Kaz: Right, right. Over 60 K babies are born by IVF. Tim: So, what's driving that trend in Japan? Kaz: Strong tendency is increased age of married and having the first child. Before time, there are average was 29 years old, but now, and the first baby will be born in later stage of women's career and life stage. Of course the age is strongly rated to the pregnancy, and it is getting harder to get pregnant when women ages. That is biggest reason. Tim: It seems like Japan is really number one in the percentage of IVF births. But is the average age that women have their first children significantly higher in Japan than other nations? Kaz: Comparing to the US, yes. Their first child comes in the later stage for women. Tim: Oh, okay. Well, before we get deep into the technology and your go-to market plans, I want to take a step back and talk about you. So, you graduated from Waseda back in 2020, you went into investment banking. And so what led you from investment banking into Dioseve? Kaz: The fact is I already decided to start my own company when I was in my high school. And when I was in my university, I experienced some internships in some startups. And after that I noticed that their main job of CEO in a startup is to raise money. Tim: That's an important one. Yeah. Kaz: Yes. And I thought, okay, what is the best way to learn finance? I thought, okay, investment banking. That's why I decided to go investment bank. Tim: But that didn't last very long. Kaz: Yeah, I'm sorry for the company, but I learned finance, and I exited. Like I resigned. But I already declared that I will have my own company in the near future when I got an interview. And the company said, okay. Yes. So yeah, I joined them. Tim: So they probably just didn't think it was going to be in like two years. Kaz: Yeah. Tim: So, how did you come together with Dioseve? Why this area? Kaz: Okay. As I said I decided to start up my company when I was in my high school and I was diagnosed with Hepatitis C, and there is a kind of potential liver cancer. And my parent had that disease, and back then there was no treatment. But the doctor said, in three years, the new drug will come to Japan. And I waited for three years, and the doctor said, yes, now we have the treatment. And surprisingly, the drug has super good effect on hepatitis C. Actually, I, my parent and my grandparent all totally cured. So, I was amazed and I felt, okay, my life was saved by biotechnology. So, it's turn for me to save others by starting new biotech company. Tim: What did you study medicine or biology at university? Kaz: No. I studied geology. Tim: Geology. Kaz: Yeah. Totally different. Tim: Alright. So, how did you meet your founding team members? Kaz: VC called ANRI introduced me to Dr. Hamazaki, and we got along together and I said, okay, how about establishing our company? And he said, yes, let's do that. Tim: So, of the founding team, are you the only one without a medical background? Kaz: Right. Tim: It's just you. Kaz: Yeah. But as you can imagine, the finance is super important for startup. Tim: Well, no, I think that's a really important step. In fact, over the last 10 years in particular one of the most important things I've seen for Japan's deep tech startups is that, I mean, 10 years ago, it was just kind of assumed that the professor would be the CEO. Kaz: Yes. Yes. Tim: And that's changing, and that's a terrible model because academics tend to be horrible CEOs. That seems to be changing recently. Kaz: Yes. I think so. Tim: Let's talk a little more about the technology and the positioning in the market. Women in developed nations around the world are having children later in life. This is such an important social problem everywhere. And IVF was first introduced in the 1980s, and it's been hugely successful, but it doesn't seem like we've seen a whole lot of innovation in the last 40 years. Why is that? Kaz: You're correct. First of all, the invention of IVF was super innovative. After that, there was not many rooms for improvement because get eggs, fertilize is just super simple. But there was not many things we can do for that process. But the last and biggest room was maturation because eggs can be functional only after getting matured, IPS cell technology enabled to do that. Tim: So other than that, maturation, everything else about the system is pretty optimal. Kaz: Every doctor has their own opinion and every doctor thinks their protocol is optimal. But at least like ICSI, ICSI is a second innovation I think regarding IVF. ICSI is a kind of procedure which inserts sperm to eggs directly. Before time we just put sperm and egg to one dish and waiting for the fertilization. But in 1990s they did ICSI and that dramatically enhanced and the fertilization rate. Tim: So, what are the main sort of safety concerns around this kind of a technology? Kaz: The biggest one is genetic manipulation from their natural born babies. But fortunately we have technologies to assess the situation of in genetic expression. So, we can precisely evaluate abnormality. Tim: Okay, creating the mature eggs from stem cells is pretty amazing, and it has obvious applications to fertility treatments. So, I'm just curious, does the technology of other medical applications outside of fertility? Kaz: Yes. We have. So one example possibly of topic, but we can use this for rejuvenation. So, we can reverse on the age of cells by using our eggs. So, this is very conceptual stage, so I can't say, yes, we can do that.

Last month I spoke on a panel about the future of climate tech. I was joined by Emi Naganuma, the founder and General Partner of Apprecia Capital and Richard Youngman, the CEO Cleantech Group, with Michael Matsumura of Scrum Ventures moderating. Right now is both a challenging and an exciting time for climate tech innovatoin. It's a fascinating discussion, and I think you'll enjoy it. Leave a comment   Transcript Welcome to Disrupting Japan, straight talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. I've got another quick in-between episode for you today. It's a great conversation about deep tech startups and the future of energy. I was part of a panel discussion organized by Scrum Ventures at the Sakura Deeptech Shibuya Conference. It was moderated by Michael Matsumura of Scrum Ventures, and I was joined on stage by Emi Naganuma, the founder and general partner at Apprecia Capital, and by Richard Youngman, the CEO of the Cleantech Group. We talk about the best way to raise venture funding as a deep tech startup, how enterprises and startups can better collaborate the important gaps we see in the green tech ecosystem and the somewhat controversial future of using ammonia and hydrogen as alternative fuels. So, let's get right to the panel.   Discussion Michael: Thank you much for our panelists. Maybe I'll just kick it off. Maybe you could start with Richard. Could you talk a bit about like what you're seeing globally in terms of where the dollars are flowing now? Has that changed like in the last like six months, one year from what you're seeing? From your perspective? Richard: It hasn't changed radically yet, but it made it. So, I think if you go into Q1, clearly the deals in progress and so forth, some of which may have fallen apart, but some of which happen. I don't think the community in the US judging by our conference the year before was expecting the inflation reduction act to be sort of aggressively taken apart as it was. Meaning if something was already a deal was done and it was expected to continue. And so that's obviously created a lot of back backtrack there. But geographically, I would say we're still to see that. I guess the second comment might be in our 20 years and why really we're excited to be in this part of the world more and more is because we believe that innovation under this theme is coming from everywhere and should come from everywhere and needs to come from everywhere. This is not as Silicon Valley phenomenon. Silicon Valley has a role to play but so does everywhere else. And so I think long term we're expecting to see capital allocation change quite a lot. Michael: Great. Then maybe staying on that sort of the macro theme maybe I could go to Emi obviously like on a similar topic, but in terms of like your limited partners, like the discussions you're having with your investors, like has there been a change in tone? Is it like in different sectors you guys are interested in or the partners interested in? Could you maybe touch upon a bit about that? Emi: I think from the expectations from the investors, the LPs into the fund I see that they have shifted their interest into deep tech incredibly especially university or research driven. So, really deep tech and clean tech in terms of geography as well. I think a lot of attention has been in the US but now it, we do see more attention coming into Europe. We see US VCs also emerging into Europe. Before it was series B or series C that they came into. Now, early stage, I think from seed we kind of see some US VCs coming in and trying to getting into the deals. And I also see a shift of students coming in to study in Europe, but yes. Michael: And in terms of your LPs, are they mostly Japanese or are they a mix of like global LP bases that you have? Emi: We have Japanese corporates as LPs. Michael: Thank you. Then maybe Tim, to your perspective, maybe also as JIRA, like you make one third of it a pound in Japan. But like you obviously have global operations. You've got like IPP businesses across Asia and also US as well. From like your perspective, how's the changing sort of landscape impacting the way how JIRA Ventures makes investments right now as well? Tim: So, energy is a global market and I think that to your point, you have to be globally minded. And I think when the IRA passed in the US a few years ago, there was this tremendous movement of innovative companies from Europe to the US. We're starting to see that trend reverse, and a lot of them are going back to Europe, but even within the US, I think for example, my own companies have been enterprise software. And you can go to San Francisco and understand 80, 90% of what's going on in the world of enterprise software. You can have your finger on the pulse never leaving that area. Climate tech energy's not like that, there's a lot more going on globally, even in the US I think Boston is more innovative than San Francisco, but there's a lot going on in Europe and a lot going on in Australia. There's a lot of promising startups in Japan as well. So, these things shift. If innovation in the US slows down, there's a lot of other places that'll pick up the slack and it seems like they're already doing so. Michael: Great. Thank you. Then maybe just diving a little bit deeper into some specific technologies or themes maybe as well. I think Richard gave a good overview of the sort of the, maybe the booms and buses the wrong way to put it, but like some hot sectors and less hot sectors. Maybe we'll start with Emi again then. What are the sort of areas that you see as very attractive right now? Like where do you think you'll get good returns looking for like what excites you right now? Emi: In terms of return and of course impact, we look at it into two kind of segments. First is where there's a high environmental impact right now that exists. So the large sectors, and usually these aren't so many, it's construction, agriculture, energy, concrete, et cetera. And then we look at the other one that is where there aren't so much of an environmental footprint yet, but that industry will grow and we think that's really, really interesting. And Richard has already highlighted, but we think the AI infrastructure space is going to grow. So, we're looking highly into that. It is becoming a competitive space and also we look into space tech because that is really interesting as well, and it can provide solutions in climate tech that we haven't seen before and that could provide solutions that we couldn't even think of. Michael: Yeah, I like the impact perspective is really important. And personally, I always thought that the industrial decarbonization never attracted enough capital, like given the emission level. So that's always a sector that I've always liked. Then maybe, Tim, to your side, I think JIRA's had a big focus on looking at hydrogen and sort of ammonia and I know there's been talks about using ammonia in sort of coal fire power plants like coal fire, coal firing, and then looking at sort of gas turbines using hydrogen as well. And obviously as Richard highlighted earlier hydrogen's kind of lost a bit of steam lately. In terms of the investment cases right now, is it still a viable sector that we should be looking at? Does it still have a -- what's your perspective there? Tim: Well, I think it depends on your time horizon and your investment objectives. So, as a VC with a seven year fund, I think it's really hard to invest in hydrogen. As an energy utility or as a nation who needs to have a secure power grid, it is essential to continue investing in alternative fuels. Because in the long term, even if we get a very green grid, we shut down all the coal, we shut down all the gas plants, we get to Carbon zero eventually, the Germans have a wonderful word called Dunkelflaute. And it means when the sun's not shining and the wind's not blowing. And right now we've got batteries that'll do eight hour storage, no problem, maybe 12,24. There's some promising things that'll go to a hundred hours plus. But at some point, there's going to be a few weeks or a month where you've got the Dunkelflaute and you need to burn something. And that something could be fossil fuels or it could be ammonia or hydrogen that is made with excess energy when the sun is shining and the wind is blowing. So JIRA's plant, a Hekinan was the globally first successful test of a blended ammonia and coal firing, and it was 20% ammonia, 80% coal, and it was hugely successful. The engineers are saying we go to much higher ratios. So, in terms of a startup investment from a VC perspective, it's very hard to justify an investment like that. You're not going to see returns in five years or 10 years. But as a utility who's making 40 year investments and 80 year time horizon planning, it's essential. And so that's why alternative fuels be it hydrogen ammonia is really important in the midterm. I think storage is extremely exciting in all forms, whether that's lithium-ion batteries or zinc oxide batteries or these iron rust batteries or when I see EVs, basically it just looks like storage on wheels to me. So, I think that that's like, in terms of my investor brain, that's what I'm most excited about right now. Michael: Nice. Okay. I'd like to add the geothermal and maybe nuclear to that, but… Tim: No, absolutely agree. Absolutely agree. I mean, JIRA doesn't do nuclear, so JIRA doesn't have an official opinion on it, but I think it's pretty clear from all available analysis that there's no practical path to net zero without a lot of nuclear on the grid. Michael: Yeah. Thank you. Then Richard, maybe to you obviously Cleantech group, you guys research and you look at so many different companies across the world. What are the sort of most under the radar sort of technologies and sort of sectors that interests you or excites you right now?

For the last 150 years Japan has made a science of borrowing the best ideas from the West and transforming them into her own. The startup world is no exception. Japanese startup culture is heavily shaped by western ideas, but not in the traditional top down way where leadership chooses which ideas are introduced.  Japan's startup ecosystem is being shaped by bottom-up experimentation by both Japanese and foreign founders on the ground here in Japan. Today we talk with Sandeep Casi, an entrepreneur and Partner at Antler. We talk about the challenges foreign founders still face in Japan and how they are changing Japanese entrepreneurship for the better. It's a great conversation, and I think you'll enjoy it. Show Notes How to make money investing in idea-stage startups Why Japanese startups are more likely to get funded than their global peers Where to find Japanese deep-tech founders How foreign founders are changing how Japanese start startups The myth that Japanese founders can't speak English The one thing making university spinout difficult Why professors can't be trusted to evaluate technology Different startup ecosystem needs (and strengths) in different countries What's holding foreign startups back in Japan The dark side of startup events Links from our Guest Everything you ever wanted to know about Antler The Asahi Global Sustainability Initiative Emurgo and Antler Ibex Follow Sandeep on Twitter @sandeepcasi Connect with him on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. There is a truism in venture capital that states no one invests in an idea. This references the fact that ideas are easy to come up with and they have very little value on their own. But it seems that this truism is not completely true. Today we sit down with Sandeep Casi, the general partner at Antler Japan, and he explains how Antler does in fact invest in ideas. I mean, in one sense, the truism is still true. Antler only invests in companies. But if you come to them with an idea, they'll invest a lot of resources to help get you from idea to startup. We also talk about some of the challenges foreign entrepreneurs still face in Japan, the myth of Japanese founders not being able to speak English. And we dive deep into how foreign entrepreneurs are changing how Japanese founders start startups. But, you know, Sandeep tells that story much better than I can. So, let's get right to the interview.   Interview Tim: So, I'm sitting here with Sandeep Casi, a partner at Antler Japan. So thanks for sitting down with me. Sandeep: Thanks Tim. And it's a pleasure to be talking to you today and looking forward to it. Tim: Yeah, well, I should say welcome back to the show because I first had you on maybe eight years ago? Sandeep: I think, so. It was a while. Yeah, it was about eight years ago. Tim: When you were running videogram. Sandeep: That's right. Tim: But a lot has changed right in the last eight, nine years. So, Antler has a bit of a different model than most of the VCs and accelerators in Japan. So tell me a bit about it. Sandeep: Just a bit about Antler’s background. We started in 2018 in Singapore. So, Antler is an ecosystem builder. We are not just a VC. So, what do we mean by ecosystem builder? We basically are the first check in most cases, and we take extreme risks as in zero day checks. So, we basically get people to come into our program who actually have an idea, maybe to start a company, but they have absolutely no idea how to go about doing that. They lack co-founders. They probably lack a lot of opportunities that are afforded to other startups that have pre-existing teams. So, when they come into a program, we actually sit with them for 10 weeks. We look at what their mission is, what their domain expertise lies in, and then we gel together a team in the next 10 weeks by iteratively going through different ditches and pivots. Tim: So, the founders who are joining, are they all just at idea stage or do you get founders that have an existing company and some revenues? Or do you really target those super early? Sandeep: All of them. There are founders that come in, they have no idea, never have started a company. There are founders that come to our program that have two, three exits before, and they also existing teams that come into a program because they haven't found attraction. So, basically it's day zero of their lives of starting a company. We basically work with them and get them to a point where they can actually pitch to an investment committee after 10 weeks. And we invest even when the company is not being incorporated, in most cases, they take our money to incorporate the company. Tim: So, what does the funnel look like? How many people will apply to a program? How many will get in, how many make it to pitch day, how many receive investment? Sandeep: So globally, we receive about 160,000 applicants a year. And usually we select about 3% of that applicants into our program. And out of that 3%, anywhere between one to 1.5% end up getting investments. Tim: And that's 1.5% of the 3%? Sandeep: Of the 3%. So, the way this works is that let's say that 3% that enter our program, not all of them are founders. Not everybody can be a chef. You need a sous chef, you need somebody to actually be in the front desk, somebody to take care of the supply chain. So, there are all kinds of founders that come in, not necessarily a founder that wants to be a CEO. Tim: Okay. So some of those, sometimes you'll have three different people who will coalesce into a startup? Sandeep: Coalesce into a startup. And sometimes they come with preexisting ideas and sometimes the ideas are born in the 10 week program that they participate in. Tim: Are the numbers similar for Japan, where…? Sandeep: Japan's slightly different obviously you know that but for the audience's purposes, things are slightly changing in Japan. But as you know, I had a company here from 2012. Things were really different for any startups here. There was no angel investments here in Japan. There was nothing. There was no risk capital. With Antler coming in, there's a tremendous amount of risk capital. So, I think that is changing the ecosystem a little bit. So in Japan, last batch, which was our third batch, we had about 950 applications. And out of the 950 we selected about 69 to enter the program. And out of the 69, there were 24 teams formed as in 24 ideas and out of the 24, 7 got invested. Tim: Okay, so the odds were much better for startups here in Japan. Sandeep: At the current batch, which is actually, we are in the investment committee week right now, 1300 were the applicants. Out of that I think it was 89 or 90 got selected. There are 14 teams in the IC right now. Maybe eight to 10 would come out. Tim: I mean I am delighted to hear this, but it's a little counterintuitive because everyone is constantly saying that there are no startups in Japan and they're at an earlier stage. But it sounds like the founders coming in have a much higher probability of not just getting in the program. Which could be explained by, well there's not as many applicants but actually getting investments. So, why is it different? Why are the numbers different here? Sandeep: The numbers are different because there is a tremendous amount of domain expertise in Japan. And I'll tell you why. There are two different areas of where we get our founders from. One such founder comes from a university backbone. Either they're PhD level candidates or postdocs that wanting to take their IP that they have been working on to market. So, they come into a program to find that co-founder who can actually help them get the piece of that startup experience that they don't have. The second is, very interestingly, in the last, at least a decade or so, MNCs have entered Japan, Amazon, Google, and these MNCs bring in people from outside a lot of foreign force in Japan. Let's take Rock 10 for example, or Amazon, there's lots and lots of people in these organizations that have been transferred from various locations, whether it's India or US. They come in, they work for three, four years here and they basically like, okay, I want to do my own thing. Where do you go? So, that's where Antler is. Tim: I found that really interesting because When I was a mentor or a judge at your pitch day a few weeks back, there were a lot of foreign founders. I mean all Japanese residents, but a lot of foreign founders. Sandeep: That's right. And these people have actually entered the market in the last three to five years. There has been tremendous amount of talent that is being brought into the country that are highly skilled. The first two batches of Antler was completely Japanese, a hundred percent Japanese. We really didn't have a big success rate and the minute that we changed our program to a hundred percent English. A very interesting thing happened. Even the people that are a hundred percent Japanese speakers started applying to the program because they want to really build global companies and find global co-founders. Tim: So, what's kind of the ratio between the foreign entrepreneurs and the Japanese entrepreneurs who are applying to the program now? Sandeep: We have very less data because it's only being two programs so far. We are seeing 70% foreign. Tim: 70% foreign. Well, I mean there's like two factors that are kind of pulling against each other here. One, I think it's absolutely true that in any global startup ecosystem, the foreign residents play an outsized role. That's true in Silicon Valley. It's true in London, it's just everywhere. And the other thing is like, it's really hard to get Japanese into an English only program. Sandeep: That's right. Tim: I mean,

Progress is not only slower in Japan, it is often different. Looking at the numbers, it's clear that venture capital is even more male-dominated in Japan than it is in the West. Our guest today explains not only how that's changing, but how she's changing it. Sophie Meralli is a Partner at Shizen Capital and co-founder of Tokyo Women in VC. We sit down and dive deep into the keys to developing a creative, global mindset among Japanese founders and VCs, the role immigrants have to play in developing Japan's startup culture, and what really works in changing, not only minds, but actions related to the role of women in startups and venture capital. It's a great conversation, and I think you'll enjoy it. Show Notes The kind of startups Sophie and Shizen are looking for Why Japanese AI startups need to be especially careful The percentage of Japanese VCs are women, and how it's changed over the past 5 years Why more and more VC funds are being started by women in Japan What Women in VC does, and how you can get involved The main things holding back women in VC in Japan today The critical next steps for women in VC Is it easier for foreign women to defy gender stereotypes? Are Japanese women founders making faster progress than women VCs? What a “global mindset” really means for startups How to develop cultures of creativity and innovation Links from our Guest Everything you ever wanted to know about Tokyo Women in VC Tokyo Women in VC Job Board Tokyo Women in VC Research: The 7 Stats Shizen Capital Friend with Sophie on Facebook Follow her on Twitter @Soph_VC Info on rate of Japanese Passport holders Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. Finance and venture capital in particular has always been male dominated, and in Japan, well, it's even more so, but things are changing here and not quite in the way you might expect. Today we sit down with Sophie Meralli, a partner at Shizen Capital, and co-founder of Tokyo Women in VC. And we have a frank discussion about what it's really like for female founders and venture capitalists here in Japan. And some of it is surprising. In some areas it seems that Japan is ahead of the west and in others, well, not so much. The conversation is at times both frustrating and hopeful. Sophie explains the one thing holding female VCs back more than any other, how things are changing for female founders and for male founders as well, and why so many new Japanese venture funds are being founded by women. But you know, Sophie tells that story much better than I can. So, let's get right to the interview.   Interview Tim: So we're sitting here with Sophie Meralli, a brand new partner at Shizen Capital. So, thanks for sitting down with me. Sophie: Thank you so much, Tim. It's a pleasure to be here. Tim: You're not new to VC, but you're new to Shizen. So, tell me a little bit about your new role, what kind of things you're looking for. Sophie: Yeah, sure. For me, it's kind of interesting because I was in early stage in Boston and then when I came back to Japan, I was with Eight Roads Ventures for about five and a half years looking more into growth stage startups in FinTech, Enterprise SaaS. And those are really the area that I think are super interesting to me in Japan where I see a lot of potential. And so at Shizen, given this is much more like early stage, there are tons of ideas for which there are already unicorns abroad, but in Japan, those haven't surfaced yet. And I'm really excited to either incubate new businesses or just be able to be a partner for very early stage startups in those sectors. Tim: Now, you mentioned your experience back at InSpark in Boston? Sophie: Yes. Tim: If I recall back then you were looking at AI startups and sort of the previous generation of AI startups. What's your take on the situation of AI startups here in Japan right now? Sophie: I think AI right now, industry is very, full of hype and very Agentic. Tim: For various meanings of that word. Sophie: Yes. Back in the days it was much more about machine learning and being very application driven. So, I invested, for example, in companies that help construction site being able to do inspection in a less manual way with drones and AI automation. And that enabled drop the time to do a survey from two months to 30 minutes. And that was really new at that time. We did that also for dentists. Tim: Yeah, I think that that kind of previous generation of AI was really use case focused. And there's still a lot, whether it's in like predictive maintenance, a lot of medical applications, do you see the same thing happening in the current crop AI startups, the LLM startups? Sophie: I still have to try to understand the business model and use cases. So, I'm trying to be a bit more, I wouldn't say skeptical because I'm very excited as well, but I think generative AI and it's to be taken with a grain of salt, and if you have a lot of average input, then you get average output too. So, what can really a big data set do is become average quality sometimes. So, I'm excited to learn more about the data that these startups are using and the exact use cases that they want to tackle, rather than trying to completely, fully automate jobs. I think we're still a bit far away from that, although I'm using cloud and ChatGPT every day myself. Tim: I'm the same way actually. I use ChatGTP, I use perplexity every single day, but I'm also a huge AI skeptic in terms of actually investing in the companies and whether they can live up to the hype. But actually one thing I really want to talk to you about, let's talk about women in VC. Both the organization and, well, the actual women who are in VC. So, you and Shino Furukawa founded Tokyo Women in VC a couple of years ago, back in 2020? Sophie: Yes, exactly. Tim: Tell me about the organization. What do you do? Why did you start it? Sophie: Sure. I would love to. Basically, when I was in Boston, there was an amazing women in VC community called Breaking 7% because there were only 7% decision makers that were women back in the days. And we met almost every month through dinners and exchange ideas. And it was more of a ask me anything kind of community where members come up with problems and they share it with each other. And that really helped me a lot to build my network because in the US, I knew almost like no one. And when I came back to Japan, it was 2020, it was COVID, it was very hard to network. And I felt that women were also a bit isolated. And so I discussed with a few women in VC, and Shino is a very dear friend of mine. She was actually pregnant at that time, so I felt a bit guilty to ask her to take on… Tim: More work. Sophie: My co-founder for this, but at the same time, I was like it must be her. And so she accepted and she was very enthusiastic about it. So, we launched a community in 2020 with about 30 members only. Tim: Well, and you were mentioning the 7% decision makers in the US, I would imagine that number is lower in Japan. Sophie: Yeah, so now in the US it's about 16%, 18% so a lot of progress in Japan. We are doing a survey every year since 2020. And back in 2020, the number of decision maker was about 3%, total VCs. Tim: So, what is a decision maker? Is it a partner? Sophie: Yeah. It's a partner or a GP basically someone who has a voice at the investment committee. And now in 2024, we have about 8.4% women decision makers. Tim: Well, I mean, it's low, but that's a lot of progress. In just five years. Sophie: Yes. And one interesting trend is that rather than being internally promoted, it comes a lot by launching your own fund because the fund cycles are so long, 10 years. So, there's promotion to partner or decision maker. Often when there's a new fund coming up and there's not a new fund every year, it's mostly every three, five years. So, a lot of women actually launch their own funds and that's how they become partner. Of course, there are some exceptions, which is a great sign for the ecosystem when women are also promoted internally. Tim: That is interesting. So, I mean, of course it makes sense that there'll be more women at the newer funds. Just because you don't have a whole lot of mobility in an existing fund. You just don't. But are there a lot of women raising their own funds now in Japan? Because it would seem to me that that's a lot harder than joining a fund. Sophie: I mean, so in terms of women launching their own fund, I wouldn't say that there are a lot, unfortunately, we need many more to do that, but it's growing and we're seeing a lot of women launching their own. And I think we are about 20 to 30 women who are decision maker right now in the industry. And by 2030, we want to double that to 60 or more. And we have another KPI, which is the total number of women investors, and that's now 17% of the industry. And we hope to bring that to 30% by 2030. Tim: The women who are decision makers. So, men in VC in Japan are overwhelmingly finance guys from good schools who worked at tier one companies before jumping to VC women fit the same profile, or is there more variation there? Sophie: I think a lot of women who launched their own firm come from the VC industry, or some of them finance industry as well. I see some who are actually in the startup space. Tim: So, similar profile as the male VCs, then? Sophie: Yes, I would say that there is not a trend that women have a different profile than male counterpart. That being said, when they launch their own fund, they tend to have a different lens. And I see a lot doing funds focused on women entrepreneurs or women's health or impact, ESG, but obviously there are also sectors like healthcare in general or B2B SaaS,  and we don't want to have only women VC investing in women founders.

American startups dominate the current innovation cycle not as a result of startup innovation, but of enterprise innovation. Today we sit down with Dai Watanabe and dive into the dynamics of industry disruption and startup innovation. For the last 25 years Dai has held leadership roles at the center of Japan's major innovation trends. From the glory days of Japan's mobile internet, to the utter disruption unleashed by the iPhone, to today's doubling down on startup innovation. We talk about what's in store for the future of Japanese startups, and why opportunities in innovation are never quite what they seem at first. It's a great conversation, and I think you'll enjoy it. Show Notes When it's time for a CVC to transition into a VC How Japan lost its lead in the mobile internet How DeNA went global in China and then in the US Why the first generation mobile advantage did not transfer to the second generation The different approach to retaining talent in Tokyo and San Francisco What Japanese founders need to bring back from San Francisco Which Japanese startups should move to Silicon Valley The reason there are still so few Japanese entrepreneurs How to get talented employees to leave and start startups, and why we'll see more of it The biggest thing holding back startup growth in Japan How Japanese employment law keeps startup valuations low Japanese enterprise and startups are developing more collaboratively that in the US Links from our Guest Everything you ever wanted to know about Delight Ventures Meet the team Learn how they invest [Japanese] Connect with Dai on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Mukashi mukashi, Once Upon a Time, but not so long ago, Japan was far and away the world leader in mobile internet innovation. But such times were not to last. The world changed, Japan changed, and today Japan is trying to catch up. And, you know, they just might do it. Today we sit down with my friend Dai Watanabe, co-founder and managing partner of Delight Ventures. And as you'll see from our conversation, Dai's career put him at the center of the entire arc from Japan's mobile internet explosion and crash, the current focus on startup growth and why Japan is now seriously rethinking the Silicon Valley model of startup innovation. Dai and I dig deep into his work with METI and other agencies to help form innovation policy, how Japan's lifetime employment system is suppressing M&A activity, and keeping valuations low. And why Japanese mamas don't let their babies grow up to be founders. But, you know, Dai tells that story much better than I can. So, let's get right to the interview.   Interview Tim: So, we're sitting here with Dai Watanabe, the co-founder and managing partner at Delight Ventures. So, thanks for sitting down with me. Dai: Thank you for having me. Glad to be here. Tim: Dai, I'm so glad I finally have been able to get you on the show. We've been talking about these things for years now. So DeNA, it's mostly mobile, social gaming, networking, entertainment, sports, consumer facing content, that kind of thing. But Delight's portfolio seems to be much, much broader than that. So, what's your thesis? What kind of companies are you investing in? Dai: So, the Delight Ventures is a VC fund that started as a spin out of DeNA, my ex-employer. But we are not CVC, so we don't do any strategy investment. We invest as independent VC. We set up some investment thesis at the beginning, which isn't necessarily aligned with DeNA's core strengths. Tim: Is DeNA still your sole LP? Dai: No, DeNA is one of the LPs. So, we are on fund two right now. The majority of the LP money is coming from Japanese financial institutions, some corporates banks. Tim: So DeNA, just like the rest of the LPs are looking for financial returns. Dai: That's true. Yes, that's correct. Tim: Well,  let's back into this because your career, it kind of perfectly mirrors this rise and fall of Japan's mobile internet and then the innovation shift to Silicon Valley and sort of the new rise of Japanese startups. I want to dig into this and to kind of set the stage for those of us who've been in Japan a long time. In the 2000s, Japanese mobile internet was by far the biggest and the most innovative in the entire world. And DeNA was clearly the most successful entertainment player in that market. That's no longer the case. Things have changed. So, walk me through what happened. Dai: So, going back to the year 2000 when I joined DeNA, I was one of the earliest employees of DeNA, it was pre-mobile era. So, there was dotcom bubble happening in Japan too. And like a fast wave of startups came in. Objectively, I think we can say that most of the internet services were dominated by US, especially Silicon Valley startups, whether it's Google, Amazon, these guys. And then this mobile internet started to happen in Japan, mainly thanks to NTT Tokomo's I mode, I think mid two thousands Tim: Imode were, was introduced in 1999. I mean, we were sending emails and browsing the web in a very basic way on our phones in 1999 in Japan. Dai: Oh, yeah. Oh, wow. I think it was early 2000s when this pake-hodai like all you can eat pricing came in, and then the whole population started to spend a lot of time just looking at the phone. That phenomenon didn't start in the rest of the world for another few years. Japan was definitely leading the whole phenomenon of mobile internet consumption in the world. And in that industry, DeNA was different leading. So, we came up with mobile auction. We came up with a mobile gaming platform, and we came up with mobile ad platform, none of which existed outside of the country. Tim: What do you think prevented this technology, this innovation from moving from Japan overseas at that time? Dai: The sign of that happening was seen in Korea, China, but this imode was so brilliant that the players in other countries really struggled. Outside of Japan you have to spec your website based on different phone devices, whereas in Japan, you just make one website for imode and then you don't have to worry about different devices. Tim: So at the time, was it just the carriers had the lock in, in the different countries and that prevented it or? Dai: So, different carriers didn't control precise spec of how the mobile websites are supposed to be built. So, the user experience was not as smooth as what you could see in Japan. But it's all you can eat. Pricing didn't start until few years later. So, the Japan was leading that market, and DeNA was leading that country. So, it was really natural for everybody to think that the DeNA should get out of the country and expand in other areas where mobile internet was about to explode. So, that's what we are working on starting 2004-5. Tim: Right. And you were president of DeNA global during that period, right? Dai: Yeah. Even before that, I was president of DeNA China. We actually started in Korea because Korea was known for its broadband. The government policy was really bullish on internet, and then also mobile internet too. But we found that the market was a little bit too small for us. So, we shifted our focus to China. So, we set up DeNA Beijing and I was leading that effort. And in China there is a huge mobile internet consumption explosion happening in the south of the country. Tim: Like you came to San Francisco to launch mobage, right? Dai: Yes, yes. Tim: Like the year before the iPhone launched. So, what was that based on pre iPhone? Was it the palm pilots and Blackberries and…? Dai: Yeah, our targeted platform was WAP. It is still feature phone, and we launched a gaming platform on the WAP platform. Tim: And when the iPhone was introduced, I mean, it didn't change overnight. Dai: No, it didn't. So, actually when I moved to the US iPhone had already been released, I believe it was in 2007. And then this iPhone app platform came out in 2008. It was like it was immediate hit. Tim: It took three or four years to really develop. Dai: So, DeNA was like leading star of mobile internet. So, not just ourselves. So, the whole industry in Japan, we felt was really rooting for us to become something in this mobile internet. So, we representing the whole Japanese industry we had really great product back then. We had gaming contents, we had a platform, but over time, maybe before we realized, the whole premise was disrupted by iOS and Android. So we were running gaming platform on top of much stronger, bigger platform of iOS and Android. And we really struggled and we swung our strategy to making games instead of working platforms. And that was totally different game too, no pun intended. We were making games on feature form platform, which was much lighter less expensive, but on iOS and Android game development was much more expensive. It took longer. It didn't work. Tim: That's a really good point. I mean, everyone kind of groups the mobile internet together, but the change from desktop to early mobile in Japan and the change from the feature phone to the smartphone, the iPhones, that was almost just as big a shift. Dai: Yes, yes, exactly. It took us a while to really realize how like fundamentally our business model was disrupted. That's one thing. Another thing is we came to Silicon Valley thinking this is a place that we launched new business, but when we started to see a lot of competition, we had to compete over like a talent. And we later realized that the Silicon Valley was not necessarily a great place to keep talent, especially when we are working on some industry that's past, like a very peak of the hype cycle. So, people started to leave. Tim: So, this is something that's very interesting.

Fifteen years ago, University-run venture funds were all but illegal here in Japan, but today a higher percentage of major Japanese universities have VC funds than in the US or Europe. Today we sit down with Kei Furukawa, a partner at the University of Tokyo IPC, a $300M venture fund, and we talk about the unique role these funds play in Japan, how they drive innovation in rural areas, and why he has to talk professors out of becoming startup CEOs. It's a great conversation, and I think you'll enjoy it. Show Notes UTokyo IPC'a mission and investment strategy How the Japanese government is trying to accelerate university innovation Why the government plans to stop funding university VC funds The unique role of University funds in Japan How IPC is helping startups work with large enterprises Why Japanese CVCs are more founder-friendly than American VCs Why Japanese CVC investment increased during covid How to talk a professor out of being a startup CEO Can startup interaction reform Japan’s universities? The challenge in developing innovators outside of the major cities Which startup sectors are most promising in Japan How senpai culture is holding Japan back Links from our Guest Everything you ever wanted to know about UTokyo IPC IPCs 1st Round program Follow Kei on X @keisukefurukawa Friend him on Facebook Connect on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. University Venture Funds play a much larger role in the startup ecosystem and in startup finance in Japan than they do in the US or Europe. Japanese university funds also operate differently, and  fill a different niche than most of their Western counterparts. Their oversized impact is all the more amazing when you consider that 15 years ago, it was basically illegal for Japanese universities to invest directly in startups, but now they've become a driving force. Well, today we sit down with Kei Furukawa, a partner at the University of Tokyo IPC. A $300 million University fund, and we dive into how Japanese university VCs invest today and how that's going to be changing in the near future. Oh, and for our overseas listeners in this conversation at different times, Kei and I talk about the University of Tokyo and Todai and UTokyo. It's all the same place. It just goes by many names. So Kei and I talk about how you can get investment from IPC, even if you're not a University of Tokyo student or faculty. The single biggest challenge to getting university professors on board with what's required to commercialize their research and how the different investment strategies in Japan are leading to a different kind of startup enterprise collaboration than we see in the rest of the world. But, you know, Kei tells that story much better than I can. So, let's get right to the interview. Interview Tim: We're sitting here with Kei Furukawa, a partner at the UTokyo Innovation Platform or IPC. So, thanks for sitting down with me. Kei: Thank you for having me on. Tim: In the introduction, I gave a brief description of what IPC is and what you're doing, but could you explain a little bit more? So like, what's your thesis? What are you investing in? Kei: So, we are a university of Tokyo Innovation platform company. In short, we are called in Japanese Todai IPC. I think there's three major points in our activities. Number one, we are a hundred percent subsidy of the University of Tokyo, which until a few years ago, it was a pretty rare case because national universities were not allowed to have, let's say, investment companies or let's say companies itself under the organization. But we were created for a more government policy point, we are a hundred percent subsidy, which is pretty, I think, unique model around the world that there's a venture capital right under the organization of university. Point number two is our main activity is investment. So, we have three funds right now. Todai is about 400 million in USD. And we do direct investment into startups, and we actually also do fund funds. So, we actually invest into other venture capital funds. Tim: Well, actually, your three funds, it's really interesting, and I hope we have time to dive into each of them, because each of them kind of represents a different strategic importance for the university. Kei: That's very true. Okay, let's dive into the three funds right now. So, we have three funds IPC one fund, AOI one fund, and ASA fund that we're working on right now. So, the IPC one fund is a fund that we invest into other venture capital funds, and also we do direct investment into startup into a more middle to later stage. ASA fund we invest into more early, let's say, seed round or very early stage funds. And we also do our car out spinouts from large corporations. And this is why we do it. I'll talk later. ASA is a complete fund of funds. It only does fund of funds which we are working together with the Tokyo Metropolitan Government. Tim: So, throughout the course in this interview, let's talk about each one of those individually. Because they're all really interesting to themselves, but focusing on IPC and the direct investments. So, what's your thesis? What kind of startups are you investing in? Kei: The thesis of startup investment for IPC fund and the AOI fund, there's a minor difference, but in general, we invest into startups that are utilizing research coming out from the university. So, that is the investment criteria that we have when we make investment into startups, that they're utilizing the research coming out from university in some way. It can be an IP from the university, or it can be like core research done together with the startup events and the university, which then we can call university related. And then there's other parts where it's like the professor comes in as an advisor. So, there's many ways we can form the way. Tim: Yeah, that's pretty broad. So, it's not necessarily just professors spinning out their research or students forming it. It could be founders with no particular connection to Todai who want to use the IP. Kei: That's exactly right. So, the most beautiful story will be that all startups are using the IP or research coming out from, let's say, just completely done in university. But one thing is that we want startups around the world to utilize the research coming from UTokyo not just the IP. So, we have actually about 10% of our portfolio is global companies. I don't know one about one third of the companies that we invest into is non UTokyo at day one, but we make that UTokyo connection in, let's say, academic or research way. And then they utilizing the UTokyo asset. And then we make investment, which is also a great way, I think, to enlarge the ecosystem around UTokyo. So we welcome other companies coming into UTokyo and utilizing the asset. Number two, if we restrict ourselves to just spin us from, we'll be restricting our investments. And the important thing is that we bring back return to the investors. So we broaden our, let's say, investment thesis so that we have a balanced portfolio in that way. Tim: Yeah. Are you focused on just the initial seed investment, or do you follow on the later stages? Kei: We are a follow on fund. So our fund size for IPC and ASA is both 200 million USD. So, we have a fairly big fund, and of course, it depends on the project itself, but we tend to do all our investments. Tim: So research at the University of Tokyo is really wide ranging. But for the IPC funds, is there a particular sector or a number of sectors that are particularly active, whether it's like healthcare or energy, or… Kei: About one third of our portfolio is healthcare, which is drug discovery, medical devices, and a bit of agritech. We do put a lot of power on biotech because it is important for humanity. We think it's important for investments. So, we do a lot of biotech. About 20 percentish goes into hardware including space, aerospace, materials, semiconductor and robotics. And about, let's say, one rest of the one third 40 percentish goes into AI and IT. We hardly do two consumer because we know in the market there's a lot of venture capitals that do two consumer kind of investment. And we do the more difficult AI and IT related between enterprise related startups in that sense. Tim: There are a huge number of foreign students here at the University of Tokyo. Are there a fair number of foreign founders in the fund? Kei: We have about 80 companies now, and I think we have about three or four companies that are non-Japanese founders of founding companies in Japan. Tim: Excellent. So you mentioned IPC started in 2016, and part of the motivation was the national government trying to get the national universities to be more active in supporting startups. At the time they did provide a lot of funds for that investment. So, who are your LPs? Is it all Todai money? Is it a little external money? Is it…? Kei: Good question. So most of the fund comes from Todai, but it comes from the government. For the first fund most of it comes from the government, but we have a little bit coming from major banks. For the second fund, about 60% comes from the government, but the rest comes from private sector. So that's financial institutions and enterprises. So half and half. Tim: So every fund is more and more private money. Kei: Yes. So, we have to go complete private most probably we are no longer yet, but for the next one, maybe we have to go more complete private on that. Tim: Well, I mean, that's a good trend. I think that was what the government was hoping for, right? Prime the pump and then let private money take it over. So, let's talk about university funds in Japan in general.

(sketch by Kaori Rei)Today we are going to sit down with an old friend. It was over seven years ago when I first had Tim Rowe on the podcast, and we mapped out what we saw as the future of startup innovation in Japan. In today's short episode, we talk about what we got right. what surprised us, and what we think is next for Japanese startup innovation. It's a great conversation, and I think you'll enjoy it. Leave a comment   Transcript Welcome to Disrupting Japan, straight talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. I'd like to share a special short in between episode with you. Last month I had a fireside chat with Tim Rowe, the founder and CEO of the Cambridge Innovation Center at the Global Venture Cafe's anniversary celebration in Tokyo. And I thought I would share it with you just as it happened.  I first had Tim on the show about eight years ago, just before CIC opened their Big Tokyo collaboration space. This time Tim and I talk about the changes to the Japanese startup ecosystem since then, what we are likely to see in the future, and we also discuss what might be a new model for startup ecosystems. As startups have become more and more accepted and more and more common. The old community playbook may not be as effective as it once was. But Tim tells that story much better than I can. So, let's get right to the interview. Interview Romero: All right, Tim, it is great to be sitting down with you again. And as a bit of background for the audience. You and I back in 2017, we were sitting down over coffee in Tokyo and you were telling me about your plans to open Venture Cafe and CIC and I remember asking you like, how the hell are you going to fill 6,000 square meters of co-working space in Tokyo? And here we are. Venture Cafe is one of the driving forces in the startup ecosystem. CIC is over capacity. I have never been so delighted to have my doubts proven wrong, so congratulations on that. Rowe: Thank you, Tim. Glad to be here. Romero: Before we dig in, you've got ties to Japan. You've been working with Japan for a long time, so can you tell us a little bit about what was your involvement in Japan in the 90s and forward? Rowe: Okay, so a bit of background. I'm from Cambridge, Massachusetts. My father was a professor at Harvard. My mother was a professor at MIT, so I'm one of those kids. And I was fortunate to be exposed a bit to the world. My grandmother had spent about a decade in Asia in the 1920s. And she used to teach me kanji when I was little. And so I didn't know much about Asia, but I thought this was really interesting. And I learned later that my great-grandfather arrived in Yokohama in 1919. He was then acting Surgeon General for the United States. And he was on a world trip to kind of build connections and relationships. So, we go back a little ways in Asia. My father, when I was in high school, did something that I think all the parents in the room should do. He said, look you should learn a little bit about the rest of the world. And he said, if you learn Japanese, I'll give you an opportunity to work in my company's Tokyo office for the summer. And I said, okay, deal. And I started studying Japanese. I didn't know the language at all, but it seemed like a cool opportunity. By the way, a generation later, I made the same offer to my oldest child. Actually, I made the offer to all my children, but my oldest child took me up and he came and worked in Tokyo also when he was 16. Kihara-san, I understand that you did something similar. You were in school in Chicago and in Amsterdam when you were young. And clearly your English reflects that experience. I think all of us should have this opportunity to go out of our usual comfort zone and work in another country and learn about other cultures. But that's my background. So, I did a year at Dosha University later as an exchange student from Amherst College. And then I was fortunate to get a job at Mitsubishi Research Institute Mitsubishi Soko for about four years after college. So, I've had time now and then in Japan. Romero: Alright, well, things have changed a lot, both from the 90s when you were first here and in the past seven years or so with the Venture Cafe and CIC experience. So, before we get into the future of Japan, what sticks out as some of the most significant changes you've seen in the startup ecosystem over the last, say seven years? Rowe: Japan as a country, and many of Japanese institutions have really gotten serious about startups I would say the last decade. I think the first wave was a lot of the Japanese corporations starting to really embrace working with startups. Before that it was almost impossible to work with a Japanese company as a startup. If you remember back 15, 20 years doing business in Japan is typically about your experience, your reputation as a business. And startups kind of by definition have none. And there was an awakening to the fact that, well, that's true. Startups are new and don't have this experience. They can also move faster and be agile and sometimes introduce new technologies that the larger companies have trouble introducing. We see this story in the automotive industry where Honda and General Motors and others could make an electric car, but they could never quite figure out how to make a market for electric cars. And then it took a startup Tesla to come in and say, okay, we're going to really seriously make a market. And that happened and later others followed. So, there's this recognition that I think emerged that startups can do things that companies, 10,000 times their size can't. And that's exciting. And so the doors started to open. More recently, I think the Japanese government started to really lean in and say, how can we support? What can we do? How can we support this part of the economy? Hey Michael, how are you? We have an expert in the room. Michael Cusumano, professor at MIT who has been writing and teaching about this for decades longer than I have. So, later you should get a chance to hear from him on this. But, so that started to happen, but I really need to say here, Tim, that there's a history before all this that I don't want us to forget. If you go back to Japan in the post-war era, Japan was one of the most productive startup economies in the world. And if you look at the results of that today, all you need to do is look at the percentage of the Russell 2000, most successful companies in the world that are from Japan. And you'll see that that percentage is roughly tied with the United States when you adjust for population. And all of those successful big companies were startups. These were companies like Sony and Honda and so forth. So, I just need to baseline this. There isn't some difference really, in terms of Japan's potential or capability to build world-leading startups than the United States. Yes, there's a difference in where we are today. Yes, there's a difference today in the amount of venture capital that's flowing. Those are all true, but there isn't some sort of fundamental reason why Japan shouldn't be producing startups of the same size and impact as the ones coming out of the United States or the UK or other leading innovation countries. So, the importance of this is that sometimes people think, well, maybe this is cultural. Maybe there's something about the Japanese culture where it doesn't produce as many startups. No, that's BS I won't say the full word because I'm in a public venue here. But that's BS, there's absolutely no cultural barrier here. There are structural barriers, there are differences. And I was pleased that Kihara-san talked about tax policy. We have policies in the United States, for instance, that make it very attractive to invest in startups. We have policies for our pension funds that make it very attractive for them to invest in venture funds. These policies are not necessarily followed equally everywhere. I know the UK, for instance, doesn't have that same policy, which has made it harder to get venture capital funds out of the pension and similar kinds of institutions. Those are policy changes, the policies, and they can be changed. And so I think what we're seeing now in Japan is this sort of openness to really rethink the structural drivers of innovation and how to move things forward. Romero: I agree. I think probably one of the most significant changes is the willingness of large enterprises to interact with startups. In the dotcom era, it was next to impossible. You get pushed down through four layers of subcontractors, and now almost every large organization to Japan has a team that's dedicated to working with startups. But looking back, and I agree, cultural explanations are kind of hand wavy. So structurally, I mean, is there anything you can particular that you point to and say, ah, that was the triggering event, this was the most important policy, social change, anything that set the wheels in motion? Or do you think it was more of a gradual change of people realizing the opportunities that working with startups presented? Rowe: Japan has a history of embracing things that have high level support. There's a little bit of follow the leader kind of behavior. People say Japan is not a risk taking country, but that's not true at all. Again, if you go back to World War II and look at Japan, there were a lot of risks taken. And if you look at modern, say, extreme sports, you have Japanese contestants that are just as capable as others, and they're taking extreme risks. But what Japan culture, this is a cultural piece. There tends to be a sort of a need for kind of a stamp of approval from someone that it's cool to take these risks. So when the Prime Minister's office launched its startup awards when METI and the cabinet office backed the J startup initiative, which you're probably familiar with that said,

Today we are going to break down some startup stereotypes. I sit down with Kunio Hara, co-founder and CEO of Beatrust and break apart the stereotypes of the uncreative Japanese enterprise and the young startup founder, and Kunio explains how Beatrust is already teaching old dogs new tricks. It's a great conversation, and I think you'll enjoy it. Show Notes How Japanese enterprises are different from their US large counterparts Things to know when starting a company in your late 50s Why older founders lead to more successful outcomes Challenges in breaking the age-hierarchy in Japan Can software actually make people collaborate? What it takes to get Japanese firms to innovate and collaborate freely Does Japan's management style have to change or can innovation happen within it? Why American companies will also soon have to change their work styles What new founders need to keep their eyes on when starting a startup Links from our Guest Everything you ever wanted to know about Beatrust Follow Beatrust on X @jp_beatrust Beatrust on Note Get in touch with Beatrust Connect with Kunio on LinkedIn Friend him on Facebook Leave a comment Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. I didn't really realize what this episode was about until I finished the editing. Oh, don't worry. I'll be introducing you to an innovative founder in just a minute, and we'll dive deep into their business and their market. But this episode is really about stereotypes, how much truth they really have and why they stay with us, and what we can do to change both the perceptions and the realities that underlie them. Today we sit down with Kunio Hara, co-founder and CEO of Beatrust, a startup that's focused on getting Japanese enterprises to break from their hierarchical structures and let their employees collaborate. Listeners who have spent time in Japan know that this is not an easy task, but as we explore this subject, it becomes clear that both the reality and the solutions are not as straightforward as the stereotype suggest. We also explore the stereotype of the young Rebel startup founder, and man that is a pervasive one. In 2007, a 22-year-old, Mark Zuckerberg famously declared that quote, young people are just smarter. Paul Graham explained in 2013 that investors tend to be skeptical of any founder who is over 32 years old. However, if you take the time to look at the real world results, the data actually show that older founders are much more likely to have a large value exit than younger founders. Kunio started Beatrust in his late fifties, and we talk about the positives and the negatives associated with that. But, you know, Kunio tells that story much better than I can. So let's get right to the interview. Interview Tim: So, I'm sitting here with Kunio Hara, the co-founder and CEO of Beatrust, who is modernizing corporate collaboration and culture in Japan. So, thanks for sitting down with me. Kunio: Yeah, thank you, Tim. Long time no see. Tim: Yeah, it has been a while since you're at Google. So Beatrust is focused on helping employees collaborate. This is important. Everyone agrees it's important. But it's hard. So what is Beatrust doing differently in this space? Kunio: We call our service talent collaboration tools because we try to define the new space and compare with other HR tech, especially talent management. What we do is mainly to help large organizations drive and facilitate more autonomous collaboration like cross functions. Tim: Okay. Yeah, that's challenging and in a bit, I want to dive deep into exactly how you do that. But before that, tell me about your customers. So, who's using Beatrust? Kunio: Obviously, large enterprise customers. They want to transform the culture to more innovative oriented, but our uniqueness about the product is we don't always go to one specific divisions. We go to a lot of different organizations such as R&D, Sales or maybe even new business development, because they really need to facilitate those autonomous collaboration across different functions. Tim: Okay. Yeah. Now this is something you and I have talked about before. I mean, we first met back when we were at Google, and you and Masato Kume left Google to start Beatrust in 2020. So why? What was your vision? Kunio: So, when I was at Google, I led a couple interesting projects. One is Olympics and the other one is startups. And the last one is more like DX support for Japanese enterprise. And for the last project, we had a lot of meetings with Japanese executives. And the main theme of those meetings, how they can make more innovations simply. So, Japan lost 30 years for making innovations. And they go far behind US companies such as Google and Microsoft and Amazon, and they want to understand why they were not able to make innovation like those big US IT companies. I realized a couple things because Japanese organization they have a lot of good employees. Many good employees. And sometimes management vision is very good, but why other organization, they cannot make innovation. At that time I was reading Google so I try to understand what's the difference between US IT company like Google and Japanese traditional large enterprise. And then I found maybe two main causes. One is culture, because culture is the essence of the innovation. When I was Google we had about 120 thousand employees. But usually with that size organization become very structured. So, it's very hard to make collaboration those different functions. But Google has preserved good culture, very open communication style. Tim: So, is your goal kind of to bring a Google vibe or Google structure to corporate Japan? Kunio: Of course not. It's not easy to import that kind of culture from a US company to Japanese company, because Japanese company has also good culture. Hundred years, three years, very good culture. But for innovation perspective, maybe they're not so good fit anymore. So, that's why they have to adapt but not easy to transform. Tim: Well, actually that's one thing that's always fascinated me. Because I agree. What you're saying is almost common sense among people who study innovation. But when you look at Japanese companies in the sixties and seventies, they had the same hierarchy. The same rigid structure, but they were incredibly innovative. So, is it just the structure? Is there something else missing? Kunio: I think what the market demands really changing, maybe Japan is good at focusing one thing. So, they want to create some product in a very efficient way, good quality. That's the strength of our Japanese business used to be. But now they need to have more consolidated, more hybrid type business or hybrid type of product and services with technology. So in that case, they have to collaborate more and more across different function because they really need different expertise and skillset. Tim: That's really interesting. And I guess you're right, if you're looking back into like the sixties and seventies, it was definitely innovative, but the product cycles were much longer. These were products that were marketed and the fundamental product would continue for years or decades. And now, especially in the software age, life cycles are a couple of years at most. Kunio: You can imagine three years ago there was no generative AI in the market. So that speed at the Japanese organization was not able to adapt. Tim: Okay. Another thing I think that's very unique about the Beatrust story and your story in particular is that the image we have of founders is always some 20 something new college graduate. But that's not really true. And in your case, especially, I mean, you were a Google exec for about seven years, and you worked at Microsoft for three or four years before that. And you were in your late fifties when you started Beatrust, right? Kunio: Exactly, yes. Tim: So, what were some of the tradeoffs you considered when you were starting? Kunio: Yeah, I think the starting company doesn't matter any ages. And the seniority provides a lot of good things. Because you have no house, you have experience, you have connections. So, we should leverage those assets. But at the same time, senior people don't have more updated sense of the market. And I think I have energy, but of course, younger people have more energy they can really work for 24 hours. But it's kind of a combination. I was able to set up a company because I had a partner Kume San, he's much younger than me, it then can be good synergy. I think more and more Japanese senior people should aim at founding the new business because they have those expertise and background and relationship and young people don't have. So, that could be a good synergy. Tim: I think that's especially true when selling enterprise software. It's incredibly important to understand the problem you're trying to solve, and the people without those experiences won't be able to understand the customer's real problems. I think that kind of interaction is incredibly important for innovation, being able to communicate as peers despite age differences which is hard in Japan. Even back at Google for startups, one of the most common problems was we'd have a 35-year-old founder who had just hired a 55-year-old head of sales. And both sides really had trouble with the management structure, even when they really wanted it to work it was just so much against Japanese culture. And we set up kind of protocols and I worked with them to get them through it, and it worked out great in the end, but it's really challenging in Japan to get past these types of cultural box. Kunio: Yeah. So of course you know that depends on the personality. For senior people, usually they have their own idea, very structured, very solid.

While American AI startups are dominating the headlines, one Japanese company has begun rolling out "AI employees" to famously cautious  Japanese enterprise customers. Today we talk with Shota Nakagawa the CEO of Caster and discuss their model of human-AI collaboration, why Japan is positioned to lead real-world AI deployment, and the big steps needed for Japan to catch up with the West. It's a great conversation, and I think you'll enjoy it. Show Notes Caster’s new model for gig-workers Why almost 90% of Caster's workforce are women How remote work is evolving differently in Japan than in the US Can remote work really revitalise rural Japan? Why Caster uses full time staff rather than gig workers How AI employees could be the solution to Japan’s labor shortage How Caster makes extensive use of AI in their workflow today What is responsoble for the low level of trust that Japanese have in AI and how to fix it Which tasks AI agents will take over and which they will never do Links from our Guest Everything you ever wanted to know about Caster Follow Caster on X @caster_jp Friend Caster on Facebook Friend Shota on Facebook Follow him on X @nakasy000 Leave a comment Errata Caster's percentage of female employees is about 87% not 95%. Caster was founded in Tokyo, later moved to Miyazaki, and then moved back to Tokyo after the IPO Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero, and thanks for joining me. While American CEOs are competing to see how quickly they can leverage AI to replace both full-time employees and gig workers alike, one Japanese company is taking a different approach and they're already rolling out their AI workforce. Today we sit down with Shota Nakagawa, founder and CEO of Caster. Now, Caster is a remarkably progressive and innovative Japanese company. They were a strong and vocal advocate of remote work years before the pandemic hit, and even after their IPO, their 800 person workforce remains fully remote with our corporate headquarters located in a shared office space in Tokyo. Caster has now begun rolling out its AI workforce, and they're taking a very Japanese approach. Rather than leveraging a collection of flexible gig workers or freelancers, Caster continues to build a long-term full-time workforce who is co-developing and already working alongside their AI employees. If history is any guide, Caster’s thinking today might tell us what the Japanese market will be thinking 10 years from now. Shota and I talk about the long-term AI trends in Japan, how Caster solve the problem of corporate, Japan's deep skepticism about AI and whether or not AI can really provide a solution to the economic problems associated with Japan's declining population. But, you know, Shota tells that story much better than I can. So, let's get right to the interview. Interview Tim: So, I'm sitting here with Shota Nakagawa, the founder and CEO of Caster, who is creator of an outsourcing platform and a relentless advocate of remote work. So thanks for sitting down with me. Shota: Thank you very much. Tim: So, I explained very briefly what Caster did in the intro, but I think you can explain it much better than I can. So, what does Caster do? Why is it unique? Shota: People are all work remote every day, every day. Tim: So, the entire company is remote. Shota: Yeah, yeah. All people. Tim: That's pretty unusual. And we're here today actually sitting in a share office space to have this conversation. Well, actually let's talk about that in detail later. But first, let's talk a little more about Caster. So, what do you do for your customers? Shota: BPO, business process outsourcing, client about SMB small business, want back office service. Tim: So, what kind of back office services, is it like recruiting, accounting? Shota: Many types. Tim: So, I think what Caster's most compared to are other services like Upwork or freelancing platforms. But what you guys are doing is a little bit different. Shota: Yeah. Most different point is trust, Caster is B2B business. Upwork is a B2C business. Trust is all different. Tim: So, in practice that means if in the Upwork model, if something goes wrong, it's the problem with the freelancer you hired. In the Caster model, if something goes wrong, Caster has to fix it. Shota: Exactly. Tim: Okay. And the other thing I've noticed, you use full-time staff rather than freelancers. Shota: Yes. Yes, exactly. Tim: So, tell me about your customers. Are they startups? Are they enterprises? Who uses Caster? Shota: Startups, small business and lawyer, tax lawyers and social security specialists and consulting. About 30% is startup and 20% is professional lawyer, tax professional. Tim: Okay. And tell me about your employees. If everyone is remote, where are they? What kind of people are they? Shota: Many different. Many different. 70% are living in the local area, not Tokyo all over Japan from Hokkaido to Okinawa. Tim: Do they fit any particular type of profile? For example, are there a lot of retirees reentering the market or there part-timers? What type of people? Shota: 95% people is women. Very unique. Tim: 95% are women? Why is that? Shota: Japanese unique point. The women’s usual job is so secure. Women want a remote work job in Japan. Tim: And is that just, are a lot of them like working mothers who want to work remotely because of children? 95% just seems really high. So, I'm curious about what the strong point is there. Shota: The point, just could say half people have children to have lifestyle and half people local pay, so low. Caster paid to standard price attractive for the people. Tim: I can imagine Corona changed everyone's thinking about remote work in Japan and all over the world actually. But let's take a step back because you were advocating for remote work a long time before Corona. From the very beginning when you founded Caster in 2014, you were talking about remote work, but what was the attitude towards remote work 10 years ago when you first started? Shota: It's impossible. They say it's impossible. Tim: Why did they think it was impossible? Shota: Why? Because they have not tried. Tim: Okay. That was my experience too. Corporate Japan spent 20 years saying remote work was impossible. When Corona hit in three weeks, everyone kind of figured out how to make it happen. But what was the biggest excuse companies used when they said they couldn't do remote work? Shota: Fear to something they don't know. Tim: Wow. So, it is just the unknown. Coming back to Caster and post Corona, you have around 800 staff now. Shota: Yeah. Yeah. Tim: Everyone's working remotely. This is a really unusual management style in Japan. So, what did you have to change about Caster's culture or management style to make this work in Japan? Shota: Almost no management. Tim: That sounds very dangerous. Shota: Yeah. Almost no management, because remote is digital work. All actions tracking every time, but we not see all action every time. Tim: So just measuring the results. Shota: No, trust comes with and result. Tim: I've noticed that another different thing about Caster when compared to other platforms is that you tend to assign like a project manager for each customer. So, does the project manager act as kind of that management layer? Shota: Yes. Yes. Tim: But what about the feeling from the workers? Do your workers ever want to get together and have that kind of social connection that's so important in many Japanese companies? Shota: A little, but I don't know. Tim: Okay. Well let's talk about the management approach, because Caster was founded in Miyazaki. But we are here in Tokyo even though it's a shared office, which is great. So, was it the IPO, was it interacting with investors? So it seems like there's some aspects of business still need to be done face to face in Japan. Shota: Yes. Good time. If they want me come. Tim: Visit customers, is it investors? Shota: People who have power. Tim: So, that would be investors. Shota: Yeah. Yeah. Investors. Tim: But still, I think that running a public company out of a shared office is absolutely amazing. So after Corona, we've seen a lot of talk about remote work and some changes in attitudes. It seems that startups, small offices are adopting it very quickly, but do you think Japanese enterprises are still mistrustful of remote work, or are they embracing it more and more? Shota: Change after Corona enterprise company decrease new hiring, difficult hiring people in Japan and now enterprise companies change the slowly but many remote work people hiring more. Tim: So, is it just they can't find the staff they need? Or is it that new hires want to work remotely and are demanding to work remotely? Shota: Yeah, both of those are happening. Big company want many higher level people about marketing and professional. You can't find them. Tim: I think it's interesting that recently in the US there's a real backlash against remote work. A lot of companies are forcing people to come back to the office. But in Japan, companies, as you say, they're slowly starting to embrace remote work more. Well, I'm going to be a little bit skeptical here. So I'm a huge fan of remote work. I've hired remote workers. I've been a remote worker. So, 70% of Caster's workforce is outside of Tokyo. And people love to look at remote work as a way of revitalizing rural areas of Japan. And during Covid, we saw that a lot of people left Tokyo, but afterwards it seems that people have come back and that the population of Tokyo is growing again. And population of rural areas is going down again. So, is there a way to reverse the trend long term? Shota: Do you know about 2030 population? It labor population decrease about 5 million people. About 2040 decrease by 10 million.

Welcome to Disrupting Japan. Straight talk from Japan’s most innovative founders and VCs. I’m Tim Romero, and thanks for joining me. There is so much happening in Japan right now. Startups and innovation are beginning to reshape Japan with the same dynamism we saw during the post-war boom or the Meji-era re-opening. And I’ve been in the middle of this for a long time. I’m now a partner a JERA Ventures, but over the over 30 years that I’ve lived in Japan, I’ve started four startups here, worked at TEPCO Ventures, ran Google for Startups Japan, and, of course, I’ve been running the Disrupting Japan podcast for more than 10 years. Every episode, I sit down with friends, VCs, founders, and leaders who are shaping Japan’s startup ecosystem to give you an inside look at what’s really happening here in Japan. So, please subscribe and join me on this journey. I’m Tim Romero, and thanks for listening to Disrupting Japan.

Japanese business loves paper. From fax machines, to business cards, to massive project binders. Paper processes are slow to die in Japan, especially in industrial facilities. Today we talk with Jumpei Yoshida of Kaminashi who explains why that's finally changing and how foreign workers are driving the transformation. It's a great conversation, and I think you'll enjoy it. Show Notes What is Kaminashi, and who is using it? Why it took Kaminashi four years to  to gain traction The biggest challenge in digitizing blue-collar industries Advice for selling software  to Japanese companies How foreign workers are driving digital transformation in Japan How to reach analog customers The sales cycle for SMB and enterprise software Why enterprise sales in Japan is fundamentally different from in the West Kaminashi’s global expansion plans Real innovation comes next Links from our Guest Everything you ever wanted to know about Kaminashi ... and about their products Connect with Jumpei on LinkedIn Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Japan is unquestionably one of the most advanced nations in the world, and yet corporate Japan's love of paper processes and its resistance to going digital has become kind of a running joke even within Japan. At the more traditional industries all over Japan, at corporate headquarters, regional offices and frontline facilities you'll still see people rushing about carrying thick three ring binders to prove to the rest of the office that they are busy and productive. It seems some things never change. So, why? Explaining this kind of thing is a cultural difference is a cop out. It doesn't actually explain anything. It ignores potentially valuable business opportunities. And more important, it overlooks the startups that are finally beginning to change things. And so today we sit down with Jumpei Yoshida of Kaminashi - a name that literally means paperless - and he explains how Kaminashi is pulling factories, food processing, and other critical industrial processes into the digital age. We talk frankly about why it's taken Japan so long to begin this transition and the recent trigger that has really kicked open the market. Jumpei also shares some great advice about how to sell innovation to conservative Japanese companies, the importance of foreign workforce to Japan's future prosperity and what to expect if you're a startup selling to SMBs in Japan. But, you know, Jumpei tells that story much better than I can. So let's get right to the interview. Interview Tim: So, I'm sitting here with Jumpei Yoshida, the CFO of Kaminashi, who's digitizing frontline and field service work. So, thanks for sitting down. Jumpei: Thank you for inviting me. Tim: It's a pleasure to have you on. Now I gave a really high level explanation of what Kaminashi does, but I think you can explain it much better than I can. Jumpei: Sure. Kaminashi is a company focused on providing SaaS solutions to empower frontline workers. Our main offering include tools that digitize and streamline paper-based workflows. Tim: What is the primary focus? Is it mostly just checklists? Is it inspection comments, like approval, workflow? What kind of things does it cover? Jumpei: The application itself is checklist, but there are so many variety of usage. Tim: And what about the hardware runs on, is it iOS, Android, is it onsite terminals? Jumpei: Initially it was only for iOS and iPad, but now our products can use any devices like Windows or Android. Now it's on the web-based software. Tim: Now a bit later I want to get into more detail about the business model and the value you're providing beyond just the checklists. But tell me about your customers. Jumpei: Regarding our flagship product Kaminashi report, it serves companies with large scale frontline operations across more than 30 industries. But we have a strong presence in food related industries like food manufacturers, restaurants, retail stores, and hotels where quality management is critical. So, they are using our checklist app for quality control of their food. Tim: And actually Kaminashi is not a new company. Started back in 2016, but the current version of the products, the current incarnation was only launched in June of 2020. Early on it was very much focused on the food industry. Jumpei: Yes, you were right. Tim: What happened during those four years and why was the decision made to change things? Jumpei: So, I've heard from our founders, like initially he was focusing on the food industry. The initial product was not only software, but they also have device. So just before we launched Kaminashi report, our product was mainly focusing on the quality management for food industry. But the quality management business is so small so he decided to expand their business into other area. That's the reason why we are still good presence in the core team management in the food industry. Tim: Okay. Well, I mean, no that makes total sense of why that forms the core of the new business. So, kind of the lessons learned were you decided to move away from hardware and be pure software and to broaden the customer base beyond just food services and quality control. Jumpei: Yes, that's right. Tim: Just to get a sense of the potential user base. As I understand about 60% of Japan's workforce would be classified as frontline or blue collar work. So, that's a pretty big addressable market. Jumpei: It is. It's about like 39 million people. But now most of our clients are in the food industry because in the food industry, quality control is crucial. But in other industries who has frontline operations, sometimes they don't have to have the application for core team management because paper is enough. Maybe Excel spreadsheet is enough for some industries. But now we have a lot more new products focusing on other operation in the front lines. For example, our facility maintenance product, the demand for the facility maintenance product is huge in the manufacturing industry. Tim: Both Japan's food industries and its manufacturing industry has companies that range from the huge multinational brands that everyone knows down to lots and lots of four or five person companies who are supporting the supply chain. What's your ideal customer size? Jumpei: Our clients are pretty much diverse. We have really large enterprises and also we have very small SMB clients, like 20 employees or something like that. So, we have both. We are welcome both clients but thinking about our revenue size, the larger clients pays a lot more than smaller ones. And also they have a lot of sites so that they can expand the usage of our products in many other locations. Tim: Well, let's dig down a bit into the business model and the value proposition. So, obviously Kaminashi reports is more than just digital tech list, it's more than just Google Forms. So, what is the real value add for both Kaminashi reports and this kind of DX in general? Jumpei: Kaminashi report, it's a basically simple checklist app. Before using combination report, our clients will use paper checklist or Excel spreadsheet. But if they write in a paper checklist, sometimes they write wrong things and sometimes they don't write. So, they have certification like ISO or they get audited by their suppliers. We have many clients in the supplier of 711, almost 90% of 711 food suppliers are our clients. So, 711 goes to their suppliers factory and check everything goes well. So, in a digital checklist app, if they write a wrong thing, then they can get allowed so they can write a right answer. Tim: Are you considering doing kind of a supply chain integration where different parts of the supply chain, the quality assurance information that gets put into Kaminashi gets rolled up to the purchasers? Jumpei: No, the quality management operation is pretty much independent from other operation in the factory. It's not related to supply chain of our clients, but the auditors sometime prefer to use Kaminashi if they go to their suppliers factory. So, sometime they decide to use our product and they ask their suppliers to use our products. Tim: That makes a lot of sense. So, do you also support integrated workflows and approval processes as well as the data entry? Jumpei: Yes. So the approval process is integrated in the checklist app. Before introducing our products, they need to check all the papers, but now they can do the approval from any other sites via internet. So that's a lot easier. Tim: Right. Startups selling digital transformation tools, especially in Japan, it's a great business, but blue collar work, blue collar processes has always been hard. This is something that startups have been trying to do for the last 25 years in Japan. So why hasn't this problem been solved already? What makes it so hard? Jumpei: That’s a good question. One of the biggest challenge we've seen is through adoption of IT frontline operations. A lot of companies are still using PayPal and Excel spreadsheet and yeah, there is often resistance of switching to digital tools. Tim: Why do you think that resistance is there because the basic tools have been around for 20 years? Jumpei: In many ways paper is an excellent UI, it's easy to use. Tim: I mean, I've got my notes right here on paper, right? Yeah, that's true. Jumpei: So, it's intuitive and physically visible, which makes it really simple to understand. Excel too has become so widespread and familiar for many people. So, these factors make traditional methods hard to replace. There is also a cultural element to this, like Japanese workers often seen as change adverse, maybe. And with an aging workforce, that perception can feel even stronger.

Most outside of the energy industry are (pleasantly) surprised to learn how aggressively startups and CVCs are pushing decarbonization forward. Decarbonization is a fascinating and incredibly important issue, so please join me on this short but special episode. It's a great conversation, and I think you'll enjoy it. Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. This is a short episode. I wanted to share with you a panel discussion I moderated at the Global Corporate Venturing Asia Congress on the role that CVCs are playing in the green energy transition. It's an inside look at what some of the leaders in the field are thinking. You'll hear from Sophia Nadur, the managing director of APAC and Middle East at BP Ventures. Nicole LeBlanc, partner at Woven Capital, and Jim Aota, chairman of Yamaha Motor Ventures. You know, outside of the industry, a lot of people are surprised to learn just how active and supportive of startups global energy and transport companies can be and how they're working to push meaningful innovations into the marketplace. So here are some quick insights into how some of the world's leading energy related companies are working with startups to green our power system and transition us all to a sustainable future. We talk about the specific kinds of startups we're looking to invest in, the different ways we have to support and work with startups and what we see is the most exciting energy startup trends for the next three to five years. But you know, the panel tells that story much better than I can. So, let's get right to the interview.   Interview Tim: Okay, thank you so much. I am really looking forward. We're going to be talking about how CVCs are supporting and fueling the growth of energy startups all over the world. And to start off, I'd like to do brief, brief introductions because there's four of us here. So I'm Tim Romero, I'm a partner at JERA Ventures. JERA is a Japanese electric utility. We generate about a third of Japan's electricity. We're investing in decarbonization, new business models and energy and looking for the best companies globally to bring to Japan. I also, for the last 10 years, have been running the Disrupting Japan podcast that talks about VCs and startups in Japan. And this is important because this is being recorded to release on the podcast. So, you are all part of the show. Nicole: Hi everybody. Nicole LeBlace. I'm a partner with Woven Capital and longtime listener of Tim's podcast. So, we're the Growth Venture fund for Toyota. So, we look at growth stage companies typically that are able to work with Toyota across a number of different sectors. So energy that we're about to talk about here is certainly one, but also looking at supply chain automation. And if you think about mobility 3.0, connected cars, that sort of thing. Our team is mainly based here in Tokyo, including myself, but we also have people in the US and in the UK. Sophia: Hi, I'm Sophia Nadur, MD for Asia Pacific and Middle East at BP Ventures. BP Ventures is a global energy company. I am delighted to have Masaki Kaison, who's the head of BP Japan with me, such as the importance that we are placing on looking for investments in Japan right now. We have $850 million assets under management. We invest $150 million at least every year from our balance sheet. We invest in series A, series B, potentially series C companies who are scaling up energy transition related offers, which could include battery storage, offshore wind, solar, hydrogen, mobility, even retail and convenience. Even these areas are of interest to us and we are actively looking to invest in in Japan. We have two, nearly three investments in India, two in China, and two in Australia. Just in this region alone. Jim: Right. So, my name is Jim Aota and I am the chairman of the Yamaha Model Ventures, but it's the same as the cause of the Sony Ventures. Talking about, I have a double hat. So one is the Sony one of the Yamaha Motor Corporation of the new Business development head. And also I'm taking care of the Yamaha Motor Ventures chairman's positions. Typically it's a Yamaha Motor Village as chairman's position is taking care of the investment committee, which is a Yamaha Motor Ventures in the Silicon Valley is taking care of it. Lots of the sourcing activity, decision making processes. So we got a setting up for the IC from the LPs point of view, it's a one LP, one GP structure, we have it. And currently we are running the 300 million commitment fund in the United States, which is going to be one fund for the startup side. And the second is a 401 and I got to have the separate fund, which is focused on to the sustainability side. So, the three fund is side by side structures and we got to going to focus on, but the typically it's compared with the size of the Toyota or VPs. My investment theme is a little bit narrower, so I don't know how much can contribute for the energy sector's conversation here, but we'll try. Tim: I think you can contribute quite a bit from our earlier discussions, but one point I want to kick us off on. So, traditionally energy startups have been very capital intensive. It's taken a long time to bring them to an exit. So, it's been an area that CVCs have been playing an active role in. But if you follow GCV research, as I'm sure we all do here, we know that just very recently CVCs are no longer providing the majority of investment capital to energy startups that institutional financial VCs have now taken the lead. So, I want to your thoughts on what is the best role that CVCs can play here? What is the unique value that we add within this ecosystem? And Sophia, I know you've spent a lot of time thinking and working on this, so what are your thoughts here? Sophia: I think if you think about the infrastructure institutional investors, the banks, the financial institutions, they don't want to take any technology risk. They're okay even with a bit of business model risk. But the value that we bring as folks here in this room and many people here is that we can help the companies very early stage overcome some of the technology hurdles using maybe some of the resources within our own company to be able to run pilots and POCs and programs to help ensure that the product service has market fit and then also to overcome business model innovation challenges. And that's still a service that we offer and that's what I think why VCs and CVCs will have an enduring role to play as this energy transition progresses irrespective of how, let's say infra heavy this particular part of the transition will be. Tim: So, is BP pretty hands-on in that respect? Do you actually like pull engineers out of the field and work with the startups and that kind of thing? Sophia: That's a good question. So we invested in a geothermal company a few years ago in Canada. And you might think geothermal is essentially looking at underground heating and then basically pulling that heating to heat homes and businesses above ground. But to get that, you need to drill wells four and a half kilometers below the surface of the earth. To do that it might be useful to have drilling engineering experience. And that's what we found in terms of the real value that BP has offered to this startup. And now this startup has drilled well four and a half kilometers below the surface of the earth in Bavaria in Germany. And a lot of that support and expertise have come from within BP and that helps accelerate the scale up of this young company. Tim: Fantastic. Jim, what are your thoughts? Jim: Probably a little bit different point of view what Sophia is talking about. So for example, Yamaha Motor, we established the company's a 1955 and that is a spin of venture of the Yamaha music. So, we have the music business, but suddenly the top management team decided we got to make motorcycle. So, it's kind of the startup mindset. We started back in 1955 and believe it or not, my city is called as Hamamatsu city. You can take the Shinkansen from here, it's 1.5 hours away from here. We got to have over 80 plus motorcycle company in town. So, it's kind of the expansion of the venture time in that city. And now you can imagine for the Japanese motorcycle company, Honda, Yamaha, Suzuki, Kawasaki, we totally going over for the consolidation phase and we got to making the company as very quality, high quality recognition from the customer side. So, from the company who is building up startup now, probably what we can help is how we can make the company better from the larger corporation point of view. So, we have some history and we got to do something on this so we can tell something to the startup company. So, that is the things we can help them to raising their bar or maybe getting into the market much higher space. But other than that, very difficult like Sophia can tell more about what's kind of your energy transitions. But my job is the people who has a passion, they want to change the world and how we can help. I think that's the only point I can do this in a CVC point of view. Tim: Well, I think Yamaha's in a really interesting position and a lot of people forget that companies like Yamaha and Honda were incredibly disruptive in the fifties and sixties. It was just redefined what a motorcycle was and in the ensuing decades have built up an incredible engineering expertise. So is it really, when you say increasing quality, is it that engineering that suitability for market? What aspect do the startups find most valuable? Jim: I think it's a large manufacturing corporation always compelling with the startup and myself and they are not, we are better and it really true actually. But from the day one, you don't need this kind of level things. You have to kind of step one, step two,

Japan is lagging behind in AI, but that might not be the case for long. Today we sit down with Jad Tarifi, current founder of Integral AI and previously, founder of Google’s first Generative AI team, and we talk about some of Japan's potential advantages in AI, the most likely path to AGI, and how small AI startups can compete against the over-funded AI giants. It's a great conversation, and I think you'll enjoy it. Show Notes Why Jad felt Google was not pursuing the best path toward AGI The fundamental AI scaling problem and likely solutions Why robotics is critical for the advancement of AI (and the not the other way around) Why Japan is the ideal place to build a new AI startup The reason it is so difficult for robotics startups to make money Why humanoid robots are a dead-end How AI startups can compete with the foundation-model comnpanies How we get to AGI from our current AI Solutions to the alignment problem The challenge of making AI fundamentally benevolent The biggest challenge in AI development is not technological Links from our Guest Everything you ever wanted to know about Integral AI Stream product announcement Follow Jad on X  @jad_tarifi Friend him on Facebook Connect on LinkedIn Check out Jad's new book The Rise of Superintelligence ... and the companion Freedom Series website Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Japan is lagging behind in AI, but that was not always the case. And it won't necessarily be the case in the future. Today we sit down with Jad Tarifi, current founder of Integral AI, and previously founder of Google's first generative AI team. We talk about his decision to leave Google after over a decade of groundbreaking research to focus on what he sees as a better, faster path to AGI or artificial general intelligence. And then to super intelligence. It's a fascinating discussion that begins very practically and gets more and more philosophical as we go on. We talk about the key role robotics has to play in reaching AGI, how to leverage the overlooked AI development talent here in Japan, how small startups can compete against today's AI giants, and then how we can live with AI, how to keep our interest aligned. And at the end, one important thing Elon Musk shows us about our relationship to AI. And I guarantee it's not what you, and certainly not what Elon thinks it is. But you know, Jad tells that story much better than I can. So, let's get right to the interview. Interview Tim: I am sitting here with Jad Tarifi, founder of Integral AI, so thanks for sitting down with me. Jad: Thank you. Tim: Integral AI, you guys are “unlocking, scalable, robust general intelligence.” Now that's a pretty big claim, so let's break that down. What exactly are you guys doing? Jad: So, when we look at generative AI models right now, they usually operate as a black box. And because they have minimal assumptions on the data, they have to do a lot of work and they tend to be inefficient in terms of the amount of data they need and the amount of compute. We're taking a different approach that's inspired by the architecture of the neocortex, which roughly speaking follows a hierarchical design where different layers produce abstractions and then feed into higher layers that create abstractions of abstractions and so on. Tim: Okay, so this is not an LLM architecture or is this a kind of LLM architecture? Jad: When people talk about LLM, usually they talk about auto regressive transformer networks. So this would be a different type of architecture than that. However we can use transformers or other models like diffusion models as building blocks within that overall architecture. Tim: It's interesting that you took a different path than LLMs because you're not new to AI. You led teams at Google for what? Nine years or so where you were working with transformer architecture. So, you know this technology deeply. What made you decide to not only leave Google and start a new startup, but to leave the LLM path and pursue a different technological architecture? Jad: So, this all goes back to my PhD where we were exploring how the neocortex could work from an algorithmic perspective. And in fact, when I started the first generative AI team at Google, we were targeting how to have models that can imagine new things, which what we call generative AI right now. Transformers was one of the very exciting, scalable architectures to do so, but there were clearly limitations there that I cared about deeply because I do care about these models affecting the real world, and there was a bottleneck there in terms of reliability and in terms of efficiency. And from my work on the architecture of the neocortex, it was clear that there is a path that goes beyond the current models and I could pursue that path at Google, but it also felt that there's a new class of applications that are going to be unlocked to have nothing to do with search that more about the physical world robotics movement, real time user interfaces, all of those exciting things that felt a little bit outside the box. And so it felt like it'll be good to have a new company with a blank slate so we can move fast and make an impact. Tim: Integral AI, let's see, you guys launched in 2021, right? So this was a solid year before, well before generative AI became mainstream. So, has that prediction played out? So, generative AI in the last two years has increased significantly in accuracy and reliability, but do you think it's going to hit a wall or has hit a wall in terms of how accurate it can be? Jad: No, I don't think generative AI will hit a wall at all. As someone who is one of the founders of generative AI, I think the sky’s dilemma, I think we are going to go to general intelligence and beyond human level all the way to super intelligence. In fact, I think the transformer architecture will continue to improve, but the rate of return on general pre-training of these architectures have reached diminishing returns right now. So, you need to spend 10 times more energy, 10 times more data to get the next step up. And if you give me infinite energy, infinite data, then I can do anything. But we are already seeing our models can do much better with far less resources and they have better scalable qualities. So you think about it as the slope of your scaling exponential. Tim: So, I appreciate the thought that LLMs aren't going to hit a wall, but if we do have that kind of a scaling issue, we can theoretically come up with 10 times more compute. But is there 10 times more data and is it, is it like quality data? I mean, sure we can train LLMs on YouTube videos and TikTok, but I'm not sure we really want to use those. Jad: I'll answer that in three different ways. One is by expanding to modalities. As you mentioned, YouTube vision is largely under explored. Just training on all the text on the internet is not enough. There's a lot of other data sources including proprietary data sources, but also multimodal data like vision, like sound and all that stuff. But even that has fundamental limits. The next thing is about actually having humans create new data. And I think there's a lot of ethical issues there. You know, a lot of the data is creating in poor countries, people who are underpaid. A lot of the labs are exploring this strategy and I think to some degree there's some success there, but I don't see it as entirely scalable long term. Third and most promising approach is the new paradigm of test time scale. So, these models can look at data reason and then generate new reasoning chains or plans, thereby creating better and better data for themselves. So, there's this cycle in psychology, it's system one and system two thinking. So when we think, when we make a plan, this plan becomes a new, fresh, high quality data that we can retrain our intuition. And an example would be chess. When you start off a chess, you need to maybe think about every single move. And as you become more experienced, those naturally come to you and you still have to plan, but you're planning at the higher level. And so there's this loop system one gives you a better system two, system two gives you a better system one. And so there's a real sense in which this model can self-boost, trap and create their own data. Tim: Okay, that makes sense. Let's get back specifically to Integral AI and the work you guys are doing. So you mentioned the, the importance of multimodality and you and the team are doing a lot of work with robotics and with DENSO Wave. Jad: Yeah, so ultimately the way AI is going to impact the real world is through taking physical action. And the form that computers take physical action in the world is robotics. So the way we define robotics is any controllable physical tool. So that includes cars, drones, but even elevators. So anything that you can move intelligently would be in our category, a robot. Tim: Well, it sounds like just about anything with a physical manifestation of it would be a robot, anything that can interact with the world. Jad: Right, that's our expansive definition of the world. And if you are going to interact with the world, it's really helpful to understand the world. And the most rich sense for understanding the world is the visual sense. As humans, you know, about 40% of our neo cortex is specialized for vision. So we tend to spend a lot of our energy processing the real world visually, compliments language very well because language is the natural modality for abstract thinking. So there's the abstract thinking through language and there's the real world grounding through vision. And so the world of abstraction is already compressed enough that you can get away with a very inefficient algorithm.

While the rest of the world is copying Silicon Valley, Tokyo is looking at Paris. Today we sit down with Mark Bivens and Matt Romaine, the co-founders of Shizen Capital to talk about Japan's new startup policies, the changing role of M&A, the main force behind the changing attitudes about startups in Japan. It's a great conversation, and I think you'll enjoy it. Show Notes Why Japanese startups need to start buying other startups The root of Japan's odd attitudes towards M&A and the forces changing it Structuring investments into foreign startups making a Japan market entry Why the Japan's angel investing tax-break is not really about taxes What Japan plans to import from the French startup ecosystem The best way to win the hearts and minds to change startup culture What's driving the recent explosion in startup events, and will it last? The best Japanese startup ecosystems outside of Tokyo Can authenticity scale? Links from our Guest Everything you ever wanted to know about Shizen Capital Connect on LinkedIn Follow Shizen Capital on X  @shizencapital I highly recommend Mark's blog Rude VC Follow Mark on X  @markbivens Follow Matt on X  @quanza Check out Mark's Nostr https://rude.vc/nostr Transcript Welcome to Disrupting Japan, Straight Talk from Japan's most innovative founders and VCs. I'm Tim Romero and thanks for joining me. Everybody wants to be Silicon Valley. Regional and local governments the world over proudly announced that they will be the Silicon Valley of, you know, whatever. We've seen Silicon Glen, Silicon Beach, Silicon Harbor, and countless other less publicized variations. Now, politicians calling out to Silicon Valley works fine as a metaphor, but you know, it's not really a plan. Well, the Japanese government has a plan and they are not looking to San Francisco, but to Paris. And today we're going to talk about that plan and so many other things as well. When we sit down with Mark Bivens and Matt Romaine, the co-founders of Shizen Capital, an early stage fund focused exclusively on Japanese startups. Now, Matt and Mark are both startup founders who became VCs, and that's still pretty rare in Japan. These VCs tend to be overrepresented on disrupting Japan because I don't know, it's a small group and I'm friends with a lot of them. But founders turned, investors are critical to the success of any startup ecosystem, and they're playing an outsized role in shaping what's happening in Japan right now. Mark, Matt and I talk about what's driving the changing attitude around M&A in Japan, which part of the government efforts to support startups are actually working and Japan's potential advantage in becoming a startup powerhouse in the coming years. But you know, Matt and Mark tell that story much better than I can. So, let's get right to the interview. Interview Tim: We're sitting here with Mark Bivens and Matt Romaine, the two founding partners of Shizen Capital. So, thanks for sitting down with me. Matt: Delighted to be here. Mark: Yeah, pleasure. Tim. I think I mentioned this privately to you before, but I'm pretty still relatively new in Japan. Seven years ago I moved here and you were my first source as I wanted to learn about the Japanese startup ecosystem. Tim: Well, thank you. Mark: Somebody introducing me to your podcast, so thank you. Tim: Well, no, thank you. It's been a great project and I'm glad this has kind of come full circle and I get a chance to sit here and interview you on it. Mark: I also have to say, in a past life I was a radio DJ. You have a great radio voice, Tim. Tim: Thank you. It's funny, people tell me that all the time, but this is just the way I talk, like normally. Well, thank you. So, let's get into it. So, tell me about Shizen Capital. Who are you investing in and why? Matt: Yeah, well, so I first met Mark in 2015 at a conference in Fukuoka. It was the B dash conference. We were introduced by one of Gengo's investors. Mark and I, hit it off and eventually just sort of flying forward a couple years, we reconnected and I was ready to sort of think about post acquisition, a new adventure. Tim: Let's back up a little bit. Long time listeners will know what Gengo is and who you are, Matt because you were on the show seven years ago. Matt: Would've been eight years ago. 2015, yeah soon after we raised our series C. Tim: Wow. That was a while ago. However, some of our newer listeners who have not absorbed the entire back catalog yet could deal with an explanation. So briefly, what was Gengo and what happened to it? Matt: We were a crowdsourced human translation platform, founded in 2009, and over the course of about 10 years we raised $26 million from both local and overseas VCs. And in 2019 we were acquired by a company called Lion Ridge. Tim: After that acquisition, because I remember you and I were talking about this over coffee a couple of times. Did you want to start another startup? Did you know you wanted to get into VC after that exit, or was it just this kind of synchronicity of meeting up with Mark and Fukuoka that led you to this? Matt: Fortunately, I guess the latter half of my time with Gengo, I had a few opportunities to invest in sort of a new generation of founders, both in Japan and overseas. That kind of got me interested. So, I had already basically been dabbling in a little bit of angel investing. So, when Mark approached me with this idea of doing something, scaling it up, doing something a little bigger… Tim: Kind of a natural next step. Well, Mark, I mean, you guys founded Shizen in 2016, but you've run funds for quite a while before that. Mark: Real quick, if I leave out the naughty bits, my background's pretty short. Tim: Oh, don't leave out the naughty bits. Mark: But three startups in the nineties, born in Silicon Valley. My first two startups failed. The third one was acquired in 1999. This was the.com bubble period. Very lucky break in terms of timing. Tim: 99 was a great time to be acquired. Mark: It was a good time to exit. So, I became unemployed. I sold the company. I was unemployed. One of the VCs that had backed us, took me under his wing, hired me, taught me the business of venture capital, and I realized I loved it. So, I've been doing that since then, almost 25 years, I guess now. And approaching Matt with this idea of a fund, actually it was a no-brainer, understands things on the ground, native Japanese speaker. And I tell you, Tim, I would meet star entrepreneurs and maybe midway through the conversation it would come up that my partner is Matt Romaine. And then the tone of the conversation just was transformed. Oh, you know, why didn't you start with that? Suddenly everyone's friendly and nobody's trying to pitch anyone anymore. It's like, how much can you invest? What do we need to do to secure your capital? Tim: So, was that reaction because of Matt specifically, or was it just the fact that there was people with startup experience and that was your differentiator from 99% of the VC firms in Japan? Mark: The answer is the former, and I can confirm that with specific anecdotes. Because usually I would put that upfront that our differentiator is we are former entrepreneurs, we've built companies, and that's at the point where they would say, well, who's your co-founder? I mentioned Matt Romaine and then the conversation reaches this inflection point and suddenly we're talking about a deal. Tim: What types of startups you're looking at? How does that inform your portfolio selection? Matt: We're fairly agnostic, there has to be a tech piece to it. We're investing in companies that we believe can scale. So, we've done everything from FinTech to property tech, some Web3, some education tech. Our backgrounds are primarily in software, and so it's more biased towards those types of investments. But we've done a few in hardware some in medical. They are really early stage. And so a lot of what we look at relies a lot on sort of the team and the interactions that we have with the founders. Tim: Is your value proposition mainly, we've been through the struggle ourselves. We can help you, we're going to help propel you globally. What's the main attraction of Shizen to those ambitious founders who everyone is chasing down? Mark: Obviously it depends on what is appropriate for their business, but indeed, we are often investing in founders who can take a business global. We don't prescribe that every company we back needs to go global. In fact, ironically, many of the foreign founders in Japan that we've backed are focused on the domestic market. Tim: Japanese VCs have a tendency to be very hands off. As former founders, is part of your value add being hands-on? Matt: Maybe you've heard this from at least one other fund out there, but we're more kind of a hands if we don't put together a schedule where we have to be involved on some regular basis. So, for example, we do this Shizen workshop series. Today's was on actually M&A. What's interesting is the founder listening to it might be thinking like is that my exit? But actually it is also a way to think about how to grow, can grow a business organically, or you can also grow a business through acquisitions. Tim: So, like startups acquiring other startups is common in the US where startups tend to be much better funded. I is that something we've seen in Japan? Mark: This is a topic that we speak a lot about. And in our opinion, it is an essential ingredient of a healthy startup ecosystem. Still missing in Japan, improving, but still missing. So, I like to use France as a benchmark because France is an ecosystem that in 2000, it was a country of multinational companies, but very few startups. Entrepreneur is a French word, and the irony is very few of them in France at the time, the good ones would leave and go to Silicon Valley.

Today, we are going to talk about AI, but not in the way you expect. Today, I’m going to give creatives a solid three-point plan to beat AI in the marketplace. I’m going to explain how musicians, podcasters, authors and other artists can survive and even thrive amidst the unstoppable flood of AI generated slop we will all be forced to wade though for the foreseeable future,  And to maybe do some good in the process. It’s taken me over a year to write the script for this episode, and like so many of my solo episodes, I originally planned on it being very different from how it turned out. But sometimes the scripts takes on a life of its own, and I have to follow it to what always ends up being a far more interesting place. Those episodes tend to be my most popular I hope you enjoy it. Introduction This is a solid three-point plan for beating AI in the marketplace. I’m going to explain how musicians, podcasters, authors and other artists can survive and even thrive amidst the unstoppable flood of AI we will be forced to wade though for the foreseeable future. Artists, don’t kid yourself, generative AI is here to stay. There is no going back. But there is a way forward. This is a personal topic for me. I used to be a professional musician. I put myself though college playing in bars and clubs. I was Japan’s first professional podcaster. I also love generative AI and am excited about the amazing creative potential it promises. I want to see all of these things thrive. AI will be fine, of course. It’s supported with practically unlimited funds and by lawmakers and industry leaders around the world. Artists, however, could use a little help. What exactly does AI create? People asking if AI can create real art are asking the wrong question. Artists who need to put food on the table need to be asking what artistic needs AI meets in our economy. With those parameters, let’s look at what exactly AI is creating, using podcasts as an example. Google NotebookLM can take any textual input (your website’s FAQs, a press release, last quarter’s sales reports, anything) and create a convincing podcast from that input. A male and a female voice will smoothly and professionally banter about the topic and tease the listener that they won’t believe what’s coming up, and they express broadcast-caliber levels of surprise and admiration over the most trivial bits of information. It’s really good. NotebookLM has very high production standards. But there is nothing really inside. After a minute or two, it’s just not that interesting to listen to — even when the input information was interesting. This is because NotebookLM is incredibly good at imitating the structure and affect of a quality podcast. This is how all LLMs generate art, music, and video. They imitate a particular structure and affect, but the quality of the content is irrelevant. Structure and affect are the logical and emotional cues that let us classify a work as a particular type of art. The structure is the logical parameters; a pop song should be about three minutes long, it should have an identifiable melody. An image should be rectangular. An email should start with a greeting and end with a signature. Those kinds of things. The affect is the emotional parameters. It refers to the emotional reaction we have to a given work. It’s the vibe. Rock and country covers of the same song will have a different affect. They will feel different. Generative AI is successful today in those areas where structure and affect are important but quality is irrelevant. Saying “quality is irrelevant” is not an insult or a backhanded way of saying that quality is poor. The key fact is that AI-generated art (whether it is of high or low quality) excels in situations where quality is irrelevant, and human-generated art (whether it is of high or low quality) excels in situations where quality is relevant. If you are an artist arguing about the quality of AI-generated art, you are having the wrong conversation. What is art to us? Since your future income depends on leveraging this, let’s take a closer look at how we humans interact with art, whether generated by human or machine. AI music startups like Suno and Udio have announced that they have created hundreds of thousands of “top-40 quality” songs that include vocals and full orchestration. It’s unquestionably impressive, but if you were to ask them “Pick the best two or three, and let’s listen to them together.” it would be an utterly bizarre request. Quality is irrelevant. There is no “best”. When Suno says they create “top-40 quality” songs they mean they can reliably produce the structure and affect of a top-40 song. All of the songs can plausibly pass for a real song. The quality of any individual song is irrelevant. The quality is not necessarily bad, it’s just not relevant. For a human counter-example, let’s say your young friend has just put together their first garage band. They play their three best songs for you and ask what you think. You are not going to respond in terms of structure and affect. Saying something like “Wow. That sounds like a real song. I couldn’t even tell it was written by you.” would be so odd it would not even be insulting. No, you would talk about their music in terms of quality. You might say things like “The lyrics are really clever.”, “The second song had a great groove.”, “You know, maybe you don’t really need a two-minute drum solo.” It’s not that the quality is good, it’s their first band so they are probably terrible. However, we interact with human-generated art in terms of quality. Structure and affect are mostly assumed. Why things got so hard for artists The real problem artists face today is that almost all commercial uses of art focus solely on structure and affect, with quality being irrelevant. As tempting as it is to blame technology, AI did not create this rift between structure and affect on one hand and quality on they other. AI is taking advantage of culture-wide shift in how we engage with art that has been growing for about 25 years. Unless artists stand up for themselves, it’s going to get much worse. It’s important to understand that we all used to experience music completely differently. As a kid growing up in the 80s, if you wanted to listen to a particular song, you had to go buy the record. In addition to the friction of going to a physical store, albums cost about $10 and CDs about $15. In today’s dollars that’s $29 for a record and $44 for a CD. For a student, that’s about the price of a six month subscription to Spotify premium. For a single album! I’m not saying that was a better system. It was terrible in many ways. However, it forced us to interact with music in terms of quality. After making such a major investment, you didn't just put that album on your shelf. You read the liner notes, and you listened to every track multiple times. You then got together with your friends and listened to these albums together. You would each play your favorite tracks from the album you brought over, say what you liked about it, and everyone would talk about the music — and about all kinds of other things too. This dynamic forced you to engage in terms of quality. Nobody cared how many albums you had. They cared about what you brought that day and the specific things you liked or disliked about it. “Listen to what he’s doing with this guitar part.” “The vocals in the second chorus are amazing.” “I think he screwed up the bass part there.” Every kid was a music critic. Quality mattered. The music was not necessarily better quality, but engagement with music focused on quality. Some of my Gen Z friends have told me they would consider that situation horrifying. “Why would I want to sit around and be forced to listen to other people’s bad music and having to make some kind of presentation about why I like my music? Why not just let everyone listen to the music they enjoy?” Yeah. I get that. Being immersed in music in your headphones is pretty awesome too. Those music sharing sessions got annoying sometimes. You had to sit though some bad music occasionally, and there was always that one jerk who would jump up saying “We have to hear that guitar solo one more time!” I was that jerk on many occasions. So, my Millennial and Gen Z readers, I’m absolutely not saying this was a better way to listen to music. I might get nostalgic about it, but I don’t listen to music this way any more. (Although, perhaps I should.) However, these constraints, as annoying as they could be, forced previous generations to engage with music very differently. They forced listeners to consider and commit and engage with music in terms of quality. This is why every Boomer, Gen X kid, and all but the youngest Millennials will longingly tell you about the first album they ever bought with their own money. (Kansas, Point of Know Return)   When things got so hard for artists Things began to change in the early 2000’s. Many blame the streaming services and the super-abundance of music they brought, but the change is deeper and more pervasive. About that time, structure and affect started to get locked down across most mainstream culture from music to books to movies. This lock-in has nothing to do with AI, but it has set the stage for AI dominance of artistic output. If you listen to the Spotify top ten, perhaps a third of the songs would not have sounded out of place if they hsd been released in the 80s or 90s. This is unprecedented. The hits from the 80s sound nothing like the hits of the 40s. The hits from the 70s sound nothing like music from the 30s. Since the beginning of recorded music, every decade of popular music had a unique feel. A unique vibe. A unique affect. Until now. As an aside, I feel kind of cheated here.