Peter Kozar: Fundraising in Japan is art

He´s been living in Asia for about seven years, in Japan and Singapore. He worked for a bank in London and for a short while cooperated with a Slovak startup sli.do. Thanks to many startup events, he gained precious experience in fundraising and a good knowledge of Japanese business and startup ecosystem. Currently he is running his own projects. Peter Kozar.

What was the journey that led you to startups?

When I was in Japan, I started to build the usual career in a corporation that all parents always dream of. After some time and because I have always been rather entrepreneurial, I realized that this kind of a job was just not the right thing for me.

Around that time, I was thinking about creating something like Alibaba but with a social aspect to it, focused on trade between Japan and South-East Asia. Let´s say something like LinkedIn and Alibaba combined. In my corporate job I was dealing with trade insurance between companies in these regions and I´d noticed a trend which I thought was interesting to explore further and which served as a basis for this idea. Unfortunately, it didn’t go as planned. Potential investors found a certain logic behind it but asked for a complete UX and UI re-design, which I had to agree wasn’t good. Considering challenges, additional finances required and maybe for simply being too comfortable taking corporate salary at that point of my life, I let it go. This experience was very rewarding however, as it was my first touch with the world of technology startups.

What´s the story behind StartupClub?

At the time when I was in Singapore, the government started to consider technology startups a national priority. Despite all the government interest, in 2010 / early 2011 there was only small and mostly local startup ecosystem in Singapore and only a handful of mostly university related startup communities. I couldn’t find any international startup community, therefore influenced by my friend in London, I decided to create a Facebook fan page called Singapore StartupClub. The goal was to bring a few likeminded people together so I can discuss and learn from my previous startup mistakes. After a while more and more people started to join and suddenly there was 200 of us. At this point we realized, that we should probably organize a meetup. And so we did, it was really great and step by step it grew and more events were organized. We didn’t do this for money, just out of pure interest. Financially on operational level our events were sponsored by companies like Google or AWS. The goal of these events was to meet interesting people, discuss our challenges and connect early stage startups with potential investors.

Then the co-working space in Singapore followed?

If you start with things like these events, at some point you will come across a person offering you cooperation. That´s how I met a guy who owned a co-working place and rented offices. He wanted to sponsor one of such co-working spaces for us and suggested we could do a joint-venture between his offices and our events.

As such we opened a branded co-working space with an ambition to extend it to an accelerator with a small external fund, so the early stage startups would have space to work and small capital to begin with. Since a lot of investors I met in Singapore were either local government related funds or Japanese based funds, I decided to return to Japan and try to find Limited Partners there. As a foreigner in generally closed business society, I thought getting an MBA from a Japan based Business School would enable me to build my own credibility. That is one of the reasons why I chose to study at the Globis University in Japan, whose founder was also founder of a very famous Japanese VC fund called Globis Capital Partners.

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Fundraising

By organizing startup events or working on your own startup you must have gained a lot of experience in fundraising.

You just cannot avoid it. A few days back I was talking to a guy from an angel investment group in Silicon Valley that´s investing in the space-tech industry. He told me “If you want to be successful raising from Angels, you have to have at least 30-40 hours of net meeting hours with investors”. I have already booked maybe 25 hours raising for my newest project, so there is always room to go.

What do you think is the most important thing when fundraising?

Luck 🙂 And maybe persistence.

Really?

Really. You can have a perfect team, a perfect pitch, a great business model, but if you cannot find the right person who is on the same page with you, he will not give you the money no matter how logical, charismatic or ambitious you are. We had many meetings here in Japan where I was very persuasive, had all the right arguments and explained everything in detail to the point where no questions were left – logically – unanswered and even though they liked it, eventually there was no deal.

Of course it’s also about other factors such as timing, opportunity, fund strategy fit, presentation quality, founder’s charisma and persistence. The more people you meet the bigger the chances you’ll have to meet the right person who shares your vision, but sometimes you don’t. On the other hand, I know people who raised money after their third meeting. The investor just saw their potential, they got along well and banked the money really fast. I also had experience where we had two good meetings with an investor and despite good rapport between us the deal didn’t progress further. After two months, same investor messaged me to see if I am still fundraising, because circumstances at their fund changed and they were now willing to consider us again.

As such, naturally I don’t think that luck is the most important factor, but from my experience together with timing and the quality of your pitch it is an element that determines the outcome.

So you would say it´s better to know the potential investor beforehand.

From my experience, it seemed like I have always had more open and ultimately more fruitful discussion if I knew investor beforehand as there was already that personal rapport between us.

If the investors are familiar with your background and you share some history, they will at least be more open-minded to listen to your pitch compared to if you just cold called them. In a way it´s similar to sales, clients are probably more likely to trust you and buy your stuff if they recognize you from before.

How and where do you meet these investors or any other interesting people?

Actually, I have met many people at events I´d organized but did not pitch them my stuff right at the event. What I consider works best, is to create a network that allows you to get to know the investors through another person you already know, a kind of personal recommendation. Afterwards you can meet for a coffee and just talk casually to get to know each other better.  After some time, you can meet them again and pitch them your project in detail.

I personally found this approach better than trying to pitch investors at the networking event. Most investors are likely “hammered” with dozens of pitches at those events, therefore simply because of information overloaded the impact of your pitch may not be as good as if it was heard over coffee, when all attention is on you only.

That being said I don’t think being overly secretive at events is a good idea either. Delivering a short 2-3 sentence micro-pitch, exchanging business cards, reaching out by email and saving juicy bits for later worked for me better than selling my idea hard for 10 -15 painful minutes at the event. I think events are a great openers but difficult settings for startup pitch.

When talking about raising money, what are the specifications for Asia at this point? What would you tell is different there?

Asia is very diverse and complex region. You can´t say that things work the same way in Korea as they work in Japan, Singapore is also different from Malaysia, and so on. These countries may be close to each other geographically or somewhat culturally but they actually differ very much. Due to my local experience, I can only speak about Singapore and Japan.

In Japan, it´s quite complicated. It´s a strictly traditional country where if you come in as an outsider without understanding of the local context, you are unlikely to succeed. Not only in terms of fundraising, but in business in general. If any Slovak startup would like to come there, I would highly recommend them to get in touch with someone local first or a foreigner living here for a longer period of time, so they can help opening the door.

If you don´t speak Japanese, getting a seed investment isn´t impossible but the chances of this happening are not very high. On the other hand, if you already have a running startup in Europe or the US, you have some traction behind you and have a compelling reasons why to enter the Japanese market, I don´t see any reason why they wouldn’t talk to you.

Singapore?

In Singapore, the government is already doing very good job helping startups by setting up a favorable legal framework and investing a lot of money in the ecosystem by means of many different programs. They work on a so-called “appointed” VC funds which co-invest with the state funds. The national strategy is not only to boost domestic, but also to attract foreign technology companies to the country.

As a foreigner with an interesting idea, you are more likely to succeed in Singapore than Japan for example. You also won’t face major language barrier as English is an official language. On the other hand, Singapore with its 5 million-ish inhabitants is actually a rather small consumer market to test a b2c focused idea. There are pros and cons of being based there.

Can you see Singapore as a starting point to Asia?

Many people think and it is presented as such in media, that Singapore is a great stepping stone from you can branch out to South-East and wider Asia. I am personally not that optimistic about this notion. Due to diversity in cultures, economies and languages in Asia, you still likely need a local staff who know the market specification in each country.

Of course, you can hire such talent even in Singapore, but there is a huge competition on the job market because many companies look for the same as you do and naturally there are also immigration challenges for bringing foreign talent from abroad.

Singapore seems to be more accessible than Japan, right?

That depends on what your expectations are and what innovation you bring to the local market. Japan is a huge consumer market with 127 million people. What may work better in Japan as service offered by foreign company is B2B. B2C market is very specific and there are lot of unique cultural specifics to consider, that is why many foreign consumer brands failed or face difficulties in Japan. Take LinkedIn for example. What is now a staple in Western business culture is still facing only minor adoption in Japan.

I believe that in South-East Asia better than web 3.0 technologies as VR, deep learning and similar cutting edge things, there is a lot of space for e-commerce, payments, B2C and other on demand businesses. If you have a good FinTech startup, some kind of innovative payment system as e.g. TransferWise and you see a good market fit in South-East Asia, it´s obviously better to go to Singapore than Japan, where banks are still somewhat dinosaurs and may not co-operate with your service. That being said I’m not saying TransferWise is not good for Japan, just trying to illustrate my point that such service may face more operational challenges here. E-commerce services and fulfillment centers have proved to have a great potential in Singapore.

Who are the top key players when talking about VC in Japan?

Each fund has a different target. In early stage you can approach accelerators. In go-to-market stage there are funds like MIC , Incubate Fund, SunBridge, Cyberagent Ventures etc. DeNA Ventures and Gree Ventures are likely more interested in gaming.  If you´re in a later stage, let´s say series A and B, maybe you can try Globis Capital, but from my point of view they are more into the domestic business from the beginning until the IPO. To name few of the larger funds there is NTT Docomo, KDDI, ITOCHU, Jafco or SalesForce Ventures. Rakuten also opened a large Japan focused fund recently.

Could you give two, three or five hints for Slovak startups who want to go to Asia?

First of all, do your homework properly – do a fine research.

Second, if you do the research, think over very carefully about the reasons why you want to do your startup in Japan. It´s an interesting but difficult market.

Try to learn the language or at least some basics.

Try to hustle it. If you are completely new on the market, try to look some up on LinkedIn. Or there are consultants such as Synergy Bilateral, working in Slovakia dealing with Asia. These people could help too.

It´s also crucial to learn Japanese culture because fundraising is more of an art or craft there. It´s not like in Silicon Valley where you just meet someone, pitch the idea full of confidence and ask their money. In Japan you need to know your place, respect and follow local customs accordingly. I have been once told by a Japanese investor that they like me and my enthusiasm, but that I was too persistent which made them feel uneasy about me.

How does the Japanese startup ecosystem look nowadays?

Actually, Japanese startup ecosystem is really interesting. From what I heard and experienced there are currently few to none technology angel investors. I dare to say there is no angel network or at least l haven’t found one yet. The first level of financing usually goes through accelerators with three prominent ones: Samurai Incubate, Open Network Lab and Movida.

If you verify your idea, you have some basic traction and users, then there is the VC level. My rough estimate is that 70% of all the venture capital here is corporate compared to approximately 20% in the US.

Another specification is that most exits from Japan go through IPO compared to being acquired by a technology giant. The IPO is still preferable most often at Tokyo stock exchange. Recently, that was the case of Hatena.

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Slovakia

If you think about it, what Slovak product, service or startup comes to your mind?

I might be biased in this, but I really like sli.do. Not only because I worked with them for a short while but because I got an insider´s view of their work.  I can say they really are creative bunch of people who are extremely good at what they do and are absolutely buying into it not only for business reasons but also because of their vision for better future. They don´t startup to be cool, they truly believe their thing, they stick to it and “grind” to become success. They have super operational processes; the whole team works great together be it in customer service, great tracking as well as the whole engineering team. They are the type of people you can put into Silicon Valley and nobody would notice any difference.

When I did business development with them in the UK, I didn´t meet anyone who would say sli.do is an average service. All customers absolutely loved it! They saw it at an event and were totally crazy about it. Sli.do has a service disrupting a fairly conservative and difficult to approach market. Despite the consumer enthusiasm in their product the sales cycle is a little longer, but when it comes to startup processes, culture and their attitude, they are definitely my number one in Slovakia and I really believe they have what it takes to become a “Slovak-Global” success.

How far is Slovakia or the whole CEE region from Asia or vice-versa?

Hmm, that´s a very good question, but it´s really difficult to say because market here is dealing with other problems than the one in CEE.

For me, Japan is in many aspects fairly contradicting market. On one hand, when I visited first time in 2008, I was amazed by how advanced the infrastructure was. Everyone had a mobile phone where you could watch videos and use it to pay for wending machines or trains, there were machines at every restaurant where you could select your menu and toilettes with “millions” of buttons. So I would say they are pretty far in the daily convenience, not only in comparison with Europe but worldwide.

On the other hand, there are many dinosaur processes here which I just can´t understand. The traditional culture is mixed with innovation and generally many are afraid of changes. To name a few examples it is not unheard that large corporates will insist on having a hand-written CV when you apply for a job because they want to see your handwriting. Or they still use analogue stuff as fax machines in offices that are pretty much not used anymore anywhere else in the developed world. Another interesting relic is use of old HTML business websites, which often look like they´ve been there since early 2000s.

There are many aspects where Japanese businesses are ahead of us and in some ways some CEE businesses may be getting ahead of them.

And in terms of entrepreneurship?

Generally speaking, entrepreneurship still has a long way to go here. Most Japanese still prefer corporate career with long working hours over working on their own ideas. Tolerance to risk associated with starting your own business is generally very low.

However, if there is an individual who has a good idea and a right personality, the opportunities are huge. I personally know Japanese who became successful because they were willing to take a risk and were very entrepreneurial. Support they received from investors, corporates etc. was great.

I believe that in CEE we have a lot of talented and entrepreneurial individuals, but the support they receive is fairly limited. I would say that is the major difference – large opportunities and small amount of people to exploit them in Japan versus a lot of people but not as many opportunities for these people in Slovakia.

I will put the question differently. Is there anything we can learn from them, in the good sense?

To be more disciplined but at the same time keep our flexibility.


Cover photo: Jindong H (Unsplash.com) / Photos: Peter Kozar

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