[Podcast] Foreign founders are changing how Japanese start startups (Part 2)

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. 

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.

(Continued from the previous part)

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, I remember at Google, it’s really tough. And how much of that is at play? Do you feel like a lot of Japanese are hesitant to join an English language program?

Sandeep: Well, we thought so when we started this in the last third batch. But to our surprise, we actually haven’t really found that much of an effect that is, they’re not going to participate because it’s a English only program. In fact, we actually see a lot of Japanese joining the non-Japanese and wanting to join the foreign founders and start to build really a company that is global from day one. There are very few founders in the last batch that are Japanese, but there’s a lot of Japanese that have joined the founders that want to build global companies.

Tim: Alright, well, I mean that is kind of ideal. I mean you need that crosspollination within individual teams and within the broader ecosystem as well. Let me ask a bit about the Antler business model, because I mean, this is amazing. You do the founder matching and the zero date checks, and you’re putting in a lot of help with like ideation. And this is expensive. Is this all funded through the VC fund?

In Part 3, we will talk about Antler’s business model, how it collaborates with universities, and the challenges faced by university-based startups in Japan.

Top photo: Envato

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