[Podcast] Foreign founders are changing how Japanese start startups (Part 7)

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)

Sandeep: I’m not talking so much about Sushi tech. I’m talking so much from places like METI, JETRO. JETRO is not region specific. It’s like country specific. But a lot of money that’s being poured in is, is very, very much focused in Tokyo and the saturation point here. Opportunities exist in the tier one cities in terms of universities, Osaka, Hansa area is much better because there have a lot more universities that are in the top 10 in that whole vicinity. But why is money not pouring in there as much as it’s pouring into Tokyo?

Tim: Yeah. Fair enough. Let’s get back to some of the logistical issues you were talking about because I think those are very real and very interesting. So, it is hard to open a bank account at a traditional bank, or I should say it’s hard to open your first account at a traditional bank. But for the new banks, the online banks, what’s been your workaround?

Sandeep: The workaround? Because if the online bank actually does take foreign wire transfers directly into that, it’s possible. But GMO doesn’t. So, we have our runaround is Wise.

Tim: Oh yeah, right. Sure. Oh, but those are pretty small transfers.

Sandeep: We are seed investors. So, the Wise basically taps into that. But if it’s a series A like $10 million series A for example, then we are going to run into problems. So yeah, there’s a lot of things, if I had a magic wand I would fix, and those things are friction for the startups, and it would absolutely be amazing if those things could be fixed. You’ll be amazed at how many more startups will be formed formed.

Tim: But looking back at some of the programs now where you’ve got the Shibuya Startup support group and the one-stop corporate creation that Shibuya and Tokyo and national government has set up. In order to streamline this, have they been successful? Is it easier in some ways, but these are just a few things that, that need to be fixed.

Sandeep: I think with the Shibuya they do solve one issue, which is renting, but not at scale obviously. The other issue is these fiefdoms, is that if you basically get help from Shibuya startup, then you have get your company fully incorporated in Shibuya.

Tim: Well, that’s fine. I mean, but you got to incorporate it somewhere as good as any other place.

Sandeep: What if you’re selling to Panasonic?

Tim: Well, I mean…

Sandeep: Yeah. Look, at least things have improved since the time that we tried stocks.

Tim: Oh my God. Yes. But so like part of me looks at this and says, yeah, those are real problems that need to be fixed. Part of me is always like, oh, come on, in the grand scheme of building and growing a startup, this is nothing. These aren’t in even the top 100 problems you will are going to encounter.

Sandeep: I’m with you. But the issue is not the problems that they have to go through or overcome it’s issues that unnecessary roadblocks.

Tim: Yeah. Just the added friction, every little bit makes it that much harder.

Sandeep: So, for example, if you want a bank account, then you need to have a hanko, if you need a hanko, you need to have a company registered.

Tim: Yeah. It’s a lot of chicken and egg bootstrapping. The Japanese bureaucracy and rules can get a little maddening at times, but it is like we were saying before, compared to our earlier companies, it’s much better.

Sandeep: Yeah, definitely much better. I mean, but that doesn’t mean that, we have to not be constantly…

Tim: Absolutely. We got to keep improving it.

Sandeep: But yeah, definitely from the time that I started a company, and I’m sure you started a company, things have improved a thousand percent. But it still adds friction to startups because they end up spending a lot of time in these managerial and accounting and administration issues, whereas they should be focusing on building their MVPs and products.

Tim: That’s true. And every bit of friction that can be eliminated just increases the chance of success at scale.

Tim: Hey, listen, Sandeep, thanks again for sitting down.

Sandeep: Yeah, thank you Jim. Pleasure always. Let’s not wait for another eight years before we do the next one.

And we are back.

My conversation with Sandeep reminded me of how my own opinions about what needs to change in Japan to increase the number of startups might seem inconsistent or even contradictory.

If you hear me speak at public events, you might notice that I offer seemingly very different opinions depending on whether I’m talking to policymakers or talking to founders.

When I talk with policymakers, I tend to talk about the importance of removing friction, of simplifying processes, of making things easier. I try to focus on the fact that even though these processes may not be unreasonable or overly burdensome for one person in aggregate, but when you add them all up, it results in a very real economic drag. And that drag should be removed, making even what seems like a small improvement can have huge benefits.

However, when I talk with founders who express similar opinions, when founders say quite correctly that, for example, the red tape involved in starting a startup in Japan is too complex, especially if they seem to be pointing to that as a reason why they’re not rapidly growing their business, I tend to lean the other way.

I’m more likely to say, “Suck it up buttercup! You’re a founder now. It’s your job to figure out how to make this work”. This is only level one. The challenges get bigger from here.

Now, I hope you see this is not really a contradiction. It’s just giving the right advice to the right people.

Policymakers are in a position to drive change. Most have never started a company and they’ve never had to actually go through these processes. Sometimes they need help understanding why something that looks so trivial on paper is actually a big deal with founders.

On the other hand, I mean, I’m not full coffee is for closers or anything. But the fact is that as a founder, even if you are right about the excessive red tape, and yeah, you probably are, even if you’re right, complaining about it to those without the power to change it, it’s just a waste of your time and energy.

Complaining won’t open your bank account or close your next sale.

Now, of course, if you’ve got a chance to explain your experience and challenges to policymakers, by all means do it. That’s how things get changed. Now this is especially true once you’ve successfully navigated the process in question and can speak from a position of success.

But in most other circles, especially while you’re still working to overcome a particular bureaucratic challenge, it’s best to stay in problem solving mode.

You need to make sure that you solve this problem for yourself and your own startup first. Then you can help solve it for the rest of us.

If you want to talk more about how to make it easier to start a startup in Japan, Sandeep, and I would love to hear from you. So come by disruptingjapan.com/show238, and let’s talk about it. And if you enjoy disrupting Japan, share a link online or just tell people about it. Disrupting Japan is free forever and letting people know about it is the absolute best way you can support the podcast.

But most of all, thanks for listening and thank you for letting people interested in Japanese startups and VCs know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.

Top photo: Envato

Click here for the Japanese version of the article