What You Need to Know to Raise Money in Japan

Startups and venture capital work differently in Japan.

The rounds are smaller, the priorities distinct, and while the same terms are used, people quickly discover that the definitions are often subtly different. The game is played differently in Japan.

Today we get a chance to clear up a lot of the confusion as we sit down with James Riney, founder of Coral Capital and head of 500 startups Japan. We talk about some of the most significant changes that Japanese venture capital has seen over the past five years, and we look at how things are going to develop going forward.

James and I also break down the business model behind venture capital funds themselves. It's something that all serious startup founders should understand, but few do.

It's a great conversation, and I think you'll enjoy it.


Show Notes

How venture funds raise funds
Why Japanese banks and corporates are changing their attitudes towards Japanese startups
The tradeoff between sector-specific and general VC funds
What the hell is a Series-A anyway?
How VCs try to appeal to the "right kind" of startups
The real problem with IPOs in Japan
How Japan's new, bigger funds will change Japanese VC in the long term
What you never want to tell a VC when you are raising money
What VCs do with their portfolio companies that don't work out
How Softbank's Vision Fund is changing the market
Advice to foreign founders who want to raise money in Japan



Links from the Founder

Everything you wanted to know about Coral Capital
Check out James' blog
Follow him on Twitter @james_riney
Friend James on Facebook

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Transcript
Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

Today, we’re going to do something a little bit different. We are going to talk about the state of venture capital in Japan. If you are raising money in Japan or thinking of investing in Japan, you really want to listen to this.

Now, normally don’t interview VCs on Disrupting Japan. It’s not that VCs are not interesting. I’ve got nothing against VCs. I mean, some of my best friends are VCs. No, it’s just that VCs have a tendency to talk in the abstract.

They talk about general trends and their portfolio companies, and I have always found that it is far more informative to go straight to the source, to talk to the founders about what they specifically are doing to capitalize or respond to those market trends, to have them tell you about the real challenges that startups are facing right now, and how that fits into the bigger more important society-wide stories.

Well, today, we’re going to do both. Today, we sit down and talk with James Riney of Coral Capital, and we examined the business of venture capital, how VCs view advertising and customer acquisition, and what causes some VCs to make money and others to lose money.

It is not exactly like it is for startups, but it is surprisingly close. We talk about the most important changes happening in Japan’s startup community, of course, but we also dig into the challenges facing venture capital funds in Japan, and Coral Capital in particular.

We talk about what VCs look for when evaluating a pitch, things you should never tell a potential investor, what the next few years of venture funding in Japan will look like, and hopefully, we will clear up some of the confusion about the difference between seed and pre-seed, and pre-series A and series A rounds.

But you know, James tells that story much better than I can, so let’s get right to the interview.

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Interview
Tim: So, we’re sitting here with James Riney, the founding partner and CEO of Coral Capital and former head of 500 Startups Japan, and we are going to be talking about venture capital.

James Riney: Yes, it’s good to be back, Tim.