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Month: January 2019

CEO needs to be good at everything and must enjoy it

Being a CEO for the past 5+ years, one thing I enjoy the most is the fact that CEO needs to be good at everything ranging from product development, marketing, legal to sales, hiring and even firing.

Below is my work schedule for a typical weekday.

9:00 – 10:00 Read online news and share a couple of important ones on Slack
10:00 – 11:00 Get updates from technical team about ongoing projects and give feedback
11:00 – 12:00 Write follow-up emails to prospective customers
12:00 – 13:00 Lunch with teammates
13:00 – 14:00 Face-to-face meeting with a prospective customer
14:00 – 15:00 Review legal documents and important contracts
15:00 – 16:00 Face-to-face meeting with another prospective customer
16:00 – 17:00 Work on proposal materials for new customers and partners
17:00 – 18:00 Skype interview with candidates
18:00 – 20:00 Dinner with candidates or customers (rarely)

As you can see, a startup at post Series A still needs CEO to work as salesperson and I believe this is the way it should be. I spend much of my time talking to potential customers and partners. When I talk to them, I’m considering myself as a top salesman and being better than anyone at the company in terms of sales. But it doesn’t mean I can suck at everything else.

When I talk to CFO, I tend to use a lot of financial jargon just because it’s convenient. When I talk to CTO, then I leverage my full knowledge of being a former CTO myself in the past. It’s not enough for CEO to understand what a counterpart is saying. CEO needs to excel an opponent’s knowledge so that CEO can give a proper feedback and sometimes point out mistakes if necessary.

When I first stepped into the world of venture finance, Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist was my bible. I’ve read it countless times not because it was co-written by my favorite capitalist of all time Brad Feld, but it was my go-to destination whenever I countered something I didn’t know about in venture finance.

Same story goes to sales, HR, marketing, leadership, etc. I have at least one or two books I always refer to or a couple of mentors I can talk to whenever I face my lack of knowledge. I believe an excellent CEO is an excellent learner who has willingness to become master at everything.

Is small IPO a bad thing?

Japan is known as the easiest stock market for startups to go public. A startup less than $10M revenue can do IPO. I’ve been hearing a lot of criticisms saying Japanese startups are going for public too soon and they are all aiming for small IPO. This is why Japan does not have unicorns as much as U.S.

The question is: “Is small IPO a bad thing?” The answer is: “I don’t think so.”

In Japan, there has been almost 400 companies that went public in the last 5 years. The majority of them were not unicorns and the mean value for company valuation is somewhere between $150M and $200M at the time they did IPO. But there are a countless number of companies whose valuation went up to $1B after IPO.

In my opinion, IPO should be considered as another financing round to startups. Japanese startups treat IPO as something following the previous financing round whereas American startups treat it a bit differently. It’s just a difference between raising money from VCs and doing the same from ordinary people.

This explains why a secondary market like SecondMarket and SharesPost exists in United States. A secondary market is the only way for American startups to provide liquidity for their employees and other stockholders before IPO since a bar for going public is way too high as compared to Japan. On the other hand, in Japan we simply do small IPO, achieve the same liquidity and then become unicorn using the money raised from public market. This isn’t exactly a bad thing for founders, employees and VCs wanting some liquidity early on.

We as Japanese startups need to take this advantage and should not be biased by the thoughts brought from the market where definition of IPO is completely different.

Welcome to 2019

Happy new year, everyone. I’m writing this blog post in my hometown (as you see it in the above picture) in far north Shiga. This year there is less snow than previous years so it looks like I don’t have to help my dad and younger brother do a thaw work, which I used to do a lot every year in this season. Thanks to global warming, maybe.

For the past few years, I always started my first day of January by reading blog posts written by the people I follow. Most of them are venture capitalists, some are thinkers, and others are just my friends. But this year I’m doing something different. I’m writing one myself.

From my frame of reference, I’d like to make some predictions for 2019 at both macro and micro levels.

China: The country faced (and still is facing) a political difficulty raised around an arrest of the chief financial officer in Canada. Instead of giving a backslash to other countries, my guess is that there will be a lot of M&A initiated by Chinese companies in 2019. Some will be direct against US companies while others will be indirect. Anyhow, China will try to get into foreign markets by leveraging the huge amount of cash reserved by domestic companies and spending it for acquisition. All startups CEOs need to be aware of that.

Japan: Unlike China, the domestic economy will keep shrinking and big companies will also keep their cash as retained earnings rather than spending it for international M&A or acquiring technology asset from startups. To me, it’s nonsense to create SaaS or any business that’s specific to this country. We’ve seen many ‘domestic’ startups raising multi-million dollar investment from VCs and CVCs in 2018, but theoretically it’s just a matter of time for them to go international since there is only limited market here. Startups without proper internationalization and global mindset in place will hit a hard wall.

Concentration: I think we will see more concentration of assets globally. Successful businesses aka GAFA & unicorns will attract more investment and appreciate an influx of talents while others do not. We’ve been in same situation before, but this trend will accelerate even more. On top of that, we need to be aware of concentration of information (or data) as well since it will be the most important asset apart from cash and human resource for next 10 years.

AI: 2018 was definitely the year we recognized that deep learning can do something meaningful to our society, but at the same time we learnt it has certain limits. In 2019, we will see a big edge-AI race between China and United States. I don’t think there is any room left for Japanese companies to jump onto this bandwagon. It’s just too late. However, this is technically “inference on edge side” race so there is still a room for learning on edge side, that is often considered as a true AI.

Venture Funding: As every entrepreneur I know is talking about it already, there may be some crash in venture funding in 2019. I din’t know what will trigger it exactly. It might be so called unicorns with too high valuation facing difficulty for going public. It might be startups raising too much money and missing key milestones that companies promised to their investors. Again, we’ve been in same situation before, but this time an expectation vs. reality gap is huge since more and more venture money was poured into the startups. Thus, all startup CEOs should stick with this founder’s principle: “Raise as much as money while you can.”

I’m feeling a bit sorry to see our country will face yet another economic downtime. But as startup CEO I need to overcome that situation, which will force me to spend more time outside Japan and look for potential deals and markets internationally in 2019.

As I wrote in the previous post, I decided to write all future posts in English only. This decision was made partially due to my above prediction. I need to globalize myself for sure.