U.S. venture capitalist James Riney has always had his foot in two cultures. He came to Japan when he was one, returned periodically through age 12, then completed his schooling in the United States. Having two home countries prepared him to become one of his generation’s key entrepreneurs.
In an exclusive interview with The Journal, Riney spoke on a range of topics including his career path, the state of venture capital, and how he plans to transform entrepreneurship in Japan.
SEEING IT ALL
Each culture has its own way of doing business, and cultural differences can be an obstacle to success in a global economy. As Riney has come to realize, those who can see both sides are extremely valuable.
“The benefit of growing up in both worlds is that you always have a birds-eye view of everything. You always have one foot inside Japan and one foot outside,” he explains. “It does give you sort of this global perspective that local Japanese can’t necessarily understand, and also [one that] people from abroad can’t necessarily understand about Japan. I think a big part of the reason that I’ve gotten to where I am is the ability to take advantage of that arbitrage.
“In Japanese you say ‘kuuki wo yomu’ (‘read the air’). I think reading the air is a really important thing that I learned as an adult coming back to Japan and actually being in the workforce.”
THE ROAD TO 500
Today Riney is head of 500 Startups Japan, where he manages a $30 million fund to help nurture the nation’s fledgling companies. But how did he get there?
“There’s not like a romantic creation story,” he says. “I was never really exposed to entrepreneurship growing up or in college. I didn’t even know anything about Silicon Valley at the time.”
Upon graduating, he followed a traditional path and landed at J.P. Morgan. “The tendency is to go toward something that’s like a brand name that your peers and your parents are going to respect you for. So I kind of went that direction, because I didn’t know any better. And then I just threw myself into that world. I met a lot of very smart people—and that was the valuable part that I got out of it — but immediately I realized that this was just not for me.”
His first startup was ResuPress. Riney recognized that, while there is a lot of demand for bilingual talent, candidates in Japan are most often prioritized by test scores — not always a good measure of one’s communication ability. The idea was to give prospective employers a way to quickly assess true English ability through a video-based supplement to traditional resume services. “That was a good idea in theory, but the problem is that it wasn’t very defensible. Big players can just put that feature into their platform.”
So they evolved the concept into Storys.jp, based on the idea of “the story that doesn’t fit on your business card.” In a country where LinkedIn doesn’t work well for networking — because it is seen as a job search site — this platform allowed professionals to tell the stories of their successes in a way that worked within the culture.
The final stop before 500 Startups was DeNA, where Riney oversaw Silicon Valley and southeast Asia investments. He cites the trust placed in him there as important. “If I really had conviction about an investment, my boss never said no. Because he trusted me so much, I grew a lot more.”
ENTREPRENEURSHIP IN JAPAN
Now, with 500 Startups as the vehicle, Riney has begun helping those who seek to innovate in Japan. With it comes some specific challenges.
Riney’s experience giving a presentation at Keio University, attended by students and a lot of people from corporate departments, highlights one such obstacle. “I was just curious, so I asked ‘Would you hire an entrepreneur who failed?’ I saw maybe 10 percent of the hands go up out of the corp dev people. Hardly anyone wanted to hire someone who had failed before. That was a shame, and I think that’s one of the big reasons why people are afraid to take risks. That would be different in America. It’s a completely different perspective.
“The irony is, now the big topic in Japan is open innovation,” he continues. “Everyone is like ‘How do we create new ideas and new business?’ But they don’t realize that these people that are starting companies—even if they failed—you want them inside your company. Because just because you’re smart and you start a company, it doesn’t mean it’s going to be big. And so, if you fail, it also doesn’t mean you’re an idiot. You need those people back inside your organization so you can create these fresh ideas and build them inside.”
The level of investment in Japan is also a major challenge according to Riney. “In any given year, there’s about $1 billion in venture capital, and about $200 million in angel investment. So you have $1.2 billion versus $48 billion in venture capital in the U.S., $24 billion in angel investment, then add crowdfunding and it’s like $75 billion. It’s a huge, huge gap. I’m not saying that this number from Japan should be anywhere close to that, but it should at least be $10 billion.”
500 Startups plans to change this. Conceding that they cannot change the mindset of the large domestic companies, the plan is to attract M&A interest from abroad. Riney sees the time lag of six to eight months between the emergence of a new business model in the US and the appearance of a similar company in Japan as a key. “We see an opportunity to invest in those [Japanese] companies and then use the 500 network to build a relationship with the company in the U.S. We want to build that over one or two years so, when they actually start thinking about Japan, they start thinking about it as an acquisition rather than going about it by themselves.”
Closing out his discussion with The Journal, Riney offers a bit of personal advice for those looking for venture capital. “Before you come to people like 500 Startups, you should be thinking about the team elements. If you have something that’s lacking, make sure you have other members who complement that. One thing that I really, really look at is, whether the CEO was able to get people who are very, very high caliber. Because if you can get high-caliber people to take a risk, to leave their presumably very cushy jobs to jump into this risky startup, that shows your ability as a CEO.”
Custom Media publishes The Journal for the American Chamber of Commerce in Japan.© Japan Today