I want to be overwhelmingly close to the heart of entrepreneurs
This article is translated and reprinted with permission from an interview article with ANGELPORT.
Mr. Oyu’s Upbringing was Far Removed from being an Entrepreneur
【Pursued what he liked in high school and dove into various programs in college】
ーWhat was your upbringing like?
Neither of my parents were entrepreneurs and my upbringing was far removed from being an entrepreneur. What was different is that from the time I can remember, before starting elementary school, I was going to the Kumon Learning Center.
I was fortunate to have parents who were positive about the learning environment, so from the time I can remember I was going to the Kumon Learning Center and was doing things in class like “drawing lines.”
I started studying from a very early age, so I was studying about one or two years ahead of the class in school. The pattern where I would learn new things at Kumon, teach my friends around me at school, and then receive their gratitude took root early on and that was a lot of fun.
I think it was from around this time that my ambition began developing, so I am very grateful to my parents.
I went to high school at Keio Shiki Senior High School. It is a very relaxed school, so basically, unless something really extreme bad happens, you can graduate and enter Keio University. Some people played shogi the whole time as it was the type of school where everyone could focus and pursue their interests. I wore plain clothes to school and had an eccentric hairstyle, but at the core, I was serious and the feeling that “studying is fun” that was nurtured at Kumon allowed me to focus on my studies seriously.
I liked chemistry, so I even wrote chemistry reports during other classes, and those reports were about 30 pages in length every week. The school allowed us to spend our time on what we liked.
For college, I selected the Faculty of Law at Keio University because the law would change the course of my life, even if I had no idea about it.
Since I entered that faculty, I was determined to do well there and spent a lot of time studying law, but after studying for one year, the format for the bar exam was badly changed. That caused me to lose interest in passing the bar exam, and I decided to take another direction.
For the two remaining years, until it was time to start looking for a job, I participated in many international programs. As a member of a Japan-China exchange program, I was sent to Shanghai, Beijing, and Wuhan in China, and as a Japanese member of a Japan-Russia student exchange program I held discussions with Russian university students. I also participated in the role of the Japanese Minister of Foreign Affairs in a program like a student version of the G8 Summit.
【At the foundation of my thoughts: “If there’s a will, there’s a way”】
ーWhy did you participate in these various programs?
Because I am very curious and I have the sense that “If there’s a will, there’s a way.”
The overseas students that participate in such programs, unlike Japanese, are mostly graduate students and are knowledgeable about their specialties, can speak English well, and are good at discussions, which was like a triple hardship for me. Even if I participated in a debate, I would always get thrashed.
But I wasn’t too shy in such situations since my curiosity won out because I could learn things I knew nothing about and newly meet excellent people.
Also, from a young age I understood the studying cycle of “Make a mistake → Fix it → Get praised,” and I liked that, and I had the idea that, “You will be rewarded for trying. If there’s a will, there’s a way.”
My motivation came from multiplying those two things together.
When I was in my third year of college, after finishing participating in such extracurricular programs I began job hunting and interviewed with international investment banks and consulting companies. For the reason that I felt there would be many excellent people working for them, and eventually received some offers from them.
【Delayed starting work for 6 months to study religion overseas】
ーBut you studied overseas after getting a job offer. Why did you do that and what activities were you involved in overseas?
I decided to study overseas for a year to learn about religion and business in a different culture.
The job offer was from a global company, so after joining the company it would be commonplace to interact with people from overseas, so I imagined I would be giving presentations for decision making to the management of a company of a foreign culture.
I thought that logic and emotion were factors that contributed to decision making, and in regards to emotion in particular, I did not understand at all the emotions of people from other cultures.
This led me to be interested in the relationship between emotion and decision making, so I decided to study religion because it seemed to contribute greatly to the emotion in foreign cultures.
However, it is very difficult to study religion in Japan. Religion feels remote in Japan and people tend to be averse to it. Once I started working, I thought it would be at least several years until I would get another chance to study it, so I got the company that made me the offer to agree to delay the starting date half a year and I then went to study overseas.
And since I was taking the opportunity to study overseas, I also wanted to study business, so I took a course in entrepreneurship. This allowed me to grow a little more than I did during the business contests in Japan, and although it didn’t go as far as registering a company, the class did encourage us to try doing business actually.
But it was difficult, as expected, and we didn’t get far enough to execute the business, but we considered Uber-like business model and discussed it.
During the second half of the overseas study, there is an internship program that gives students the experience of actually working in a company, so I did an internship at a governmental investment fund.
I had worked a little bit at a foreign affiliate in Japan, but in America I was surprised, everyone had rushed to the home after 5 p.m., which was a bit of a culture shock for me (laughing).
Turned down the job offer and started a business
【What I learned overseas and encountering a co-founder prompted me to start a company】
ーIn the end, however, you declined the job offer and started a company. Was this mainly due to your experience overseas?
It wasn’t that dramatic, but the feeling that “freedom is nice” that I gained overseas played a major role. Looking back, after entering Keio University it was like riding an escalator to enter a good major, get good grades, and get a job offer from splendid global companies, I felt that I lived “someone else’s life.”
The decision to study overseas, however, required that I delay graduation by half a year, which, for the first time in my life, took me off the staked out path, which in this case was 3 years of junior high school, 3 years of high school, and 4 years of college time frame. I did it not even knowing if the company that offered me the job would agree to it.
It was the first time in my life that I had gotten off the staked path, but living overseas I saw people going to work in T-shirts and shorts, and there was a kind of freedom that was not bound to convention. As part of studying religion, on the weekends I went to mass, but even there I got the feeling “the people are free.”
That doesn’t mean my overseas study was directly related to starting my startup, but realizing “it would be nice to freely decide for myself,” did have a large influence.
A direct factor that had a major impact was encountering co-founder, Mr. Shimada.
The Great East Japan Earthquake occurred while I was studying overseas, so I did return home temporarily and had time on my hands. At that time, an old childhood friend said he wanted to introduce me to “an interesting person,” which was the first time I met Mr. Shimada.
While we were discussing overseas internships and my attempt at business oversea, I came to think that, “I could do interesting things with this guy.”
The time for starting my job was getting close, and if I started working for the company, I would have to seriously focus on my job for at least 3 years, so I thought if I was going to do something, it would be better to do it now when the risk was at a minimum, so I started a business.
Although I said “started a business,” that wasn’t how I looked at it. To me, I was beginning a project to do something interesting. I didn’t actually register the company until six months later and only did it at that time because it was required to register the company for participating in the MOVIDA program and receiving funding.
【Technique for finding wonderful co-founders】
ーYou started the company with Mr. Shimada as the co-founder before getting to know him that well. That is a much-mentioned failure pattern, so weren’t you concerned?
I had only met Mr. Shimada twice at the time I decided to start the company with him. It’s true that generally speaking that is anti-pattern (laughing).
One thing we had going for us is that the division of labor was very clear. Mr. Shimada was in charge of everything engineering and I was in charge of everything non-engineering. I was very fortunate that we started with good separation like that between the CEO and CTO with almost no overlap in responsibilities.
Another major thing was “having a referral.” I didn’t meet him without having anything in common because he was introduced by the guy I have been good friends with since the fourth grade. For that reason, he matched the basic protocol I had in mind and the necessity that we get along. Both Mr. Shimada and I are serious at our core, have built up ambition, are very curious, and like to take scary challenges.
It wasn’t just his skill set but rather that he is a really wonderful person. He left the impression from the very beginning that he has a personality that hates deviating from what is proper and would never betray me.
Rather than being co-founders, Mr. Shimada and I started out more like project partners, and I think it does not work well if you are trying to find the best co-founder.
This is just like hiring. If you hire five people, you don’t expect to be completely successful with all five, and since you can’t match up perfectly, you need to run through the PDCA cycle. But for some reason, people try to match up perfectly with co-founders. It’s better to just be yourselves and try working together, and if that works out, you can be co-founders if you want to. He and I just happened to match up perfectly, so we were very lucky (laughing).
【“The Internet is a technology that nurtures culture”—Oyu’s formative experience with the WEB】
ーYour first project was Creatty, a platform for creators, but did you view the Internet as an area of interest from the beginning?
I liked the Internet a lot as a consumer.
My high school was relatively unrestricted, so everyone could pursue their own interests, and since it was a boys-only school, we didn’t have to worry about what the girls thought, so it was an environment where the boys could say, “I like what I like!”
Up to then, I wasn’t interested in any subculture things, but within that high school environment I become more and more interested in various cultural elements, such as thinking manga are interesting.
Then for a period when the Internet subculture was rising, Niconico at the time was really popular. It was interesting to watch the YouTube-like video platform while viewing the comments people entered as they scrolled across the screen. The fun of collaborating via the Internet was my formative experience with the WEB.
And around the time I graduated from high school, I even formed a band with people I met on an Internet bulletin board. On the bulletin board I posted something like, “I want to form a band! I want to play the guitar, but I have no experience!” and for some reason people wanted to do it. So in that way, I had no resistance to getting to know people over the Internet. Rather, I liked how culture was formed in that way via the Internet.
It was really exciting for me to watch the growth in popularity of Hatsune Miku on Niconico, and I was strongly impressed that the Internet is a technology that nurtures culture.
That impression played a major role in forming who I am today.
ーWhat was the background behind starting up and closing down Creatty?
We created Creatty because we wanted to make visible on the Internet the abilities of the people who design things and the people who create things. I had many friends who were going to art school and I felt there was a problem because they were creating some really interesting stuff, but not getting recognized for it. I thought it would be great if they could get recognition more easily and to sell some of their works.
The business was to acquire the design license, take that license to a factory to have them make smartphone cases and T-shirts, which would then be sold with the intent of bringing out the abilities of the people who make things.
From the user’s standpoint, the platform worked like an Instagram for creators and they enjoyed using it. The users were satisfied to the point they were adding the Creatty URL to their business cards, but it was difficult to make a business out of it.
This was during the dawn of the smartphone age when it was still difficult to buy and sell things with their smartphone, so we decided to make a major change in direction.
【It is extremely important to make something people “desperately” want】
ーWere there any differences in coming up with the idea between when creating Creatty and when creating Mamari?
The clear difference was if there were people that desperately needed the product.
The problem with Creatty was that there was no one who desperately needed it.
There were some users who wanted to make a living creating things, but 70 to 80% of them felt just making things as a hobby was enough.
To create that service we were working 7 days a week from morning to night, but when interviewing the users, we found that many of them were happy just to create things on the weekends, so there was a disparity in enthusiasm. That was the major and final straw that led us to decide to close it down.
Basically, a startup is over when the founders give up, and that was the pattern for Creatty.
Conversely, I think that when starting a business or creating a service, you will win if you don’t quit. For that reason, you must try to avoid reasons for quitting as much as possible. In that sense, having people that desperately need your product reduces the reasons for quitting.
For generating ideas we selected the health area because that is something people desperately need. Facebook might not be popular in 10 or 20 years, but the action of searching your smartphone when you don’t feel well will not disappear.
I thought it was clear that for at least the next several tens of years people would continue to worry about their health, and that led us to find an opportunity of Mamari.
What I can say looking back on it is that I have a strong feeling Mamari is doing something good for society, which makes me very happy. I have felt during these past six years that there is truly great satisfaction in having a business with high sociality. When you are doing something that is good for society, you think of all kinds of ways to reduce costs.
If you’re sure what you are trying to do is not good for society, then it will absolutely hurt your performance. It might sound like an exaggeration, but in the case of Mamari right now, I believe that every line of code written by the software engineers is solving the depopulation problem in Japan.
The satisfaction of knowing with a certainty that your product is directly needed by people has a positive effect not only on the founders but on the employees as well.
【Switching to Mamari was not a “pivot” but rather was “traveling”】
ーWhat made you successful when you pivoted to the next business?
In our case, we define it as a business transformation rather than a pivot. For a pivot, the premise is there is a “pivot foot,” but we didn’t have a pivot foot or anything else, so we were completely in a state of traveling (laughing).
We thought about what was truly necessary from a completely zero base. Of course, we still had the “startup essence,” which was the ability to create apps that we had developed and the feeling that we wanted to make things that people need. I think it was very good that we were able to think carefully about what we wanted to keep and what we wanted to get rid of.
I think a pivot pattern where there is a strange persistence to stick with the current business area by thinking, “We have worked so hard up to now, so let’s stick with this area and just try changing the business a little,” is actually rather common. There just aren’t that many people who actually believe 100% that “we need to be in this genre” and are correspondingly passionate about it.
I think a carelessly persistent pivot is a pattern that consumes too much time and money, so I think it is better to clearly decide what to keep and what not to keep.
Business Transformation, fundraising and M&A
【Funding strategy for bringing in an angel investor】
ーWith what kind of funding strategy did you proceed?
To start with, we received $50,000 as seed money from MOVIDA which is a Ycombinator-ish program in Japan initiated by Taizo Son, a little brother of Masa Son from Softbank. After MOVIDA was over, we were selected by another incubation program and were able to use an office space for free.
I worked for the first year without any salary and the second year only received $500 a month, but after a year and a half, most of the money was used up just paying for the server fee and other. It was at this time that the company was selected as a support program by the Ministry of Economy, Trade and Industry and we received a grant of $100,000, but, of course, after two and one-half years that were gone. At that point we had received two outsourcing jobs that are not related with our business worth $70,000.
So that means that over two and one-half years we received $50,000 million with equity financing, $100,000 from a grant, and $70,000 from outsourcing jobs.
At the point when our cash was about gone, we decided to start our next business, we received an investment from ANRI. The general partner of ANRI said that since he was also an alumnus of the Keio Shiki Senior High School, as was I, and that Mr. Shimada and I were talented people, he would offer to invest if we changed the business.
He also suggested that we bring in an angle as an insider. Although there was no investment relationship, we reported our progress once every six months to Mr. Ariyasu (Founder of Coach United is acquired by Cookpad inc.), who served as an entrepreneur mentor.
Both parties felt, however, that closer involvement was required, and ANRI suggested that we have Ariyasu invest in us.
In other words, rather than creating a new financing round, we had a private round without increasing valuation too much from the previous round. Our premise was to get his commitment by offering a reasonable valuation. We made that decision since up until that point we fundraised from venture capitals, and we wanted to bring an angel investor.
Mamari grew rapidly and we got $1.5 million from B dash Ventures and Primal Capital after one year of previous funding.
【Considering Mamari’s progress and sociality, we pursued M&A】
We considered both M&A and IPO after experiencing some funding rounds. At that time we had both a media business and a community business, and we could see the media business making a profit, but the community business needed more work. In particular, we had to figure out how to use the data the community business had accumulated.
Mamari’s user demographic was related to the major life event of having a child, so we had users who were at the point of changing their consumption trend. We focused our thinking on how to use this data for such big expense as insurance, homes, and autos.
One of the things we had been dreaming of was creating insurance under our brand. Recently in the news is how the insurance of the Alibaba economic zone in China is selling well, and that is the kind of thing we wanted to do. It would be very difficult, however, for us to develop that kind of business on our own, so we wanted to do it together with a company that had the know-how.
Even if we had gone public and the media business, which was our main source of income, continued to be profitable, we didn’t think the market capitalization would increase that much. To achieve a large increase after going public we first felt we needed to make 2 or 3 more jumps, and one of those was insurance under our company brand, and that is something we could not do ourselves.
Another thing was the characteristic of Mamari as a business with high sociality. Since we received the user’s data during the major event of having a child, we didn’t want to take that data and use it just for advertising to push hard to monetize it.
We thought it would be better for it to be a service that would become an important role for society that would continue over many tens of years. For that reason, rather than pursuing a profit with advertising business, we wanted to increase the sociality while making a profit from multiple businesses and thought the impact would be greater by increasing the stock price of a large company.
In that sense, we thought we would be able to better leverage the capabilities of the Mamari service by working together with a company having a long-term perspective that would appreciate the value of sociality.
We decided that an M&A would be good to achieve both further business growth and sociality and so decided to join the KDDI Group.
Mr. Oyu’s Angel Investment Theory
【Wanting to invest in the companies that will create the next-generation culture】
ーWhat is your purpose for conducting angle investment?
The primary reason is that I really like startups.
Of course, since it is a financial investment, I think the entrepreneurs should be aware investors expect a return. My perspective as an individual, however, is that the results are what they are and I’m not trying to pursue only that aspect.
When I first began angel investing, my motivation was learning about something I didn’t know. By investing in an industry I don’t know about, I can use my experience to help entrepreneurs and they can teach me about an industry I am unfamiliar with.
What I realized after investing in several companies, however, was that this purpose did not match. It’s not really proper for me to ask for a high frequency of information disclosure and, more importantly, I realized as an entrepreneur it’s troublesome for me to ask about details every few days, so I don’t do it. I felt viewing angel investing as a way to get primary information was not quite right.
That’s when I entered my second phase of angel investing and my motivation changed from receiving something to repaying the previous generation that helped me by helping the next generation, kind of like a pay forward concept.
Now I recognize that I am in my third phase of angel investing and my latest theme is services that will create the next-generation culture.
I believe that young people can create a new culture. As people grow older, the things they need to do increase and they don’t have a lot of free time, so they are less sensitive to new things. So for that reason I think the new things come from the younger generation.
Things such as Facebook, Instagram, and Snapchat, the new culture that is shaping the world is coming from the younger generation. A great deal of investment is being made in younger people, and I am making an effort to do that.
I want to actively invest in entrepreneurs who have a chance to create culture in areas I can understand in my head but not in my heart.
【Looking for people who are flexible like bamboo】
ーWhat kind of people do you want to invest in?
I like people with a good balance between “specialization and passion in their chosen area” and “receptivity to different perspectives”.
First I look at the entrepreneur’s determination and insight regarding the market they have selected. Are they the most knowledgeable about that market and clearly see facts about it that others are missing? Something like, “This is currently happening in this market and it’s a big problem!”
At the angle or seed stage, when the product has been newly created, I often receive stereotypical pitches like, “The market is ABC, the competition is XYZ, and the business model is AAA,” but I don’t think those are the core questions. I think that in most of the presentations that are like, “Sales will be $50 Million in two years!” not even the presenter is convinced.
Anyway, that’s how I was in the very early days (laughing).
Rather than that, I want to hear is what only that person sees and believes in. If they are doing telephone consultations business, I want to hear the recordings, and if they have compelling comments from users, I want to see them.
At the same time, having a flexibility that is not too persistent is also important. Not being like, “No, there is no way!” when asked, “Well, what about this perspective?” I think there is a big difference between saying “No” after carefully exploring a perspective, than saying “No” by rejecting the possibility right at the beginning.
I think being receptive to different perspectives is very important, kind of like being like bamboo. I think that people with a backbone who are also flexible are good.
There’s no problem if the company does a pivot for an angel investor. If when we were undergoing the business transformation while doing Creatty we had been persistent and said, “The creator market will absolutely arrive!” then we may have never created Mamari. It is from my own successful experience that I feel it is important to be receptive to different perspectives sometimes.
Also, seeing ambitious entrepreneurs makes me want to support them. If you line up entrepreneurs who have built a unicorn company, I think there will be more of them that declared from the beginning that they would get to be a unicorn than those that didn’t. I wasn’t the type that could say such things, maybe it’s a complex, but it must be nice to be able to say such things with a straight face.
Of course, just saying it is no good, so it is important for them to be thinking through the process up to that point. I think the explanation can be rough, and I think it can be approached from estimating the market size, by considering the profit that can be made, or by estimating the competitors. But even if they don’t have this kind of logic, I basically like the entrepreneur who can describe a big picture.
【I want to be the type of angel investor who can be right by your side】
ーYou have a good reputation for your commitment to entrepreneurs, but why is that?
Is that right? Well, I’m glad to hear that. Thank you (laughing).
Why am I so committed to entrepreneurs? That is also probably because I like doing it.
It’s the same logic as people who don’t mind missing out on sleep to watch anime. It’s just that I like it.
I feel that as long as I’m investing, I have a responsibility and I should get involved. Of course, there are limitations and I can’t work like an employee of that company, but I want to be as useful to that company as I can.
I think it is important to be accessible for the entrepreneur, to give the impression that you are by their side. For that reason, I am conscious about how quickly I respond, whether it be on a weekday, holiday, or late at night, so my key phrase is “feel free to contact me.” I am someone you can easily consult.
The other day, the manager of our corporate department said something good. He said, “I am like a wall that can give a little useful advice to people.” In other words, if you consult with him, he will listen carefully to what you have to say and sometimes have a useful response. I want to be a wall that can say useful things for entrepreneurs (laughing).
Part of it is that I’m close in age to the entrepreneurs in which I’m investing, but I feel it’s important for entrepreneurs to think they have someone who will help them if contacted, so that is the role I want to play.
Actually, for skill-related advice, there are people who are willing to do even if they are not investing in it. But more so than this type of physical strength, I think it’s important for there to be shareholders that can provide emotional support. This is the positioning that I take when I am selected as an investor.
I don’t think that I am an investor that can be selected for every round and I tell entrepreneurs they should carefully select their investors.
I think there are three factors an entrepreneur should use for selecting investors.
1. Funding amount (How much funding can they invest?)
2. Skillset (What is their specialty? What kind of knowledge do you want?)
3. Accessibility (How “easy to use” do you want the investor to be?)
These three factors and which of them is the most important should be considered for each investment phase.
In my case, I explain that, “For 1. I am about XX yen, for 2. I can provide general knowledge from launch to expansion for other than engineering issues, and for 3. I have an overwhelmingly quick response,” so they can choose me if it is a mutual match.
Of course, there are media and community services and AI-related investment opportunities, so I give broad business advice, but in the seed phase I think it’s important to be easily accessible to the entrepreneur.
【I want to continue to be a lifelong entrepreneur】
ーWhat is your long-term outlook?
Basically, I am a planned happenstance person, so my stance is to make the most of what is best right now.
Right now, as an entrepreneur, I want to be close to other entrepreneurs and grow together. Over the long term as well, I have a strong desire to remain at the side of entrepreneurs. I want to make it my life’s work.
I also have a strong desire to remain an entrepreneur. Rather than just being an investing cheerleader, I also want to continue making things.
As I said before, I greatly admire the creation of new things and culture, so I want to be there when those things are created. To do that, I need to remain youthful. Not only my body, but my senses must also remain youthful.
And to do that, I want to remain at the forefront of the startup ecosystem. They say that people who keep working don’t go senile, and I think that continuing to push forward preserves youthfulness, so in some role, I want to continue making things.