Made in Japan: Osuke Honda on the Evolving Startup Scene

osuke-303Osuke Honda is having a good week. In 2010, the DCM partner bet on Kakao Talk, Korea’s biggest messaging app, and on Wednesday, Kakao acquired Korea’s second biggest Internet company, Daum Communications, which was already public. Now the combined company, Daum Kakao, is expected to list on the Korean stock exchange in a couple of weeks with a market cap of roughly $10 billion.

It’s quite a feather in Honda’s cap, though he’s had a pretty prosperous career all along. We talked the other day about his work and, largely, the evolving startup scene in Japan, where Honda was born and lives today. Our chat has been edited for length.

You were born in Japan, but you’ve always been a global citizen.

I was born in Japan but came to the U.S. when I was eight months old because my dad was transferred here. We lived in Houston, then L.A. I went to Tokyo for my undergraduate degree [at Hitotsubashi University], then grad school [at Wharton] in Philadelphia.

Why head to Japan for college?

I always identified as Japanese, but I didn’t really know Japan. I’d spent a month and a half there in the summers, but that was it, and I wanted to know where my family is from. I’d also started doing martial arts when I was 11 and figured if I wanted to get better at Judo, I should go. I figured if I didn’t like it, I’d just come back, but I liked it.

Your first job was at Mitsubishi. What was that like?

Very Japanese – kind of like Samsung in Korea. It was the kind of company everyone wanted to get into. I spent seven years there and was lucky enough to be part of a new organization that in 1999 was [tasked] with figuring out the e-commerce thing in Japan, which Mitsubishi’s CEO recognized was going to be the Next Big Thing.

You were eventually lured into venture capital, first at Apax Globis Partners, then, in 2007, at DCM.

Yes, one deal I was involved in was Gree, the largest mobile gaming platform in Japan, which went public in 2008 and was valued at $5 billion at its market peak. There isn’t a big venture community in Japan and you get to know people, and [during that time, DCM’s] David Chao and I started talking about what we thought was a successful VC model moving forward, which is cross-border [investing]. And we eventually joined forces.

What shifts have you seen in your time as a VC in Japan? Are founders still seen as, well, crazy?

Relative to five years ago, things are changing very quickly for the good.
In the past, raising money in Japan was a challenge. That was one reason people didn’t do startups. But especially because the IPO market has been very good, a lot of corporate VCs are being established. And as [more capital emerges], the mindset of entrepreneurs is changing, too.

Is hiring still a challenge? I sometimes hear that more people are willing to start companies, but that it’s hard to extricate employees from their comparatively safe jobs to work for them.

I think it depends on the sector. When it comes to consumer Internet, I see a lot of folks [joining startups] if there’s a hot entrepreneur involved, especially someone from Google or Rakuten or Yahoo or Gree. They’re very much able to attract smart, capable people.

I noticed you’ve backed a number of people to come out of Google, including Daisuke Sasaki, the founder of the accounting software startup Freee, and Hiroshi Kuraoka, the cofounder of the online bookings company Coubic.

Folks who come out of Google are interesting based on what I’ve seen. Because at Google, they work across offices, their teams tend to follow what’s happening in the U.S. and other regions around the globe and to think: What can we learn from them? That mindset is very important. Also, if you’re a product manager at Google, the way it’s metric driven is a great way to be trained.

Are college graduates thinking about startups right out of school, as in the U.S.?

No. If you go to a top university and ask students what they want to do, they’ll still say they want to work for Mitsubishi. But it’s changing, and growing a company is something that people respect more these days.

Ten or 15 years ago, for example, no one could have imagined that SoftBank would own a carrier. But entrepreneurs like [SoftBank founder Masayoshi] Son are kind of encouraging people that, hey, I can do that, too. They’re looking at the CEOs of [the clothing company] Uniqlo and [e-commerce giant] Rakuten – these self-made billionaires – and getting inspired.

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