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Jakarta Venture Night: Building Great Companies and Industry
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Jakarta Venture Night: Building Great Companies and Industry

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  • 1. Building Great Companies and Industry - Startup Strategy and Finance - Jakarta Venture Night Jakarta – 12th Jan 2012 Shinichi (Shin) Takamiya Globis Capital Partners Principal s-takamiya@globis.co.jp www.globiscapital.co.jp/GLOBIS CAPITAL PARTNERS
  • 2. Agenda 1. Intro 2. Defining the Business 3. Strategizing 4. Organizing Resources 5. OutroGLOBIS CAPITAL PARTNERS 1
  • 3. About Me Shinichi Takamiya Principal, Globis Capital Partners • In charge of consumer internet investments Portfolio: Q Entertainment, Indisoftware, Yumemi, Shimauma Print System, RocketStart, iStyle, Kayac, Pixta, One of Them, Aucfan Prior to Globis: • Project Leader, Arthur D. Little: management consulting • MBA Harvard Business School (Second Year Honor) • BA Economics, University of Tokyo (graduation thesis Honors Award) • 8+ years of overseas experience in UK, US, Holland • Internet geek (but unfortunately not an engineer), avid tennis player, and Jazz loverGLOBIS CAPITAL PARTNERS
  • 4. About Globis Capital PartnersLeading VC in Japan with JPY38.5B under management:• Globis Incubation Fund (1996 JPY 540M)• Apax Globis Japan Fund (1999 JPY 20B)• Globis Fund III (2006 JPY 18B)Specialized in value-added investment:• Lead/co-Lead investors with board seat• Management value add – best practice venture management• Deployed 50+ executives/managers to portfolio CompaniesIndustry insider• Bus. dev. and partnership for portfolio companies• Hub of the startup and internet industry since dawn• CEO Conferences (G1 and Asuka) and Globis Business School Network (14Kstudents/y)Pioneering Japan VC & Venture Industry:• 90+ portfolio companies• Proven track record: IPO 25%, buyout 25% - GREE (Mobile social network) x97 - ngi Group (internet ad tech & incubator of mixi) x31 - Works Application (No.1 ERP in Japan) x20• Teach at Japan VC Association training programGLOBIS CAPITAL PARTNERS 3
  • 5. History of Japanese StartupsThe system of creating new companies and industries isworking in Japan (although cyclical). Number of Companies Going PublicNumber of IPOs250 5 years 5 years 5 years 5 years+? 204200 187 188 167 169 175 150 158 144150 121 124 121 107100 90 86 49 50 36 27 19 22 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20112 Key to the successful establishment of the system…GLOBIS CAPITAL PARTNERS Source: Azusa KPMG as of Sep 2011
  • 6. Key to Success EcosystemEcosystem within and surrounding the startup community wascrucial. Investors Corporations Investment Banks Startups Professional Banks ServicesGLOBIS CAPITAL PARTNERS
  • 7. Key to Success Entrepreneurs’ AspirationsEntrepreneurs’ started to “think big”. Entrepreneurs’ Aspirations Social Impact Self-Actualization Financial Return Means of LivingGLOBIS CAPITAL PARTNERS
  • 8. Agenda 1. Intro 2. Defining the Business 3. Strategizing 4. Organizing Resources 5. OutroGLOBIS CAPITAL PARTNERS 7
  • 9. Vision - How High Do You Want to Go? You can only get as high as you envision. Entrepreneurs’ “The Summit” AspirationsEnterpriseValue $ Multibillion Social Impact Self- $ Multimillion Actualization $ Million Financial Return t Means of LivingGLOBIS CAPITAL PARTNERS
  • 10. Business DomainSweet spot of a company’s business domain resides in betweenvision, capabilities, and market attractiveness. • Future view of the world • Value proposition and the Vision difference the company makes • Values and culture• Basis of competition – • Market size “Necessity” Market • Market growth• Competitive Capabilities • Degree of Attractiveness advantage – competition “Differentiator”GLOBIS CAPITAL PARTNERS
  • 11. Business ModelThe business portfolio and the profit model is key to feasibility. Business Portfolio Profit Model After Service/ Self-Branded Bus. High Subscription Model Model Cash Flow Cash Flow Profitability t t • Stable cash flow • High scalability & • High profitability profitability after threshold • “Deep J” - big upfront • Organic scalability investment Low Revenue Share/ Contract Work Model Low High Project Finance Model Cash Flow Cash Flow Growth RateIssues to Consider• Synergy v.s. conglomerate discount• Fast growth by focus v.s. Stability by t t diversification • Short term cash flow & • Moderate scalability & profitability• Resource allocation – balance and speed capacity utilization • Shared risk • Low sustainabilityGLOBIS CAPITAL PARTNERS • Control and collaboration • Low scalability
  • 12. Agenda 1. Intro 2. Defining the Business 3. Strategizing 4. Organizing Resources 5. OutroGLOBIS CAPITAL PARTNERS 11
  • 13. Growth Strategy Evolve strategy per different stageCash Flow Startup Stage Growth Stage Later Stage t “Proof of Concept” “Auto-Pilot” “Power Play” • Fast validation and • Setup processes and • Fueling growth withEssence iteration of the system ample cash & resources of the service/bus model • Operational excellence • Strategic alliance toStrategic • Cash management – fast PDCA leverage partnership • Key management • Team assembly • Exit planning assemblyGLOBIS CAPITAL PARTNERS
  • 14. Competitive StrategyEstablish defendable and sustainable advantages – not a mererelative strength Type of Competitive Advantage “Participate” Necessary Capabilities Crystallizing Strengths “Perform” • “Only One” Key Success • “Structural Sustainability” Factors Reverse Leverage • “Sunk cost” “Win” • “Segregation” Competitive AdvantageGLOBIS CAPITAL PARTNERS
  • 15. Finance Strategy Essence of finance strategy: 1 Leverage outside funding to accelerate business growth 2 Design the capital table deductively according to the goal Self Funding Outside Funding & Organic Growth & Accelerated GrowthCash Flow Cash Flow 2 IPO IPO Mngmt Share 33.4% 1 Seed Round: 85% t Series C: 40% t Series A: 66.6% Series B: 50.1%GLOBIS CAPITAL PARTNERS
  • 16. Agenda 1. Intro 2. Defining the Business 3. Strategizing 4. Organizing Resources 5. OutroGLOBIS CAPITAL PARTNERS 15
  • 17. FundsSuitable finance per different stage of a startup Type of Financing Instruments Instruments and Stage for Startups Cash Flow Investment/ Cost of Loan Size Debt Capital (Image in Jpn) Provider Equity Debt Low Mid-Large • Bank ($500K-5M) • VC Large • Angel Convertible Bond Equity High ($500K-10M) • “Friends & Family” Stage of a Startup Variable Small • Angel CB Low (-$1M) • VCGLOBIS CAPITAL PARTNERS
  • 18. Funds Fund Raising Tips1. Cap table is irreversible2. Blindly high valuations are not always good – balance dilution and the following rounds3. Design financing rounds around business milestones4. Save management time for business – finance enough to keep you running for18-24 month5. What does the investor bring other than money?6. Long term relationship starting way before and after financingGLOBIS CAPITAL PARTNERS
  • 19. Team Vision/Passion • “Make sure you only hire people that really love your product or service and are capable and willing to make decisions on what is best for your company.” • “Its hard to tell with these Internet startups if theyre really interested in building companies or if theyre just interested in the money. I can tell you, though: If they dont really want to build a company, they wont luck into it. Thats because its so hard that if you dont have a passion, youll give up. ” A-Team • “A people hire other A people, B people hire C people, who the f*ck hired you?” Shuffle • “What kind of person could you get to run a small business if you told them that when they came in, they couldnt get rid of people that they thought werent any good?”GLOBIS CAPITAL PARTNERS
  • 20. Process Operation excellence crucial to the success of a startup PDCA Cycle Key Performance Index Search Sales = Registered Users Listing Action Plan x Affiliate Step 1 Retention Rate Step 2 x Step 3 Item A Conversion Rate Item B Check Do x Item C Heavy Users ARPPU Mid Users Light Users• Speed, speed, speed • Measurable• All level of the organization – • Aligned with strategy management to operation • Actionable• CultureGLOBIS CAPITAL PARTNERS
  • 21. Agenda 1. Intro 2. Defining the Business 3. Strategizing 4. Organizing Resources 5. OutroGLOBIS CAPITAL PARTNERS 20
  • 22. Take Aways 1. Huddle around – ecosystem is the key 2. Think big! …and the rest is “hows” 3. Management is about constantly balancing the trade offs • Defining the business domain: attractiveness v.s. feasibility • Business model: growth v.s. stability 4. Things that have to change and that cannot change • Growth strategy: flexible recalibration per stage of the company • Competitive advantage: defendable and sustainable 5. Securing and allocating resources with speed are critical to the success of the “have nots” – startups 6. Processes key to operational excellence required in the internet earGLOBIS CAPITAL PARTNERS
  • 23. Thank You!GLOBIS CAPITAL PARTNERS 22