I was in Hong Kong and had just finished speaking at a technology conference hosted by Red Herring when the email arrived. It said that the Netage Group had been listed at an opening price that was twice its public offering.
At the conference, I had felt like a lone warrior fighting the good fight, describing how Japan is now at an evolutionary threshold facing sheer opportunity. Unfortunately, most of the audience had been focused on China and India. The email announcement of Netage’s success unwittingly reconfirmed my message at the conference, and I was in the mood to celebrate.
I have known Mr. Kiyoshi Nishikawa of Netage for nearly ten years. We had first run into each other after a speech I made near Gotanda at the invitation of Michihiko Kawamata, the president of Tsukasa Downtown Development. As Nishikawa and I exchanged business cards, he remarked that he had just joined AOL and had come to hear me speak because he was interested in ventures. I invited him to join a study group I ran, and our friendship began.
The study group, called the MBA Venture Workshop, started around 1995, four years after I graduated from Harvard Business School. MBA students at that time were still conservative, so I was ultimately the only one who actually started up a venture company right away. I had started the group in response to that, hoping to inspire my MBA contemporaries to get involved in the world of venture.
The group was open to those who intended to either start a venture company or to support venture companies in the future. Once a month, we would assemble in the GLOBIS classroom and learn about ventures through activities such as inviting guest speakers or discussing business plans. A number of venture capitalists eventually came out of this group, including Mr. Mikitani of Rakuten, who had at that time retired from The Industrial Bank of Japan and established Crimson Group; Mr. Hiroki Hayashi of Dream Corporation, then in the midst of start-up preparations that would eventually lead to the famous Bagel & Bagel; and Mr. Shinichiro Nishino of Fujisan Magazine Service, who at that time was at NTT and subsequently set up Amazon.com in Japan. There was also Mr. Soichi Kariyazono, who would become a partner of GLOBIS Capital Partners (GCP).
Upon joining the study group, Nishikawa began to brainstorm ideas and mull over business concepts. Then, in February 1998, he established the Netage Group.
Obviously, GLOBIS completely supported Netage right from the start. We invested in Netage and had Kariyazono join as an external executive director. I visited the Netage office in Shibuya several times. After removing my shoes and entering a room in the apartment, I noticed several part-time staff who looked like students. The room was steeped in the very essence of venture.
Nishikawa subsequently hit it off with Mr. Satoshi Koike of Net Year and developed the Bit Valley movement. They named it Bit Valley by taking the “bitter” from the Japanese word, “Shibu” of Shibuya, and “ya,” meaning “valley.” Nishikawa told me that this was also a play on words based on the computer digital unit, bit. He consequently gave this name to the area in Shibuya where many internet venture companies gathered and held monthly meetings.
While some young entrepreneurs launched the wildly successful public offerings of such companies as Livedoor and CyberAgent, Netage has continued to steadfastly focus on being an incubator. The young people who gathered at Netage subsequently raced ahead to become third-generation entrepreneurs. One of these is Mr. Kasahara, who created the social networking site Mixi. Mixi took off with substantial support from Netage.
Now, more than eight years after its establishment, including seven years and seven months of investment from GLOBIS, Netage was prepared for the much-awaited achievement of going public. With a public offering price of 600,000 yen, an opening price of 1,200,000 yen, and a closing price of 1,400,000 yen, this was a fantastic beginning. (forty times the original investment cost for GLOBIS).
Netage’s public listing was particularly significant for GLOBIS Fund No. 1. Six out of thirteen investments from that fund have become listed companies, including the The Goodwill Group, Fullcast, FISCO, and Works Applications.
The sole remaining company was Dream Corporation. If this company were also to become listed, our track record would rise to seven out of thirteen—over half the businesses we invested in would have gone on to become listed companies. In addition, in terms of investment performance, a return of better than seven times the original investment meant we could cover our investment costs ten times over.
Needless to say, while this level of return in itself delights me as a shareholder, I really want to congratulate Nishikawa as a friend. My relationship with him goes far beyond that between a shareholder and manager. We are fellow entrepreneurs.