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JUN 14, 2004

Three-Day Business Trip to Hong Kong and Shanghai

By Yoshito Hori
Copyright GLOBIS

People often say I take an active role around the world, but the way I see it, it’s more like a strenuous effort. It feels like I’m struggling with all my might in the middle of the ocean that is the world.

Since starting-up my company in Japan 12 years ago, I have built up a network, cultivated customers, constructed a brand, and earned trust in Japan. I’m now trying to carry out this same process in the open waters of the world, and that is why I’m swimming as hard as I can.

I have just completed a business tripーone night each in Hong Kong and Shanghai, just two nights and three days in totalーduring which I met with three investors in Hong Kong and spoke at a conference in Shanghai.

Investor meetings are, in a word, sales. I need to sell our fund at 500 million yen per lot. We’re selling something you can’t actually see, so investors have a hard time making up their minds. This investment carries a risk and costs a lot of money.

Investment decisions have to be based on our track record, the potential of the Japanese market, the GLOBIS brand and network, and the trustworthiness of the management team, including me. The kinds of investors I approach abroad are not usually found in Japan, and so I have to explain everything clearly and in detail. I have a presentation of around 50 pages to explain the GLOBIS fund. I also explain the macro-level factors, such as the economic and technological situation in Japan, the social environment, the state of the stock market, and M&A. The meetings typically last from 60 to 90 minutes.

Investors just don’t seem to be won over unless the head of the company conducts these explanations. So it’s up to me to travel overseasーfairly oftenーto meet and brief them.

It’s the same materials, the same explanations over and over again, but perhaps I’m a salesman at heart. I always adopt a positive attitude and try to have fun with it.

GLOBIS has recently enjoyed a solid investment track record, and trust in us is going up. Thankfully, that also means that the sales side of things is getting easier. My plans for overseas trips are gradually focusing more on other kinds of events, such as attending or speaking at conferences. Around this, I arrange visits with investors.

On this trip, I was asked to speak at the Asian Technology Roundtable Exhibition (ATRE) in Shanghai. ATRE is organized by the DASAR, which was founded by a French-Jamaican man named Alex Vieux. His company purchased the American magazine, Red Herring, runs a gathering in Seattle which recently welcomed Bill Gates as a guest, and hosts ETRE (European Technology Roundtable Exhibition).

What stands out about these ATRE and ETRE conferences is how Alex always provides his own sharp and witty ripostes to the speeches. Doesn’t matter who has spoken, Alex will have a penetrating observation that keeps the audience on the edge of their seats, not wanting to miss a beat.

As a speaker, I was also the target of his deeply probing questions.

On this occasion, I was speaking on the morning of the first day during a keynote snapshot, a time slot of particularly high quality, which is always particularly well attended. I had insisted on being a keynote speaker during my negotiations with Alex when he asked me to participate in the event. This was an ideal chance for people to understand what Japan is really about. Thinking about this got me going.

My turn arrived, but since we were running behind schedule, the organizers wanted to cut my speech and go straight into the Q&A. I insisted on making the speech. You have to be assertive when you’re overseas. More than anything, it was a great opportunity to promote GLOBIS and Japan to the audience.

I didn’t have quite as much time as I should have, but I went ahead before an audience of over 200 people from 27 countries. As soon as I finished, Alex launched into his grilling questions, just one after the other:

Why is the annual amount of foreign investment into Japan so low?
Why are foreign VC firms retreating from Japan?
Why isn’t venture capital taking off in Japan?
“There is more venture capital in China than in Japan. Why China but not Japan?
It seems the culture in Japan does not respect successful people, as if making money was a dirty word. Why? Successful people are acknowledged in places like California.
People say Japan is changing, but this isn’t true at all, is it? What’s going to happen with China and Japan?
If you were to start a business right now from scratch, what would you do? There is no bubble at the moment, so where are the opportunities?

The questions kept coming, right in the middle of my replies.

I am used to these kinds of questions, so I was able to reply with relative calm:

“Many believe that Japan is three or four years behind the U.S. Foreign venture capitalists adopted the model that succeeded in the U.S. and brought it over to Japan. They thought this would bring success. However, it appears that the issue is more than Japan being behind the U.S. It seems, in the first place, that Japan has a completely different industrial structure and management environment. Trying to shoehorn U.S. investment style into Japan without acknowledging the differences led to failure, and they left. They needed, however, to give a reason for pulling out, so they said things like, ‘Japan can’t nurture entrepreneurs,’ or, ‘You can’t assemble a management team,’ or, ‘The market is immature,’ making Japan out to be the scapegoat. As a result, it has become difficult to raise funds for venture capital in Japan.

“The signs that Japan was changing began to emerge around 1996. This has now developed into a formidable swell. In 1997, Yamaichi Securities autonomously ceased business, and many large banks subsequently started to go bankrupt. This led to the collapse of lifetime employment, since a company going bankrupt means all employees lose out, regardless of loyalty. If that’s the case, you may as well strengthen your own capabilities and identify your own career path. This is the generation that is coming to the fore.

“Today, many venture capital enterprises are springing up with young people at the helm. Some of the companies in which we invest have been set up by technical people who quit major corporations like Sony and Matsushita. This was unheard of before 1997. Furthermore, the stock market is energized. In terms of venture capital, the current investment environment in Japan is extremely good. However, investors and media in the West tend to base their judgments only on image and atmosphere. Investment in India and China is fashionable right now, so attention is fixed on those two countries. This, however, is just a trend. I want to say, ‘go for it,’ to anyone who chases after these trends. For our part, we are enjoying operating in a relatively non-competitive market.

“It’s not true that Japan does not respect successful people. I do think, however, that the way successful people use their money is being closely watched. People who use their money decently and responsibly are respected, but those who engage in reckless spending are reviled. Japan has a culture that emphasizes harmony of character, so an understated assertiveness is very highly valued. I think that this, in itself, is not so bad. It’s really not necessary to become as materialistic as in the U.S.

“If you look at the bigger picture with regard to Japan, in contemporary history we are now in the third period of upheaval. The first period was the Meiji Restoration, the second was the post-war era, and now we are in the third. You never see major changes in Japan during periods of stability. Actually, I don’t think that many significant changes occurred during the periods of stability in the Edo, Meiji, and Showa eras. Yet, when change does begin, it really generates upheaval. We are now in such a period. During the bubble era, you didn’t have to be smart; you just needed to have guts to make lots of money. In that sense, it was not a very good period. Now you have to be smart and courageous with an international perspective. These times represent a magnificent opportunity for us.

“I think Japan will undergo immense change in the next few years. At the center of this change will be the generation now in their 30s and early 40s. This generation will become the main event, and people with ability will make themselves known, thereby driving the evolution of the social and economic environment. Around about 2010, I think it is safe to say that Japan, China, and Korea will be economically unified in terms of their economic systems. I am very excited about this.”

Alex continued his relentless flood of questions, to which I responded just as quickly.

I was a little worried about whether I got my message across, but you can usually tell how well a speech went by the number of people who approach you afterwards to exchange business cards. This time, I exchanged cards with a lot of people, so I think that my speech went fairly well.

I returned to my room with mixed feelings of relief and exhaustion, but an overall sense of achievement.

I headed for the station to catch the Linear Motor Car. The time and speed were displayed above the door into the train car. We took off and cleared 100 kph, then 200. After two minutes or so, we had exceeded 300 kph. It was like entering the unknown!

Three minutes later we were going faster than 400 kph. We started to sway from side to side. In another three minutes, we began to settle into a speed of 420 kph.

Looking out of the window, urban Shanghai was soon replaced by barren land. Beyond that, you could see the ocean and several tankers.

In Japan, around the time of the Meiji Restoration, the new government ran steam trains from Shimbashi to Yokohama to ferment the idea of change in people. I wonder if the Chinese government is following a similar pathway now. Just as I was thinking about this, the Linear Motor Car began to slow down.

It had taken seven minutes to reach the airportーa trip that would have taken more than 40 minutes by car.

As much as I want to be positive about everything in this column, there are many things I want to say about the policies of the Japanese government. One is about the Linear Motor Car. I don’t know how much money has gone into it, but China has already got it up and running with technology from overseas. I wish that Japanese politicians would follow suit, breaking away from the old school to energize Japan.

I will soon be back in Japan. At the request of the flight attendant, it’s time I shut down my PC.