Inside Japan’s Startup Boom: Elite Engineers, Exploding Revenue, and Almost No Funding

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Last week, I landed in Tokyo and put up a single tweet: “What founders should I meet?” It blew up, getting thousands of views.

Ever since, I’ve been fielding a flurry of messages from awesome Japanese founders. These are some amazing companies!

Here’s what I’m seeing in the Japanese startup world…

Note: I’m getting together a select group of founders next week in Tokyo. We have 1-2 more spots. Message me if you’re interested.

1. Elite technical teams. Every company I meet has several hardcore engineers on staff. This lets them build product fast.

One of the biggest barriers I see for American startups is a lack of builders on the team. Japan is stronger here. Maybe it’s because of Japan’s excellent education system?

2. Launched products. Since these startups have strong builders on the team, they’re able to ship product quickly.

The Japanese founders that contact me almost always have a product in market. In the US, it’s a mixed bag.

3. Serious revenue, fast. Better yet, these startups are making real revenue — often a huge amount for their stage.

Japanese startups can’t rely on the venture capital gravy train. They need to make sales.

4. Stunning lack of access to capital. Japanese startups have strong builders, launched products and paying customers. The one thing they don’t have: capital.

Pre-seed rounds are about $300,000. That would easily be $1 million in the US.

Japanese startups are getting to over $1 million ARR on just a couple hundred thousand invested.

The number of messages I’m getting is a good indicator. If I had put that tweet up in America, I wouldn’t have gotten nearly as many takers.

5. Prepping to raise in the U.S. Having quickly exhausted the capital available in Japan, many are looking to raise in the US.

Some founders I’ve met have been incredibly savvy about this process. One is already working on executing a Delaware flip. This turns his Japanese company into a subsidiary of a Delaware C Corporation.

Sounds wonky, right? But it’s really important.

Most U.S. investors only invest in Delaware C corporations, myself included. In fact, many VC funds have a legal agreement with their investors (the LPA) that only lets them invest in this structure.

If you want to raise in the U.S., a Delaware flip is extremely helpful. The cost isn’t insurmountable: about $20,000. If that opens up millions in funding, it’s well worth it.

6. Hybrid US-Japan teams. One Japanese founder I spoke with last week is planning to move to SF. This will make raising money and finding customers much easier.

The rest of his team will stay in Japan. Japan has tons of engineering talent, and salaries are lower than in the US. This means more great engineers for less.

Distributed teams can work very well. One of my recent investments has the founders in New York and most of the rest of the team in their native Kosovo.

Wrap-Up

Japan is a massive pool of great startups. But these startups are largely ignored.

This is a giant opportunity. And of all American investors, I’m one of the best positioned to exploit it.

I’ve been to Japan many times. I can speak, read, and write some Japanese. And I love this beautiful country.

So I’m excited about meeting more awesome Japanese startups. It’s time for American and Japanese tech to unite!

Inside Japan’s Startup Boom: Elite Engineers, Exploding Revenue, and Almost No Funding

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