Heavy
Hitters in the High-Tech Market
Balancing their understanding of Japanese business with the fast-paced startup world.
by: Kent Foster
Sixteen
years ago Silicon Valley was a very different place. The semiconductor industry
was king, few had heard about the Internet and there was no Palm Pilot. At
that time two families living next door to each other had daughters the same
age. Their mothers were privately investing in startups. They started playing
golf together and talking about their investments and the two realized they
had surprisingly similar professional interests. At the time, Lolita Vasquez
was president of Waverley Investment & Financial Group, where she helped
start-ups obtain funding for international projects. Diana Yoshikawa had founded
Interface Japan, a company specializing in negotiating strategic alliances
between American and Japanese firms. They joined forces, creating Asia Star
Ventures (http://www.asiastarventures.com)
in May of 1998.
While Japanese firms are heavy hitters in the high-tech market, they play
by a far more conservative set of rules. Compared with Silicon Valley companies,
Japanese firms take much longer to make investment decisions. In real time,
the Japanese funding cycle is 12-18 months, which translates to eons in Internet
time. This difference poses a unique challenge for Asia Star Ventures, who
must balance their understanding of Japanese business with the fast-paced
startup world.
Recently, ASV negotiated a deal between a US startup and a Japanese firm in
less than three months. For the startups they represent, that type of turnaround
can be the difference between success and failure. This is due to the Internet
and their online newsletter, e-Ventures. It is changing strategic alliance
methodology and acts as a filter for screening according to ASV's specializations
(semiconductors, telecommunications and the Internet). ASV chooses one startup
at a time to highlight in e-Ventures. They have also formed a new partnership
with the Japanese economics magazine Keizaikai, Japan's version of Business
Week, to profile young companies in the US, particularly in Silicon Valley.
ASV nominates some of the e-Ventures companies for the opportunity to give
presentations in New York or Los Angeles to Keizaikai's membership of Japanese
executives from top corporations. Keizaikai then features the company in its
weekly magazine, which in turn often attracts later-round funding.
What draws Vasquez and Yoshikawa to this work? While Yoshikawa likes brainstorming
with the Japanese and encouraging them to be more aggressive and risk-taking,
Vasquez enjoys getting to know lots of startup companies and their new technologies.
Presently, ASV operates in three distinct areas: semiconductors, telecommunications
and Internet.
As a women-owned and operated company competing in the male-dominated Japanese
high-tech world, it might seem like ASV would have a tough time securing clients.
But in a relatively short time, their client list has included Epson, Sharp,
Toshiba, Olympus, NTT, Sony, and NEC.
Vasquez says, Our track record speaks for itself. In addition to steadfast
determination, much of the business comes by word of mouth, Yoshikawa explained.
Clients have already been told we're two very strong, aggressive women. They
know our credibility and are open-minded to our recommendations.
The Process
The million-dollar question on everyone's mind is how ASV picks
a winner. Vasquez says that she keeps current with technical magazines, conferences
and trade shows. She is also highly selective. We don't accept a lot of clients.
She admits, Investment is very subjective…so much of it rests on intuition.
They look at their collective assessments to potential clients. Because we're
both strongly analytical, says Yoshikawa, if neither one of us has strong
feelings, we pass on it.
While such intuition is impossible to teach, the founders do offer some concrete
advice in assessing a startup. The management team has to include people who
are going to listen to our advice, says Yoshikawa. Over-confidence can be
counterproductive to working with the Japanese…we look for a certain
personality type and management style, a management style which is more team-oriented
and international in vision. She also stresses individuality. We don't make
investments based on who else makes an investment. We're not followers. We
anticipate trends.
Being proactive is what sets ASV apart in nurturing a young company with a
good product. ASV acts as an outsourced business web development department
for the young startup. They assist with their business plans and give practical
advice on who may be an early adopter or customer for their service as well
as identify potential corporate partners. ASV has compiled a database with
over 300 new startups per year--often before they even have an office or website
and usually a good six months before they hit the radar screen anywhere else.
The main focus is to find angel partners and investors at the crucial Series
A round of fundraising. Crucial because it becomes much easier after Series
A to move forward and receive future rounds of funding. (Series A funding
is the first one to five million dollars raised, usually by non-institutional
investors, not venture capitalists.)
Staying ahead of competition has also been an important strategy for ASV.
Yoshikawa realizes that there are a lot of other professionals doing similar
work on the investment side. She also realizes that her company's focus on
Japan and Asia is not unique. But, ASV goes one step further with research
and trend analysis, which is highly targeted to the specific needs of the
Japanese client, she adds.
By means of customized research, ASV's recommendations guide potential investors
through a model of top-notch startups who are a good fit for strategic alliances,
as opposed to just tossing them a list of unfamiliar companies to fumble through
without any background or perspective. Yoshikawa emphasizes that ASV "makes
sure that the latest technologies can be adapted to the Japanese corporate
structure." One of the effective tools upon which ASV trend analysis
is based is the "wish lists" (targeted new technologies such as
data mining) provided by the Japanese client. They work closely to fulfill
these lists; this comprehensive attention to detail leads to a high success
rate.
The NASDAQ factor
The NASDAQ devaluation of tech stocks this past spring has
also significantly influenced ASV's services, but these market ripples have
only meant more business for ASV. As a result of such market volatility, fledgling
startups are "more attentive to our advice," says Yoshikawa. "We
feel much more comfortable since things are slowing down." In addition,
she says, " People are taking more time to study." Yoshikawa cites
a startup that recently lost $2 million because it was holding out for more
money--against her recommendation to accept the investment. Has more money
come from other investors? "They're still waiting," she says.
In the end, what makes it all come together? Besides thorough strategic planning
and research, Yoshikawa and Vasquez have had a long-term business relationship
with many investment projects. Yoshikawa also jokes, "Lolita's sign is
a snake in the Chinese Zodiac and mine is a wild boar...the wild boar is very
courageous, while the snake is very strategic."
Considering the turbulent market, courage and strategy are needed more than
ever.
