This is one of the articles belonging to e27’s Meet the VC series, where we chat with venture capitalists in the startup space to find out more about how they do what they do.
Based in Japan, Riney manages a US$30 million fund meant to invest in innovative startups in the country. He has plenty of experience, having founded a startup in Tokyo and worked as a Principal at DeNA’s venture arm.
e27 spoke to Riney over the phone to find out more about his journey as a venture capitalist, and traits he looks out for in founders.
Here are the edited excerpts:
How did you get involved with venture capital?
Well, my first gig was at DeNA. I had originally started a company here and I raised venture capital on my own. Turns out one of the major LPs [limited partners] of the Incubate fund – at least for the first fund – was DeNA, and up until that point, DeNA had been doing LP investments but not very many direct investments. About two years or so ago, they wanted to launch their in-house VC arm. That’s when I joined. Now I’m at 500 Startups.
DeNA was also originally an LP and funded Fund One of 500 Startups. Also, I had done co-investments with 500 Startups. It’s a small world so we meet each other a lot. Dave [McClure] was looking for someone that had startup experience, venture experience and was bilingual – there are not many candidates in Japan that fit that criteria.
There’s another thing – I don’t know who it was, but someone else actually dropped my name as a potential candidate.
What challenges did you face when you first started investing?
In the VC business, brand is everything.
So I really had to hustle in order to get into deals. What I found was that at 500 Startups, deals just come to you whereas, at DeNA, I had to really do a lot of the legwork.
What I did was I found out who ran the hubs in the ecosystem such as people who run co-working spaces or lawyers, for example because those people know about startups’ existence before the investors do. Inevitably, the investors are going to refer deals that they’ve already looked at and they’ve passed over.
What sort of startups do you usually invest in?
A lot of VCs tend to think that they have a crystal ball. They like to pontificate about the future. The truth is that we all don’t really know what the hell we’re talking about.
I want to meet smart, innovative founders, first and foremost, and after I hear their perspective on where they think the market is going and how they’re going to approach the market, then I make a judgment. With that said, of course, I have my biases. In Japan, there are a lot of opportunities in IOT and bio-tech as well as robotics.
A lot of these traditional companies – these big juggernauts corporates – certainly have been very good but in recent years, have not been. There have also been a lot of layoffs. There is a stereotype thinking about the Japanese that they are risk-averse. But the truth is, these big companies don’t offer the stability that they used to.
If you’re a smart engineer, and you have an idea, the upside of starting a company is much higher now.
Do you specialise in any particular geographical markets?
At DeNA, I was doing Silicon Valley and Southeast Asia. I’m familiar with those markets. However, my focus now is solely on Japan.
Walk me through a typical day for you. What time do you usually wake up and go into the office? What happens next?
Normally, I wake up very early – something like 530 AM. I go to the gym, I go back and then I go to the office or a cafe and I just basically block off everything for at least two hours to get some deep focus in. I read. After that, I do meetings, and when I do meetings, I’m meeting potential investors for the fund, potential companies or founders I want to invest in, and corporate development people that might be interested in acquiring or co-investing.
For most VCs, the job is never off. You have founders who will ping you at 11 PM or 1 AM – especially in my case since I was handling Silicon Valley – so you have to ignore that sort of typical idea that you have a nine to five. There is no work-life balance, basically.
What traits do you look for in founders?
The main trait that I look for, at least in the CEO, is their ability to sell.
Sales is an underestimated skill within the tech startup world. People tend to praise engineering talent, and of course, engineering talent is important. But after the early days, it’s unusual for the CEO to continue coding. So he’s going to be selling.
The three important things for a CEO are:
1) Have money in the bank: You need this so you can pay your employees’ salaries. That requires fundraising, typically, if you’re still in the red.
2) Recruiting talent: In the early days, when you can give significant equity to your employees, it’s a lot easier. What happens when you have to recruit a Google or Facebook engineer, and he’s like employee number 20? You’re not going to be able to pay him as much, and you’re not giving him enough equity. How are the CEOs going to convince really good talent to join the company?
3) Vision: Does the company have a compelling vision for the long term? For example, I don’t think that Rocket Internet companies have that vision. I think vision determines the longevity of the company. That’s quite important too.
Oh, also to clarify, I don’t like ‘salesy’ CEOs. I highly weigh authenticity when I say the ability to sell is important.
Are there deals you regret missing out on?
Well, I have not been a VC long enough to see the mistakes I’ve made. I’m sure there will be. I’m humble enough to recognise that there are deals that I’ve passed on that will go on to be extremely successful. That’s part of the business, right?
Like Dave McClure, he passed on Uber, right? It just happens. You tend to not know about those mistakes until four years down the line. Who knows? I’ve probably made tonnes.