lawyers tend to get their bread buttered by serving hot startups in,
no surprise here, Silicon Valley. But Tokyo's recent Venture Business
Support Symposium, organized by the Tokyo Metropolitan Government,
the Tokyo Chamber of Commerce and Industry, and the Nihon Keizai Shimbun,
saw John Sasaki, attorney at the
Palo Alto offices of Wilson, Sonsini, Goodrich & Rosati, up on stage
explaining the Silicon Valley VC model to an audience of Japanese investors,
angels, business folks, and bureaucrats. The assignment was right up
John's alley: as development leader of WSGR's Japan group, he's a keen
supporter of Japan's nascent entrepreneurial scene. The second-generation
Japanese-American (his mother's Japanese, his father's American) also
made it a point to scope out Bit Valley and dowse for signs of Internet
life. Editor at Large Daniel Scuka met up with John the morning
after the symposium to ask his impressions of Japan's Netpreneur scene.
What is the Silicon Valley VC model?
In a nutshell, all players share the risks and rewards by accepting
equity instead of immediate cash; founders take cheaper common stock;
and outside investors take more expensive preferred stock. This embodies
a spirit of risk sharing, whereby the founder isn't the sole bearer
of all the risk. In Silicon Valley these days, everyone -- founders,
employees, outside firms -- is willing to take equity in a startup.
It's acceptable -- it's a badge of courage.
Does the Silicon Valley model apply to Japan's entrepreneur scene?
There are some big obstacles here, structural as well as cultural. You
can't do a founder round [of stock offerings]; you need a minimum ¥50,000
par value, even in first-round share offerings; you need a ¥10 million
capitalization to form a company; preferred stock doesn't exist to the
extent it does in the US; and stock options are weird. For example,
there's a 10 percent limit on the option pool, you can only issue them
to employees, and all options have to be allocated at the time the pool
is created. More importantly, though, I haven't seen the culture of
risk sharing emerge here.
How can Japan get on track?
Money is around; you could probably use more entrepreneurs -- not just
entrepreneurs who are willing to take a risk, but who have a real idea
of what they're doing -- there are a few out there, but I think you
need a few more. It'd be nice to get the lawyers more active in the
Can the foreign community help out here?
What I've realized is that the non-Japanese have a big role to play.
Yet at the same time, the foreigners can't do it alone -- they've got
to work with the Japanese. What the foreigners think and what the Japanese
think is still quite different.
Is Silicon Valley a model for Japan to follow?
I don't think Japan wants to go the whole nine yards and follow the
Valley. The big problem [in SV] is the greed. You used to have young
kids who had a vision, who wanted to build something. Now you've just
got kids who want to get to an IPO as quick as possible, flip their
stock, and get out. I'm kind of disappointed. I hope Japan doesn't go
And Bit Valley?
I think the Bit Valley [organization] is going to be an important part
of the puzzle. They are one of the leaders of what's happening here,
and Japan does need leaders. I'm excited about what's going on. When
I came out here a year ago, first trip back in two years, I met with
a number of people, but the response was lukewarm. There was no one
leaving the big companies, there was no one starting their own, the
VC industry was dead. Now, there's a ton of money, and VCs are learning
how to evaluate companies. You've got a bunch of young guys who don't
like the establishment -- who want to go out on their own -- and you've
got a bunch of older guys who are getting laid off by their [traditional]
The best thing about what's happening here is that it's happening
with young people my own age. Also, I don't have to worry about speaking
keigo [formal, polite Japanese] -- I can speak in my own, comfortable
Scuka is managing editor of Japan Inc.