As a global recession continues to bring down some companies, there are a few that survive, and even thrive.
Reading the media every day, you’d be forgiven for imagining that March 2009 was the beginning of the end of the commercial world as we know it. While it is true that we are certainly dealing with a major global recession, or possibly even a depression here in Japan, the fact is that people still have to live and eat, and as such the recession should be seen as merely grating upon rather than destroying the fabric of our economy. Of course, I’m an eternal optimist!
In any case, history teaches us that some of the best new companies are born in times of adversity, and that humankind needs a challenge every now and again in order to keep evolving. This may not be much comfort for those in companies that are going under, but for those who are up against the wall but not yet beaten, it is sound advice.
Getting “beaten up” takes many different forms. As the future CEO of a rising start-up, you may today be a sales guy or engineer about to receive your pink slip. As the CEO of a company about to lose early investors who are jumping ship and selling your stock for cents on the dollar, you may be about to get a replacement investor who is a lot smarter and more willing to get involved and help you become successful. And for those managers whose companies are experiencing a steady hemorrhaging and a frozen CEO and/or senior management team, the realities of a pending bank crackdown may mean that the company is forced to move away from the currently unprofitable business and into something new.
All these changes mean that more and more companies are willing to look at and take on new products and technologies—a good thing for foreign firms in Japan, and also for those looking to license their know-how to the Japanese market. We are finding that traditionally conservative companies are suddenly opening up to new ideas and solutions, particularly if they help improve the bottom line. It doesn’t matter any more whether you’re foreign or strange.
Perhaps surprisingly, venture capital funds are also becoming a lot more active again. Of course there are those funds that are spent and are dumping their shareholdings for absurdly low prices. However, for those funds which have some financial strength, the activity has been brought about for a different reason—GREE, the SNS game site.
The GREE listing in December last year sent (positive) shock waves through the investment community as it ended its first day of being public with a market cap of about 107 billion yen—about 21 percent more than the valuation of market leader Mixi. The shock waves occurred because not only was GREE not first on the scene, and the IPO had come in the midst of the worst economic downturn the Japanese stock market has seen in 30 years, but also because it returned a spectacular 75 times profit on the original investor’s investment.
This stupendous return has not been lost on other competing venture capital firms who were not part of the deal. As a result, despite the recession, there is a lot of new investment activity going on. My suggestion is that if you have strong intellectual property and can find a partner in Tokyo to use as a launch platform, then now is probably a good time to be looking for venture capital money. Timing wise, it has to be good as well—in that anything started off now will take 2-3 years to bring up to IPO grade, and by that time, we should be well over the current low-point and be looking at a rising market again. JI