Allen Miner

Back to Contents of Issue: July 2000

President of SunBridge, former head of Oracle Japan

He's back! Allen Miner, that is, ex-head of Oracle Japan and one of the best-known Japan technology hands. After a four-year break in Silicon Valley during which he finished up his Oracle stint and moved on to found SunBridge, a respected venture catalyst, Miner has returned to Tokyo to establish SunBridge's Venture Habitat, a 20,000-square-foot incubation facility that aims to foster new Internet life in Bit Valley. But strictly speaking, incubation is not SunBridge's goal. In fact, according to Miner, the term is a misnomer that conjures up images of a struggling chick on life-support, just a breath or two away from ultimate demise. Instead, the Venture Habitat aims to "synthesize all the natural elements" that go into fostering new enterprises. SunBridge's Venture Habitat is notable also for being one of the first (if not the first) of the Silicon Valley venture catalyst firms to relocate its headquarters to Bit Valley, showing just how fertile the ground is here. SunBridge hasn't abandoned the US completely, however, having dispatched Netscape alumna Sandy Hirano to continue prospecting out of the Menlo Park office. Editor at Large Daniel Scuka spoke with Miner in Tokyo prior to the Venture Habitat launch press conference.

What is SunBridge's business?
Creating Japanese Internet ventures at Silicon Valley speed. We started doing this basically through investing out of Silicon Valley. We thought at one point we might open a technical team in Silicon Valley to do all the technical development for [ventures] in Japan -- doing the technical work for them in Silicon Valley. Over time we have found that it simplifies things a lot to concentrate our activities here in Japan.

And you're actually moving your HQ from Silicon Valley to Tokyo?
That's right. Same thing I did at Oracle back several years ago. After trying to build Oracle's business in Japan out of Oracle's [US] headquarters, it just became obvious that I needed to be here on the ground. Same thing here. You can place investments [in Japan] working out of Silicon Valley, and you can engage with people working here, but to really make a difference, you have to be here. On the other hand, we feel like we still have to keep our Silicon Valley presence to stay current with what's going on there. There are a number of ventures here that we're involved with which are looking to move to the US and a couple that we'll bring over from the US to Japan, so Sandy will maintain an engagement with the Silicon Valley community -- the US Internet community.

So the bridging is going on between Japan and the US?

Of those two directions, which has the strongest flow?
I think in the short term, the most interesting activities are [those from] the US to Japan. But what we most want to do, and what will make the biggest difference, is bring a few Japanese ventures to the US.

Why set up shop in Japan now?
It's an evolution that's been going on for about a year and a half -- or going way back four or five years ago when I was still with Oracle before I moved back to local headquarters. I kind of had come to the conclusion in, oh, late '95, that the next thing I wanted to do after Oracle was get involved in the Japanese Internet space. And since then I've been watching and trying to figure out what way I wanted to get engaged, and what the timing was. In mid-98, late-98, I started to get a sense that things were starting to move, and I anticipated that 1999 was going to be a year of significant progress and breakthroughs with early-stage Internet ventures in Japan. So, I left Oracle at the end of '98, and spent several months working on what, exactly, business model we were going to deploy to get engaged with the Internet. So basically, what's happening with SunBridge now is the next evolutionary step in a process that's been under way full-time since late 1998.

What will the venture habitat concept achieve?
I think it's implied fairly simply by the name, and we use that name in contrast to perhaps the more popular way of describing this kind of thing as incubators. There are a couple of reasons why we chose that name. One, the nuance of the English word. The 'incubator' is how you hatch chicks as their mothers run away, or what you do with a baby that might not make it to somehow help it make it through. Dealing with troubled people -- helping them to survive -- is the nuance. The habitat is the place where all of the natural elements, the systems, the interactions between living creatures and the environment, are the most suitable for the living creature to thrive and grow in a very natural way. So that is more the concept we wanted to achieve rather than going in [to a new venture] and manipulating and artificially trying to force success -- this provides an environment that has all the right elements.

And so for our model, we think of Silicon Valley itself -- not the incubators there -- as the ideal habitat for creating a venture business. So rather than replicating [Bill Gross'] Idealab per se or being just yet another real estate firm that offers startup office space, what we are really trying to do is use [the Venture Habitat] facility, and our activities going around that facility -- in Shibuya Mark City -- as almost a sort of symbolic central point for bringing together both our own activities and activities of partners we work with to move venture capital, to move the venture-oriented legal activities, [to move] the accountants who are interested in ventures -- sort of becoming a catalyst for bringing all those elements together and kind of recreating a microcosm of what Silicon Valley is. So it's not just "We'll invest and provide you space" -- which is the typical incubator pattern -- or "We'll invest and provide you space and we have a few people who have some kind of relevant industry experience who can give you advice." We're really trying to have the venture habitat become sort of a symbolic catalyst to bring together groups within and beyond the physical company itself.

On one hand that's very altruistic; on the other hand it could very well be a business as well.
Well the key is ... it's altruistic in the sense that we're not just focusing on servicing the clients in the center. But it is self-interested in the sense that by committing to take our piece of that level, it gives us an opportunity to engage with people well beyond those ventures who happen to end up passing muster and coming in to the facility itself; to engage with the whole community and provide a service and thereby benefit from the relationships that evolve after providing the service to the whole community. And the observation that that whole infrastructure - that whole venture ecosystem - did not exist in Tokyo today was a big factor in my decision that I really needed to move my physical location and move the center of our activities from Silicon Valley into Tokyo to try in whatever ways we can to facilitate a change from a catalyst for moving the culture for creating venture business over here to some kind of balanced combination of what's best about Japan and about Silicon Valley.

Will you aim to blend some of those elements?
Silicon Valley in some ways has gone off the deep end. There's so much easy money chasing so few really interesting opportunities with intrinsic business value, that you end up with basically speculative investments in IPO schemes, as opposed to real venture business development - and I think there's a little too much of that going on in Silicon Valley, and unfortunately I've seen a little bit of it starting to creep into Japan as well. In Japan you have traditionally very strong relationships between corporations and partners - you have the whole cross-share-holding culture that, I think, creates a more stable environment for businesses to grow. And traditionally I think there's much more attention paid to the social role of a company, and what [are] the company's contributions back to the larger society. Some of that business culture - that philosophy - I certainly don't want to lose, or have the Japanese lose the good parts of their traditional business culture in a Pell-Mell race to make lots of money-making IPOs.

But, there's a lot of good elements in corporate governance and thinking about equity not just as investor capital, but the concept of equity - the concept of sweat equity - the concept of values that just don't get reflected in a company's capitalization in Japan. There's far too much traditionally oriented about the money investment - the cash capitalization - as opposed to other forms of [value]. So that more balanced view as to what are all the elements that make a company valuable and successful, and rewarding everyone who contributes to the success of a company in various ways - including capital - but including things like work, labor, and ideas. Balancing [this] is the big change that we're hoping will happen in Japan.

Who are your partners in Japan? Are you looking for any?
Mainly the venture capital community. And the reason for that is that we feel like our own management team members have very strong backgrounds in the IT industry, in business management, strategy, and development. We all worked together at one point or another at Oracle Japan. Sandy, for example, went on to Netscape for several years, one of our directors was basically the turn-around president of a US-based distributor here, another was the head of marketing at Adobe, a couple were with IBM Japan -- we have experience in a number of businesses in Japan. On the management side, traditionally, a venture capital firm wants to partner with large corporations and consultancies -- to have partners where they can tap into management talent, while they're really strong on capitalization planning, financing, and the IPO process. Basically, we found that just as VCs in Silicon Valley are desperately looking for interesting investment opportunities, VCs in Japan have a lot more money to invest than we do, but it seems that there'll be a very easy collaboration with them where some will be sending us early-stage opportunities and asking us to incubate them into more attractive, next-stage investments, where they can justify a $5 million or $10 million investment at a high valuation and have a high degree of confidence that they'll see a return on that. So basically, we're engaging with opportunities at the startup and seed stage that are high-risk, where a lot of hands-on management support is more important than the cash capital, and tech cash that needs to be invested in the company is significantly smaller.

So we're basically doing the early-stage business development and financing and then working with tech VCs; we don't want to learn how to manage the whole IPO process -- our focus is always going to be on the requirements and strategy and culture and thinking process of the startup and seed-stage venture.

What are your target companies in Japan? What's a typical profile?
There's no particular focus or category. I think there's one characteristic that we expect all our investees to share in common, though: no gimmicks. Every company that we get involved with [has to be] one where we can see that there's real intrinsic value, so that no matter what happens in the IPO market, by working together, we're actually creating something that makes a real difference for tech customers or to the larger community. The other would be: Is it a company where the management is flexible enough, and is the company early enough in its development where we can see how we can make a difference from a management and strategy point of view, as opposed to [giving] purely financial [support]. It turned out that a couple of [recent] investments [that we looked at] were basically companies already registered to go public and they were interested in bringing us in on the mezzanine round. As an investment, they were no brainers -- great places to park some money for a few of months and get a great return. We debated about these for a while, but said no -- it didn't fit with our basic concept and would just be a distraction.

Do your investees all have their own intellectual property?
You don't necessarily have to have a proprietary piece of technology to be a successful business. But you do have to create something that is of real value to customers. One way to differentiate yourself is just to execute [better than competitors]. Take an idea that is not so terribly unique, not patentable, and just do a better job at doing it than anyone else.

What sort of incubation help do Japanese companies need most?
I think that what both Japanese and foreign companies need the most is to understand how the other's business culture is different. Specifically, Japanese entrepreneurs and the Japanese investment community have some understanding of how Silicon Valley equity models work and how [wealth] gets created there, but I think not deep enough. And knowing and doing [are different]. For example, an entrepreneur being able to think of his company that he's creating not as 'my company' but 'our company' -- we being himself, his employees, his investors, his customers, and the difficult implication of that for a Japanese entrepreneur is it's commonly understood in the US that the person -- the personality -- who best fits the creation of a company rarely is the right personality to manage a large company. And so the idea of hiring a professional CEO at some point in the company's development is an idea that is common in the US, but the sense of duty, the association of one's self with one's company -- that very strong 'my company' kind of attitude -- and the feeling that 'I need to be responsible because I created it' is very strong.

And for US companies coming into Japan, it's just the opposite. The US has a well-defined valuation scheme, and so at company creation or first financing, often you'll have companies valued at 1, 2, 5, or 10 million dollars. [But] the Japanese model for valuing companies at formation is: How much cash did the joint venture partners put in, or how much cash did the founder borrow to come up with the $100,000 startup funds [required to form a company in Japan]. So it's all a cash-oriented, post-money valuation model in Japan. And for US companies, understanding that culture, and understanding the relative difficulty of recruiting people and figuring out the startup culture -- how to effectively work in that environment without losing the good elements [is a challenge].

The biggest service we can provide is helping the entrepreneurs of US partners understand that culture gap and come up with creative ways to combine the best of both.

You mentioned the difficulty in finding good people. What sort of people is it tough to find?
I think experienced people of all disciplines. You can find young people [here] having a lot of potential as either entrepreneurs or tech people who want to jump into this, and you can find people in consultancies. The people are out there to be found, but relative numbers -- among the total business population -- [are small]. There's a whole generation or two of people joining entrepreneurial startups in the US, and there's an accepted culture of moving from established corporations to go become the CEO of a startup. Both the willingness of [Japanese] entrepreneurs to bring in seasoned management at the right time, bring in people more senior than themselves, and the willingness for [those seasoned people] to take that risk [are low]. There are certainly people out there ... but they're far fewer, and there's not yet the culture of doing that.

How do you find companies here?
For us, it's been word of mouth. We've had a lot of referrals from people we've talked to and from other VC firms. And then, we've had a surprising amount of response just from press coverage where we've talked about what we're doing. We had an article in the Nikkei in February, and the response was 30 or 40 people. That's been a pleasant surprise. We've [also] had a number of cold calls. When we decided to get into investing, deal flow was a big concern, but my guess is that because we have a somewhat unique team and somewhat different offering, people recognize that and [this is] driving a lot of opportunities our way.

What do you forecast for Japan's entrepreneurial scene?
What I'm seeing mostly in the last six months as opposed to a year ago is a lot more interest by seasoned senior talent out of the trading companies, out of the consultancies, out of the large Japanese corporations who are saying, "The Internet's big in Japan," and there's a new wave of much more experienced people wishing to pursue entrepreneurial opportunities. That's a big change. And the consequence of that will be better and more professionally managed ventures. [We'll see] some of those people will [become] second-stage CEOs of established companies, some will start their own. I think the big change in the next year or so will be in the flow of experienced talent into venture companies in Japan.

Another thing is ... in contrast to when the real estate bubble burst in the late '80s in Japan, this time around, the Internet bubble is creating a wave of entrepreneurialism and creating an environment where seasoned professionals are willing to take a risk. So while the real estate [collapse] basically left weakened banks and financial industries as its legacy, when -- and to whatever degree -- the Net bubble bursts, I believe it'll leave a legacy of people in Japan willing to take risks, willing to create venture businesses, and a whole new process and model by which these are created and by which risks and rewards are shared, as well as a whole community of people involved in venture businesses.

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