Atsushi Nakayama

Back to Contents of Issue: September 2000

President, Crescendo Venture

by Daniel Scuka

Atsushi "Nick" Nakayama is typical of the new breed of Japanese VCs. Savvy and US-experienced, 37-year-old Nakayama is working to bring venture capital to small firms that traditionally have relied on bank loans to grow -- if they grew at all. His company, Crescendo Venture Capital, specializes in IT ventures, especially those that can stake out significant market share in their fields. The firm, he says, is incubation oriented and extremely agile. One geographic area of interest for Crescendo is Tokyo's Ota Ward, known for its concentration of skilled SMEs (small and medium-size enterprises) turning out precision components for automotive and other industries, practically on a cottage-industry basis. Despite producing world-beating manufactured goods, many have never used computers and are ripe for a little VC disintermediation.
Editor at Large Daniel Scuka caught up with Nakayama recently.

When was Crescendo founded?
This year in March. We placed our first investments on May 23.

What's your background?
I was working for Nomura Asset Management until this year in February. I started in Tokyo as Japanese small cap analyst and Japanese equity fund manager, and then moved to New York at the end of 1990 as technology analyst and US small cap fund manager. I also picked up a lot of English. I came back to Tokyo in 1994, and from 1996 until I left, I was in charge of the Nomura Global Growth fund, which came out as the top-performing fund three years in a row. We introduced a team-style, global base bottom-up approach for analyzing corporations into our fund management, and now everybody is using it in one form or another. It was tough to leave.

What did your company say?
I think I'm a sort of a pioneer in terms of Japanese investing. The team-style of fund management that we used at Nomura five years ago was not familiar to the industry in Japan. I felt that I had done all I could at Nomura. If I had stayed, I probably would have been promoted, so I felt that I could do well on my own.

So you came back to Japan and founded Crescendo? With partners?
Yes. The management team is three right now. One is ex-Nomura Securities with a background in investment banking for venture support. Another is ex-Goldman Sachs. We've been working together on and off for almost 10 years.

What's Crescendo's investment style?
Our investments start with discussions, usually after being introduced by third parties. Then we provide consulting services. One or more of our management team will join the venture as a director or in another capacity. Normally, the venture has great technology, or understands technology very well, but they lack basics like accounting skills. We can help -- those services are free. We are following classic Silicon Valley style, except all the original Silicon Valley VCs have now become too big--they don't do what we do anymore. We aren't aiming to become too big -- independence is more important.

Our focus is mainly seed to first round, but we want to continue consulting right up to IPO -- usually two to three years. Until last year, IPO was the only strategy. But the culture of ventures is changing, and I think the MBO option is becoming significant even in Japan.

What's your target for the first 12 months?
We'll invest $30 to $40 million. Before launching Crescendo, we had already started incubating several companies, so we had already invested our own money -- we'll transfer these to Crescendo.

How are you finding the ventures?
So far, we've done well with introductions by colleagues. We haven't spent any money on marketing. Officially and unofficially, we have a lot of contacts amongst lawyers, accountants, and other professionals -- the assistance is mutual. Because of the lack of seed money providers, even large VCs are introducing themselves to us. We're also getting some help from our ex-colleagues in the securities companies. Of course, they can't help officially.

Are there other new-style VCs like Crescendo?
Some. The VC industry is still immature, so very few have built up careers in venture capital. There's a need, though. Many of the top managers at IT companies in Japan want to launch [Net] ventures, but they don't know who are the right people to help. That's where VCs are needed.

Of course, CFOs, CMOs, and CEOs are also needed. There's no lack of technology here -- there are lots of CTOs, but we can help with the missing management talent. There are lots of marketing people with retail sales experience around, but it's still tough to find CFOs. One of Crescendo's managers will serve in these capacities for an initial six months or so, then help hire a permanent replacement.

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