Why Line’s IPO won’t be good for Japan’s ecosystem

Messaging app Line’s cute stickers are ready for the big time this Friday for one of this year’s most anticipated IPOs. The app, made by a team in Tokyo, may have won hearts around the world with its kawaii antics, but the IPO is not shaping up to be a big win for the tech industry or startup community in Japan.

That’s because much of the benefit is going to South Korea.

In search of angels

Line was essentially born out of Korean internet company Naver in 2000, even though the Facebook and WhatsApp-battling app itself didn’t launch until 2011. The heritage really shows when you look at who owns the spin-off company. Of the top 20 stakeholders, only five are from Japan.

Line CEO Takeshi Idezawa.

Line Corp CEO Takeshi Idezawa is the first non-Korean name on the list at number six. His stock options give him 0.05 percent of the soon-to-be-listed company, or 96,500 shares. Thanks to the proposed debut stock price of US$32.80 that was set earlier this week, his ownership amounts to around US$3 million. It’s nothing to sniff at, but it’s probably not going to change his life.

Or the Japanese tech industry.

That’s because what Japan needs is more angel investors.

He pushed back against Japanese corporate culture and changed the top-down structure.

Japan has 20 to 30 active individual investors, a number dwarfed by the number of wealthy individuals backing startups in Silicon Valley or China.

Angel investors frequently spring from the success of their own businesses, often after a buy-out or an IPO gives them hundreds of millions or billions in cash as reward for what they’ve spent years building.

“The biggest thing is, there is no money involved. No VCs or anything,” said a prominent Japanese entrepreneur to me, complaining about Line’s unusual upbringing. The individual doesn’t want to be named. “For example if Mercari” – that’s Japan’s latest unicorn – “went public, a number of VCs would benefit and people would get some leeway and feel good about investing back into the system.”

Right now, Japan is in dire need of more angels to boost young startups and grow the new-wave tech industry. But they won’t be coming from the meager amounts of cash going back to the country from Line’s IPO.

The captain is gone

No food on this domestic flight