500 Startups returns to Japan with $30M fund

As promised, Silicon Valley venture capital firm 500 Startups is returning to Japan.

Speaking on stage today at Tech in Asia Tokyo 2015, founding partner Dave McClure announced that 500 Startups Japan is in the midst of raising a fresh US$30 million fund. DeNA principal investor James Riney, who made a surprise appearance on stage with McClure, will join the firm as head of Japan.

Riney says that 500 Startups Japan could be making investments via the firm’s main fund as early as next month.

“There’s less than US$1.5 billion invested per year for entrepreneurs in Japan,” Riney says. “That’s almost like one fund in Silicon Valley. The latest a16z fund is the whole ecosystem in Japan, so we want to change that.”

You’re probably expecting a cute name in line with the VC’s other Asian funds – 500 Kimchi (Korea), 500 Durians (Southeast Asia), and 500 Tuktuks (Thailand). Sorry to break it to you, but they’re keeping this one simple.

“We thought about 500 Sushi or 500 Samurai, but worried that Japanese people might be offended,” Riney – an American who grew up in Japan and speaks fluent Japanese – explains. “So we did a survey, and more than 60 percent of Japanese respondents weren’t amused by the ‘funny’ names.”

Valley VCs in Japan?

Individual investments from the new fund will range from US$100,000 to US$500,000. Including future follow-on rounds, Riney says 500 Startups Japan could collectively invest around US$1 million per startup.

500 Startups founding partner Dave McClure pictured today at Tech in Asia Tokyo 2015.

In addition to fundraising itself, Japanese startups that catch the attention of McClure and company will benefit from higher visibility on the global stage. This will benefit those seeking coverage in western media and increase the possibility that overseas investors join in on the action.

Despite his tenure at the helm of DeNA’s investment arm, Riney has been somewhat critical of the current state of venture capital in Japan – particularly the dominance of corporate VCs, which are often considered a last resort when western entrepreneurs are looking to raise money.

“There are no brand-name, seed-stage Silicon Valley VCs investing in Japan,” Riney tells Tech in Asia. “The reason corporate VCs dominate in Japan right now is because no one has that brand value.”

Hardware, healthcare

500 Startups Japan will keep an “open-minded approach” when choosing startups to back, but Riney hinted at some hot verticals for the Japanese market.

“The best ideas are the ones that surprise us, so we won’t focus too much on one area,” he says. “That being said, I’m excited about VR and healthcare – especially doctor-on-demand apps. The aging population may open doors, but we can’t assume that just because there’s great tech that they will utilize it.”

He also mentioned robots and drones, in the context of farming. With many young Japanese leaving their hometowns to chase opportunities in Tokyo and other large cities, Riney said that robotics systems and the software on top could be used to remotely manage farms and maximize crop yields.

“People forget that Japan is still the world’s third-largest economy,” he adds. “500 launching a fund was never a matter of if, but when.”

This is part of the ongoing coverage of Tech in Asia Tokyo 2015, our annual conference taking place on September 8 and 9.