Venture Cultivation Theory from an Angel Investor Respected by Google: Interview with TomyK's Tomihisa Kamata, Part 1

This time, we spoke with Tomihisa Kamata of TomyK Ltd. about nurturing tech ventures (startups centered on technology applying the latest science and technology). TomyK aims to support the founding of ventures with unique technologies as an angel investor and cultivate them into global ventures. Mr. Kamata himself is a multifaceted figure—an engineer who shaped an era by developing the i-mode browser, an entrepreneur, and a manager of a publicly listed company. Recently, he successfully sold SCHAFT, a robotics venture originating from the University of Tokyo, to Google. Over two installments, Mr. Kamada will share how he supports the creation of new products by promising, up-and-coming ventures.

Nurturing ventures that can create new industries generating new employment

Nakajima: Mr. Kamada, I'd like to ask how you engage with entrepreneurs aiming to go global from Japan, particularly those in tech and hardware ventures. First, could you explain why you define yourself as a "startup booster" rather than an investor?

Kamata: Having managed ACCESS, a software company, I believe that innovations with significant societal impact must have technology at their core, which is why I focus on technology. Japan faces a declining population trend due to its aging and shrinking population, making social security a major challenge. The senior population also needs to work, which threatens youth employment and creates competition for jobs.

Unless we create new industries that generate new employment, Japan will face a downward spiral and reach a dead end. To address this challenge, I believe we need innovation that sparks the emergence of new companies, transforming their fields into major industries. That's why my motivation is to create tech ventures that, even if they take some time, will have a massive impact when they succeed.

Nakajima: That's a very ambitious vision.

Kamata: Ambitious, but necessary, right? So, what must we do to achieve it? Since tech ventures are built on engineers, running the company itself is uncharted territory. Of course, there are cases where someone is deeply interested in management, and the technology follows. However, many tech ventures lack management experience, and I believe the most difficult phase is getting the company off the ground and into a somewhat stable form.

Therefore, I'm considering providing angel investment if necessary to help launch these ventures together. It's about diving deeper into incubation (early-stage support) and making the leap together. Like a rocket launching with its booster, I want to be a "Startup Booster," providing solid support until the venture gains traction, reaches orbit, and attracts investment from private venture capital (VC) firms.

Nakajima: So, it's just before the VC stage. Did your own broad experience as a researcher, entrepreneur, manager, and investor significantly shape this approach?

Kamata: Yes, that's right. I've experienced many failures myself and have gone through the entire process from starting from scratch to going public and M&A. So, I generally understand where young venture managers are likely to stumble. I want to offer advice to help them shorten that path even a little.

Without the novelty of creating the framework itself, it won't lead to major innovation.

Nakajima: That's certainly reassuring. Looking at TomyK's list of startup partners ( http://tomyk.jp/activity/ ), you see tech ventures spanning diverse fields like robotics, IoT (Internet of Things), space, and DNA analysis. What criteria do you use to select industries?

Kamata: Fundamentally, if I'm not interested, I can't muster the enthusiasm, so I choose fields I genuinely like. In recent IT-related technologies, platforms are largely dominated by US players, centered around smartphones and the cloud. Building a business on that foundation can lead to a certain level of success, but without the novelty of creating the framework itself, it won't lead to major innovation. We focus our support on ventures with that kind of potential.

Nakajima: There aren't many people like you, Mr. Kamata, who act as "startup boosters," are there?

Kamada: The typical VC return model involves investing when a company has already shown some promise, aiming for an exit (selling shares for profit) within 5-7 years. From an investment efficiency standpoint, this approach is very poor and time-consuming, but I'm passionate about tackling the stage before that.

I believe Japan needs far more angel investors. Compared to Silicon Valley, we still have very few. In the US, out of roughly ¥5 trillion in annual venture capital investment, about ¥2 trillion is said to come from angels. Even though Japan's venture investment is growing, it's still only around ¥200 billion, and the proportion coming from angels is likely very small.

To frame it a bit more broadly: if we consider the journey from a startup's emergence to its success and eventual transition to becoming an investor as one round, and roughly one round equals 10 years, then completing three rounds (30 years) would boost the venture market not just threefold, but at a cubic pace. For example, I currently invest in about 10 companies. If each of those companies similarly supports 10 more companies, and the 100 companies that grow from there each support 10 more, we reach 1,000 companies. This thickening of the investment ecosystem is the ideal.

Nakajima: Mr. Kamata, I think you're painting a grand context: creating valuable innovation amid the irreversible megatrend of a declining birthrate and aging population, generating social impact to create wealth and build industries. This differs from the mindset focused on service-based profits and aiming for an IPO.

Kamata: For instance, I do think it's important to quickly succeed with social game startups. However, as ventures representing Japan, I believe it's also good to see ventures emerging that lean more towards technology, not just games. I hope to see the emergence of entrepreneurs capable of much larger-scale ventures.

Also, whereas hardware ventures used to require immense resources to expand globally—like building sales networks and sales teams—today's environment allows immediate global targeting. You can sell online and promote via social media. If the idea is good enough, you can take it worldwide. At TomyK, we aim to support ventures that "target the world from the start" and operate in Japan too.

The first challenge startups face as they grow is hiring people and building an organization

Nakajima: What is the ratio or time allocation for your involvement with ventures?

Kamata: As mentioned earlier, we currently support about 10 companies. During fundraising phases, we advise on business plan creation or connect them with VCs. Since one of our portfolio companies is almost always in a fundraising phase, it's quite busy (laughs).

Also, since investment decisions are usually made immediately, I spend time advising portfolio companies.

Nakajima: In advertising agency work, I regularly interact with advertising directors, marketing directors, brand managers, and often engage with corporate executives from a marketing perspective. As an entrepreneur yourself, what challenges do startup founders typically face?

Kamada: First, when envisioning the future and setting the company's direction, the initial vision doesn't always materialize. So, there's the strategic challenge of figuring out exactly where to aim. Also, if you're in a B2C business, you can plan things yourself, like using online sales. But if you're in B2B dealing with large corporations, if you don't handle it well, you risk being swallowed up. That's why you need to think about contracts and transactions purely as business.

Nakajima: One wrong move in negotiations could easily turn you into a subcontractor.

Kamata: That's where you must strategically consider multiple options: whether to accumulate know-how instead of taking on contract work, lower prices in exchange for securing rights, or grant some rights in return for business commitments. Before determining which is best, I often suggest that various options exist. After presenting the choices, it's up to the management to decide which is best for the company.

Nakajima: In my own interactions with startups, I often find that when we successfully find a mutually beneficial outcome, it's frequently because someone like you or a VC has provided advice. That approach seems to lead to smoother transactions.

Kamata: There are also challenges with hiring and building the organization. Startups often begin with a close-knit group of friends and gradually enter a phase of hiring more people. At that point, hiring the next wave of people after the founding members can become a significant challenge.

On another note, tasks like accounting, labor relations, and social insurance procedures are time-consuming. Even if you delegate these tasks, founders still need to understand the underlying processes. It's also problematic to compromise on hiring due to resource constraints, but you can't just wait forever for the ideal candidate either. I often get consulted on striking that balance.

Nakajima: When addressing these concerns, do you teach them the mindset for hiring? Or do you specifically introduce people from your own network?

Kamata: I've made my fair share of hiring mistakes, so I start by teaching the mindset. It's not just about competence; it's also about whether someone fits the company culture. Fundamentally, if you're considering hiring someone as a core team member, the most important thing is whether the founder believes they can endure the hardships and walk the path to success together. If you need the resources but lack that level of conviction, I also advise trying a contract or part-time arrangement for a while. We also refer good candidates to each other among startups when someone is a great fit for another company but not for ours.

Nakajima: Those kinds of information-sharing platforms have definitely increased. Recently, various events happen daily, including engineering study sessions.

This time, we heard about Mr. Kamata's investment philosophy and the challenges startups face. In the second part, we'll explore collaborations between startups and large corporations, as well as the future of media.