The "AQ and Ten Commandments" Essential for Ventures

A series of interviews visiting venture companies developing innovative businesses originating in Japan, exploring their passion for their ventures and their vision for the future society. The final installment focuses on venture capital firms investing in startups. Tomoya Okutani, who serves as a producer for hands-on support of startups at Dentsu Inc., spoke with Mio Takaoka, Director of Monex Ventures, the corporate venture capital (CVC) arm of the Monex Group that supports numerous startups including Userbase and Money Forward.

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Monex's Venture Support That Created "FinTech 1.0"

Okutani: First, could you tell us how you came to join the Monex Group, Mr. Takaoka?

Takaoka: Due to my parents' work, I spent my time overseas until university. After graduating, I worked at the Japanese branch of a foreign investment bank. After working at several banks, I joined Monex Group in 2009.

At that time, while numerous services handling money were available for institutional investors, the services offered to individuals were still limited compared to those for institutions. I resonated with President Matsumoto's vision of "creating the future of finance," which aimed to change that. It was also right after the Lehman Shock, and I felt I wanted to be involved in a business more closely tied to people's lives rather than just dealing with large numbers.

Furthermore, when I joined, Monex was beginning its overseas expansion, and I was involved in executing the acquisition of a U.S. securities firm. Around that time, the term "FinTech" started gaining traction in the U.S. In Japan, it became a boom around two years ago.

Okutani: So Monex was truly at the forefront of "FinTech." And within that context, you launched a CVC to support venture companies?

Takaoka: Yes. If we define FinTech as ventures that leverage IT to improve financial services, then Monex itself is FinTech – think of "disrupting trading commissions" or "making financial services like stock lending, previously only available to institutional investors and the wealthy, accessible to individuals." That was essentially "FinTech 1.0." The recent FinTech boom feels more like "FinTech 2.0." Monex Ventures operates with the purpose of supporting ventures that will help us build the "finance of the future" by leveraging technology.

Okutani: It was precisely because Mr. Matsumoto held the vision of "creating the future of finance" that the policy of supporting venture companies naturally emerged alongside advancing Monex's own business.

What Makes CVC Venture Support Unique

Okutani: As Monex Group's CVC, what do you consciously focus on when engaging with startups?

Takaoka: Unlike venture capital firms that raise funds from external investors, our primary objective isn't financial profit. We focus on operating as a CVC. Therefore, when evaluating investments, we prioritize alignment with Monex Group's business. Amidst the tremendous speed of technological innovation, we operate with the perspective of enabling the Monex Group to gather information and build networks for sound decision-making, as well as to discover seeds for new businesses, including through collaboration.

Okutani: So, through supporting ventures, you gain business ideas and cutting-edge technologies, creating synergy across the entire group. What does Monex provide to generate that synergy?

Takaoka: I believe we can primarily offer four things. First is credit enhancement. Whether B2B or B2C, credibility is crucial when a venture starts sales from scratch. Companies like Userbase and Money Forward explicitly stated we were shareholders in their initial service launch materials.

Second is our customer base. Monex has 1.6 million individual customers in Japan alone. For B2B ventures, we also provide access to our financial industry network, opening doors to potential customers and investors.

Third is leveraging our own experience as a financial venture to provide advice. As a regulated industry, we possess expertise in navigating relationships with financial regulators. For instance, we've provided various advisory services in this area to companies like CrowdCredit, which operates investment-based crowdfunding, during their investment rounds.

Fourth, and this is actually quite valued, is having Matsumoto serve as a mentor. Entrepreneurs with proven success in financial ventures are extremely rare, so the fact that Matsumoto says, "I'm always available for consultation," seems to be seen as a strong reassurance.

Okutani: I see. So, the first and second points involve providing resources for ventures to scale, leveraging our position as a large corporation. The third and fourth points involve sharing know-how gained from Monex's own scaling experience as a venture. Venture capital firms that can support ventures from both angles are rare, so I imagine many FinTech ventures would want to rely on you and your team.

The key to investment judgment is "people, people, people"

Okutani: Conversely, when it comes to identifying the right companies to support, what are the key points?

Takaoka: Of course, we rigorously evaluate business opportunities, value propositions, and differentiation factors. But even more than that, we place tremendous emphasis on compatibility – whether we can work effectively with these people.

Okutani: It's about whether we can resonate with the founding members' mindset and the level of passion they bring, right? As Dentsu Inc. expands its initiatives with startups, we deeply understand the importance of that "fit."

Takaoka: So Dentsu Inc.'s support primarily involves marketing?

Okutani: Yes. As an advertising agency, marketing is our core business. We believe it's crucial for startups to focus on their product while we thoroughly consider the market, then combine those elements.

On the other hand, we're increasingly providing support beyond just marketing, extending into management and business operations. Specifically, we have all employees thoroughly discuss and define the mission, vision, and values. By clearly defining the future we aim for, we boost employee motivation and leverage this in communications with investors to facilitate fundraising. On the business side, we support monetization in the early stages shortly after founding, and service design in the middle to later stages.

In that sense, we also have many opportunities to speak with founding members and employees, so we certainly value "compatibility." But what specific aspects do you look at when considering the "compatibility" Mr. Takaoka mentioned?

Takaoka: Since we invest almost exclusively in early-stage ventures, we do look at the business potential. However, we also recognize that pivots (business shifts) are inevitable. Focusing solely on the initial plan can lead to failure. So, our perspective boils down to three things... "People, people, people" (laughs).

Okutani: So it really comes down to "people," doesn't it?

Takaoka: Exactly. Specifically, the first thing is whether we can maintain a good distance. In terms of synergy with our group, partnering with another company might sometimes be better. No matter how much we resonate with them, we don't intend to force an investment.

Another factor is whether we can complement each other. Relationships with portfolio companies truly vary from one firm to the next. Some companies thrive rapidly after investment, needing only our credit enhancement, while others require hands-on support as we struggle alongside them. In any case, we constantly consider whether that sense of fit is visible.

And finally, passion. As Mr. Okutani mentioned earlier, it's about intensity – whether they possess the talent to persevere through tough times. Resilience, which dictionary-wise translates to elasticity or recovery power, but in nuance, "grit" might be closer. On the entrepreneurial journey, where things absolutely never go according to plan, that resilience is incredibly important.

What entrepreneurs need isn't IQ or EQ, but "AQ"?

Okutani: Indeed, the strength to endure through the peaks and valleys is crucial.

Takaoka: Yes. But since founders need more than just that quality, I think it's fine as long as the team balances it out.

While IQ (Intelligence Quotient) has long been used to measure people's abilities, recently the "EQ (Emotional Intelligence Quotient)" – an index of one's ability to control their own emotions and understand others – has been emphasized as crucial. You could also call it the power to engage people. However, a new concept called "AQ (Adversity Quotient)" is now emerging.

Okutani: Adversity—meaning exactly that, facing adversity.

Takaoka: We look at whether a few founding members collectively possess these traits, even if one person doesn't have them all. For the person embodying AQ, I believe passion is the driving force that enables them to perform at their best. Even if opinions diverge, can they persevere with passion?

Okutani: I see. In the early stages, business pivots aren't uncommon, so to put it bluntly, the quality of the team might be more important than the business model itself. The ability to engage and drive others, which comes from high EQ, is crucial, and I also understand the importance of strong AQ.

No matter how good an idea is, it means nothing if you don't see it through. Dentsu Inc.'s fourth president, Hideo Yoshida, left behind a code of conduct called the "Ten Commandments of the Demon," which includes the phrase: "Once you start something, don't let go. Don't let go even if it kills you. Until the goal is achieved..." I often recall this recently while serving as an instructor and judge for accelerator programs.

When I see that kind of burning determination to see things through no matter what, combined with a clear sense of purpose—a desire to benefit the world, help people, or change society—I find myself wanting to champion that person or team.

Takaoka: That's right. I hear Monex also went through several tough years of losses after Matsumoto founded it. But they persevered through the hardships aiming to transform finance, and that has become their strength today. The will to "improve society" becomes a pillar of support even in adversity.

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In the latter half of the discussion, we explore the conditions for venture companies to scale and the potential for establishing open innovation in Japan.

Part 2: " The Right Relationship Between Large Corporations and Startups "