Local issues are startup opportunities: IMJ’s Saito

Koichi Saito, who was earlier with IMJ Partners is starting a new VC fund

On a lookout for promising startups, Japanese startup accelerator IMJ Investment Partners claims to have found a gold mine of high-potential startups in the region of Southeast Asia. In fact, the accelerator has decided to dedicate its resources and its VC(venture capital) fund to support enterprises in the region and in Japan.

IMJ Investment Partners’ director Koichi Saito spoke to DEALSREETASIA during his recent visit to Manila to meet up with founders of prospective startups. He talked, in detail, about different countries in the region and the pros and the cons of their emerging startup ecosystems; especially the importance of the market size.

According to him, the “problems” of SEA region are actually the biggest “opportunities” for the startups here. Again, he foresees a lot of acquisition-oriented interest in the region, especially from the larger corporations from Japan and the US.

Recently, the company partnered Philippines’ largest pharmacy network, mClinica; a startup that creates digital infrastructure connecting pharmaceutical companies directly to pharmacies for better delivery of healthcare).

Here are the excerpts from the interaction:

How long has IMJ been investing in startups?

It’s already been a year and half in Southeast Asia but we actually started from Japan in 2012. We have done 10 investments in Japan, 10 in the US, and 11 investments in Southeast Asia since 2013, as we saw more potential there. We even moved our headquarters from Japan to Singapore. Since 2012, we have already invested between $4 million to $5 million in startups in Japan, US and the Southeast Asia.

In the Philippines, we invested in ZipMatch last February. The revenue  for lead generation of the real estate developer almost failed. Now its revenue has skyrocketed and the number of employees are increasing quickly.

Between the IT and the non-IT startups, which ones do you prefer most and why?

If the business is offline, most likely the growth rate will take a much longer time. We cannot wait for that long. IT startups are more suitable for our investments. We have never invested in a business in a new restaurant or cafe because it takes time and one will have to use a lot of cash or CAPEX in the beginning. In IT, you only need a small initial amount of money or low CAPEX.

Which is a better place for a startup in Southeast Asia?

There are always pros and cons. In Singapore, there are a lot of investors and a lot of chance to get a grant from the government. I think the government is almsot indulging the startups . The ecosystem of startups in Singapore is very good but very costly, and it has a small market. Usually investors treat Singapore as testing a market before going to other areas.

Personally, I like local startups in Indonesia, Philippines and Thailand because they (the countries) already have a decent market size. For investors, it’s easier to scope them out as they don’t really have to think too much about regional expansion.

The situation is different in Malaysia. The startups there, have to go expand as the market size is small. Again, Malaysia does have a good sized population, an established banking system, logistics, operation function, and talent. Its a good place for a startup, targeting a smaller market

The Philippines is a good starting point because it has good access to the US and I really hope more and more investors from the US come here. The country has a decent market size with its 100 million population and people speak English.

Also, the startups (SEA) have a lot of issues or opportunities that need to be solved. Like the pharmacy business in the Philippines, the industry is so fragmented. There are a lot of individual pharmacies and they don’t have one uniform software.

There are a lot of problems like that in Southeast Asia and I like the fact that startups like mClinica are solving real issues. I have never seen this kind of business scenario in Japan or in the US because we already have the tech.

For example, in Vietnam, I met some startups that are trying to solve the issues in the car rental market. There are a lot of car rental business owners but users cannot compare prices and services well. On the owners’ side, they don’t have the software for the customer data. Startups are solving these kinds of problems. You see, problems are opportunities.

What is your criteria for investing in a startup?

It needs to have a good team profile. Second, is the market size and business model. I look at education and working background too, especially if they have the experience and know the industry very well. Also if they have the clout or network to reach out to their users.

How can a startup attract more investors?

A good founder can find good people and create a strong team to clarify what is the real problem or opportunity here. Once the problem is identified well, you can determine the solution. There are many ways of solving a problem; but the problem should be very clear.

Startups need to present and then identify the problem they are going to solve or address.
For the venture capital side, we have to bring good company exits and then young people will also consider the startups. Success depends also on how you define it. It could be about funding, going to IPO, or having a good exit.

What do you expect of the startup space in the Philippines?

I don’t really expect many startups will go for an IPO here, especially the ones in the IT industry. I think there would be more company acquisitions by large local companies. I expect Japan and Korean companies to buy startups here.

In Japan, the market is matured and growth rate is stagnant. A lot of large corporations are looking for growth opportunities outside Japan and I really see a lot of them coming to the Philippines.

For IMJ, we will be testing a lot of startups here. We see a lot of talent especially Filipinos who have studied and worked in the US and are coming back to establish companies here. I think there would be a lot of startup acquisitions too from US companies.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.