Silicon Valley "Rules" All Japanese Companies Should Know – US VCs Talk About The Current State Of The Local Ecosystem | 【東京都主催】海外進出支援プラットフォーム「X-HUB TOKYO」

Silicon Valley “Rules” All Japanese Companies Should Know – US VCs Talk About The Current State Of The Local Ecosystem

vol.09

2018.08.30

Silicon Valley is home to the headquarters of such IT giants as Google, Apple, and Facebook. Known as the “Holy Land of Innovation,” the area continues to attract entrepreneurs and investors from around the world, creating the world’s leading startup ecosystem in the process.

That’s why X-HUB TOKYO, which supports overseas expansions of Japanese businesses, has invited four US West Coast VCs and accelerators to “The Present and Future of Global Ecosystems ~ Silicon Valley Edition” event. What do Japanese startups need to do to succeed in Silicon Valley, and how best to utilize the local ecosystem? That’s what the guest speakers have discussed.

This article will cover the Q&A session featuring four accelerators and venture capitalists: Alchemist’s Michia Rohrssen, Genentech’s Erica Chain, Catapult’s Jonathan Tower, and Venrock’s Steve Goldberg.


To Succeed, Japanese Companies Have To “Network”

Alchemist’s Michia Rohrssen

Q1: What do Japanese companies have to do to grow their business in Silicon Valley?
At the startups that we are supporting, the very first thing we do is set up a “customer advisory board” compromised of clients who can give us feedback on our product ideas.

We call or e-mail the most insightful clients and ask for their opinion about our product. If at that time we can’t get any feedback from anyone, we decide that the idea isn’t suitable for us and we try to think up of something new from scratch.
Q2: Has fundraising in Silicon Valley changed significantly?
There are more VCs investing in early-stage startups than there used to be. Also, more and more major VCs are investing huge amounts of money into the ecosystem. However, every year the hurdles that you have to overcome to get the money get higher and higher, making it very difficult for startups to make it here.
Q3: What do Japanese companies have to plan for in order to secure funding in such an environment?
They must network with VCs and investors. Most investors will only agree to meet with you if an entrepreneur they know introduces you to them. If Japanese companies want to be taken seriously, they cannot neglect networking.

When I moved from South Carolina to Silicon Valley to start my own business, I started making connections by joining a local accelerator program in order to meet an investor who attended the same university as I did.

A Mission You Can Fall Back On Is An Entrepreneur’s Greatest Weapon

Catapult’s Jonathan Tower

Q1: What do all successful Silicon Valley entrepreneurs have in common?
I think it’s their passion and drive that really resonate with investors. Investors are really attracted to entrepreneurs who are driven by their mission first and business profits second. When all members of a team believe in their mission, then even when trouble arises, they can fall back on their guiding principle and change their business model or even industry without any problem. Companies that are able to do that end up having the highest rate of success.
Q2: Will Silicon Valley be able to retain their status as the innovation capital of the world?
Yes, I think so. I believe that Silicon Valley will create all sorts of cutting-edge innovations in the fields of robotics, AI, self-driving cars etc.

However, there are other cities which have already dominated some of those fields. For example, Pittsburg is currently the place to be for AI engineers. That’s where cutting-edge AI research is being conducted at Carnegie Mellon University, where local startups are hiring Carnegie Mellon researchers, and where the most advanced products are being developed.

Venrock’s Steve Goldberg

Q1: What are some of the mistakes that too many startups make?
Startups make their biggest mistake when choosing their market. VCs that hope to create a unicorn company don’t usually support entrepreneurs who are aiming for small-scale markets. Businesses operating on volatile ground will never be able to become unicorns. So, if you choose the wrong market, you will have trouble with fundraising.

Another mistake is putting all your efforts into product development without securing the time to interact with your customers. Entrepreneurs like me with engineering backgrounds tend to make this mistake a lot.
Q2: What is necessary to secure funding in Silicon Valley?
Many VCs like to invest in startups that are headquartered in the US. The reason for that is simple: it’s easier to see how a business is doing when they are nearby. That’s why it’s important for Japanese companies to have one of their executives in the US. It wouldn’t even hurt if everyone except the CEO resided abroad.

Also, in Silicon Valley, it’s considered good manners to turn over all the necessary information to potential investors so that they can make their decision. You must be able to prove how the product will do in a given market, how your company matches up against the competition, whether you’ve managed to secure enough personnel etc. It’s not just about the product itself. You must also show that your financial situation is stable and that you have a solid business plan. The second people think that you “don’t know the rules of Silicon Valley,” they won’t consider you as a potential investment.

In The Healthcare Field, Data Is The Key To Success

Genentech’s Erica Chain

Q1: Genentech is a VC specializing in the field of healthcare. What is the current situation with healthcare startups in Silicon Valley?
There are two main trends dominating the field right now. The first is to put all the attention on the “patients” by making them wear wearable technology that records data in real time, which we can then access whenever we want. The second one concerns itself with “data.” By allowing not just business people but also academics and really just everyone to play around with the data, we hope that someone out there will create something useful to the field of healthcare.
Q2: Are there successful foreign healthcare startups in Silicon Valley?
It’s still hard for foreign companies to succeed here. For example, after NOKIA purchased the French healthcare startup “Withing,” they had trouble growing their business in Silicon Valley and ended up selling it off. Overseas companies must overcome such hurdles as an unfamiliar legal system and regulations, which makes it difficult for them to penetrate the market. That’s why you’ll find more US businesses in Silicon Valley.
Q3: What kind of problems do foreign healthcare startups face when expanding to Silicon Valley?
Being unfamiliar with the law and regulations. For example, in the US, you not only need permission from the government to get your product into patients’ hands, but also to simply give them medical advice. If you want to expand into the healthcare field, it’s very important to familiarize yourself completely with all the regulations.

From what the four VCs and accelerators shared about their real-life experiences in Silicon Valley, it became clear that the area is ruthlessly competitive. The old saying goes: “When in Rome, do as the Romans do,” but as the leading hub of global innovation, Silicon Valley has its own unique set of rules. Any startup that wants to expand into this severe ecosystem must first overcome a lot of obstacles standing in their way, but even if they manage to do that, someone might still question whether they’re guided by the right “mission” or not.

Going forward, X-HUB TOKYO will continue its “mission” of supporting Japanese startups boldly challenging themselves overseas.

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