I received an email letting me know that the Netage Group had been listed at an opening price that was twice its public offering. I had just finished speaking at a technology conference hosted by the American magazine Red Herring in Hong Kong when the email arrived.
I had been a lone warrior fighting the good fight at the conference in describing how Japan is now at an evolutionary threshold facing sheer opportunity, while most of the audience had been focused on China and India. The email announcement of Netage's success unwittingly reconfirmed what I had said, and in the excitement following my speech, I was in the mood to celebrate.
I have known Mr. Kiyoshi Nishikawa of Netage for nearly 10 years. We had first run into each other after a speech I had made near Gotanda at the invitation of Michihiko Kawamata, the president of Tsukasa Downtown Development, which is famous for the operation of the Weekly Mansion. Mr. Nishikawa was in the audience.
As we exchanged business cards, Mr. Nishikawa remarked that he had just changed jobs to join AOL, and since he was interested in ventures, he had come to hear my speech. "In that case," I replied, "there's a study group I run myself, why don't you come along?" This invitation marked the beginning of our friendship.
The study group I was referring to, called the MBA venture workshop, was started around 1995.
I graduated from Harvard Business School in 1991, and since MBA students at that time were still conservative, I was ultimately the only one who actually started up a venture company. (Afterwards, Ms. Tomoko Namba started up DeNA, but that was nearly 10 years after graduation). I had started this group driven by a sense of regret that I had not been able to get many of my MBA contemporaries involved in the world of venture.
I wanted MBA graduates to actually apply the knowledge and wisdom acquired through gaining their degree in the world of venture, and I decided to start a study group for those who were interested in ventures and had gained an MBA within the last three years.
The study group was open to those who intended to either start a venture company or to support venture companies in the future.
Once a month, participants would assemble in the GLOBIS classroom, and together we would learn about ventures through activities such as inviting guest speakers or discussing business plans.
A number of venture capitalists eventually came out of this group, including those like Mr. Mikitani of Rakuten, (who had at that time retired from The Industrial Bank of Japan and established Crimson Group), Mr. Hiroki Hayashi of Dream Corporation (then in the midst of start-up preparations), which is famous for Bagel and Bagel, and Mr. Shinichiro Nishino of Fujisan Magazine Service (who at that time was at NTT and subsequently set up Amazon.com in Japan).
As someone who began supporting venture capitalists after participating in this study group, Mr. Soichi Kariyazono become a partner of Globis Capital Partners (GCP).
Mr. Nishikawa joined this study group, where he became acquainted with Mr. Nishino, Mr. Kariyazono and others, and they brainstormed ideas and mulled over business concepts. Then, in February 1998, he established the Netage Group.
Obviously, GLOBIS completely supported Netage right from the start by investing in Netage as a venture capital and having Mr. Kariyazono join as an external executive director.
I visited the Netage office in Shibuya several times. After removing my shoes and entering a room in the apartment, I noticed several part-time staff who looked like students. The room was steeped in the very essence of venture.
Mr. Nishikawa subsequently hit it off with Mr. Satoshi Koike of Net Year (at that time), and developed the Bit Valley movement.
They named it Bit Valley by taking the "bitter" from the Japanese word, "Shibu" of Shibuya, and the word "ya," meaning "valley." Mr. Nishikawa told me that this was also a play on words based on the computer digital unit, bit. "It's a great name, don't you think?" Mr. Nishikawa said.
He consequently gave this name to the area in Shibuya where many Internet-related venture companies had gathered and held monthly meetings—more like study sessions. Many Internet entrepreneurs emerged from Bit Valley.
While some young entrepreneurs launched the wildly successful public offerings of such companies as Livedoor and CyberAgent, Netage has continued to steadfastly focus on being an incubator for creating many enterprises.
The young people who gathered at Netage subsequently raced ahead to become third-generation entrepreneurs. One of these is Mr. Kasahara, who created mixi.
Mixi took off with substantial support from Netage.
So more than eight years after its establishment, after seven years and seven months of investment from GLOBIS, Netage was prepared for the much-awaited achievement of going public.
With a public offering price of 600,000 yen, an opening price of 1,200,000 yen and a closing price of 1,400,000 yen, this was a fantastic beginning. (forty times the original investment cost for GLOBIS).
Netage's public listing was particularly significant for the GLOBIS Fund No. 1.
Now, six out of thirteen investments from the Fund No. 1, had become listed companies, including the The Goodwill Group, Fullcast, FISCO and Works Applications.
The sole remaining company was Dream Corporation. If this company were also to become listed, our track record would rise to seven out of thirteen, in other words, over half the businesses we invested in would have gone on to become listed companies.
In addition, in terms of investment performance, a return of better than seven times the original investment meant we could easily cover our investment costs ten times over.
Needless to say, while this level of return in itself delights me as a shareholder, I really want to congratulate Mr. Nishikawa purely as a friend. My relationship with him goes far beyond that between a shareholder and manager; it's really closer to being fellow entrepreneurs.
Mr. Nishikawa must have been incredibly busy just four days prior to his company being listed, but he was kind enough to come along to the Young Entrepreneurs' Organization BBQ party I organized at my mountain lodge in Karuizawa. Looking back, I can even recall going to clubs with him in Minami Aoyama. To me, Mr. Nishikawa will be eternally youthful with a perpetual vitality.
I see even greater things ahead for Mr. Nishikawa and Netage, and with that thought I'll close this column.
Congratulations, Mr. Nishikawa. When you have a moment, let's get together again. :->
August 30, 2006
In the hotel, Hong Kong