Unlikely venture star bags 35% returns by mining science papers

Goji at UTEC’s office in Tokyo.

Japan isn’t known for its startup culture. Tomotaka Goji, a bureaucrat-turned-technology guru, is working hard to change that.

The 51-year-old runs a low-profile venture fund in Tokyo that has quietly built a track record that would make Silicon Valley’s finest envious. He’s done it by blending his experiences at Stanford University with intellectual connections to the prestigious University of Tokyo.

His firm, University of Tokyo Edge Capital Partners, concentrates on turning academic research into commercial businesses. With a doctorate in data science, Goji uses big data and artificial intelligence to uncover promising research results in fields like material sciences and chemistry. The result is 35 percent yearly returns at one of his funds since its founding in 2018, the best in Japan for any fund of more than 10 billion yen ($75 million) according to one survey.

“Historically, Japan had several periods where startups were very successful,” Goji says during an interview, citing the Meiji Restoration and the post-World War II years. “But after the 1980s or 1990s, we haven’t had enough successful startups.”

The world’s third-largest economy trails far behind the US and China by almost every metric, from venture money invested to the number of startups worth $1 billion or more. While the US has more than 600 so-called unicorns and China tops 150, Japan has six, according to the research firm CB Insights.

No one can blame Goji. In 1997, he took the lead in writing Japan’s first legislation for venture capital investments while he worked at the Ministry of Economy, Trade and Industry. He was only a couple of years out of the University of Tokyo, but no one else at METI was interested. The law, passed in 1998, limited the liability of investors in venture funds for the first time, but Japanese still shied away from early-stage startups. “I was very disappointed,” he says.

Goji went to Stanford business school in part to understand the magic of Silicon Valley. He started in 2001, the heart of the dot-com bust, and found motivation from lecturers like Vinod Khosla, a partner at the venture powerhouse Kleiner Perkins. “I was very inspired by his perseverance,” he said.

Shortly after returning to Japan in 2003, he resigned from METI to start his first venture fund. “My bosses were angry about my decision,” he said. “I had to pay back my tuition. It took four years.”

It took Goji a few years to get his venture efforts going too. After setting up UTEC in 2004, its first portfolio company went public in 2009. Even then, it was a modest success, and at one point all the employees at UTEC left—except Goji. “I had no place to go,” he said, adding that he felt an obligation to the 150 investors who had put money into his early funds.

His real breakthrough came a few years later with PeptiDream Inc., the brainchild of a chemistry professor at the University of Tokyo named Hiroaki Suga. He had done innovative research into peptides—or short chains of amino acids—that can help make new drugs more effective. UTEC helped connect him with Kiichi Kubota, a businessman who became chief executive and help turn the research into a business.

In 2013, they took the company public in a blockbuster initial public offering. PeptiDream has signed collaboration deals with US drug makers Eli Lilly & Co. and Merck & Co. and now trades on the Tokyo Stock Exchange at a market value of about $2 billion.

That approach has become something of a template for Goji. He believes the research in Japan is world class and the key to success is finding a path to commercialization.

“Goji-san really has strong leadership in the space,” said Kaoru Onishi, who oversees alternative investments at Nissay Asset Management and has backed UTEC since 2004. “They focus on the deep tech and life science sectors; no other player like them exists in Japan.”

Goji urges Japanese founders to be ambitious. Many settle for building a modest business within the country and shy away from expansion overseas. He thinks going global is critical to gaining real scale—and international success.

“We have been keen on enabling our startups to be global based on their scientific or technological strength for years” Goji said.

Those include OriCiro Genomics KK, which helped speed up the manufacturing of mRNA used in Covid-19 vaccines, and was the first company acquired by US drug maker Moderna Inc. Another firm, Boston-based 908 Devices Inc., which makes hand-held medical devices that detect and identify chemical threats, listed on Nasdaq in 2020.

Iwao Yoshino, CEO of Microwave Chemical Co., said Goji and UTEC excelled at understanding their technology and then helping them grow.

“When we were a small company and people were suspicious of us, it was helpful that they were able to provide a network and introduce us to major clients,” Yoshino said in an interview.

Goji thinks Japanese founders should opt for selling their companies more frequently, rather than taking the path of going public domestically—which lets them stay in control. Some 76 percent of Japanese startup exits are through IPOs, while 24 percent are via mergers or acquisitions, according to data from METI. In the US, 90 percent of exits are M&A.

There are signs of progress. Japanese startups raised a record 877 billion yen in 2022, according to INITIAL Enterprise, which collects data for domestic startup funds. That’s roughly ten-fold the figure in 2013.

Perhaps more telling, 25 years after Goji began to advocate for startups in Japan, the effort is gaining support from the highest levels of government. Prime Minister Fumio Kishida’s administration plans to pour 10 trillion yen into Japanese startups through direct investment and tax incentives. The goal is to increase the number of unicorns tenfold by 2027.

UTEC oversees 86 billion yen of assets, and closed its largest fund yet in 2021.

Goji doesn’t regret leaving METI, one of the most coveted jobs in Japan. He says his days in the US made him realize that there are benefits to working in both the public and private sectors.

“Serving the public is not just doing government work,” he said. “Doing business can be more effective.” With assistance from Ken McCallum/Bloomberg

Image credits: Bloomberg


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Previous Article

Experts say attacks on free speech are rising across US

Next Article

Warmer Arctic tests troops training for subzero warfare

Related Posts