One of the original investors in Japan’s second-largest social media company, Gree, says investors are too focused on ‘old Japan’ – the Toshibas, Sonys, Toyotas – that made Japan what it is today.
Instead, he believes, they need to focus much more on the country’s fast growing sectors such as the Internet in order to get bigger returns. “Old Japan is slow, bureaucratic and at the same time is not able to adapt to changes. New Japan is entrepreneurial, more global, nimble and at the same time more digitalized,” Yoshito Hori, Managing Partner at Globis Capital Partners, told CNBC.
Hori, who oversees about $400 million in venture capital funds, saw 100 times return on his investment in Gree when it listed in 2008. Gree now has about 25 million users, a market cap of $7.5 billion, and its founder is among Asia’s youngest billionaires.
“In the case of social media and the Internet, growth has unlimited potential. Growth margin is close to 100 percent, fixed cost is low and investment is low and you don’t need much R&D,” Hori said.
Another mistake investors make, according to Hori is that they focus too much on Japan’s GDP growth and consumer prices. “We have had 20 years of stagnant economy – stagnant doesn’t mean no growth.” He explains that during the past 20 years some sectors have been growing very fast while others have been declining.
He said Japan still has plenty of advantages as the world’s third-largest economy, such as a high per-capita income.
Hori’s next bet is on an insurance company called Lifenet, which is reported to be considering an IPO in early 2012. “Lifenet has no sales forces, they sell online and have a low fixed cost....they can come up with low priced products....and it has a high potential for big profit margins,” Hori said. His firm has invested about $10 million in Lifenet for a 5 to 10 percent stake.