What Over 20 Years of Capitalist Experience Has Taught Me

Junichi Taguchi

General Manager, Investment Department 2, Mitsubishi UFJ Capital Co., Ltd.

Born in 1974. After graduating from the School of Commerce at Waseda University, he worked at Deloitte Tohmatsu Consulting (now ABeam Consulting) engaged in business improvement consulting.
Since November 2001, he has been involved in venture capital investment at Diamond Capital (now Mitsubishi UFJ Capital), handling investments in a wide range of sectors, including IT (manufacturing and software) and service industries, for over 20 years. After the Lehman Shock, he has focused on investments in X-tech, media, and content, ranging from seed to later-stage investments.
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【Main investments】
Hololab Inc.　　　　　　　 https://hololab.co.jp/Spider Labs Inc. 　　　　　　 https://jp.spideraf.com/AppBrew Inc.　 　　　　　　https://appbrew.io/Tribeau Inc.　　　　　　https://corp.tribeau.jp/ROXX Inc.　　　　　　https://roxx.co.jp/Trinity Technology Inc. https://trinity-tech.co.jp/VARK Inc.　　　　　　　 https://vark.co.jp/Parallel Inc.　　　　　　https://www.parallelcorp.com/Funds Inc.　　　　　　　https://corp.funds.jp/

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A 48-year-old VC with over 20 years of experience.

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- Mr. Taguchi, you have been an active capitalist for over 20 years, and have been with Mitsubishi UFJ Capital (MUCAP) throughout. From your perspective, could you share the unique features and appeal of MUCAP?

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MUCAP was established in 1974 and has been engaged in venture investments for 48 years. Since it became Mitsubishi UFJ Capital in 2005, the company has made over 1,400 investments and invested more than ¥80 billion (as of May 2022). This makes MUCAP one of the top venture capital firms in Japan in terms of both investment volume and the number of IPOs among its portfolio companies. In recent years, the firm has continued to make approximately 90-100 investments annually.

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- What is MUCAP's position within the Mitsubishi UFJ Financial Group (MUFG)?

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MUCAP is a venture capital firm within the MUFG group. The funds it operates are joint partnerships with MUFG Bank, but unlike a typical CVC, MUCAP independently makes investment decisions across a wide range of sectors and stages to actively support startup companies.

Currently, there are over 40 capitalists at MUCAP, with a staffing ratio of about 2:1 between seconded employees from MUFG Bank and external hires like myself.

In terms of value-added support for portfolio companies, MUCAP leverages its extensive network within the MUFG group, including banking, trust, and securities networks, to provide a wide range of assistance such as expertise and collaboration in sales efforts.

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- Could you also share details about MUCAP's investment areas, investment stages, and the company's overall approach?

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As a Japanese bank-affiliated VC, our mission is to broadly support the startup and venture industry, contributing to its growth. While we also manage a life sciences-focused fund (approximately ¥10 billion), our firm does not specialize in any single sector. Regarding investment stages, we cover a wide range from seed and early-stage to later-stage investments. The typical investment range per company is between ¥10 million and ¥500 million.

The standard investment review period is between 2 to 4 months. However, we make sure to have sufficient discussions and communication before making a decision. Especially with startups, where the leadership team often plays a key role, it is essential to assess not only business acumen but also align on values and ensure compatibility. We find that it is often smoother to establish contact in a more casual, exploratory phase rather than when financing needs become urgent and timing becomes critical.

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- Could you share why you have stayed with MUCAP all these years, and what unique strengths the firm offers that other companies may not?

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I believe one of our strengths is the long history of consistently conducting VC activities in Japan, along with the extensive experience and knowledge that comes with it.

As evident from our long-term commitment, even in the face of external changes, our firm has never wavered in its approach to supporting ventures. As I mentioned earlier, even during the recession after the Lehman Shock, we continued making close to 50 investments annually. The fact that we have maintained this investment stance and been able to build long-term trust-based relationships with startup management teams is one of our key strengths.

Additionally, our experience supporting numerous IPOs enables us to provide insights, knowledge, and practical guidance based on a wealth of cases concerning the challenges and trends around the pre-and post-IPO stages.

In terms of value-add support, another unique aspect of our firm is the ability to leverage the wide network within the MUFG Group. For example, we can introduce our portfolio companies to MUFG’s business partners or facilitate connections with the lending departments.

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- I understand that you have been interested in supporting venture companies from a young age. Was there a particular turning point that led you to this field? When you were a student in the late 1990s, VC may not have been as widely known as it is now.

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I first became aware of the existence of "venture capital" and developed a specific interest in it when I started job hunting during my student days. However, I had always had a vague desire to do something that involved supporting growth and challenging individuals, even from a younger age.

In middle and high school, I learned about Kenichi Ohmae from McKinsey and Koichi Hori from Boston Consulting Group through media such as TV, and I also enjoyed reading their books. Learning about consulting firms that advise on corporate management and growth strategies seemed like an exciting job to me.

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- How did you spend your middle and high school years?

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At that time, I lived in Matsudo, Chiba. It wasn't far from Tokyo, but it was a calm, rural area where we didn’t have trouble finding places to go crayfish fishing. It was the kind of place where you could enjoy nature, and I think it was very different from how people imagine Tokyo suburbs today. It was also a time when schools being "disrupted" by violence was a social issue, and my middle school seemed to be one of the schools that were a part of this trend (laughs).

It’s hard to imagine now, but it was common to see teachers using physical force against students, and there were incidents of motorcycles entering the school grounds and breaking windows. I was part of the swim team, and like many sports teams at the time, we would often do things like winter swimming in freezing temperatures, which, in a way, helped build both physical and mental strength.

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- It's like a scene from a song by Yutaka Ozaki, a very intense environment.

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I went to a public high school, which was a big change from middle school. The school had a very free and open atmosphere, with no uniforms, and individuality was respected. Since I felt like I had already experienced enough in sports during middle school, I joined the light music club in high school and played the guitar. Interestingly, two members of the band "Bakufu Slump" were seniors in the club, so I had a great time making music with my friends.

When I entered Waseda University, I enjoyed student life with sports and part-time jobs, but the seminar I joined in accounting was a serious one, so I studied bookkeeping and accounting as well.

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- You joined a consulting firm after graduating. Did you have any particular thoughts or principles regarding your job search?

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I had always been interested in jobs that support the growth of people and companies, but I didn't have a clear idea about it until I started seriously researching during my job search.

At that time, it was the era known as the "employment ice age," and as traditional large Japanese companies began cutting back on recruitment, consulting firms started to gain prominence as potential employers, which also influenced my decision.

Although I was already interested in venture capital at this point, there were only two venture capital firms hiring new graduates at the time. So, after receiving a suggestion that I could be assigned to a venture support department in the future, I joined my previous company to systematically learn about consulting. Four years later, I made the switch to my current venture capital firm.

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- What was it about "venture support" that attracted you at that time?

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It was the desire to support "the creation of new value" and "growth and challenges."

Through my research during my job search, I learned that consulting firm clients were mainly large corporations, and the focus of their work was often on "productivity improvement" and "cost efficiency," which I felt was somewhat limiting. The corporations that could afford to hire consulting firms were rarely venture companies, so it made sense from a structural standpoint.

In contrast, I found venture capital (VC) to be a very appealing way to support startups not through business operations but by "investing." I found this approach fascinating.

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- It seems like you had a clear view of what kind of work you wanted from an early stage. Were you not interested in major Japanese companies like manufacturers, financial institutions, or trading companies?

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I wasn’t really interested in them. One factor was the influence of my father, I think. My father worked in a purchasing role at a construction company and stayed in that department for many years. He was a very serious person, always working for the family. However, it was very clear that he didn’t like his job. I could tell he always had the feeling of "I wish I could be doing something else." Growing up seeing my father like this, I think I started questioning the idea of "doing work you don’t enjoy."

When I was a student, I also worked part-time at the finance subsidiary of a large manufacturer, and I noticed that many people there had joined to work in manufacturing but ended up doing finance work they didn't enjoy. This feeling of discomfort was very similar to what I saw in my father, and it left a strong impression on me.

Because of these experiences, I was very clear that, when thinking about my own career, it was important to directly engage in the work I wanted to do. I wanted to minimize the possibility of being stuck in a job that wasn’t what I truly wanted, so I didn’t consider large Japanese companies that commonly rotate employees through various departments to gain a wide range of experience.

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- You pursued the work you wanted and eventually became a capitalist at MUCAP. How did it feel when you first joined the firm and were able to do your ideal job?

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I had the strong enthusiasm of "I want to invest in promising companies and provide solid support!" when I started. However, once I began the work, I quickly realized the large gap between "what I wanted to do" and "what I could actually do."

Without industry networks or a track record of supporting IPOs, there was no way I could be chosen by top startups. Just finding investment opportunities was a struggle.

Similarly, within the company, I didn't have credibility. Even if I found a company I was excited about, I couldn’t convince the internal team to approve the investment. I also had to consider factors like the business potential, funding amounts, and the balance with the stock price, but I didn’t know how to approach these challenges at first. As a result, there were instances when I was unable to move the internal team forward despite being asked by a startup CEO to engage in communication and due diligence over several months, and ultimately, nothing came of it. I felt deeply apologetic to the entrepreneur and it was a difficult experience.

Meeting startup companies, exploring their potential, and working on convincing the internal team with a convincing story was a significant hurdle I faced at the beginning of my career in VC.

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- I think the "wall" you faced when first involved in VC and CVC is something everyone encounters. How did you overcome it, Taguchi-san?

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Looking back, I think the fundamental problem was that my "finding activity" and the "depth of thinking" regarding potential investment targets were insufficient.

I wasn’t meeting enough venture companies. Even if I thought a company was good, it didn’t always align with the investment criteria within the company, so there was a gap there.

Additionally, when you're inexperienced, a capitalist tends to become more of a messenger, simply passing on the entrepreneur’s or startup's business story without critically engaging with it. That approach makes it difficult to rally internal support and convince others. What really matters is approaching the company as if it were your own business, repeatedly asking questions such as: "What is the new value being created here? What are the success factors? How can growth be accelerated? What needs to be improved? What should I be supporting?"

I believe that being able to build a story that can secure internal approval is an essential skill. You need to convince people who don’t have knowledge or interest in that business by telling them a story that excites them. Even considering the risk-return balance, can you get others to believe it’s a valuable investment? First, you need to deeply understand the company, the business, and the entrepreneurs, and really dedicate yourself to thinking through these points. This is also a crucial skill when introducing companies after the investment, so I think it's wrong to negatively view the process of getting approval from the company as mere "internal sales" or office politics.

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- So, to gain trust from both entrepreneurs and within the company, a level of effort like this is required.

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Exactly. Once I became capable of doing that as a matter of course, that’s when I started to see a new horizon.

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Startups are 80% about the management team

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- After overcoming the first "wall," what was the next new "wall" that came up?

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The second "wall" I encountered was realizing the gap between the companies where it was easier to build a compelling investment story that could get approval, and the companies that would actually succeed.

When evaluating an investment, facts like "having a relationship with a large corporation," "being technically recognized," or "having a professor from a famous university as an advisor and holding patents" provide a certain sense of security and can help in convincing others within the company. However, I realized that these factors often didn’t correlate much with the actual success of a startup. These facts are certainly helpful and important, but they don’t guarantee the growth of the business. That’s obvious, but at the time, I was confused about what to rely on during due diligence (DD) and how to structure the story.

Even though I was able to handle DD and internal persuasion to some degree, I found myself struggling with how to break through the situation when these didn’t lead to successful outcomes like an IPO or an exit. I was quite frustrated.

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- The second "wall" seems more fundamental and challenging. What was the breakthrough that helped you overcome it?

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The turning point was the 2009 Lehman Shock.

During the financial crisis, many players in venture investment significantly reduced their activities. While there was some scaling down, MUCAP continued its investment activities. With the competition for sourcing investment opportunities virtually gone, I was able to build connections with excellent entrepreneurs and venture companies during this time.

In such an unprecedented recession, many startups were struggling financially. However, there were also startups that managed to survive, create new value, and successfully go public. I witnessed this contrast firsthand.

And then, I realized that the difference was in the "management team." When the management team is strong, they can recruit talent, gain customer support, secure financing with shareholder involvement, and grow into a strong company. Seeing successful management teams in action helped me develop my own perspective on the matter.

After this realization, my approach to venture investment changed significantly. This insight became a huge asset for me. Now, I firmly believe that "the success of a startup is about 80% dependent on its management team."

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- What would you say are the conditions for a "successful entrepreneur or venture CEO"? And how do you sense these qualities?

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While there are various types and expertise, I generally get the impression that successful entrepreneurs and venture CEOs have high levels of "involvement power" and "drive." They also tend to be people who can think deeply about their business and organization.

In order to perceive these qualities, it's important to maintain strong communication. I ask many different questions in various situations. Of course, I ask about what they want to achieve, but I also inquire about their decision-making process, and about past failures or situations where things didn’t go well.

People with high involvement power tend to attract supporters, so as I build a relationship where such exchanges take place, I naturally find myself wanting to support the management team and the company.

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Successful Patterns of Collaboration Between Corporates, CVCs, and Startups

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- You've been a capitalist for over 20 years in a world of constant change. I believe just a desire to succeed wouldn't be enough to continue this work. Is there anything you consciously do to stay on track?

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One thing is to maintain an area of interest that I can continue to be passionate about.

Along with that, I focus on finding investment opportunities while keeping in mind the balance between scale, time horizons, and business models.

For me, I’ve divided my areas of interest into two main categories: one is B2B sectors that aim to transform existing industries through DX (digital transformation), and the other is B2C sectors such as new entertainment, content, and media. I try to keep them about 50/50 in terms of focus.

A challenging aspect of venture investment is that, chronologically, failures often become apparent before successes. It’s common in the venture world for businesses to struggle with expansion, run out of funding, or face impairments due to poor performance. Instead of worrying too much about these setbacks, it’s important to keep investing, control the scale of the investment, and gain experience. That’s the key.

Looking back, I feel that I should have taken more risks and tried more opportunities.

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- Are there any qualities that you believe are essential for a venture capitalist?

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In my opinion, one essential quality is "curiosity."

For example, Web3.0 is a hot topic these days, and I make it a point to keep myself well-informed by reading domestic and international articles, attending events, and speaking to people. I’m aware that younger individuals often know more about new technologies and trends, but I don’t hesitate to learn from them, regardless of age differences.

This type of job would not be suitable for someone who finds that kind of learning uncomfortable.

For me, while there have certainly been difficult times, I’ve never once thought, "I want to quit." Over time, I’ve gained more experience, and lately, I find myself encountering more exciting investment opportunities and working longer hours than I did when I was younger (laughs). I think it's because I love new things and enjoy meeting people.

Staying adaptable to change is something I consciously focus on in order to continue being a relevant and effective venture capitalist.

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- Do you have any future goals for yourself?

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The environment at my workplace is unique in that it sits between the worlds of mega-banks and venture companies. From this position, I want to continue my career as a venture capitalist, take on new challenges, increase my capabilities, and further develop my expertise. Ultimately, I aim to become a "bank-affiliated venture capitalist" who can serve as a role model for younger generations, offering them some guidance and inspiration.

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- In recent years, many corporate companies have become more active in startup investments through CVCs. What do you expect from corporate CVCs in terms of supporting the growth of ventures that can improve society, and what areas do you think can lead to successful collaboration?

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There’s a significant cultural gap between large Japanese corporations and startup companies, especially in terms of decision-making speed and ways of thinking. I believe the role of CVCs, as a bridge between these two worlds, is crucial.

In order to achieve results in such a high-difficulty project as CVC, it’s necessary to commit long-term from the top down, while also setting up systems that allow for quick internal mobilization and involvement.

For startups, the burden of trying to collaborate with large companies is not small. If there isn’t a functioning system in place, such collaboration can lead to negative impacts. However, there is no doubt that large corporations have significant potential to support startup growth, especially through their customer base and vast talent pool.

When thinking about supporting startups from the same perspective, I believe there are two main things that corporate shareholders are expected to contribute.

One is assisting with refining products. This involves providing consistent, honest, and speedy feedback from the proof of concept (POC) phase, and becoming a key reference customer. This can help create marketing cases for horizontal expansion.

The other is leveraging their strong customer base to function as a strategic partner in the commercial supply chain. Rather than simply acting as an "agent," they should go a step further—working with startups to create new products or services that incorporate the startup’s offerings, and helping to build systems that drive sales growth.

In fact, in some of our portfolio companies, having corporate or CVC shareholders has been extremely beneficial, often falling into one of these two categories.

If we see more success stories from CVCs in the future, I believe that startups will grow by leveraging the financial power and potential of large companies, and new value will be created in society.

I hope that CVC activities evolve from being a temporary form of open innovation or new business development within large corporations, to something that also benefits the venture side. If that happens, it would be encouraging for all of us.

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- Finally, could you share your thoughts on the type of entrepreneurs you'd like to meet in the future, and the role startups should play?

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It’s somewhat abstract, but I would like to meet entrepreneurs who inspire me to want to support them.

Meeting people who have a strong belief in "creating a positive impact on society" and who are deeply passionate about it is always stimulating.

The unique strength of startups and venture companies lies in their speed and breakthrough ability. It’s tough to successfully implement a "zero-to-one" approach in business, and it takes a lot of courage just to attempt it.

I’m excited by the current trend where entrepreneurship is being recognized as one of the major life choices, as seen with startup discussions even during entrance ceremonies at the University of Tokyo. I look forward to continuing to meet new companies and wonderful entrepreneurs, and I’m excited to keep working as a venture capitalist with that in mind.