Short podcast interview with Teruhide Sato, the founder and managing partner of BEENEXT. Some notes below (for personal reference only, any mistakes in transcription are my own).

His background: he attended UWC Adriatic and then graduated from Keio University. In 1997 he founded Cybercash Japan (now known as VeriTrans) in partnership with Softbank. In 1999, he co-founded Beenos (formerly netprice), and, as CEO, took the company public in 2004. In 2014, he resigned as the CEO of Beenos and is now based in Singapore, where he invests in and advises startups globally. His whole career to date has been about identifying the next opportunity in technology. First half of the journey was about building a business himself, while the second half has been about supporting the next generation of entrepreneurs.

His early investments: he started visiting China around 2008; his company had collaborated with Alibaba, so he visited their headquarters in 2009 for their 10th year anniversary. At the time, he was running his business in Japan, but came to understand that this was an important social platform which was empowering a lot of people. He realized he had missed a big trend, which was the development of the Chinese internet economy. Soon after, he started looking for other geographies that could have a similar trajectory to the Chinese internet economy. Since he was based in Asia, he looked around the region and landed on Indonesia and India. When you look at the internet economy in any large economy, there is always the initial emergence of a king and a queen. The king is a marketplace and the queen is a payment platform. If they marry, there will be a huge, long-lasting dynasty. So in Indonesia, he made 2 investments, 1 was in Tokopedia (which became the largest local marketplace) and the other was in Midtrans (the largest online payment gateway, eventually acquired by Go-jek). For platform businesses to grow to a large scale, you need one more factor, which is population. These are network-effect businesses where you standardize the supply and demand side, streamline the business loop. To continue with his analogy, now there are more princesses, which would be vertical domain businesses (e.g. B2B, cars, real estate). These platforms match demand and supply, build trust in between, and wrap it up with payment, fintech services. So you start with facilitating transactions, develop more as a fintech as you evolve. One other factor you see in large markets such as India is they produce a huge volume of data, which is a byproduct of human activity. India is now becoming a data rich country thanks to low-cost smartphones, other connectivity infrastructure. Combining this with the marketplace network effects, it becomes a really large opportunity across categories.

On identifying promising ideas: all great companies and ideas start small. He looks to back founders who have strong conviction to pursue their ideas. Determined founders will keep fighting to achieve their vision and crystalize their idea. Second, he is looking for a large enough addressable business domain. The third part is all about timing. There is a moment for the large horizontal platform plays to evolve. Then there is a moment for the vertical platforms to evolve. The payment infrastructure also keeps evolving, things can build off  (e.g. UPI in India). He tries to back entrepreneurs from the early days, looking to go through the whole journey with them.

On assessing determination in the founder: you can see it in their eyes. It may sound like he is joking, but he is actually serious. Looking for someone who will be the last man or woman standing to run this business (“whatever happens I will do it”). But this determination comes from the cause or purpose or background. He tends to starts with why are you building this, what is the purpose of your journey? This should be clear to the entrepreneur because building a business is tough. There are more tough times than cheerful times. The purpose needs to be very clear. He has invested in many companies which were only at idea stage or pre-product launch stage. But he has never invested in a company that hasn’t shown anything positive. If the founders are excited, there is typically a reason for their excitement. It may not show up yet in the numbers or traction, but it might be what your friends are telling you, what your initial customers are saying etc. It can be a very small fire, but you see a path for how it gets bigger. Entrepreneurs have to identify that signal and think about how they can amplify it and build a business around it. Great founders always have something, but it is just a matter of how they present it sometimes. The conversation he has is to draw and derive the cause of their excitement, what they see as a signal that excites them. He is trying to see if, as investors, they can also clearly visualize how the small signal gets larger. 

On filtering new ideas: he still spends a lot of time with entrepreneurs, enjoys working with them and learning about new ideas. But many of their new investments come from referrals via the people they know, the founders they have backed previously and co-investors they have worked with. This community they have built over time means his life is getting much easier. He would define venture capital as a really collaborative business. You are building something together with the founders, employees, other investors, as well as the other parties (e.g. suppliers, technology providers) who support the business.

Current areas of interest: Direct to consumer, which is only possible today because of social media, the current payment infrastructure, marketplace models. He thinks the model of mass production, mass consumption has gone too far. We are getting into the next phase of commerce, which is more customized, bespoke, best fitted. This is enabled by the tech infrastructure readiness and the evolution of supply chains. They have tried to identify platforms which can empower individuals or influencers (e.g. companies such as Ship Rocket, Raena) and are building new social commerce type of businesses. One other significant change as a result of Covid-19 is what he calls the Corona-native startup, where you have to build a product remotely, collaborate as a team remotely, conduct your sales and marketing remotely. The cost structure, how you build a culture and product are very different. Covid-19 has definitely accelerated the adoption of technology and although things will normalize to some extent, we won’t be back to the same place.