After two world wars in the 20th century, Japan and other countries around the world concentrated on economic development. In 2021, more than 20 years into the new century, modern society has new challenges and start ups are our new courageous soldiers solving problems and building a better future.
There is an unlikely person who noticed the value of startups and became a devoted believer in their potential. His name is Keisuke Honda. Honda is the top-scoring Asian soccer player in the history of the World Cup, and the only player to register a goal and an assist in each of the last three tournaments. Honda took Europe by storm by becoming the first Japanese player to be in the quarter-finals of the UEFA Champions League and scoring in the knock-out stages for CSKA Moscow. Above all, he wore the coveted "No.10" at A.C. Milan, one of the most historic clubs in soccer.
In 2016, when he was attracting the attention of global soccer fans at A.C. Milan player, Honda launched KSK Angel Fund to invest in startups. Two years later, in 2018, in partnership with a Hollywood actor Will Smith, he launched a new project – Dreamers Fund. Between the two funds, Honda has amassed a portfolio of over 180 companies. And this year, he launched PROTOCOL, a new global platform that helps startups, angels investors, VCs, and influencers connect from Japan, Asia, and around the world.
We interviewed Honda in2021 in a hotel in central Tokyo. In this article, we focus on Keisuke Honda as an investor and re-examine the path he has walked in order to understand the future that he envisions with PROTOCOL.
On January 16, 2008, Honda left Nagoya Grampus Eight in Japan to join VVV Venlo in the Netherlands. This experience was the beginning of everything that would follow. Playing in his new club, Honda directly witnessed poverty and inequality for the first time. He learned that his teammates from Africa and South America were sending more than half their salaries to families and friends back home. This shocked him, having been born and raised on the isolated island of Japan, who at his age of 21 was only interested in soccer.
Two years later, during the 2010 FIFA World Cup in South Africa, he visited a local orphanage and became keenly aware of disparities in the world when he witnessed children suffering from crime and illness. He started to think: "I want to create a world where everyone is able to pursue his or her dream." Two years later, in 2012, Honda made a move, launching "SOLTILO FAMILIA” soccer school, his first entrepreneurial endeavor. Following his desire to "teach children around the world the importance of having dreams", Honda founded a number of schools around the world, including Japan, and tried hard to train and promote children there. However, despite expanding its business to about 60 schools, the real problem with the project was difficulty of eliminating educational disparities with the means of soccer clubs alone.
Then, Honda met a fellow Japanese, Tashi Nakanishi. Nakanishi was born in Japan but mostly raised in the US and an investment professional who was passionate about alternative investments. Honda’s brother introduced Nakanishi, and they first met during Honda’s visit to Los Angeles after the 2014 FIFA World Cup. Over two years, Honda and Nakanishi shared each others philosophy and built trust and eventually decided to become partners. Nakanishi explained the reason for partnering with Honda in his interview with PROTOCOL as follows:
"At that time, I never considered working with a professional athlete, but when I met Keisuke and spent time with him, I was impressed by his character and big vision of the future. With Keisuke, I thought we could do bigger things than doing it myself. The cherry on the cake was that I get to do this with a fellow Japanese".
Soccer player turned investor
As a result of repeated discussions of how to realize Honda's mission to "create equal opportunity" using the influence and economic potential Honda built up as soccer player, the two partners found the best answer in "angel investments".
On August 1, 2016, his second son was born. On that happy day, Honda celebrated another birth, KSK Angel Fund and officially started his life as an investor. The purpose of the fund is to invest his capital in startups that improve the world for his second son's generation. That day, Honda wrote in his Instagram account:
"Recently, when I received the First Penguin’s Award, I was given 50 million yen as a prize. I’m going to invest all the money in startups and venture companies as an angel investor. They say that the First Penguin is the bravest, the first one to jump into the sea, overcoming the fear of multiple enemies there. Setting aside whether I was the first penguin or not, I was thinking about how to use such an honorable award of 50 million yen. Finally, I decided to invest in clever and brave startups and founders who could become the first penguin. I'm now thinking of investing in about 10 companies. Not limited to this prize amount, I plan to continue angel investing using KSK Angel as much as I can to create at least a slightly more peaceful and bright future for next generations. Time to act!".
KSK Angel started from scratch with little experience and few business connections, but by November 2021, it had invested in more than 90 domestic and foreign startups. Results are starting to steadily appear. Makuake company, which IPO'd in 2019 was supported by KSK from the very beginning and several companies in the portfolio are planning to IPO in 2022. At the same time, Honda, who’s vision from the start had been global, was searching for investment opportunities not only in Japan, but also in Silicon Valley, the epicenter of the global innovation. Startup ecosystems in the world are built around closed communities of local investors, and opportunities for outsiders to invest in great companies are limited.
Establishing a fund with Will Smith
In July 2018, about two years since the beginning of KSK Angel, news about Honda made headlines. Will Smith, a world-famous movie star, together with Honda established a venture capital firm – Dreamers Fund. The funds were raised from top Japanese institutions such as Nomura, Dentsu and Shiseido to invest in Silicon Valley startups. The main purpose and value of the fund is to be a bridge; giving Japanese companies access to information, personal connections and business opportunities in the heart of the world’s startup industry.
Japanese firms have tried to establish corporate VCs in the Bay Area and make direct investments. However, there is unfortunately almost no track record of investing in leading venture companies at the early stage due to the lack of access. Information about the leading venture companies maybe available but good ventures can choose investors, and Japanese companies rarely win a deal. Honda was well aware of it through his investment experience with KSK Angel Fund. That’s why when he met Will Smith, who had good network with promising venture companies and shared a similar philosophy of “improving lives”, he proposed they create Dreamers Fund.
Recently, with the VC rush in Silicon Valley, money has become a commodity, creating a trend where founders have leverage and can choose investors. Under such circumstances, Dreamers is valued not only for Honda and Smith's global influencers, but also as an Asian and Black owned diversity fund. Also, startup investments by musicians, athletes and other celebrities, so-called "celebrity investments", are booming in the US. Unlike many of them, Dreamers has an institutional investment team, which sets them apart from others where the fund is run by a business manager or just the talent. Honda says, "Will and I's activities are beginning to be recognized in the industry as more than just celebrities investing".
US investment experience
In November 2021, 3 years since Dreamers establishment, Honda is evaluating its results. "We still can do much more. The real goal is to become more unique”. The fund has seen quite a growth: among roughly 70 portfolio companies, there is already one IPO, three M&As and eight unicorns. Working with Dreamers, Honda learned one big difference between Japan and the US.
“Dreamers helped me realize the tremendous power of top American VCs. In Japan, my understanding was that a good company would succeed just because it was good and a bad company would collapse naturally because it was bad. But the top American VCs with their teams just won’t let the company they invested in not win".
Andreessen Horowitz (a16z) for example has its own in-house professionals in every field and the whole team supports their partners. They researched the methods of CAA, one of the top talent agencies in Hollywood. Promising to support the companies they invest with expertise, the fund secured a unique position. Dreamers' strategy is to invest alongside top funds like a16z and never lead deals, so Honda has been witnessing the state-of-the-art investment system from close quarters. As for Japan, the "commoditization of money" here is far less advanced. VCs are not urged to give the customer something unique, so the US-style system has not yet spread.
Preparing for the next challenge with his partner Nakanishi, Honda joined forces with entrepreneur Kota Takeuchi and his team of 11 people, and incubated PROTOCOL, a new global startup community. The product helps connect startups, angels investors, VCs, and influencers from Japan, Asia, and around the world. It's like "AngelList of Asia". Honda and his group spent about half a year developing the product, and in July 2021 test-launched the alpha version without mentioning Honda’s name.
Honda comments on the background of the launch:
"Understanding my time and limitations, I've always wanted to create a support system for startups. Not just investing, but helping them through the journey. In the United States, this assistance is provided by the VC team, so I created a new VC team in Japan and tried to do the same, but it didn't work as I expected. There were many things I had to think over and over again, but my enthusiasm for startups was still there and I couldn't give up. I learned a lot from my mistakes, so instead of the team, I decided to create a system, a tool, to support startups and make them successful. That what PROTOCOL is”.
Founders and investors, building a boat called a "startup" and steering it towards a destination, face all sorts of challenges. Founders can't concentrate on their business because they have to raise funds and hire people. Investors have their difficulties too: finding a good deal and managing investments. Honda himself has been in the shoes of each of the parties and faced the same pain points. PROTOCOL aims to use technology to reduce all sorts of burdens for founders and investors while expanding the entire ecosystem.
As of today, 4 months since the launch of PROTOCOL’s alpha version, it has attracted 2000+ users from more than 50 countries, including some prominent Japanese startups and VCs like SoftBank Vision Fund. Honda himself interviewed several founders he met on the platform and has already invested in 6 companies. Having used the alpha version and convinced of its value, Honda officially announced his role as PROTOCOL’s executive chairman. He said:
"Today, I'm announcing a new challenge I’m going to take as an entrepreneur and angel investor, not a soccer player. As you may know, I started angel investments with the KSK Angel Fund in 2016, and 2 years later, in 2018, I launched the Dreamers Fund, and I have invested in a total of more than 180 startups so far. I’m an entrepreneur myself, I run NowDo, a company that is trying to solve social problems through education. This time we are launching a new service called PROTOCOL. Simply put, it is a global platform that connects founders and investors. I hope it will allow anyone who wants to participate in the startup ecosystem to become a founder or investor, and create innovations what will change the world".
Discussing prospects of PROTOCOL, CEO Takeuchi said:
"We see our mission as "developing the digital infrastructure for private markets". The first step to fulfil our mission is to connect founders and investors around the world. In July, we launched the alpha version with a matching function that makes it possible. The next step will be adding to new features such as fundraising support, financing, and recruiting."
From Japan and Asia to the world
With PROTOCOL, Honda wants to enhance the global presence of the Japanese and Asian startup ecosystem. Honda and Nakanishi continue investing in the world's most advanced startups through Dreamers as well as supporting Japanese and Asian startups. Discussing Japan, Honda says:
"Being Japanese, I love my country, my identity is here. That said, Japan has a challenging task of developing a startup industry in general, so I hope that the situation where good projects are offered only to a closed community in Japan can be resolved by opening doors to the public and investors from other countries”.
Talents and technologies, still asleep in Japan today, have world-class potential. In fact, recent years have seen investors around the world beginning to realize the attractiveness of the Japanese market. Their investment in and acquisition of Japanese startups has become a hot topic in the news. In September 2021, PayPal acquired a Japanese BNPL (Buy Now Pay Later), Paidy for $2.7B, causing a tremor in the industry.
As the national football team player Keisuke Honda scored 37 goals, which gave him 4th place in the history of Japanese soccer. Serial startup investor Keisuke Honda also aims at "37"; this time it’s the number of IPOs. Although it was a joke, given Honda's genuine passion for startups, one day he may really achieve it.
Honda isn't just investing in startups. He is investing in the "better future for Japan and the world". No wonder he considers his occupation to be a "Challenger".