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We often get asked what verticals we look to invest in at 500 Japan. Frankly, we don’t look to invest in any particular vertical. We’ll invest in any vertical, if the opportunity seems promising.
One reason we have this mentality is because we believe that at the seed stage, most things are not obvious. And by the time they are obvious, it is probably too late for us anyway. Dave McClure had an opportunity to invest in Uber very early, and passed! That may sound crazy now, but at the time, “ride-sharing” or even the “sharing economy” in general was not really a thing. Trends like these are helpful to get a sense of how the world is changing, but in order to invest in the companies that create those trends, we have to admit to ourselves that we are not fortune tellers.
What is more important is timing. Why is this the right time to start this company? What has changed? In Uber’s case, people all of a sudden had a computer in their pocket with GPS (aka a smartphone). Hindsight is obviously 20/20, but hopefully asking “why now?” provides clearer foresight.
Finally, we look at team. I think everyone looks at team, so I won’t go into too much detail on this front. We look at whether this is the right team to execute. Does this team have a unique advantage? Do they have a good balance of skill sets? Do they get along? Things like that.
So we don’t really think about verticals that much. Sure, we may have our own ideas about how the world is evolving. For example, the regulatory environment for healthcare in Japan is becoming more conducive for startups, so there may be opportunities there. Or that virtual reality may reach mainstream in the next 5 – 10 years due to a confluence of technological advances. But if we pick a vertical and a strong team doesn’t appear, then there is nothing worth investing in anyway. We might as well be academics.
Entrepreneurs are much more reliable predictors of the future because they are actually creating it. So we’d much rather listen to their vision for the future and invest in it.