After several years working at Mistubishi and then for her family office foundation investing in the public markets, Rei Murakami found a new goal while she was working out of Singapore: to get into venture capital investing. She joined Insignia Ventures Academy’s Certificate in Venture Capital for its third cohort in 2022 and a year later founded Kadan Capital, an early stage venture firm investing in fintech and AI startups across Asia. 

She goes on call to share her journey from Japan to Singapore, from the public markets to venture capital, and going from Insignia Ventures Academy’s 12 week program to setting up Kadan Capital. 

Rei also hosts Kadan’s podcast True Founders Stories.

Timestamps

(00:30) Introducing Rei and her journey from Japan to Singapore;

(02:00) Why Rei became interested in venture capital;

(02:59) Rei’s Insignia Ventures Academy experience;

(05:39) Starting Kadan Capital with a focus on fintech and AI in Southeast Asia;

(09:18) Rei’s value-add as an investor;

(11:00) Rei’s views on the Japan-Southeast Asia cross-border venture activity and investing in Japan;

(14:12) Advice for founders on expanding to Japan;

(16:03) Rei’s views on exits in Southeast Asia;

(18:38) Learnings on being a venture capitalist; 

(20:07) Make or break moment in Rei’s career;

Directed by Paulo Joquiño

Produced by Paulo Joquiño

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The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any ⁠⁠⁠⁠⁠⁠Insignia Ventures⁠⁠⁠⁠⁠⁠ fund. Any and all opinions shared in this episode are solely personal thoughts and reflections of the guest and the host.

Transcript

Introducing Rei and her journey from Japan to Singapore

Paulo: All right. Yeah, we would love to dig a little deeper into how we first encountered you through the IVA program. How did you find out about the program, and what made you decide to join?

Rei: So I joined in 2022, and that was when I started researching the whole VC ecosystem in Southeast Asia. As I was planning to launch my VC back then, I noticed there were a lot of programs for founders but not so many for aspiring VC investors. I think IVA was the only structured and truly regionally focused VC training platform. So that was an easy choice for me to join the program to get foundational VC knowledge and really understand the landscape in Southeast Asia.

Why Rei became interested in venture capital

Paulo: When were you looking into VC at that point in your career? Was it just one of many interests you were trying to explore, or was it always your plan to actually get into investing?

Rei: So, I was planning to get into investing, and I was particularly excited about the tech space. A little bit more about my background—I come from a Japanese family office. We started as a fund in Japan doing public equity investing, and we had this strategy called activist investments. The idea was to invest in public companies that had a lot of cash, and we would take majority control to improve their corporate governance. It’s a very different strategy; it’s value investing. But at the same time, I think what really defined us as a family office was backing what drives economic growth. That’s how I got interested. Also, because I’m based in Singapore and saw the margins of tech companies here in Southeast Asia, I started to research the VC ecosystem around that time.

Rei’s Insignia Ventures Academy experience

Paulo: So, what was the most memorable and rewarding part of the program for you, looking back now a few years on?

Rei: I think I felt the program was very well structured. A lot of the materials that were shared, and a lot of the information that, you know, Insignia as a VC fund has, they shared with the participants. It was really very well structured and a good introduction to venture capital in this region. So yeah, I think the biggest part was really getting an overview of the ecosystem here in Southeast Asia.

Another thing that was different for me was that everything was online because it was during COVID. But even so, I think the diverse backgrounds of the participants I talked to—mostly online, and then met in person a bit—were quite interesting. There were those who were already in finance, whether in different asset classes or investment banking. Some people had finance backgrounds, but at the same time, some were ex-founders or current founders.

That sort of mixture is something you see in VC even when you start working in venture capital. So that kind of mirrored what it would be like in VC, having diverse backgrounds and diverse opinions to form a view on investment. It was like a trial of being in VC.

Paulo: I think that’s definitely one of the things that attracts a lot of people—the whole experiential aspect of it. And you also mentioned the network. Do you happen to still keep in touch with anyone from your cohort, especially those based in Singapore?

Rei: Yeah, I do. Sometimes I get a referral for a company that we could look at, so that’s been a great network.

Paulo: And what part of the program—I mean, you mentioned a couple of things—but what, in particular, would you recommend to other professionals like yourself at that time who are maybe looking into VC or Southeast Asia as a region?

Rei: I think the best part, again, is really getting an overview of what’s happening in Southeast Asia. Another valuable aspect, I think, would be to actually have outbound reach to different founders in Southeast Asia and have an actual call—doing due diligence. It’s very similar to what you would do as a VC investor, and you really get to understand: Is that really my thing? Is that what I’m good at? Also, having that conversation would really sharpen your thoughts on how you think about investment. So, those are, I think, great experiences.

Starting Kadan Capital with a focus on fintech and AI in Southeast Asia

Paulo: And even if you already had an investment background and a finance background yourself, I think venture capital is its own kind of animal to tackle, especially venture capital in Southeast Asia. Going back to your main objective in joining the program, which was to really invest yourself into startups—how did the 12 weeks eventually lead to you starting your own firm, right? A venture capital firm, Kadan Capital, yeah.

Rei: Yeah, so I always knew I wanted to start a VC in Southeast Asia, so that was always my plan. But I think something I gained a better perspective on is that I joined in 2022, and when I look back at that time, I was particularly focused on the e-commerce sector during the program. We started looking into quick commerce because that was a big thing back then. In the US and Europe, quick commerce received a lot of funding, and of course, there were quite a few successful cases before they eventually crashed. At that time, it was a very successful investment theme.

So we started exploring that thesis in Southeast Asia and quickly realized that, first, you can’t just copy and paste the business model from the US or Europe—you obviously have to localize it. That point became very clear while examining this thesis. The other thing is that quick commerce didn’t work in Southeast Asia, and not just in Southeast Asia but globally. Even though the thesis received a lot of funding, VC can be very momentum-driven, and you have to maintain strict discipline about what you invest in and the KPIs you focus on. Those are some of the lessons that taught me to think more carefully before starting Kadan.

Paulo: I think one of the interesting things people learn through the program is what not to do, as opposed to what to do. Yeah. So, I guess that kind of finding that negative space was an interesting learning point. And I guess because of that experience, that’s partly the reason why you decided to focus not on e-commerce, but on FinTech and AI. What are the other reasons you decided to have Caans focus on those particular sectors?

Rei: So yeah, a bit of background. Again, our fund aims to invest in only 20 to 25 companies over the next two to three years. I would say it’s quite a small fund for this region. That led us to think that we would want to be strong in specific sectors rather than making sector-agnostic investments.

Also, because of the momentum-driven nature of investment in the VC ecosystem, we wanted to focus on specific sectors and specific investment theses. We aim for deeper knowledge and thesis-driven investments rather than chasing what is trendy or what is getting funded in other regions. Those were the reasons why I first thought about focusing on specific sectors.

FinTech is obviously still the most robust sector in Southeast Asia. When you look at the different sectors, FinTech still has the biggest number of unicorns. We also see a lot of fundamental opportunities in Southeast Asia. So that was the reason why we focus on FinTech and AI.

I would say AI is still quite difficult to find good AI companies in Southeast Asia. It’s undeniable how AI is going to change how we live and the business models here. So we’re looking at the application layer of AI—companies that are building a product or operational system based on AI. That could be a huge advantage for startups to grow faster and have better margins. So that’s still our thesis here.

Rei’s value-add as an investor

Paulo: So maybe not necessarily AI core or AI-native startups, but those that are perhaps using AI to augment their business model to become more profitable, cash-flow efficient, and all that. I wanted to ask—one of the things that we tell people who join IVA, especially that program, is that you really have to build a brand for yourself as an investor, an identity, so founders know what value they can get from partnering with you. So, how would you describe yourself as an investor? I guess both within the construct of Kadan Capital and also individually as Rei, right? How do you uniquely engage with founders?

Rei: That’s an interesting question. I think, based on the feedback we get from the founders we’ve invested in, one of the things is that we tend to build much closer relationships with them. So the founders don’t only share the wins of their businesses, but they also share day-to-day challenges. We really focus on having that close relationship and building trust.

When you look at VCs in Southeast Asia, I don’t want to say everybody’s older than us, but I think we’re one of the early, still very young funds started by young partners. That actually helps a lot with being very close to founders. So that’s something I get as feedback.

The other thing is, myself as a person, I like to avoid giving too generic advice and wasting their time. I want to really focus on targeted advice where I know I can provide value. That usually relates to my network with Japanese investors or advice on how to enter the Japanese market—things that I feel other investors couldn’t provide. This is a very unique value add for me. Yeah, I’m kind of an investor who is very targeted in the value I provide.

Rei’s views on the Japan-Southeast Asia cross-border venture activity and investing in Japan

Paulo: Speaking of which, I guess value-add in terms of helping companies expand to Japan and the like—are you seeing a lot more demand in that direction these days, more so than when you joined IVA, for example? Yeah. How do you see the cross-border opportunities between Japan and South Asia evolving today?

Rei: When I joined IVA in 2022, that was the peak year or peak time for Southeast Asia. We saw that everybody was very optimistic.

Fast forward to now, I think one of the biggest issues is really the exit market in Southeast Asia that people have identified. That really gave an opportunity for Japanese investors to come in. So, a lot of Japanese corporates are coming in, especially financial institutions, to provide later-stage funding both in terms of equity and debt. 

Japanese corporates tend to focus on long-term partnerships and synergy rather than just focusing on capital gains. That has helped a lot of startups here to form partnerships. I definitely see a lot of interest from Japan, and it’s a very good match with the startups here.

The other thing that has changed over time is also because of the issue with the exit landscape here. The Tokyo Stock Exchange has really focused on presenting the exit market and the IPO pathway from Southeast Asia to Japan. There are a lot of discussions happening there, so there’s a lot of interest from Japan that could be very helpful for this ecosystem.

Paulo: Yeah, no, I definitely agree. We had Ben from Tokyo Stock Exchange on our show a few episodes ago. He definitely echoed a similar sentiment and also mentioned a lot more interest from the local exchange to actually engage with international companies. 

Does Kadan Capital also see any opportunities in the other direction—partnering with Japanese founders who are interested in Southeast Asia? Or is that already beyond the scope you’ve been looking at recently?

Rei: Yeah, definitely. So, our focus is not only Southeast Asia—our main focus is Southeast Asia—but we’re also looking at different parts of Asia, including Japan. We’ve been looking at quite a few startups in Japan as well. We have not invested in any yet, but I know that a lot of startups in Japan are looking for Southeast Asia expansion.

Although, I do think that if you’re talking about developing countries in Southeast Asia, their product might not match so well. They would need to really localize their product and also the way they do marketing or go to market; they have to really localize. So, it’s been quite a challenge, but there’s a lot of interest from Japan to Southeast Asia as well.

Personally, what I think would work better is for Southeast Asian founders to go into Japan. Intellect Insignia’s portfolio also successfully entered Japan, but some of the companies that are building global products out of Singapore build in Singapore and then go into different developed countries. 

There aren’t many markets in Southeast Asia, so I think Japan would naturally come as the next market for these companies to expand into. That said, there are a lot of nuances in how you do business in Japan. The founders really need to recognize those differences and make sure that they localize when they go into the market.

Advice for founders on expanding to Japan

Paulo: We could definitely write an entire book about how to get into Japan, but maybe you can share with our audience what the most common nuance is that founders tend to overlook when it comes to expanding to Japan.

Rei: I think maybe I’ll just mention this, and it’s specifically about B2B products. One thing is that closing deals with businesses takes much longer. It’s not as simple as having online codes. It’s a lot about building trust and meeting in person. Many business deals are still done in a traditional way. You might think this doesn’t make sense for startups, but if you are closing a big deal, it could.

You really have to accept that these things, which seem inefficient, need to be done for you to win bigger deals. The upside is that, because Japan is very much based on trust, once you win that trust, the stickiness is higher. So that’s one thing.

I think the other challenge is hiring. Hiring is very tough in Japan, especially as a non-Japanese person entering the Japanese market. You need to find someone who can both localize for the Japan market and speak English to communicate with your headquarters. But there are a lot of cultural differences, so really finding that kind of country manager who can navigate those is one of the challenges.

Rei’s views on exits in Southeast Asia

Paulo: I definitely agree, especially with closing deals and finding partners. Ignia has had to arrange a couple of Japan tours for founders to actually go around and meet all these potential customers in person. And I guess the bigger the deal, the more dinners and meals you have to go out to actually close it. 

But yeah, I think the benefit of that is that once they become a partner, they’ll stick with you through thick and thin. So, there is that pro to going through all this process. And as they say with startups, sometimes you do things that don’t scale. The scale. Exactly. Yeah, I guess there is wisdom there.

You did mention earlier about exit pathways as part of this whole Japan-Southeast Asia corridor. How huge is that opportunity within Caans’ view of exits? Like, how does your firm view exits, especially as an early-stage fund? And what are the other pathways that you’ve been looking at?

Rei: Yeah, for sure. So, I think as a young fund—because we didn’t invest before 2024—we still have quite a long time until they exit. Five to ten years, we can wait. I think by then, the exit market will improve a lot. Everybody says this is the biggest issue. The governments recognize it. In fact, yesterday SGX just announced that they’re going to partner with NASDAQ to do dual listings. 

So, there have been a lot of initiatives in Malaysia, Singapore, and Indonesia to really improve this. We are quite optimistic when it comes to our portfolio companies exiting in five to ten years. But I think currently, there are still a lot of challenges. There’s not a big enough or deep enough IPO market. 

There aren’t many acquisitions happening, although I think some Chinese companies, Japanese companies, and different markets would be interested in coming into this market. But there’s a gap between the price that VCs or startups want to sell at versus what buyers are looking for. That difference has to come closer. 

Now that we’ve realized that the expectations for Southeast Asia are not as high as we thought in 2022, that’s definitely a challenge. And I think because of that lack of a deep IPO market, a lot of VCs with funds that are ending soon will need to find either secondaries, M&A, or different ways of fundraising.

Paulo: I think that’s definitely something we’re also seeing on the side. I was wondering what your view is on trying to reconcile the valuation gap. Is it more about founders biting the bullet, or would you advise them to maybe expand real growth in order to match the valuation and be able to sell from a better position?

Rei: If you had the choice to just be persistent and wait for the next raise and grow until then, I think that could be a good option. If you’re running out of options, I think you would have to have a difficult conversation with your investors and consider down rounds. So yeah, I think that’s something that needs to happen a little bit more, I would say. I think a lot of the funds in Southeast Asia still have a lot of dry powder, so they’re doing a lot of internal rounds before they go out to the market. But I think it’s starting to the extent where the founders have to consider down rounds.

Learnings on being a venture capitalist 

Paulo: I wanted to shift gears as we wrap up this interview. Maybe you could share a little bit—now that you’ve run Kadan Capital for a little more than a year—what are some things you didn’t expect to end up doing as a venture capitalist? Especially in terms of your daily routine or workflow compared to when you were doing activist investing out of Japan. Yeah, for sure. What was the biggest difference?

Rei: Coming from public equity investing, I always thought investment was just really about focusing on due diligence and making investments. I think for VC, especially starting in VC, it’s not just about investment; it’s really about building a company as well. 

So, you have to build your own team, you have to build your own brand. There’s a lot of effort that you put into operations and marketing, or starting to have more exposure on LinkedIn. We also launched a podcast, by the way, if the viewers are interested.

Paulo: You also interviewed Intellect as well. Theo, I saw that episode. Yeah, we’ll leave a link to their podcast in our episode, too. Check it out.

Rei: Yeah, perfect. So, a lot of the operational things I didn’t expect as an investor—there’s a lot of effort you have to put into marketing and, yeah, it’s really about building a company as well.

Make or break moment in Rei’s career

Paulo: Seeing as how building a VC firm is almost like building your own startup, so to speak, there are a lot more layers to it than just putting money in and waiting for that money to grow. And as you mentioned earlier, there’s a lot of talking to founders—not just about their wins, but also the challenges they face. 

Speaking of wins and challenges, to wrap up this interview, can you share a make-or-break moment from your career? It doesn’t have to be at Kadan Capital; it could be from one of your previous experiences that has shaped the way you work with founders today.

Rei: I think one of the things is, before starting Kadan Capital, I was at my family foundation, which I still run. I launched an accelerator program specifically for women in politics because I am quite passionate about the gender gap in Japan. In fact, Japan ranks 124th out of 148 countries when it comes to the gender gap in politics, according to the World Economic Forum. So, there is a lot of room for improvement. 

I started this accelerator, but in the beginning, when I was just starting, I probably talked to about a hundred people pitching this idea to get support. It wasn’t just about funding; I needed advisors and a whole ecosystem to support the program. I think 90% of the time, I got rejected. 

That was the first time I experienced constant rejection, but you have to just keep going. It’s not easy. I really learned persistence and how tough it is to build something from scratch. Of course, as investors, we have to say no to 99% of the founders we meet, but I really think about how tough it is and have huge respect for any founder who dares to challenge.

Paulo: I think there are definitely a lot of those “facing reality” kind of moments. Uh, yeah. When starting anything—starting a startup, starting a fund—I have a lot of respect for you for actually going out and doing what you set out to do. 

When you joined IVA, you guys have been running for more than a year now and have a strong LinkedIn presence, doing a lot of podcasts and making investments—I guess the most important part of it. 

So yeah, thank you, Rei, for joining us on the call. It’s really great to catch up and really see how our alumni from the program have been going out and continuing to give back to the ecosystem and helping it mature. So yeah, thank you again, Rei, and hope to catch up with you again soon.

Rei: Yeah, thank you so much for having me.