Kei Shibata on Founding with <1% Equity, Taking Risks in Risk-Free Environments & Non-Ideal Startup Paths - E62

· Founder,Harvard,Podcast Episodes English

"So it was the ultimate choice whether we're going to take the four million dollars to start, but the equity ownership was less than 1% or we leave . And then Kenichi and I were talking like, “Hey, what are we going to do? Are we going to wait for the next chance or are we going to start with no ownership?” Both of us basically said that, “Let's do it because if we fail I think probably the McKinsey or Goldman Sachs or someone is probably going to offer us a job. It is essentially risk free.” - Kei Shibata

Kei Shibata co-founded Venture Republic Group in 2001 and has been serving as CEO since the foundation. The company runs a group of online travel websites and apps across Asia including LINE TRAVEL jp , Japan's largest online travel metasearch/media (26 million monthly users on Web + 22 million followers on LINE app), Trip101, a Singapore-based global online travel media for modern travelers, and allstay, a leading mobile accommodation search app in Korea.

He led the company to IPO (2177. JASDAQ) in 2008 after 7 years of inception, to buyout by the management in 2012, to sales of “,” its online shopping engine business in Japan to Yahoo! Japan in 2013, and to bring in LINE Corporation, Asia’s leading mobile messaging company as an investor in 2018 as a liquidity event.

Kei also serves as co-founder/organizer of WIT (Web In Travel) Japan & North Asia, the largest international business conference in North Asia focusing on travel & technology, Chairman of Keio University's alumni association for startup founders/CEOs and Executive Committee Member of Harvard Business School Club of Japan.

Kei is also an angel investor in the travel & technology space across APEC and America regions for over 10 years. He received a Bachelor of Arts in Law from Keio University and an MBA from the Harvard Business School.

In his free time, Kei is an avid nordic/alpine skier & snowboarder.

You can find our community discussions on the podcast episode at

Jeremy Au: [00:00:00] Welcome to Brave Dynamics. This is your host, Jeremy Au. Leadership is harder than it looks. As a proven founder and Harvard MBA, I interview courageous entrepreneurs, executives and investors every week. I also share my frontline experiences, coaching insights and own professional development journey. If you're stepping up as a new leader, founding a startup, or venturing into the great unknown, this is the podcast for you. Hey Kei, good to have you on the show.


Kei Shibata: [00:00:33] Yeah, it's so great to see you, Jeremy. I am honored to be in this room.


Jeremy Au: [00:00:38] Thanks for taking time during lunchtime. I know you got your DAN DAN noodles right before this. So I appreciate you moving up your lunch time.


Kei Shibata: [00:00:45] My pleasure.


Jeremy Au: [00:00:47] You're someone that a lot of people look up to in the travel world and across Asia. But for those who don't know you yet, how would you share your professional journey?


Kei Shibata: [00:00:57] Well, okay, so first, let me quickly introduce myself. I've been in the technology space for the last 20 years primary in travel and technology so, travel tech. I co founded the company called Venture Republic in Tokyo back in 2001. And I am still running this company as a CEO. At the same time, I am also running one of our businesses called Trip 101, based out of Singapore, where I'm half based, as a CEO as well. Over the course of the last 20 years we have gone through many different corporate events which include IPO buyout and a couple of liquidity events, exit opportunities in the past so I have a few stories to share with you guys today. I'm excited to actually chat with you Jeremy because we never actually had time to talk specifically about certain topics for the certain amount of time, so I'm excited.


Jeremy Au: [00:01:40] Go all the way back to the beginning. Where did you grow up? What was it like growing up as Kei Shibata?


Kei Shibata: [00:02:20] Sure, I was born and raised in Tokyo, I guess, I probably call myself as one of those sort of naive students in a big city, like Tokyo. And I got in the private schools called Kayo in Japan, and then went all the way up from junior high to college. It is kind of interesting. Throughout my 10 years at the school, I feel like I did nothing but to ski. It's funny, because then I knew there was no way I could make my life living by ski but for some reason, I just love skiing, and I just kept on skiing, over the 10 years.


Then I joined the blue chip company in Japan called Mitsubishi. Like pretty much, many other my college friends. I was wearing navy suits, the white shirts and the laser shoes. And then I basically started my career as a salary man. I traded agriculture commodities back then. So that was the beginning of my career, which it sounds a little bit boring but that's how I started back as a business person, though.


Jeremy Au: [00:03:50] Yeah, what was it like? You were doing skiing and then you became a salary man. Was that different from other salary men back then? Did you know that you're different from other salary men?


Kei Shibata: [00:04:04] That's really good question, Jeremy, because I was kind of looking back. Indeed, the one thing I found myself a little bit different from other people at my college is the A, I want to actually kind of make some kind of global footprint. I was actually interested in the other countries. And B, I think it's I always wanted to do something differently. So as a result, I think it's when I graduated, I decided to actually be on a trip to Canada. I was so much into the Nordic Cross Country Skiing, so I knew a bunch of guys actually in Japanese National Ski Teams. And then one of them actually gave me an opportunity to stay at one house in the Calgary, Alberta. It was a great opportunity for me to be able to be exposed to the different culture so I ended up staying in Canada for a few weeks supporting Japan National Ski Team and also participated the Ski Marathon which is 55 kilometer long ski marathon, one of the longest ski marathon races.


I also had a chance to meet this guy called [Arsa Hala] , who was the chairman of the Mitsubishi Corporation Canada. When I had lunch with him one thing he told me was, “Hey, Kei, Mitsubishi is a great company so you must be excited. You'll be able to learn a lot but at the same time, you probably want to keep in your mind that perhaps, going to the business school may be a great option.” That was kind of a beginning of the period that okay, I probably wanted to actually go to the business school in overseas. It was one of the life's probably changing moment, I think.


Jeremy Au: [00:06:21] All right, so let's talk about that. We both ended up in the Harvard Business School via MBA, but did you know that you wanted to apply to Harvard? You heard about business school. Someone recommended you to go, and then you started doing it. I mean, even back then, and even now not a lot of people in Japan, bullfight MBA. I'm just kind of curious about that.


Kei Shibata: [00:06:48] Yeah, so this guy, Arsa, highly recommended me to go to the Harvard Business School. And then I knew some of my friends came back from Harvard Business School, and then they highly talked about it. So I told myself, “Hey, look, why don't I try it?” And I ended up applying only Harvard. And it was interesting time because it was only the Harvard Business School that didn't require GMAT. I didn't even take GMAT. I just apply only at Harvard and I got the admission letter. Very lucky. So it sounds a little bit like a joke but that's exactly what happened. Of course, I tried hard. I mean, I put all my efforts in like everyone else, maybe including you, Jeremy. So yeah, it was a luck. It was luck all about I think.


Jeremy Au: [00:07:48] I love that. I mean, well, one shot one application, like a sniper. I've heard from everybody else applying to so many schools. Did people find it weird that you're going for MBA? Obviously your boss was like… Not your boss, but mentor was supportive of it. But did your friends were like, “What is this MBA?” I mean, I guess people knew about Harvard, catching up some Japanese have MBAs and they were like, “Yeah, it's still kind of weird.” Because a lot of people feel like you should stay in Japan and there are good schools just as good as Harvard or better, domestically on their perspective. So what was that, like?


Kei Shibata: [00:08:23] It was definitely not an ideal career path if you want to climb up on a corporate ladder. It's an opportunity to be alien in a way in a traditional, like legacy the big companies like Mitsubishi in Japan. So I had a little tough time actually persuading my bosses. And then I was lucky to be able to actually get the sponsorship, corporate sponsorship. They actually felt that when I got back from the business school, I will probably leave the company right away, which didn't happen in a way. I'll get into that shortly. But there was kind of idea that bozos like big corporation, they actually don't see, MBAs are not necessary a loyal workforce or a long term workforce. That's probably fair to say.


Jeremy Au: [00:09:30] So, contrary to what everybody wanted you to do in Japan, you still went to do it. What was it like going to Harvard in Boston? What do you remember your first day, your first week? What was it like as a Japanese person, so as a new country that's one, but also as a new school the MBA program?


Kei Shibata: [00:09:51] First few months it was I would say a bitch. Well, I mean, the lacking, the experiences in communicating in English and everything else I think, and moving into the new cities, especially overseas is a lot of hustles. But at the same time, it was super exciting because definitely mind blowing. I still remember when I first got into the classroom. And the whole conversation started and the people actually introduced themselves and the… My God, is this smart, bright, the people from all over the world and then across the different places in the United States too. My god, this is actually like, the best classroom ever.


So I felt like, “I might be in the wrong place but we'll see how it goes.” And then I started making friends which really helped me a lot too. First year particularly like the first half of the first year was so much things going on and I was just overwhelmed at the same time I was super excited.


Jeremy Au: [00:11:05] Was there any moment where you were like, “Whoa, life is so much bigger than Japan?” Because that's what happened to me. At some point I was at… I mean, I did undergrad, obviously, in the States, but still is a bit different. Because I think the MBA was very intentionally like, let's have everyone from around the world. So you felt I don't know. I think Harvard as an MBA felt like it was like, “Whoa, there's a lot of business around the world.” I don't know. Was there ever a moment like that for you or how did you feel about HBS in terms of the world?


Kei Shibata: [00:11:36] Well, I mean, HBS is also known for a very competitive school. I believe that is still the system goal for scholar. So the under 10% grades actually basically fail, so it was kind of an intense sort of pressure every single time when I was at this classroom. And then I mean, even like the local Americans, I think is that they're really heavy under pressure and in the summer time didn't come back after first semester because of pressure. I felt like, “Oh, my god this actually this story I read in the book called Ear One I think is really happening in the front of my eyes.” I think which really kind of gave me a moment that, “Wow, this is actually under pressure environment.”


Jeremy Au: [00:12:39] I'm just kind of curious, were there any interesting classes that you took back then that you still remember? I know, it's been quite a while but I'm just wondering any good professors or classes that you loved?


Kei Shibata: [00:12:48] Yeah, first of all there's no question that my two years at the Harvard Business School completely changed my life. I would definitely like to mention that. One of the highlights this brand new course back then I took called, Managing Cyberspace. Very interesting name, Managing Cyberspace was taught by this professor named Jeffrey Rayport. I don't think he's… He's no longer with Harvard Business School. But anyway, so it is a course about learning dot com companies. So specializing in internet companies, from the Amazon to eBay to Netscape, and then that course had completely blown me away I think so. It definitely kind of inspired me as a future tech entrepreneur.


Just to give you a little bit more context, so '96 to '98 that's when I was at the Business School. So we are basically in the middle of a terrible red hot internet boom, everything was happening in United States. You probably can't believe this story. I remember that Jeff Bezos was even coming into our classroom, not that big a student, a whole regular classroom in Oak Ridge. He was actually sitting on a sky deck the entire time, hearing our discussion on how Amazon could beat the Barnes and Noble. And he ended up joining our debates and then he stays to the end of the class. My god, it was a crazy time.


Jeremy Au: [00:14:49] What was he like? I mean at time what was he like?


Kei Shibata: [00:14:52] Well, I mean, I still clearly remember when Jeffrey Rayport actually introduced Jeff Bezos at the beginning of class. It was like an earthquake. Back then he was already big but of course, he was not this big. You remember HBS always kind of hand out the case B or case B, or whatever it is, like the sub circuit cases in that classroom for the Amazon cases. Jeff Rayport actually handed out the case B or C whatever. I forgot. It was latest statistics in business records and whatsoever in that like the supplemental case. And then Jeff actually talks, all the things about that. It was crazy.


Jeremy Au: [00:15:46] So you got to meet Jeff Bezos. He was a protagonist in the case right? So, I know what it's like. Like you said they're big deals, but they're not big, big deals, right? I mean, he was like what? A millionaire back then?


Kei Shibata: [00:15:58] Yeah, you could say so.


Jeremy Au: [00:16:00] Being a millionaire there's lots of millionaires walking around HBS, every week, every day, every hour, there's a billionaire walking in on campus to talk to students about A, or B, or C. So lots of billionaires. Obviously, you must have thought about this ever since then, because he became a billionaire. Which a lot less... So I was wondering when you looked at Jeff Bezos, was there anything special about him back then or you're like, no, he was just like all the other Harvard Business School protagonists walking into the classroom back then?


Kei Shibata: [00:16:34] Well, that's great question Jeremy, because back then the only things I remember about him was actually basically he was very humble. He listened very carefully. When the moment he opened his mouth and then start talking something and then it was profound. He was not the type of person who kind of enthusiastically talk everything. Not like Steve Ballmer. I also remember Steve Ballmer. I saw his presentations in Tokyo, probably 10 years ago. It was a very different type of leaders but, Jeff Bezos was totally opposite. That's all I remember.


Jeremy Au: [00:17:24] Yeah, that's definitely true. So, there you are, you get to see these billionaires walk in, and potential billionaires walk in, you are at Managing Cyberspace which is like you said.


Kei Shibata: [00:17:38] Yeah, what a day, right?


Jeremy Au: [00:17:40] Yeah, what a day. I remember as a kid, I was like, you read those books and I was like, “Oh, cyberspace, there'll be virtual reality. There will be...” I don't know.


Kei Shibata: [00:17:52] Yeah, and right now, I think it's about probably the virtual reality.


Jeremy Au: [00:17:57] Yeah. I'm just kind of curious. I mean, 1986 to 1998, that's also when the Asian financial crisis was happening. Do you have any memories about that happening while you were a student? I mean, you were lucky, because you were at school and not working? I'm just kind of wondering if you saw that happening.


That's a good point. I don't remember well. Perhaps was South Korea actually going through the financial crisis back then?


Yeah, a little bit. There was lots of different countries that was just like.


Kei Shibata: [00:18:30] Yeah, I think it's the-


Jeremy Au: [00:18:32] Japan wasn't really affected but definitely the… It was happening in Asia.


Kei Shibata: [00:18:39] Right, well, the only thing I remember was I think around the time when I graduated. I think some Korean students have a tough time because they are not able to afford to stay in U.S. I think that's the only thing I remember.


Jeremy Au: [00:19:01] All right. I mean, I think that's what-


Kei Shibata: [00:19:03] I was too busy studying an MSc working out of the shadow I think.


Jeremy Au: [00:19:11] I mean that time I was lucky because Japan was much less affected and South Korea was very impacted. I think Indonesia and Thailand. My father was impacted by it because he was in business. It was a tough time. So you go to HBS and then you're like, “Okay, I'm going to go back.” Is that what happened? Or were you like, “I'm going to go back for a while and I'm going to do something else.”


Kei Shibata: [00:19:37] What happened to me after graduation was since I got a corporate sponsorship from Mitsubishi, I feel kind of obligated to go back to Mitsubishi and at least work for a bit. That's what I did. Interesting thing happened to me was after a while, when I went back to Tokyo, I got one phone call from this guy, also HBS graduate who was working for Mitsubishi. He was like, five or six years above me. A guy named [Tak Minami] . He's currently CEO of Centurion. He basically told me that, “Hey, Kei, I have a quite interesting project within Mitsubishi. Can you help me?” And then I said, “Yeah, that sounds good but at the same time, I have my own business plan I started writing. But anyway, just let me know what's the project.” And then he sent me the huge packet of documents. And that is about that M&A project of the convenience store chain called Lawson.


Those of you guys who actually had a chance to come to Japan, I think you see so many convenience stores and then Lawson is one of the top convenience store chains. So I ended up working with him for a year and a half, and Mitsubishi ended up acquiring Lawson at the end. But at the same time I kept writing my business plan. I couldn't really forget about starting my own business. Then over the course of time, I also had a chance to meet my current co founder. His name is also Shibata. The same last name, just by coincidence, and through our HBS friends. So I told Tak Minami, “Look, this project is fun, but at the same time I wanted to start my own business, I'm ready to go.”


And then what he told me was, “Kei, look, I know you want to start your own business but at the same time Mitsubishi is also looking for a new opportunity in technology space. So, why don't I talk to the Mitsubishi's top management people?” That went well, and then they ended up saying, “Kei, I know you've been working hard for our Lawson M&A project. You are pretty good. Why don't we actually just give you a couple million dollars to start your business?” So it was it kind of that connected. Mitsubishi said, “We want to invest with you guys.” I found my co founder so that was kind of a very beginning of the Venture Republic Inc, that we ended up co founding in 2001.


Jeremy Au: [00:23:04] That's actually surprising because, and I had no idea that you were kicked off by Mitsubishi in terms of venture capital. Which of course, I think kind of makes sense because back then there wasn't a lot of venture capital either. That makes a lot of sense when you say out loud. What is the like? I mean, because at that time you were a founder. Did you call yourself a founder? Was it even a term called founder? I mean, at that time and in Japan or did you call yourself CEO, or what did you call yourself?


Kei Shibata: [00:23:33] Yeah, well, you're getting into this interesting story around that. Just to give you another context, back in the days, like 2000. Year 2000, was interesting year, the level of the internet boom was bursting.The crazy time is over. So basically, when I got the promise from Mitsubishi, market was dead, so we ended up finding another investor, who is the local venture capital. Which is partially owned by the Mitsubishi, by the way. Basically, the two investors said, “Okay, the market is dead, but we are still willing to invest with you guys.” And then the size of capital was actually 4 million, which is great to start. It's great amount to start. But they said, “We're not going to give you any valuations.” So basically, the par valuation and then Kenichi and  myself didn't have much capital because we didn't have any liquidity event whatsoever.Basically, we were fresh out of business school.


So it was the ultimate choice whether we're going to take the four million dollars to start, but the equity ownership was less than 1% or we leave . And then Kenichi and I were talking like, “Hey, what are we going to do? Are we going to wait for the next chance or are we going to start with no ownership?” Both of us basically said that, “Let's do it because if we fail I think probably the McKinsey or Goldman Sachs or someone is probably going to offer us a job. It is essentially risk free.” And maybe I can even go back to Mitsubishi. That was probably the best time for us to start the business, even though our ownership was just really nothing.


Jeremy Au: [00:25:54] I had no idea. What was it like making that choice? Because, now of course it's very standardized, you get $3 million, and you give up 20%, but did you know that it was… I mean was it market? Was it different?


Kei Shibata: [00:26:10] It was market.


Jeremy Au: [00:26:11] There was a market. So it was a market, so you felt it was normal but you didn't know whether you should do at all?


Kei Shibata: [00:26:18] Yeah. Well, of course, a lot of entrepreneurs gave up starting because, there's no valuation. But we took the chance, because time is money. And then also, again, to us I think it looks like a risk free environment. I strongly feel that if I were back then I'd probably do the same choice. And for anyone with especially a recent graduate or fresh out of the business school. It's the best time to start a business, I'd say.


Jeremy Au: [00:26:59] So you started, was it like, you're working out of an office? What was the first few days like? You signed the check instead of working I guess, what was it like?


Kei Shibata: [00:27:10] When we started the business back in 2001, first of all there was not even a broadband internet in Japan. So, it's reasonable to say that there's almost no one actually, who they have idea stuff on online or who booked the flights online or so. There's only a handful number of people who does eCommerce. So it means I think it's the infrastructure was not there and we knew that we have to wait for quite some time. Until, the people started doing online shopping or doing online travel booking, whatever. So, our strategy back then was we really wanted to start the business with a low cost. So, the first things we did was to get a separate office space from the venture capital company.


Soon after that, Mitsubishi was basically downsizing so we ended up getting all the furniture almost for nothing. Then we found another office space, which was use by the one of the subsidiary of the Mitsubishi, and then we hire very carefully. We had a strategy back then which basically, we search on a web to find the primary of bloggers. The bloggers who talks about the area of our business. Let's say, online shopping, or how to buy computers online or so, or how to book their flights online or something. So we started making a cold call to them over the internet and saying, “Hey, do you want to come stop by our office and want to chat?”We ended up talking with so many bloggers, or some engineers who expressed their opinions on the internet and then we hired those people. And without paying any money to the recruiting agencies or websites.


Jeremy Au: [00:29:27] What was that like? I mean, were there other people taking travel online? Because you said, there's no broadband, did you feel weird to be I guess, like… Did you feel like a crazy person saying, like, “Oh, travel will be online, and then in Asia, people are doing it in the U.S.,” or something like that. Did you feel like a crazy person saying that? I was just kind of curious.


Kei Shibata: [00:29:56] Yeah, well, I mean, I think it's at least in Asia, Japan, I think it's back then a lot of people got you probably felt the same way. But at the same time, we closely monitored what's happening in the United States. And there was already like, Expedia was already out there. Travelocity was out therefor example. I mean, there are so many recent online travel agency businesses started making money. So we definitely believe that the market was definitely going to be available in Asia, including Japan.


Jeremy Au: [00:30:37] So tell us about your early days. You're buying all this furniture for free from VC that funded you and then there's a funny. So they gave you money and furniture. So there's good value added service. Every time he goes like, there's like value added VC. And what's interesting is obviously, you're there as a founder, was there a moment where you were like, “Oh, this is starting to work.” Like, “Maybe this isn't a crazy idea, like the numbers are going up or customers are trying to buy.” Was there a  moment there?


Kei Shibata: [00:31:13] Yeah, there are a couple moments I remember clearly. One is a little bit like early adoption of the broadband internet, which was triggered by Soft Bank. So the Soft Bank actually started distributing a free broadband modem, routers at every single station in Japan for free. And then soon after that, I think is we started seeing a lot of good tractions on traffic. And that was actually the first moment and the second moment was the search engine marketing. I clearly remember, I was first guy in our team who started bidding on Google AdWords. I was doing Google AdWords for almost a year. Even I was SEOs and everything. So it was a fun time I think as whenever I added a new Keywords to bid and then in an hour traffic just went up and then went up. And then we just basically kept counting the money.


Jeremy Au: [00:32:25] Were you like a weirdo doing Google ads? It sounds like it. Would you explain to people like, “Wow, do you know you can use Google and you can use ads?” Is that what happened?


Kei Shibata: [00:32:36] Exactly, exactly. It was definitely one of those marketing nerds back then.


Jeremy Au: [00:32:46] I mean, this is interesting because now everybody's like, “Wow, Google ads, if you don't do it…” I mean, there's no way you can't do those ads.


Kei Shibata: [00:32:54] Yeah, and then also the SEO too. SEO back then was a portal, like black box. A lot of people didn't know anything about SEO. We are one of the first companies I think, in that space who started working hard on SEO and that was also the fun time.


Jeremy Au: [00:33:19] You are starting to feel some good moments. Was there a moment where you're like, “Oh, we're starting to scale.” There's a bit of a hockey stick or transition like things had to break, you had to hire a lot of folks. What was that like?


Kei Shibata: [00:33:34] I think it's the year three, we started seeing the hockey stick clearly and... By the way, the first three years, it was miserable. So even though we knew market was not ready, and we explained to the team measures and investors always bitches us, “What are you guys doing? You guys are actually making this much amount of money. I think this is like, amount of sales that some hacker center is generating or something.” So it was a tough time by the way. But after that, I think we quickly started seeing the gross and the next probably four years, we had continuous growth. Like 2x, 3x I don't remember quite well, but I mean, every year we had a double or triple digit growths. And even before we went public I think it'd be still 30 to 50% growth year and year.


Jeremy Au: [00:34:45] Was it crazy? Did you have to hire people suddenly or scramble or something like that?


Kei Shibata: [00:34:52] Yeah, hiring was definitely a headache because especially back then not many are good engineering talents or web designers, those people. What we particularly went through in terms of the tough times to be honest was finding accounting and finance people or admin people. We had a really tough time. It took us more than a few years to build a decent team. Let me actually explain a little bit why that happened. Because we hired so many people who have a really huge interest in our business.


Remember the example I gave you when we first hired people when we basically made a cold call to the bloggers and engineers who had a big interest in our space? So those people stick around but, the people in admin, accounting, finance, they don't care much about our business. So for young companies, especially, back then, when the category of tech entrepreneurship was not really established, I think those people just saw us as like one of those small medium enterprise. That was exactly what happened to us.


Jeremy Au: [00:36:31] Any funny stories from that time? Do you remember any funny stories like, I don't know?


Kei Shibata: [00:36:36] Yeah, I mean, speaking of this hustle to find the good admin people. We hired one accounting guy who was in accounting department, he was basically bullied by the other team members. Who was female accountant, who was actually doing a great job but, she had really high pride. And then she kind of ended up bullying him. He was kind of crying, and everything and then we were always going after her like, “Oh, okay.” So I don't think he could actually keep working for us. On one morning, one guest showed up in our office, who was the mother of this male accounting team member? Keinichi and I ended up meeting his mom. And then his mom started saying, “I want to actually let him resign.” It was kind of bizarre, but that's exactly what happened. Well, anyway, so there's a lot of interesting stories like that, but I would say it's a small team with a lot of drama.


Jeremy Au: [00:38:05] I totally understand. There's a lot of drama. When I was building my startup… What's interesting is that you keep going and you are building. At some point you are in Japan, and then you're like, “Okay, Singapore.” How did that transition happen?


Kei Shibata: [00:38:27] Well, it's kind of long story, because, this is mostly probably interesting story for everyone. Because, remember, when we started the business with less than 1% of ownership. Over the course of seven, eight years two investors, especially VCs kept pushing us to go to public. Keinichi and I we didn't have any control over the company so even though we wanted to focus more on growth at the same time, in year 2007, '06, '07, I think it's the market condition in Japan was not great. And that's because A, I think there was no great macro economics like Abenomics whatever it is that was in Japan. Also, there was a corporate scandal by the company called Livedoor. Some of you guys probably remember.


It was a startup actually, who created a lot of bars and the ended up is actually being criminal charges and everything. So the market clearly didn't like us as a tech entrepreneurs and startups. So, it wasn't a great environment for us to go to public and we knew it but, we have no control over it. So, the VCs and investors pushed us very hard to jump into the public market. That was what exactly happened back in 2008, August 7th, we made an IPO. And then one month later, on August 15th, the Lehman shock. At the IPO event, of course, Keinichi and I was not able to sell even a single share, because we didn't have any ownership almost. So, zero capital gains for the founders and ended 90% still owned by the two investors when we actually went to public.


Then the Lehman shock and in the following year, which is 2009, in Japan, there was the chicken flu hit up nations. In India, people stopped traveling. And then the whole things happened, our stock price has totally crunched. It was a waste of time and the VC ended up saying we want to sell the oldest shares, which is 45%. They started selling their stocks in the market in a stock exchange. So the stock price even went down farther.


Jeremy Au: [00:41:27] How did you feel about that? I mean, it must have sucked.


Kei Shibata: [00:41:36] Totally sucked, yeah. It was disaster. This is not the end of the story because the next year 2009, Mitsubishi also said they want to sell all their holdings 45%. So, first of all the VC shares are partially absorbed by the public market but of course, there wasn't enough liquidity then. So, as a company, we bought back all the shares with them with all the cash reserves we accumulated, over the course of last five or six years or so. And then now the Mitsubishi said, they want to sell the older stock. And by the way, as a block of shares, means we have to find another shareholder to replace them. So, basically for almost a year, I scrambled to find the investor to suck it up.


Jeremy Au: [00:42:44] So you were traveling to find the investors. I guess you were building up your own equity percentage during this time as well or you were like, “Oh, it's too tough.” I'm just wondering.


Kei Shibata: [00:43:01] No, because first of all, I think that zero capital gain for the founders at the IPO we had no fund to support. The only way we could actually increase our ownership was actually through the stock options. So we started less than 1% of ownership, and then at the time of IPO, we had slightly less than 10% that went through the stock options. Then I ended up finding one investor, which is Lawson, the convenience store chains. Remember?


Jeremy Au: [00:43:38] No way, no way. Really?


Kei Shibata: [00:43:43] Yeah. It was so funny. In their strategy map they wanted to do something more online, on top of offline business. They're by far the biggest offline leaders, one of the world's biggest offline leaders. They are big on offline, but they wanted to do something online, too, so we basically offered them that help. And then of course, I knew the CEO of Lawson personally, which actually helped me, through HBS connections, and then Mitsubishi connection and that's how I got connected. So luckily, Lawson sucked up Mitsubishi's holdings, then the first one in 2012, Keinichi and I agreed upon the idea of the management buyout with Lawson. We did the LBO basically. We took the $22 million LBO loan from the Commercial Bank and the biotech companies and then took the company back to private.


Jeremy Au: [00:44:53] That must have been… That was not easy. I mean, I don't think… I know, it's not as difficult. I don't think everybody will understand it's so difficult, but it's a big one. To take the LBO. That's a very tough thing to engineer actually.


Kei Shibata: [00:45:10] Yeah, it was. I'm pretty sure there's not so many tech entrepreneurs that went through the leveraged buyout. It was a great experience in a way and by the way this whole corporate events, these series of corporate events happened in the three years or four years. My finance professor at HBS actually they found our company, and the story and then we ended up as a case.


Jeremy Au: [00:45:48] That must have been a fun case,, a lot of twists and turns.


Kei Shibata: [00:45:53] Yeah, totally but, anyway, the LBO was a very unique experience because first of all, I think it's the one we learnt at the HBS. It's a game that's based on the conflicts of interests. The management buyout, especially.


Jeremy Au: [00:46:09] It was just a bit different, because I think a lot of the newer generation founders, they're doing like three years or one startup, you know what I'm talking about. Seven years, 10 years, max and now you're at 20. Do you feel that?


Kei Shibata: [00:46:28] That's a really good question, Jeremy. I was just thinking about that, too. But in a way, all the story I told you can be separated into the different pieces too. There was a lot of different corporate events. At one point, we had eCommerce business, of course, we are still running a big travel business in Japan. But, we had Trip 101, also, we had a major investment in South Korea, too. So to me, in a way this is actually my journey as the serial entrepreneur, but it's just like the same corporate kind of entity, their adventure evolving, maybe. But I mean, over the course of 20 years, I never felt like I was kind of belonging to one thing, and then we're doing only one thing. Does it make sense?


Jeremy Au: [00:47:25] Yeah, that makes a lot of sense. Basically, you got to do different opportunities. You got to be a founder, again, in many ways at different stages in the same company.


Kei Shibata: [00:47:36] It was another game we chose was in 2018. So Keinichi and I decided to actually sell the part of our shares to LINE, the messaging app. That's another recruiting event. That gave us an opportunity to build the business on our LINE app in Japan. Now, I think we have some 22 million followers, or LINE friends, whatever you want to call on a LINE app. Which gave us another sort of like, asset. I saw it is another chapter.


Jeremy Au: [00:48:06] Okay, I think we're going to wrap things up here. My last question I have for you is, if you could go back in time, all the way to yourself, like graduating from Harvard Business School, those 20 over years ago, what advice would you give yourself?


Kei Shibata: [00:48:27] Take even more risk. I was telling you how I felt about the opportunity for the MBA graduates. It's the best time to start a business I saying, and I can't emphasize it more. If I go back there, and then I know if I actually in a position to do something new and I will even take bigger risks. I'll be even more ambitious, and I will even take more risk. That's the thing.


Jeremy Au: [00:49:01] Awesome, I love it. Take big, even bigger risks. I love it so much.


Kei Shibata: [00:49:05] Because, you're not going to die, you can actually survive. You have nothing to lose. So this is my biggest message for the audience or young people who are thinking about getting an MBA or who actually just got MBAs or, whatever it is, I think you have a golden opportunity upon you.


Jeremy Au: [00:49:35] Awesome. I love it so much. I think you're right. I think when I look back at myself I'm like, yeah, I could take even more risk at every stage. Because it is asymmetric. At the best case, you win in the worst case you learn then, like your founder friend said McKinsey will have a job for you. That's the worst case if you take the risk.


Kei Shibata: [00:50:00] Yeah.


Jeremy Au: [00:50:02] Awesome. Well, thank you so much, Kei, I really appreciate it by you taking the time.


Kei Shibata: [00:50:05] My pleasure. It was fun.

Produced by Tan Yong Quan


broken image