Saemin Ahn, head of Rakuten Ventures, talks to our reporter Kaloyan Andonov about the unit, bitcoins and his views on investment and trends in the consumers sector. Before joining Rakuten Ventures, Ahn worked for Google.
What role has corporate venturing played at Rakuten over the years? How has your strategy evolved, and how has your approach compared to your peers?
Rakuten Ventures was established in 2013 as an early-stage corporate venture capital fund, focused on empowering the startup ecosystem to positively affect internet services globally. Staying true to the spirit of Rakuten, we really thought hard about how to do disruptive business outside Japan, and one of the answers was to try our hand in venture capital (VC). We also saw a lot of the big players – present party included – making more and more investments in the growth round where target visibility was nominal and the only opportunity cost was to pay up on equity. Seeing this, we took another forked path to come down to the seed to series B stack to invest in a wide variety of core tech and service companies we deemed important; this is the path that Rakuten Ventures rides and finds value in.
Our broader goal is to invest in startups that can enable better user experience and facilitation, irrespective of verticals. Overtime, we would like to see how these businesses could contribute to the Rakuten ecosystem, technology, membership, and of course financial returns.
In October last year, Rakuten made a major investment in Bitnet, which would allow merchants to accept bitcoin payments. It was stated that you were to integrate this service and offer it first in the US market, then Germany and Austria. What is the bitcoin payment potential you see in other markets?
The Bitnet investment was led by the Tokyo investment team, which operates under a different strategic focus to Rakuten Ventures. That being said, Rakuten Ventures sees massive potential in bitcoin’s underlying applicability. If you can resect the concept of block chain away from just financial transactions, we see a multitude of uses in relation to the universal ledger and micro-transactions capabilities.
For example, with the latter, you can essentially eliminate – for the short term – any economic gain of spammers by making massive EDM runs uneconomical. It would not have any meaningful impact for even a very prolific email sender, but for people who are intentionally trying any and all permutations to hit on one unlucky Joe, this solution presents massive issues. By the way, this idea of monetary transaction to lower spam has been around for a very long time but this technology makes it reasonably feasible to execute if there is a consensus with the infrastructure holders.
Going further into that train of thought, you can also severely limit click fraud for adtech – a yearly $6bn to $7bn issue – by creating a unified ledger of micro-transactions to verify an impression or a view ability metric with a user. On the other side of the tracks, bitcoin presents challenges in the marketplace for financial transactions, equal to its massive potential of lowering trade cost and competing with fiat currency. The currency’s inability to pick up transaction velocity and people’s tendency to keep said medium as a commodity and asset class (like coffee or gold) to the tune of 70% as of 2014 – meaning only 30% of bitcoins are in circulation – is something that the industry as a whole should work on when it views the need pushing over the threshold point. The digital currency is still not protected by any major governments, but said entities are so ready to regulate it! If Mt Gox lost $550m, you would have secret service agents rappelling down blackhawks into the offices of the startup and demanding to find the source of said robbery; the fact that this does not happen is a risk for users of the currency as it means less protection. That is why you see a seasonal pattern on bitcoin exchange and wallet hacks.
Considering the majority of your investments over the past year, Rakuten seems to be quite focused on investing in IT and media companies, such as Pinterest for example. Recently you have also invested in Lyft. What other areas do you find interesting to invest in? Do you see any rising startups from the sharing economy as potential partners outside of the US market?
The Lyft investment was led by the Tokyo investment team, which operates under a different strategic focus to Rakuten Ventures.
For Rakuten Ventures, in 2013-14, we have looked at how tangible consumption was affected by the entrance of smartphones, and how liquidity could be affected by giving developing markets more tools to free up their capital. That is how investment companies record their payments. In 2015, our goal is to be more aligned with advertising technology and artificial intelligence.
I think in the US in particular, we have the first wave of successful companies that have disrupted entrenched markets with said sharing ecosystem. We will see growth investors and large stack PE+iB outfits trying their luck with already proven entities but for new companies, I think the players are looking intently to see how the market plays out.
What would you say have been your best investments to date?
All the companies we have invested in have been going strong in their own right. We focus on long-term investments, value for company, and overall positive impact to the future of the startup ecosystem. We are investing in strong teams, leaders, technology and passion that will enable Rakuten to have a stake in future user interaction.
What are your general thoughts on the evolution of corporate venturing, and its impact on innovation, especially in the consumers sector?
I think this whole movement of CVCs becoming faster and more adaptable is a great trend to see. Before there was not a definite classification between strategic investment and CVC but now we see – like Rakuten – the push to inject discipline into the investment practice and commit to a vector of market play. I really am happy about this movement.
What are investment trends do you see going forward in your industry?
We recently invested $10m into a Singaporean company called Pocketmath. It is a company that’s doing ad-tech but on the mobile spectrum. It has quite a presence in Singapore, and the revenues are really great.
We are looking for anything related to consumption, not just data but overall financial transaction. Also data receival and transferal standards.
