Venture capitalist advises travel to go on “attack mode management”
THOSE who still doubt the Covid pandemic will significantly change the way we will live and work in the future should listen to Kathy Matsui, formerly with Goldman Sachs and now general partner of Japan’s first ESG-focused (Environmental, Social, and Corporate Governance), US$150 million global venture capital fund, MPower Partners.
Matsui was appearing at WIT Japan & North Asia 2022, talking to WIT founder Yeoh Siew Hoon, about her vision to empower women entrepreneurs and invest in and advise start-ups on their journey to growth, a journey she herself has undertaken following a shaky start when she began her career as an equity strategist analysing the Japanese stock market.
Pity, then, that Matsui landed the job as the bubble burst on Japanese equity markets, with the Nikkei Stock Market Index collapsing about 40% in 1990.
“I thought that was actually kind of normal, but everybody else around me was in tears, panicking,” Matsui recalls.
“Overseas investors began to ask, ‘why should we bother to invest in Japan’. The labour market was shrinking, an ageing society was starting to drag on the economy and capital, while abundant, was finite. The prospects for Japan at a macro level were not very bright at that time.”
Matsui’s advice was to sit tight, stay focussed.
Progress made in female workforce participation; Japan still suffers from dearth of diversity in leadership
In a 1999 research report, Matsui – voted one of ‘10 Women to Watch in Asia’ in 2007 by the Wall Street Journal – compiled “Womenomics”, arguing that diversity makes for better performing companies and economies.
At the time, her professional life was shaped by the tough questions being asked of Japan’s economy, while her personal life was motivated by care for her young son.
“During that time, I took the standard maternity leave, four months, from Goldman Sachs. After I returned to work full-time, I realised that around me were many women – Japanese friends – who, for a whole host of reasons, were not able to return to their careers full-time, in the same way I had.
“Many of my friends decided to opt out and become stay-at home-moms, which I totally respected, but I also had a lot of friends who wanted to return to work, but for a wide range of reasons, were unable to do so.
“So, I just put these two things together. And it dawned on me that, wait a minute, this country is trying to run a marathon on one leg? And what if, because I’m an analyst, I can play with the numbers?
“What if Japan’s gender employment gap, which was very wide, could narrow? What if Japanese female employment rates could rise? What would that do to GDP? What could that do to a whole variety of factors of the economy?
“Companies might benefit from this phenomenon of more working women. More women working means more outsourcing opportunities for childcare, for elder care, for prepared food manufacturers.
“That was the genesis of the Womenonics report.”
Since writing that report, the treatment of working families in Japan has improved with the Japanese government beefing up parental leave benefits.
Japan’s female labour participation rate has gone from one of the lowest in the developed world in the 90s, to one of the best in the world today, eclipsing numbers in the US and Europe. Female participation rates have climbed from about 55% in 2014 to 71% in 2019, pre-Covid.
Something else has changed. Japanese public and private companies are now required to disclose the make-up of gender diversity in their corporations.
On the other side of the ledger, Matsui says Japan still suffers from a dearth of women – and all minorities – in leadership positions, whether it’s in the parliament, whether it’s in private sector managerial leadership roles or on company boards.
Increased focus on ESG, and generational shift, will move needle on diversity
Rather than work with well-established companies, Matsui and her MPower partners opted to target companies that were in their “teenage” phase, because that was easier “than trying to change the ways of adults”.
“In my prior life, trying to get large Japanese listed companies to change their ways, to shift their DNA, was very challenging.”
MPower has made three investments so far – two Japanese and one overseas – in support of “the next generation of innovative entrepreneurs”. A common theme across all investments is to focus on tech-enabled, sustainable living companies that provide solutions to societal challenges.
“In the teenage phase, these companies are more malleable, smaller and nimble, and by targeting middle to later growth stage start-ups and helping them to integrate ESG values and principles into their core business strategies, is a driver of sustainable and scalable growth.”
Matsui says the movement of increased focus on ESG factors, alongside the changing values of the younger generation, are two powerful tailwinds that will help promote greater diversity.
Companies who fail to adopt ESG principles will pay a high price, she says. “Social governance investing is exploding globally, and it’s particularly exploding here in Japan.
“Let’s say, you’re a travel company, who doesn’t really care about diversity, or a start-up that wants to pursue an IPO. If you don’t care about diversity and governance, it will be very hard for you to raise capital, or your cost of capital will be higher than your peers over time.
“Treating ESG like a box-ticking exercise to gain compliance, is simply greenwashing. If you limit it to that, you’re not really doing ESG in the true sense.”
For travel, ESG is becoming a huge issue, Matsui says. “For somebody like me, who’s only worked in an old-fashioned world where you get on a plane to meet your clients in person, you kind of scratch your head and wonder, why do we do it that way?
“Why do we burn all this fossil fuel flying aeroplanes, get jetlag that is bad for our health. Perhaps, this is an opportunity for us to reassess everything fresh, press the button and change the way we work.
“Companies can take this as an opportunity to be proactive.”
And Matsui has a word for it: Attack mode management.
* Watch the full interview here.
