Interview Investor

Shuhei Morofuji, an Entrepreneur Turned Investor, Recalls His Journey & Shares His Vision

Shuhei is the founder of SMS (2175, TSE 1st Section), one of the largest Asian internet based healthcare information platforms. SMS has a presence in 13 countries and over 30 different revenue streams. It has either invested in or acquired over 20 companies globally. Shuhei was CEO for 11 years, leading the company to a market capitalisation of US$500m before relinquishing his position in 2013.

Since 2014, Shuhei moved to Southeast Asia and is now a prominent investor in startup companies, having co-founded two venture capital firm COENT and then REAPRA.

He recalls his childhood experiences, what led him to entrepreneurship, and eventually becoming a venture capitalist.

 1. Tell us about where you grew up and how your early experiences influenced your decision to venture into entrepreneurship. 

I was born in Fukuoka, grew up in the Kyushu district and spent my latter years in Tokyo. I was not the brightest among my siblings and didn’t care much for textbooks or memorising for standardised tests. I realised very early on that the world is much more complex and hence there cannot be a single answer to any question and so the test scores didn’t matter too much to me. At a very young age I became skeptical about the underlying premise in everything and began to think multilaterally about all matters.

…the world is much more complex and hence there cannot be a single answer to any question…

When I was at University of Kyushu, I came across several Japanese companies that had filed for bankruptcy and realised that even for those who strive to get a steady secure job at these large companies, it’s not very secure. I was never inclined towards a salaried job and therefore, going against the grain of how most Japanese people thought in the past, I decided to become an entrepreneur.

2. In 2003, you founded SMS, an internet based healthcare information platform. In 2008, the company was listed in Tokyo Stock Exchange. Today, SMS operates more than 20 web-based services to serve the needs of the ecosystem of elderly healthcare industry across Asia. What do you think are the contributing factors for such expansion? 

There are two types of factors: external and internal.

External factors: My keen interest towards the internet-based companies led me to start SMS. There was little to no competition in the healthcare application domain. I also felt that with the growing aging population there was a need for a solution in that space. These are the two external factors that played a big role in the expansion and growth of SMS.

Internal factors: My meta and multilateral approach to find a solution to any problem as well as my keenness to research to gather as much information about the business as possible are the two internal factors that led to the success of SMS.

3. Having founded and led SMS for about a decade, what were some of the most daunting experiences you faced throughout your entrepreneurial journey? 

The two years after the IPO were the hardest times as I was keen to create value for the shareholders. Some of the challenges I faced were: (1) building a good team and streamlining the old team with the new recruits; (2) striving to meet the forecast earnings and thereby the stock price expectations, and (3) several experienced employees resigned, which was hard on the company.

4. You retired from leading SMS in 2013, what prompted you to make the move and the decision to focus on investing in startups in Southeast Asia? 

I believe companies managed by owner-CEO perform higher and are able to increase its enterprise value based on the initiatives that the owner-CEO undertakes during that period. However, in the long term, there are few examples of innovations within the company after the owner-CEO resigns. Hence, I concluded that in order to drive innovations at SMS, it would be better for me to step down and adopt the system in which there is a change in CEO every 10 years. I also wanted to prove to myself that my early success did not depend only on the existing demographics in Japan but also on my own aptitude and understanding of business.

The two years after the IPO were the hardest times as I was keen to create value for the shareholders.

As for why I started to invest in Southeast Asia, it is because of the region’s potential. It attracted me to move to Singapore and invest in this region because of these reasons: (1) high growth prospects in every single industry/business area; (2) since each market in Southeast Asia is different, there is a need for research to understand the complexity of each market and apply this understanding to management the business complexities, and (3) high probability of making an impact in different industries in Southeast Asia

5. What excites you about investing in startups? 

When I feel I can make an impact by creating a future for the startup

6. Could you describe your perfect startup? 

Passionate young management team building a unique business in a market with large market potential.

7. I am sure you have been approached by many startups on investment proposal. What is the best approach you have encountered thus far?

Entrepreneurs who have been able to show clear understanding of the business and the market potential while being true to the main objective of their business model.

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