Taejun Shin is the co-founder and CEO of Gojo & Company which extends financial inclusion to micro, small, and medium-sized enterprises. The company has raised over $100 million from top tier investors such as JAFCO Japan, SBI Investment, Nissay Capital, Nippon Venture Capital, Dai-ichi Life, Credit Saison, Sompo Holdings, Link and Motivation, MARUI Group, Seven Bank, Tokyo University of Science Investment Management, Japan International Cooperation Agency, Aizawa Securities, Tokyo Star Bank, 15th Rock Ventures, and Dimension.
In this episode you will learn:
- The first interview question Taejun asks potential hires
- The challenges of international funding rounds
- Why microfinance could be a good alternative
- Why failing to make this critical hire early on was a mistake
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About Taejun Shin:
Taejun Shin is the Founder, Representative Director and CEO of Gojo & Company, Inc., a start-up company aiming to provide financial service for everyone in the world.
Founded in July 2014, Gojo currently has its operation in Cambodia, Sri Lanka, Myanmar and India, providing microfinance for more than 400,000 people with 2,500+ group employees with unique technology applications.
Gojo is one of the fastest-growing and most successful startups in Japan – its valuation is the top 3 among five-years-old startups. Having graduated from Korea University and Waseda Graduate School of Finance, Taejun Shin worked at Morgan Stanley and Unison Capital and engaged in private equity investments. The financial models he made at Morgan Stanley became the template of the business plan for Morgan Stanley’s real estate investment practice. A project for which he led the deal execution at Unison Capital was awarded as the “Exit of the Year” by the Private Equity International.
While working for the industry, in 2007 Taejun Shin founded an NGO named Living in Peace (“LIP”), which became one of the most successful NGOs in Japan. It launched the first microfinance investment fund in Japan’s investment history in 2009. LIP also has supported Japanese children living under the alternative care system (foster homes, institutions, etc.) by raising funds to improve their living conditions.
As an advocate for children’s rights, Taejun Shin visited governments’ children guidance offices all over Japan and played a pivotal role to reform the national children-care system. In 2018, Taejun Shin was selected as the Young Global Leader of the World Economic Forum. He is also the youngest founding board member of Endeavor Japan supporting entrepreneurs around the world.
Taejun Shin has authored 9 books about finance, child welfare, and innovation. He is the finisher of 1648 km ultra-marathon, holds a Karate black belt and attained 6 Dan of Go, an Asian board game. He loves playing drums and taking street photos of people in the world.
Connect with Taejun Shin:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a guest that is going to teach us a thing or two. We’re going to be learning a lot about the venture world in Japan. We’re also going to be learning about how things work in low-income households. Also, we’ll learn about unique recruiting strategies; you name it. So, without further ado, let’s welcome our guest today, Taejun Shin, welcome to the show.
Taejun Shin: Thank you for having me here.
Alejandro: Originally born stateless. How is this possible, Taejun?
Taejun Shin: It’s due to the complexity of the nationality laws of Japan and Korea. My grandparents came from Korea to Japan before WWII. Back then, Korea was part of the Japanese Empire. They came as Japanese citizens, but after the war, they became stateless. They lost their Japanese nationality, and also, there was no country or no government in the Korea peninsula. Then, they became stateless. My parents inherited that status, and I did too.
Alejandro: So, when you travel, Taejun, how do you go about it because you don’t have a passport?
Taejun Shin: That’s correct. I have a travel document for refugees. In Japan, my status is stipulated under the laws for refugees. So, I bring my [3:04], which does not have the [3:06]. So, whenever I go to the immigration counter, the immigration scans my travel document, and nothing happens. They begin to ask me tons of questions.
Alejandro: Wow. Then, with the family, how was life growing up? Did you have anyone in the family, as well, that was an entrepreneur, or how did you get the entrepreneurial drive?
Taejun Shin: My parents are both teachers, so I don’t think there are any entrepreneurs. By the way, the Korean/Japanese people, there are many entrepreneurs. I think a good example is [3:54]. I think he also used to be stateless, and he acquired a Japanese nationality back maybe 40 or 50 years ago because he needed to study abroad. So, many Korean, Japanese people are quite entrepreneurial.
Alejandro: In your case, you did a combination of finance and law. Why law?
Taejun Shin: Originally, I wanted to be a human rights lawyer. When I was a college student, I told them my career plan was to be a human rights lawyer and to improve the status of the people, especially the minorities. But after being involved in many of the human rights activities – the rule of many countries is capitalism. That’s what I felt. Even human rights NGOs need to have money to run the business or to work. I thought, “Okay. Maybe if the rule of many nations is capitalism, I think I should know it. I thought maybe finance is maybe the best industry to run capitalism. That’s how I was interested in financing.
Alejandro: Very cool. You ended up as your first job in Morgan Stanley, and here is where you understand that you’re quite good a modeling. Is that right?
Taejun Shin: Oh, that’s correct. Some people called me Excel Ninja. Back then, many people used Excel to make [5:55] models. Some models I created became the template for the real estate investment office. I was also asked to make for debt-risk management database. And to do so, I needed to learn how to code, so I learned things by myself, and I also learned from the IT people of the company.
Alejandro: While at Morgan Stanley, you also started your NGO, Living in Peace. So, what was Living in Peace?
Taejun Shin: Living in Peace is an NGO founded in 2007. My original goal was to expand equality of opportunity, but I found that I needed to learn finance, and I joined Morgan Stanley, but that is a completely different world. I wanted to start something meaningful. Sorry – the investment business banking is meaningful, for sure. [7:05]. This Living in Peace is now doing three things. One is my co-finance on supporting children who are under alternative care systems, which are like the children’s’ homes, the foster homes, foster parents, etc. We always love helping refugee people living in Japan.
Alejandro: Got it. Then, after this, you did private equity. Why did you think private equity was a good way to follow your banking experience?
Taejun Shin: Some people in Japan call it private equity on [7:52] business. There, you have to know general management, investment, law, tax, finance. I felt it was a good place to learn everything and to start something by myself.
Alejandro: Is there anything there, especially during your banking years or maybe during private equity years that you understood about what differentiates good companies from bad companies.
Taejun Shin: Oh, good question. If it is in a partner situation, the quality of the management team determines, say, 90% of the performance. That’s my rule of thumb, and that’s almost always correct. Usually, another thing may be the market. If things are going well, and if the market situation is okay, many companies seem to be great, but there, I think, the quality of their full potential [9:16]. The management team, but to a certain extent, I think the macro administration has a lot.
Alejandro: Let’s talk about your bringing Gojo to life, your company, and the meaningful business that you’ve created. Tell us about how you came across the idea and how you brought it to life.
Taejun Shin: Thanks to this engineering activity, I was invited to a conference. The conference was held in summertime in China in 2012, and I attended the event. I found that the World Economic Forum is like a private sector [10:08] of the United Nations. I’ve heard that in the 21st Century, an individual if he or she works very hard, can make the private sector international organization. I wanted to do something like this, and I thought about the topic that I wanted to work on, and I thought maybe financial inclusion is the one I wanted to work on. I remember in September 2012, I determined that “I’m going to make a private sector [10:49], providing economic access for everyone in the world.
Alejandro: What happened next?
Taejun Shin: My former [11:00] when I needed some capital was quite generous. So, [11:04], the founder of [11:06] Capital, he is the first Asian general partner of Goldman Sachs. He’s also a very active member of the World Economic Forum. They gave me a one-year. During that period, I could work [11:26], and at the same time, I could prepare for my startup. I spent one year [11:39]. In 2014, I stated Gojo.
Alejandro: You were talking about the quality of the management team. How did you go about building the founding team for Gojo?
Taejun Shin: These founders should [12:04] viable team members. What I meant to say is that – until we complete Series A or sometimes Series B financing, it is not easy for the founders to recruit someone who is better than the founders. We need to team up with people who can run the business at least for a few years with the original team members.
Alejandro: Also, for the people that are listening, so that they really get it, what ended up being the business model of Gojo?
Taejun Shin: Gojo is a bit unique. It’s a holding company of microfinance institutions. Microfinancing institutions are some of the local banks or cooperatives which provide services for the poor people in the European nations. We own the majority shares of the local companies. Sometimes, we buy existing companies, but sometimes we start the companies from scratch.
Alejandro: How much capital have you guys raised for Gojo?
Taejun Shin: Roughly 100 million USD so far.
Alejandro: I know that you had some trouble raising the money because people were not very educated when it comes to microfinance.
Taejun Shin: That’s correct. One conventional reason for investors is that you should not invest in something you don’t know. Fortunately, I studied the company in Japan. Most Japanese investors didn’t know microfinance at all. In the first few years, it was like I was trying to sell orders to aliens living on Mars or something like that.
Alejandro: Right. You’ve raised over 100 million, so you did well at educating them. So, how did you go about that?
Taejun Shin: We raised 15 million USD from angels, individuals only. So, the first $3 million I raised from my friends and former colleagues. They knew me, and they invested in me without asking anything. We crossed the Series A round of 12 million USD with individual investors only. My shareholders trusted me, so they introduced many other investors to the company. I think I have to explain the background. Most of the Japanese investors are under parent companies, which are the Japanese big companies. What they cared about the most, I think, is not to make mistakes, rather, making great returns – making mistakes by investing in exotic businesses, like microfinance. It means a lot of risks for them. It’s not easy for us to raise capital from institutional investors in the first few years, but individual investors don’t care much about these things. They don’t care about making mistakes or taking risks, so they just looked at us, the team, and then they looked at what we were doing, and then they invested in us.
Alejandro: That’s amazing. How big is the team today?
Taejun Shin: As a group, we 3,500 people roughly.
Alejandro: Wow! That’s a lot of people, and I know that you have quite a unique methodology when it comes to recruiting. Tell us about it.
Taejun Shin: It’s a secret, but I have my 60 questions that I ask at the interview session, especially when I interview those who are going to work with me very closely, I ask all these 60 questions. Sometimes, it takes two hours. These questions are completely about understanding who the person is. It helps me a lot to form the corporate culture because corporate culture, I believe, is made of two things. One thing is the company’s guiding principles, so vision-mission advice. Another, I think, is the people. There should be no exception in terms of the value-alignment. If there is any one exception, that person can poison, and it is quite contagious. It sometimes kills the entire corporate culture. I’m very mindful of the interview sessions.
Alejandro: Out of those 60 questions, which is the one question that you pay the most attention to the answer that you’re going to get?
Taejun Shin: That’s a good question. I think some people might apply to the company, so I’m not going to tell that, but the first question is, “Let’s say you are on the cover page of a magazine, what would be the title and what would be the first paragraph?”
Alejandro: Wow. Then, basically, you’re waiting to see what they say and what motivates them and drives them? Is that it?
Taejun Shin: That’s correct. Yeah.
Alejandro: What is typically the big no-no that you would hear?
Taejun Shin: I think the answer itself, I don’t pay much attention to it, but how they answer and how they think matters more. Most of the questions are questions that people cannot answer if they haven’t thought about their life.
Alejandro: Got it. Now, shifting gears here, I want to ask you about the way you see the environment, and then also, technology being used there. I know that a lot of people don’t have smartphones there, so tell us how you see these low-income households and how they go about technology and all these types of things that you’re seeing right now.
Taejun Shin: I think most of our customers, their disposable income for a year ranges from $500 USD to $2,000 or $3,000 per year. [20% 20:02] of the people are illiterate. The smartphone penetration ratio is still around 30%. It’s increasing exponentially, but it is still there. Typically, microfinance customers are ladies. In our case, also, more than 99% of our customers are ladies. There are some pure, digital, inter-players who are trying to penetrate this microfinance market in the United Nations. Especially in Asia, I don’t know whether that will work. The young people own smartphones, and they know how to use them, so I think the young people might be their potential customers, but when it comes to middle age or the old people, some people do have smartphones, but most of them don’t know how to use it. Whenever I think about our service, I think about my mom. She’s in Japan, and it has been almost ten years since she started using the smartphone. But she knows how to use maybe three apps only, some messaging apps. So that’s what it is, and it is not easy for [21:41] to provide financial service for the low-income households living in rural areas.
Alejandro: Now that you guys are executing and building up the business, if I had to ask you, keeping all this in mind, let’s say if you were to go to sleep, Taejun, and you woke up five years later – a tremendous snooze that you’ve embarked on – and you wake up in a world where the vision and mission of Gojo is fully realized. What does that look like?
Taejun Shin: From day one, we set up our long-term goal, which is to provide financial service for more than 100 million people in 50 countries by 2030. It’s been six years, and we are now working in four countries, 0.6 million people. We have grown, so far, 150% per year for the last few years. If we grow by 70% from now on, we’ll be able to achieve our target.
Alejandro: Very cool. You’re part of all these organizations. We’ve talked about the World Economic Forum, and also Endeavor; you are part of Endeavor too. I want to ask you, how have you seen the venture ecosystem developing in Japan?
Taejun Shin: That became much better compared to this ten years ago. The ecosystem, I think, is made of role-model entrepreneurs and investors. I think a good network are the talent working for startup companies. Ten years ago, it was very big. Now, I think it’s much better compared to the others, and now we have 6 or 7 unicorns in Japan, and the number is increasing every year. In terms of fundraising, it’s not easy for Japanese startups to have $100 million-plus rounds in Japan only. When a startup goes to that level, they tend to [24:14] investors based in New York or London or Singapore, sometimes.
Alejandro: Does that happen at a Series B financing round, or what kind of financing cycle would that be?
Taejun Shin: Typically, a financing Series A amount is, I think, $3-10 million; Series B would be $10-30 million; Series C, it ranges from $30-200 million. So, Series C.
Alejandro: When you go for the Gojo investors, I am sure that the most sophisticated that you may have in mind are people in the U.S., so what kind of hurdles do you encounter from making that jump from, let’s say, Japan to trying to come here to the U.S. to find investors?
Taejun Shin: One is, obviously, the language barrier, but there are many others. Another is the context. I’m the gold member of Endeavor, Japan, and I attended some international selection panels. What I found is that all those times, entrepreneurs find it very difficult to explain the local context. For some panelists, the business idea doesn’t make sense at all, but if we understand the local context, quite a unique approach that another entrepreneur is making makes sense. We have to do the same thing, say, [25:59], for example. Consumer behaviors in Japan and the U.S., I think, are different, and we have to explain the how and the why it is different. It is difficult because most of the growth of the investors based in the U.S. have never invested in Japanese startups. So, I don’t know many names which raise the capital from there. But that’s a challenge that we are facing.
Alejandro: Now, you’ve been at it for a while. You started GoJo back in 2014, so it’s been an incredible run, full of lessons, ups and downs, successes, failures, you name it. The question that I’d like to ask you that I typically ask the guests who come on the show is: if you had the opportunity to go back in time, back to that moment where you were thinking about launching a business, what would you tell your younger self and what would be that one piece of business advice that you would give to your younger self before launching a business and why knowing what you know now?
Taejun Shin: Just a week ago, we had a corporate history session where I explained corporate history, and one of our colleagues asked the same question, and I thought of it. We didn’t have a chief technology officer on day one. That was a mistake because in our business, from day one, the goal is to make a totally new innovative microfinance services, which can completely change people’s lives. To achieve that, we clearly stated that we are going to use technology, but we didn’t have any tech person. That was a mistake, I would say.
Alejandro: And why didn’t you have a tech person on the team? Did you perhaps not find that person? Maybe you didn’t know that you needed that person, or why?
Taejun Shin: If you automate in [28:33] business, things will be more efficient. We thought we have to improve the operation of this microfinance business first, and then we apply technology to further improve the efficiency of the operation. We thought that “Yeah, we can hire a tech person after three years.” The thing is that if we don’t have any tech person, the global direction of the operation or improvement, or even the selection of core banking system, for example, we made a lot of mistakes, which we could have avoided if we have a tech person in our team.
Alejandro: For the folks that are listening, Taejun, what is the best way for them to reach out and say hi?
Alejandro: Amazing, Taejun. Thank you so much for being on the DealMakers show today.
Taejun Shin: Thank you very much.
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