Teppei Tsutsui of GFR Fund: “Strong focus on execution”

Strong focus on execution: We can’t emphasize enough how important the execution is for startups. Some founders are good at talking, networking, fundraising, etc. But what we’re looking for is a doer or someone who takes action and executes. As a startup, you must continue to deliver what is needed — for customers, employees, partners and investors. […]

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Strong focus on execution: We can’t emphasize enough how important the execution is for startups. Some founders are good at talking, networking, fundraising, etc. But what we’re looking for is a doer or someone who takes action and executes. As a startup, you must continue to deliver what is needed — for customers, employees, partners and investors. Otherwise you’d be running out of cash soon. Sometimes you make a mistake, but as long as you continue to execute, you’d be better off than doing nothing and making no mistakes.


As part of our series about “5 Things I Need To See Before Making A VC Investment” I had the pleasure of interviewing Teppei Tsutsui, Managing Partner of GFR Fund, LP, a San Francisco-based venture capital fund that works with strategic investors to give early-stage technology companies the opportunity to accelerate growth in the digital entertainment sector. GFR Fund is managed by GREE Capital Partners, an affiliate of GREE Inc., a global leader in the mobile gaming industry. As an active investor for the past decade, Teppei has led several key investments and acquisitions in the U.S. and Tokyo, including GREE’s acquisitions of OpenFeint and Funzio. Prior to working for GREE in roles as Director of Investments and Strategic Finance, Teppei was key to advising M&A strategy at Morgan Stanley, where his strength in the Asian market and as an investor grew. He also worked in Japan in business development at Mitsubishi Corporation. Teppei earned a bachelor’s degree in Law from Hitotsubashi University and MBA from the University of Chicago.

To date, GFR Fund has invested in 48 companies since 2016, including Wave XR (Series B, 43M dollars raised, RRE), VRChat (Series B, 15M dollars, HTC), Apprentice (Series B, 42M dollars, Insight), Tovala (Series B, 33M dollars, Finistere), Loom.ai (acqd by Roblox), Stream (acqd by Frontdoor) and Spaces (acqd by Apple).


Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?

I was at GREE, a Tokyo-based, publicly-traded mobile game company from 2011–2016 and during that time I supported the CEO in leading organizational changes that included three of the largest acquisitions the company had made in its global expansion: 140M dollars acquisition of Pokelabo in Oct 2012, 210M dollars Funzio deal in May 2012 and 104M dollars OpenFeint deal in 2011 and the post-merger integration, plus debt financing. I moved from Tokyo to San Francisco in 2014 to start the seed investment program for GREE, and eventually started an affiliate, GFR Fund, which was one of the very first funds to start investing in the virtual and augmented reality space. I believed that VR/AR would become the next computing platform and didn’t want to miss the opportunity. We raised 20M dollars for the first fund and invested in 20+ startups in the XR space such as VRChat, WaveXR, Theta.tv, Littlstar, Fable, YBVR, Phiar and Sturfee.

Our investments are typically somewhere between 100k dollars and 500k dollars and generally fall in the seed stage, and we keep one-third of the fund available so that we have the option to continue to support the companies that we have invested in, up to a series B or series C, depending on the situation.

With the launch of our second fund in early 2019, we expanded our investment thesis to include companies pushing the boundaries of digital media and entertainment through technology such as blockchain, live streaming and edge computing. We created a second fund, GFR Fund II, with 20M dollars to invest in companies like ProGuides, RTFKT, Fan.AI, Edgegap and Samba.tv, among others.

The Covid-19 pandemic has created an interesting environment for us and our portfolios, with VR and online entertainment seeing a surge in activity and investments again as more people were forced to stay home and travel less. We also saw a surge in the need for digital content, remote work and e-commerce solutions due to the stay-at-home orders, and saw an opportunity to help companies in these sectors with investments. We started a scout fund in July 2020, GFR Artists, to focus on startups in the pre-seed stage who are innovating in the digital content, e-commerce, and remote work sectors, which are expected to grow post-Coronavirus. So far we have already invested in 17 companies in North America and Europe and expect to make 5–10 more investments before the fund closes.

Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

I read “eBoys” written by Randall E. Stross when I was still at college in Japan, and it inspired me to pursue an investment career. The book is about the founding story of Benchmark Capital, one of the most respected VC funds in Silicon Valley. It taught me how venture capital works, and how these investors help entrepreneurs build a business that could impact the world. I was so fascinated by it that I joined an investment bank to master financial skills and then accepted a job at a consumer technology company to understand the market and build a personal network. That path ultimately led me to founding GFR Fund in San Francisco. It was a long way to come but I would not be here if I hadn’t read that book.

Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?

In Japan, we have α saying: Three years on a cold stone will make the stone warm. What it means is that you should not give up, and that perseverance and patience will bring positive results. Whenever I started a new job at a new company or with a new team, I stayed there for at least three years so that I could prove myself and build long standing relationships with my colleagues. I still meet with my former colleagues as potential investors or partners for GFR Fund, years after leaving those jobs. Some people stayed at the same firms and some people moved on; regardless I already built trust with each of them on a personal level, and they still remember me and are willing to work with me. This is one way I have been able to find business partners — whether it’s as an investor for GFR Fund or as clients for our portfolio companies.

How do you define “Leadership”? Can you explain what you mean or give an example?

I view leadership as how you demonstrate the vision of an organization, where the organization is heading to and how. There is no right answer for that always, but a leader needs to analyze the situation where the organization stands, come up with a few scenarios and options, and choose the one that s/he thinks is the best for the organization. The hardest part is obtaining “buy-in” from people who are involved. When I co-founded a subscription commerce startup in Japan, I was able to show the vision but couldn’t convince other founders and the team, so the company eventually fell apart. I learned from this failure, and at GREE, after I chose what was best for the team, I tried to spend extra time with my team to explain why. With that, I was promoted quickly and my last job at GREE was to support the CEO to build and implement the company-wide strategy. Again, I tried to put extra effort into getting the employees’ interests well aligned by explaining where and why we as a company were going in that specific direction. As a result, we successfully completed three acquisitions to solidify our position in Japan and expanded to the US market.

How have you used your success to bring goodness to the world?

When I was applying to US business schools from Japan in the mid 2000s, I was very frustrated that I could only get a limited scope of information remotely. I wanted to talk to the current Japanese students at each school to ask them about school life and what potential career opportunities they had after graduation. But it was very hard to identify and reach out to those students as it was the pre-Facebook and pre-Whatsapp era. Once I joined the Chicago Booth School of Business, I created an invite-only online community where current students at top US schools could answer questions from and even talk to people who were interested in applying from Japan. It eliminated the physical distance between students and applicants, and also filled in the information gap. It was a big success as there were thousands of members at the peak and we were also able to find sponsors from top firms like McKinsey, Goldman Sachs, etc. I eventually founded a non-profit to maintain this community, hired a few people and further expanded its activity to organize business plan competitions and even an accelerator program in Japan to encourage entrepreneurship.

Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly…

Can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?

There are a few things we as an industry can do at multiple levels to change this. VCs raise money from investors called Limited Partners or LPs. At the LP level, I believe LPs should pool a certain portion of its investment budget to commit to emerging fund managers who are women, minorities and people of color. At a fund or GP level (General Partner, our fund managers), we should create a Kauffman Fellow equivalent program for investment managers who are women, minorities and people of color

Can you share a story with us about your most successful Angel or VC investment? What was its lesson?

I wouldn’t call it the most “successful” but rather an investment that is somehow special to me is VRChat, a UGC (user generated content) platform in VR. It was our first investment at GFR in 2016, and there were only 1,000 active users when we decided to invest. Back then there were other competitors like AltSpaceVR or High Fidelity who were backed by top tier VCs, but both companies failed to grow. VRChat was the only one that survived and eventually became the largest VR community. It was a great learning experience. People tend to be more comfortable co-investing with top tier VCs, but the truth is, you have to make your own decision — don’t let others decide. In this case, we chose VRChat because they were the ones who listened to their community and kept improving their product, and because of that, their audience grew into the millions and the decision we made was right for us. I’m not sure how successful it will be from a financial perspective, but at least there are millions of people now who really love VRChat.

Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

In 2015 when I was still investing on behalf of GREE, we made an investment in a San Francisco-based company that was in the sharing economy space, which was very hot back then. I met the founders and the team, and something about them didn’t instill confidence in me but other members at GREE fell in love with the idea, so we ended up investing in the company. I tried to keep in touch with them, but after a year or so, the founder stopped responding to my emails, and eventually I lost contact with him. I was no longer able to get hold of him. After a few months I read on the Internet that the company was acquired by one of its competitors for a small amount. As a shareholder, we were supposed to receive proceeds from this exit but we never did. I still couldn’t get ahold of him. It was a really difficult experience for me, and my lesson was that you should never invest in a company if you can’t trust or have confidence in the team — even though the idea seems interesting.

Can you share a story with us about a problem that one of your portfolio companies encountered and how you helped to correct the problem? We’d love to hear the details and what its lesson was.

One of our portfolio companies, Jido Maps, had been working with a global retail chain and they agreed to launch a test product at their Tokyo store. Jido Maps had been working with their team in Tokyo since 2019, and visited there a few times to get things going. When the Covid-19 pandemic hit, the product launch was already scheduled for July 2020. Jido needed someone on the ground to communicate with the store’s team in Tokyo and test out the software they were implementing at the store. We searched in our network to see if there was anyone in Tokyo who understood the retail and computer vision technology and was able to help. Within 12 hours, we found two candidates and introduced them to the CEO of Jido. After a few interviews, he found one of them to be a perfect fit for the job and hired her as a contractor. Because of this, they were able to launch the test product in July as scheduled and it was a big success.

Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?

I clearly remember having a conversation in 2011 with a founder who was just starting a new online knowledge sharing platform. I was in Tokyo and had just joined GREE after closing down the subscription commerce startup I had previously co-founded 18 months earlier. He was looking for investors for his friends & family round. I had known him for a while before that meeting. His idea was to launch an online platform where a user could share any knowledge or expertise with other users for a fixed price of 5 dollars. The expertise could be anything from teaching a new language to showing how to take beautiful photos. I thought this would never work and even told him so, because a) I thought 5 dollars was simply too little money for anyone to share their knowledge; and b) the platform could not be sustained economically as it only takes 10% of a 5 dollars transaction. But I was wrong — because in fact people were more than willing to share their expertise for 5 dollars, in fact they were willing to do it for free. So this company was successful in acquiring many many users because people liked it’s fixed price and the fact that it was cheap. Then once they reached critical mass, they started raising the price and even letting people determine their price, too. And just recently, the company, Coconala, announced that they’re going public on the Tokyo Stock Exchange. I learned that you should never see things only with your own lens, but be open to other views and perspectives.

Super. Here is the main question of this interview….

What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.

Since there isn’t always a product or service to show at the early stage, seed/angel investors look for different things, including:

  1. Experience of the founding team (founder-market fit). The founder-market fit is very important especially in the early stage of a startup when the team needs to iterate product improvement fast. If a founder knows the industry and potential customers/users well, the speed of this iteration would become much faster. If the founder has an extensive network in the industry, s/he can hire and build the team fast. So it really comes down to the speed of finding a product-market fit.
  2. Unique perspectives of the market: Successful founders have very unique views on the market and user behavior. For instance, the founder of Coconala, the company I mentioned above, saw a new user behavior in which people were willing to share their skills and expertise online with someone they don’t know personally. Another example is Adam Arrigo, the co-founder and CEO of WaveXR, a VR-based music platform for virtual concerts that connects artists (as avatars) with their fans. Adam has a background in both games and music and he had envisioned a new format of live music. WaveXR became the pioneer to spread the concept of “virtual concert”.
  3. Clear vision of the company: As I mentioned earlier, a leader should always have a vision for the company and where they’re heading. The same requirement applies to a founder, who defines the company’s destiny. When I met with Angelo Stracquatanio, the founder of Apprentice.io, which offers AI & AR driven software for the life science industry, I was very impressed that he had a very clear vision of the company and where the company should be in 5 and 10 years. So far, the company’s growth trajectory has pretty much followed his plan and it is on the way to becoming a new standard management tool for manufacturing in the life science industry.
  4. Strong focus on execution: We can’t emphasize enough how important the execution is for startups. Some founders are good at talking, networking, fundraising, etc. But what we’re looking for is a doer or someone who takes action and executes. As a startup, you must continue to deliver what is needed — for customers, employees, partners and investors. Otherwise you’d be running out of cash soon. Sometimes you make a mistake, but as long as you continue to execute, you’d be better off than doing nothing and making no mistakes.
  5. Timing: There are two meanings here. One is whether a founder is solving a problem at the right time; i.e. “why now?”. For example, starting a VR company in 2013 might have been too early as there was no technological backbone to support it. In 2016–17 however, when all the big players like Facebook/Oculus, Sony and Google introduced new VR headsets for consumers, it could have been an excellent time. The other aspect of timing is whether a founder is talking to us (investors) at the right time. We often see people coming to us too late and we end up trying to unwind some things if the direction is slightly off. It’s better to get in early than course correct once they are already in it.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

I would encourage people in urban cities like San Francisco to get outside and clean up the streets and parks on the weekend. Probably once a week. Unlike the streets in Tokyo, the streets in San Francisco are full of garbage. If people care about it and actually take actions, the city would be much cleaner.

We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. 🙂

I’d love to have a private lunch with Bill Gurley who joined Benchmark in its early days and has been a general partner of the firm since then. As I mentioned before, the book about Benchmark was the reason I started pursuing a career as an investor. He is an investor in Uber, Grubhub, Stitch Fix, Nextdoor and many other successful companies. I’m curious to know how the early days of Benchmark were, what he learned as a venture capitalist for more than two decades, and how he and Benchmark continue to make great investments.

This was really meaningful! Thank you so much for your time.


About The Interviewer: Orlando Zayas is the CEO of Katapult, an award-winning omnichannel payment platform. Zayas is known for his revenue growth strategies and visionary leadership in the eCommerce and retail space. His future-forward expertise has led companies such as GE Capital, Safe-Guard Products International, and DRB Capital. Zayas is also highly committed to providing educational opportunities to underprivileged communities through his philanthropic endeavors. Zayas’ business insights are regularly featured in publications such as Forbes, Entrepreneur Magazine, Retail Insights, and more.

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