Keisuke Honda has played football on five continents, including stints at CSKA Moscow and AC Milan. He has represented the Japanese national team 98 times and participated in three World Cups – and remains the highest-scoring Asian player in World Cup history. A longstanding angel investor, Honda launched US-focused Dreamers Fund in 2018 and Japan-focused X&KSK last year.

Q: What first made you interested in investment?

A: During the 2010 World Cup in South Africa, the Japanese team visited an orphanage, and it was a real shock to me, seeing kids who couldn’t follow their dreams. I started learning about economics – I had never been encouraged to do anything like that, I was supposed to focus on becoming the number one football player. After that, from around 2016, I began backing start-ups as an angel investor.

Q: Where were you making investments at this time?

A: Mainly in Japan, but there were some in the US, Southeast Asia, India, Europe, and Africa as well. Those were from my family office. It’s high-risk money, but if one company becomes a decacorn in 10 years, the return would be larger than for other asset classes. That’s partly why I find the VC space attractive. Two years after I started making angel investments, I launched Dreamers Fund, a US-based venture capital firm.

Q: Dreamers Fund is a collaboration with Will Smith. How did it come about?

A: My business partner happened to meet his business partner. At the time, we were looking for partners in the US. I knew that my profile couldn’t be used in the US as it was in Japan. Lots of people would come to me in Japan, asking me to invest in companies, which was a huge advantage in terms of deal flow, but the Japanese opportunity wasn’t of the same scale as the US. We thought there was a great opportunity, we knew Will made some investments from his family office, so we had dinner and I explained what I wanted to do. He agreed with the project, and we set up Dreamers Fund. We raised additional money out of Japan and deployed it into US companies.

Q: What is Dreamers Fund doing now?

A: It was about USD 60m in size. We are in the harvest period now; the focus is on generating DPI for investors. We have some companies with strong potential, such as The Boring Company [a tunnelling company established by Elon Musk], Neuralink [a brain-computer interface business, also established by Musk], and Oura Ring [a Finland-headquartered developer of smart rings used to track sleep and physical activity]. We also still hold some shares in Alchemy [a web3 development platform that closed a USD 200m Series C at a USD 10.2bn valuation earlier this year].

Q: Why did you set up X&KSK last year?

A: When Shigeru Ishiba was prime minister, Japan introduced a series of start-up support programmes [including a five-year plan to increase start-up annual investment in start-ups to JPY 10trn, USD 65bn]. I thought that if the government was serious about supporting Japanese start-ups, then maybe we could compete with the US, China, and other countries. I had some experience in the US through Dreamers Fund, so it seemed like a good time to launch a fund for Japan, focusing on Japanese start-ups and Japanese founders. My ambition is to help create the country’s first decacorn.

Q: What challenges are involved in creating decacorns?

There are several, but the biggest is the need to expand globally. Japan has a history of venture capital investment, but it’s been very domestic. Few global VC firms have entered Japan. It’s not until companies go public that they have any exposure to international investors. We want to help with that global expansion. The Japanese market alone isn’t large enough to create decacorns.

Q: To what extent are there examples of global expansion?

A: The best example is Pokémon. It’s unusual – perhaps we should call it a secret decacorn – because the company is private, it doesn’t accept external capital, and there will never be an IPO. Pokémon formed a partnership with Nintendo and used that to expand globally. This might be the most successful agreement between a Japanese start-up and a larger corporation. Language and culture are both barriers for Japanese companies. They often struggle to hire internationally and create the right culture to support global expansion. From a start-up perspective, it happens too slowly as well. Pokémon focuses on gaming and IP [intellectual property], but I think what it did can be used in other areas, such as AI [artificial intelligence], biotech, robotics, autonomous driving, energy, and consumer. If the market opportunity is large enough, start-ups can pursue these partnerships.

Q: It’s interesting that you mention IP. Why do you think South Korea has been successful in globalising IP as part of the K-culture phenomenon?

A: It’s a very different situation. The Korean government has been supporting start-ups for a long time. In Japan, these efforts are more recent. Also, a lot of Korean start-ups are global from day one – the founders can speak English, and their home market is smaller than Japan, so if they want to become unicorns, they must go overseas. Japan has global companies, but they aren’t necessarily technology companies. When you look at the last two or three decades, we lost out to markets like the US. Our technology companies are very domestic.

Q: Are you seeing enough start-up talent in Japan?

Young founders are very ambitious. Maybe they are looking at the last two or three decades, and they want to change the situation. The AI era is coming, and Japanese start-ups can be part of that.

Q: How many investments has X&KSK made so far?

A: We have invested in 14 companies, and the fund is about 40% deployed. We have backed start-ups focusing on AI-based consumer, deep-tech, health-tech, robotics, autonomous driving, and nuclear fusion. We focus on Series A rounds, typically companies have already received very early-stage funding. There must be some kind of track record – it might be revenue-based, user experience-based.

Q: Are you investing overseas as well?

Our scope is Japanese entities and Japanese founders. Two of our 14 founders are based outside Japan. The number of local entrepreneurs overseas is increasing. Some just want to go after global markets.

Q: X&KSK has raised approximately USD 100m. What does the LP base look like?

A: Our anchor investors are SMBC and SBI Group. Most of our LPs are banks, including a lot of regional banks. The rest are corporates and high net worth individuals.

Q: What more could the government do to support Japan’s start-up ecosystem?

A: I don’t think the existing programmes will change much. We still have a lot of regulations that make it harder to back start-ups – for example, around tax benefits – and the government is trying to simplify those. More could be done to increase the amount of capital and number of participants in the ecosystem, especially government investment entities and university endowments.

Q: How do you leverage your profile as a footballer in venture capital?

A: I try to use my influence to help portfolio companies, for example, in marketing their products and services. That’s part of the reason I haven’t retired from football yet: I need to be an influencer and an investor. Because I need to run the VC business, I can’t play in other countries for extended periods. It’s mostly short contracts. That’s why I played in Bhutan last year. I’m interested in coaching as well. My last role was with the Cambodian national team, which ended in 2023.

Q: Athletes and celebrities are increasingly visible in venture capital in the US. Are you still unusual in a Japanese context?

A: I feel lucky to be doing this because I wasn’t really supposed to become an investor. When I started in 2016, I think I was the only Japanese athlete making angel investments. Now, maybe there are 10 or so, and the US is 100x that. And it’s only athletes. I don’t see any celebrities active in the start-up ecosystem. There are cultural issues in Japan and in Asia more broadly: people want athletes to focus on their main activities. When I was at AC Milan, there were a lot of social media comments saying I should just concentrate on football. Others might have stopped, but I carried on.