Asset Trip with Yohei Nakajima: From Becoming a Venture Capitalist to Creating His Own NFTs

Partner at VC firm Untapped Capital talks about breaking into the world of startup investing, why he prefers a concentrated investing strategy, and getting hooked on the creative, collaborative world of NFTs.

Sep 22, 2021

Asset Trip with Yohei Nakajima: From Becoming a Venture Capitalist to Creating His Own NFTs

When NFTs started picking up, I just saw the community rising around it. It was the finance people and the artists and the developers and game developers, this mix of people you'd never seen a room together, all getting excited about this one movement. It all clicked.

Yohei Nakajima

The basics

General Partner at Untapped Capital

General Partner at Untapped Capital

34 years old

34 years old

Seattle, WA

Seattle, WA

Married, two kids

Married, two kids

10% income invested

10% income invested

Big Ws & Ls

Started Investing:

29

29

First Investing Platform:

Robinhood

Robinhood

Biggest Win:

Investing early in Square

Investing early in Square

Biggest Loss:

Not investing in NFTs like Bored Apes and Cool Cats

Not investing in NFTs like Bored Apes and Cool Cats

Favorite Platform for Startups:

Off-Piste

Off-Piste

Favorite Platform for NFTs:

Creatify

Creatify

To start out, can you talk a little about what you invest in and why? What's your strategy and philosophy behind how you invest?

Generally speaking, I invest for the long term. I don't like being distracted with day-to-day movements. I have a rule for myself: I always hold things for over a year. Usually a lot longer. Mostly I just buy and wait. I usually go for companies or businesses I understand and feel conviction around, mostly based on my research. I don't really talk to a lot of other people about it.

I'm usually pretty concentrated. So, at least historically, I'd have all my money in like four or five stocks or four or five different assets.

Can you talk a little bit about why that is?

I think it's just about building conviction and looking for alpha, right? Like the more diversified you are, the less return you can get in theory. If you can make a couple of big, good bets into companies you believe in, you can get a figure off that. It's also just less news to be distracted by.

I feel like trading and investing can be psychologically damaging if you're distracted, if there's constant FOMO or if you're just checking the ticker when you should be doing something else. So I think a lot of my investing is kind of designed around managing that side of things. Not just optimizing for high returns, but also optimizing for return on emotion.

That makes sense. I always end these interviews asking people for their biggest investing wins and losses, so that's coming. But I have had multiple people tell me that their biggest loss was around paying attention to hype, kind of diving into an investment because of the buzz instead of going with their intuition. So that seems to be a recurring theme.

What are your goals for investing? Are they more traditional, long-term retirement? Do you have any other specific goals for the money you invest?

No. I just want to make sure that it's growing. Obviously getting to a point where you're just living off of the capital gains would be fantastic. So I'd be lying if I said that wasn't a nice goal. But I'm more concerned with being patient and learning along the way really.

I know you're very involved in the startup world and investing in startups, and your VC firm Untapped Capital focuses on investing in unexpected founders, which I think is really interesting. Could you talk a little bit about what you mean by that and why you look for those unexpected founders?

If you look at the venture capital world, it feels to me that too many VCs are looking at the same startups. Largely because every VC I know sources through referrals. And secondly, going back to the psychology of investors, it's really hard to ignore hot deals. So you spend a lot of time diligencing them, and especially in this market where there's so many hot deals, there's a whole slew of founders that VCs just aren't paying attention to. And then from an investment perspective, I look for opportunities in the market, and that's the opportunity I identified. It was all these great founders that VCs just don't have time to find because they're too busy chasing hot deals and talking to referrals. So our fund uniquely sources primarily through outbound.

So 90% of the founders I talk to are ones I cold emailed. If you look at our portfolio, I think still 70% of the ones I cold emailed, so I didn't know them previously. It allows us to find founders who are building really strong companies that just don't have a network. It's much more fulfilling. And also, we do get it at a lower valuation usually than than a founder who's super well connected. So there's a return aspect to that as well.

And how did you get started investing in startups?

I started on the community side. I was really active in the startup community in Los Angeles. I just fell in love with the community. I was going to events, I was running events, and then started working for co-working spaces. And when Techstars came to Los Angeles to start the Disney accelerator, they wanted somebody who was pretty familiar with the LA ecosystem. So it was tough to join that team. And that was my first time investing. It was incredible sitting with Techstars and Disney in a room and talking about all these different companies. And then during that time, I was actually pretty good at finding interesting companies online. I found the info for the Disney program, and when Techstars was going to about 30 programs, they asked me if I wanted to do that role for every program. So they asked me to kind of run top of funnel, sourcing across every Techstars program, and I did that for a couple of years. And the next thing I knew, I was a VC.

Wow, that's exciting. Do you have any early lessons that you learned in your first few years of startup investing that you can share?

Going into it, every start-up seems exciting, and they are. But moving to the investing side, there was a little bit of a shock period. The more companies you talk to, the more practical you can be. Some people coming not from the startup world, when they suddenly started looking at startups, everything just looks really exciting. So I've seen a lot of angel investors coming in and talking to startups and if they don't come from the startup world, the first idea does sound really exciting, but it's probably not the best investment. I was fortunate enough to have been around startups long enough before that, but a common mistake is being overexcited by the first couple of startups you see.

Do you have any advice for people who have some money saved up and are really interested in startup investing, but are just getting started from scratch? How can they lock into that world?

If you're not ultra wealthy or really wealthy and you want to learn and you're young and you have a little bit to play with, look at Republic. If you're accredited, then AngelList syndicates may be a good place. If you have angel investor friends you're close with, you might as well talk with them. Maybe some angel investing is a good idea. If you don't, I would be hesitant to just start angel investing immediately without doing a little bit of learning and building a community. And then recently the newer trend is that there are a lot of venture funds that are raising small $5, $10 million funds. And they can take checks that are pretty small, sometimes like $10,000 or $25,000. I think it's a pretty interesting approach for someone who wants exposure to the asset class, but doesn't really want the pressure of picking the right angel investments.

To rewind back to before you started in startups, how did you get started investing? How old were you, what was your very first investment?

I really started investing, honestly, when Robinhood started picking up. So it wasn't until later in my life, even though I studied finance. I didn't really start investing my own capital until 2017. I don't remember specifically what my first investments were. It's probably Amazon or something. A pretty safe bet.

What drew you to Robinhood? Why'd you decide to download the app and buy some stocks?

I think I went to E-Trade once or twice, but I landed on the site, and it was just a lot of wording and a lot of fees. I just didn't pull the trigger. And with Robinhood, you don't deal with all that. No fees, there's the Plaid connection. It was just so easy. And I feel like with E-Trade and whatnot, people were talking about which platform you should use because the trading costs money. But if you only trade a certain amount, then it doesn't matter. So there's a lot of decisions to make around which platform to do, how much you'd invest. And you had to think a lot more before you've made investments. Robinhood just really made that easy.

And since then, have you become a lot more interested in investing in individual stocks or is that not really where you're focused?

After I started investing in 2017, I pretty much did only stocks until this year. So almost all of my investment was essentially in stocks, just split amongst like four or five stocks at a time. But I've rotated slowly. But this year I went pretty heavy into crypto. And now that there's a lot of other investment platforms, I'm looking at kind of diversifying the asset classes I'm in. I want to do a little bit of real estate, a little bit of collectibles. Playing around and building out a more diversified portfolio now that I feel like my stock investing is good and humming along.

Yes, ready to branch out into other stuff. I noticed that you've created some NFTs. Do you have any interest in investing in NFTs?

I'm playing around, although candidly, it's more to learn the space than an investment for monetary reasons. I think of it a little bit different than my investment portfolio. It's definitely more of an education.

And what about your foray into crypto? What are your thoughts behind why you went into that and how that plays into your portfolio?

I slept on crypto when DeFi came out. I mean, I didn't sleep on it. I followed it, but it just wasn't exciting enough for me to really dive in. I understood the mechanics, but it didn't really click to me. But when NFTs started picking up, I just saw the community rising around it. It was the finance people and the artists and the developers and game developers, and this mix of people that you'd never seen a room together, all getting excited about this one movement. It all clicked, and I looked back at DeFi as well. And I was like, okay, I see why we're calling it Web3. I do see this touching every aspect of business now. I'm sure a lot of people saw it when Bitcoin happened, but for me it was really when NFTs picked up that it all clicked for me.

Yeah. I feel like there are a lot of people out there who are really interested in these investing communities, which community is not something you would associate with traditional investing. But I think a lot of people get into things like crypto and startup investing and alternatives in general because of the communities that are built around these asset classes.

So you started investing in 2017, you've branched out into crypto. You said you were looking at real estate as well. Are there any other asset classes or types of investments you've been eyeing but haven't jumped into yet?

Real estate is one I haven't done yet. I want to. I know there's a lot of fractional platforms out there, so I don't really know which one I'm going to do, but I'd love to do some real estate. Because most of my stuff, I just hold and wait, but something that has a little bit more payouts over time, dividends, I think would be interesting to try a little bit more out. So that's at the top of my list right now. And I think the idea of art [investing], being able to own pieces, fractions of things that I couldn't afford myself, I think is pretty interesting. I'd love to learn it, but also, one asset class at a time.

Yeah, definitely. If you could hop in a time machine and go back to age 18, what would you change about your investing journey thus far?

There's the most obvious answer which is just invest in the right thing. At that point Bitcoin didn't exist, but I don't know if I'd give myself any advice. I'm not much of a regret person. I'm pretty happy with who I am.

So what's your biggest investing win and your biggest investing loss?

Biggest investing win? When I put a lot into Square pretty early, so I felt pretty good about that. I had a lot of conviction and put a pretty large percentage into it. That one was a good win. And again, I think it's less about how much percent you got from it. If you're able to put a large chunk in with conviction and, if you put a large percentage of your investment portfolio in it, it has a big impact on your portfolio itself.

My biggest loss probably is actually... I got into NFTs in February, and I was tracking, but instead of buying NFTs, I minted them. I set aside a budget to play with NFTs in February, and I was looking at minting a couple. And at that time it was like Bored Apes and Cool Cats, which are now...the floor is like hundreds of thousands each. But instead of putting a thousand dollars there, I put a thousand dollars into minting my own NFTs, which I didn't even market because I didn't like them. So that to me feels like the biggest loss.

And I had told my friends to buy Cool Cats. So they're all really happy that I told them. But I was like, I'm not going to buy, I'm a creator. And that was always my biggest loss for sure.

Do you have plans to mint any more NFTs?

I'm going again, round two, doing it right. Actual artwork. The first time, I just put like numbers on a white background and I was like, I'm going to play around with some of the Rarity mechanics. This time I'm doing actual artwork, building the community. So doing it right this time.

Can you tell us anything about what you're doing this time around or is it top secret?

Yeah, it's called Pixel Beasts. And they're 10,000 cute little animals, 24 by 24 pixels each. Right now the community is mostly venture capitalists, founders, developers, designers, who are all interested in NFT space. So we're going to be building a lot of utility tools to experiment with, collaborating with other people on the new tools and starts that are coming out. And as a VC, Pixel Beast is kind of my Web3 learning strategy. So it's a platform in which I'm open learning about all the new things happening in the space.

Take your own Asset Trip

If you're interested in investing like Yohei, you can check out these platforms:

  • Republic: Anyone can use Republic to invest in vetted startups, real estate, video games, crypto, growth-stage companies, and small business.
  • Rarible: Rarible is an online marketplace that aims to make the world of buying and selling valuable non-fungible tokens (NFTs) more approachable and affordable for everyday users.

Read more

Asset Trip with Richard McBeath: Inside a Startup Founder’s Hands-Off, Smartphone-Friendly Investing Strategy

Asset Trip with Richard McBeath: Inside a Startup Founder’s Hands-Off, Smartphone-Friendly Investing Strategy

MoneyMade founder Richard McBeath talks big crypto wins, buying stocks for the first time, intuition, and moving away from quick wins to focus on the long game.

Asset Trip with Artem Milinchuk: Why This Startup Founder Believes ESG Is the Future of Investing

Asset Trip with Artem Milinchuk: Why This Startup Founder Believes ESG Is the Future of Investing

The FarmTogether founder talks about his love for US farmland as an asset class, greenwashing in sustainability, and why making the switch to ESG investing is best for both the planet and your wallet.