Disrupting Japan

Education is very hard to disrupt. That’s both good and bad. Education is so important to both individuals and society, it should not be changed on a whim, but over time it seems that our institutions of higher education have drifted away from meeting students real needs. Yoshito Hori, founder and CEO of Globis, is making radical changes. He turned a small training school into Japan's first independent and fully accredited business school with an MBA. Less than ten years later, Globis became Japan’s most popular MBA program. We talk about the need for change in education and about the successful, real-world pilot program Globis is running to modernize Japanese higher education. Yoshito also shares insights on how to teach innovative thinking and explains why such a high percentage of Globis MBAs go on to found starts or join them. It's a fascinating discussion and I think you'll really enjoy it. Show Notes Why most Japanese do not want to attend full-time MBA programs How to make an advanced degree both exclusive and inexpensive How to groom MBA students to start startups How Sumitomo missed out on a multi-billion dollar business Why Japanese higher education is so resistant to change This difference between SPOCs and MOOCs, and why it's important How drinking in front of your computer might save higher education Links from the Founder Check out Globis Yoshito's blog on entrepreneurship in Japan Follow Yoshito on Twitter@YoshiHoriGLOBIS Connect with him on LinkedIn Yoshito's article on 100 Actions to revive Japan The G1 Global Conference [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. I’ve got another great select show for you today. I really like this particular episode because it highlights that disruptive innovation does not have to be about the technology, If fact, even when disruption seems to be about technology, it’s really not. It’s about changing systems, changing the way people and businesses interact with each other. Of course, that often does involve technology, but when it does, the technology is only the conduit. Nowhere is that more clear than in my conversation with Yoshito Hori, the CEO, and founder of Globis. In fact, I would say that at least so far,  Globis has brought far more genuine change to Japan’s education market than all Japan's edTech startups combined. So please enjoy the episode and I’ve got some important updates to our story for you after the show. ----- You know, education is hard to disrupt. And as long-time fans know very well, that’s both a good thing and a bad thing. It’s good because education is so important and foundational not only to how well a given child will do later in life but also because in the large developed nations, the educational system forms the basis of society itself. It provides us all with a shared set of experiences. So the fact that we don’t change the rules every few years is a good thing. On the other hand, this lack of disruption leads to educational systems that don’t really meet the needs of today’s students and today’s societies for that matter. So clearly, there must be a better way of doing things than what we’re doing now. Well, today, I’d like to introduce you to someone who’s found a better way. Yoshito Hori founded Globis as a small business training school and grew it into Japan’s first independent and fully accredited business school offering MBAs. And then, Globis became Japan’s most popular MBA program. Yoshito’s strategy for innovation is fascinating. Unlike similar schools in the US, Globis does not compete on cost. In fact, the Globis MBA is more expensive than similar degree programs at Todai or Hitotsubashi. No. Globis is doing something unique and something that is making a lot of people rethink how university and post graduate education is done in Japan. But you know, Yoshito tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview  Tim: So we’re sitting here today with Yoshi Hori of Globis. Thank you so much for sitting down with me. Yoshi: Thank you very much as well. Tim: Globis has about 7,000 students per year. It’s the most popular MBA in Japan. It always does well in the national business school rankings here. But what seems most unusual, it’s a truly international MBA program. You have students both from Japan and overseas now, right? Yoshi: Yeah. Tim: What sort of ratio? Yoshi: Well, we have English MBA program and Japanese MBA program. Japanese MBA program is a part-time program. English MBA program, we have part-time, full-time, and online. We have roughly about over 100 English MBA program students. We have about 800 Japanese MBA programs. Tim: That’s interesting. So you have more Japanese students but it sounds like there’s a lot more flexibility in the English language courses. Yoshi: That’s right, yeah. Tim: Why is that? Yoshi: Well, our vision is to become number 1 business school in Asia. In order to become number 1 business school, we need to have full-time English MBA program. But in case of Japanese, we don’t need to have full-time in Japanese MBA program because not many people quit jobs to get MBA in Japan. Therefore, in Japanese side, we have Japanese MBA program in five locations with Mito and Shin-Yokohama at Yokohama station for hop campuses and also online.  Most of Japanese students participate and enroll into MBA program as a part-time MBA program. In case of English, we need to have full-time MBA program so that quite a few students come from overseas. There are roughly about more than 50 different nationalities within Globis MBA. More than 90% of Futa MBA program is non-Japanese. So it’s a very truly international MBA program. Tim: Moving forward, do you think there will be more and more international students fueling the growth or more Japanese? Yoshi: We feel that there will be more and more non-Japanese international MBA students coming in. The reason is that we have not been into English MBA programs until 2009. We have been around only for about 8 or 9 years and we just started full-time MBA program in 2012. We have a lot more room to grow. Tim: MBA programs in the US tend to be quite expensive and Globis as about 4 million yen per year. How does that compare with MBA programs at Waseda or Keio? Yoshi: Well, Waseda and Keio are almost about the same. But difficulties in Japan is that we have national universities like Hitotsubashi and Tokyo University which is roughly about one-quarter of tuition compared to Globis and they are highly reputed as well. So therefore, it’s difficult for us to raise our tuition simply because we are dragged down by those national good university in Japan as for tuitions. Tim: Are their tuitions so low just because of the government subsidies towards those universities? Yoshi: Yes. 70% of those revenue for those national universities are tax payers’ money. So it’s highly subsidized, mostly run by the tax payers’ money. Tim: Okay. It does make it difficult to compete. Yoshi: Well, you know, we cannot raise our tuition higher and we have to appeal to our potential students that our quality of education is three times or four times better than those who are run by tax payers’ money. Tim: Before we get too deep into the program and the school and Japan, you’ve got a traditional MBA and you became an entrepreneur. What percentage of your MBA students go on to become entrepreneurs and what percentage would you say take the more traditional career path? Yoshi: I would say roughly about 10% becoming entrepreneur and 20% more are joining entrepreneur companies. And then roughly about 20% will be changing jobs to consulting or other foreign affiliate companies. I think roughly about half remain in their companies. Tim: Are those numbers pretty similar for both the Japanese students and the non-Japanese students? Yoshi: In case of non-Japanese students, it’s difficult to compare because quite a few of them come from overseas to study here in Japan and most of Japanese students are living here in Japan, and therefore it’s difficult to compare. But in case of non-Japanese students who come to Japan, some start their own companies here, some change their jobs, and some go back to their home countries. Tim: So that 30% of Japanese Globis MBAs are either starting a new company or joining a startup company? Yoshi: Yeah. Tim: That’s fantastic. That’s really high. Yoshi: It’s quite high. Tim: Excellent. Well, listen, before we talk more about Globis, let’s take a step back and talk about you. Yoshi: Okay. Tim: So you went to Harvard Business School. This was back in 1992, when you were graduating, and this was before the last internet bubble. What made you decide to start a new company rather than just join a consulting firm or going to a very high-paying job at a Japanese firm? Yoshi: I was sponsored by Sumitomo Corporation to get my MBA. I feel thankful for my sponsor company, Sumitomo that I had never thought about changing my jobs. I was planning to come back and I did come back to Sumitomo but I really wanted to start up mu own companies and I want to become an entrepreneur. So I came up with 30-40 business ideas and I shortlisted it into 2, and I raised 2 business plans within Sumitomo Corporation for the new businesses to be done and executed by Sumitomo Corporation. But those two business plans were rejected by Sumitomo and therefore I had to do either of them by myself and I chose this Globis idea. I raised capital from my friends, small capital only about $8,000 and I started Globis from scratch.

Ad-fraud is one of the most profitable activities for organized crime today. The scammers are sophisticated, disciplined, and numerous, and they might be using your IoT devices to rip people off. Over the past decade, there has been relatively little of this kind of cybercrime in Japan, but that's changing as the ad-fraud crime networks go global. Japan has to catch up and catch up fast. Unfortunately, Japan defenses have been rather poor. Today we sit down and talk with someone who is fixing that.  Satoko Ohtsuki is the founder and CEO of Phybbit, Japan's largest ad-fraud prevention network, and she's going to explain the biggest scam you've probably never heard of. Of course, we talk about the different kinds of ad-fraud and what is being done to combat them, but we also talk about how she was pushed into entrepreneurship, and the challenges of raising money (and raising children) as a female founder in Japan. It's a great discussion with one of the most interesting founders in Japan,  and I think you will really enjoy it. Show Notes The global scale of ad-fraud How to bluff your way into starting a leading software company The main kinds of ad-fraud Google & Facebook's conflict of interest in solving ad fraud How scammers try to get around the fraud countermeasures Who exactly are the ad-fraud scammers and where are they located? How your devices and home electronics are helping the scammers The challenge of raising venture money as a woman in Japan Satoko’s advice for women raising money in Japan Balancing the demands of a growing startup and growing children How Japanese VCs stop Japanese startups from going global How the 2020 Olympics are affecting venture investment in Japan Links from the Founder Everything you wanted to know about Phybbit Phybbit's 2019 Whitepaper on Ad Fraud Check out Satoko's blog Follow Satoko on Twitter @satoko90 Friend her on Facebook Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today we are going to be talking about ad-fraud. Ad-fraud is a multi-billion-dollar problem that a lot of people don’t really want to see get solved. You see, when you run an internet ad campaign or participate in an affiliate network, some of the clicks or installs you pay for are from real people interested in your product or service, but a lot of them are bots that are simply scamming money for the site owners. In fact, a surprising number of ad-clicks are bots. Internet advertising is a $280 billion global business and it's estimated that somewhere between 25% and 50% of it is fraud. Well today, we are going to sit down with someone who is doing something about that. Satoko Ohtsuki founded Phybbit to combat ad fraud, and it has now become the largest ad fraud detection service in Japan. Satoko and I talk about how Phybbit is using artificial intelligence to combat the seemly endless stream of online ad fraudsters, the challenges she faced raising money as a woman founder in Japan, and how you, yes you in particular, might be helping out the ad fraud scammers without even knowing it. But you know, Satoko tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: Cheers! Satoko: Cheers! Tim: So, I'm sitting here with Satoko Ohtsuki of Phybbit, so thanks for sitting down with me. Satoko: Thank you too. Thank you for your time. Tim: Phybbit makes Spider AF. Satoko: Yes. Tim: And the AF stands for 'Anti-Fraud'? 'Ad Fraud'? Satoko: Ad Fraud. Tim: Ad Fraud. Satoko: So, let me introduce what is Ad Fraud first. Ad Fraud is exactly as it is written, it’s advertisement fraud. For example, if I was a blogger, I will put some advertisement spot inside of my blog and if you saw my blog and clicked us, I will get some, like 10 Yen or $1, or something like that. If I was a malicious actor, I will try to abuse it to steal the revenue, right? Tim: Right, so Ad Fraud is basically people clicking on online banners and things but not real customers? Satoko: Yeah. Tim: Bots, things like that. Satoko: Exactly, to steal revenue. This is Ad Fraud, and now, our service, Spider AF, Ad Fraud prevention tool. Tim: Okay, and you guys released a white paper recently where you're saying that in Japan, a huge amount of traffic is ad fraud and it was almost like 20%, so does that mean like, in Japan, 20% of advertising clicks are bots and fakes, and scams? Satoko: Of course, 20% is very big, but compared to global market has kind of the same amount of ad fraud or even more. Tim: Okay. Well, we'll get to the details of how the fraud works and the different kind of scams later, but before we do that, tell me about your customers. So, are you selling to ad networks and affiliate networks, or are you selling to people running websites to make sure that they're not getting scammed by their advertisers? Satoko: Our service is especially for ad networks and affiliate networks, yes, and also advertisers. Tim: Okay, so it's both sides, it's the ad networks themselves and the people who buy ads, and what is your monetization model? How much does it cost? Is it like a monthly SaaS service? Satoko: Yeah, monthly SaaS service based on the traffic. Tim: So, like, about how much would it cost? Satoko: For networks, from 200,000 Yen to 700,000 or something. Tim: So, about $1,600 to around $6,000 for a network, per month? Satoko: Yes. For advertisers, it's going to be a little bit cheaper. Tim: And it's quite a range for individual sites, so I guess the idea is they save much more than that by reducing the ad fraud? Satoko: Yeah, exactly. Tim: Okay. Well, listen, before we get into the details of Ad Fraud and the different kinds of scams, let's back up a bit and talk about you. Satoko: Me? Tim: You. So, when you started Phybbit, you were getting your Master's in Atomic Physics at Tokyo Metropolitan University, right? And you actually started Phybbit while you were still in school? Satoko: No, just when we finished university, I graduated in March, and then I started Phybbit in April. Tim: And you started it with a lot of your friends in university, right? Satoko: Yeah. Tim: And a bunch of Physics majors? Satoko: Not everyone is from Atomic Physics. Some people are from space area …some people are from several types of Physics. Tim: And at first, you were just doing like, contract development for other companies? Satoko: Yeah, because at the time, we never work in other companies or we didn't know what is a business card or email, right? Tim: Well, and it's hard to get a job in Physics. I was a Physics major myself. Satoko: Oh! Tim: Yeah, yeah, undergraduate, but Physics is sort of like, it's almost like the Liberal Arts of the Sciences - you know a little bit about everything - Satoko: Yeah, so most of my friends, they are still working in the university. Tim: So, why did you and your fellow Physics majors decide to start a software company instead of doing Physics? Satoko: It's a very funny story. It was 2011. At the time, the Japanese Government decided to start to make not so much budget for not only Physics, Scientists, or Mathematics - everything, so many friends, PhD friends, lost jobs because of that. While we were drinking alcohol and we had just joked and complained, but like, they cut it. Tim: Well, yeah, Japan had always funded a lot of basic research. They funded fundamental research really, really heavily and they've cut back in the last 10 years. Satoko: Yes, that's right. So, we complained about it, but some of our friends who already worked at the time, he said, "Okay, you guys could get money for what you want to do." Of course, we were drunk so we said "Okay, let's do it!" So now, we are here. Tim: So, did you all have basic programming skills from university? Satoko: Unfortunately, …  usually, well, yeah, we have very basic programming skills, but not that much. Tim: So, how did you get your first contract? If you have a bunch of very smart people with some basic like, hacking skills and some really solid Physics knowledge which is useless outside of the laboratory, how did you get your first contract? [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Satoko: First contract is we need to make some iPad application for education for kids, I think. Tim: But like the iPad programming environment, that must have been brand new to you guys, so did you just start studying again? Satoko: Yeah, but please remember that 10 years ago, just iPhone came or Android came in Japanese market, so nobody can do anything. Tim: That's true. It was new to everybody. Satoko: Exactly, so that's why. Tim: That is one thing I do think Physics teaches you: it teaches you how to learn continuously. Satoko: Yeah, that's right, exactly. Tim: And so, you're obviously successful that you have more and more contracts, so what made you decide to watch an ad fraud prevention tool? Satoko: By chance. Tim: By chance? Satoko: Honestly, like three years ago, one of my friends, he gave me an advice: "Why don't you use it for ad fraud?" because ad fraud is also Big Data. Many people need such an automation tool. Tim: What was the initial reaction? I mean, did people understand that ad fraud was a problem or did you have to go to the networks and the customers and educate them about ad fraud? Satoko: In this case, everyone knew the problem. Not only that, at that time, we have some contract development with an advertisement company already, so we knew this problem as well. Tim: Okay,

The robotics ecosystem in Japan is amazing. And confusing. It's a collection of crazy ideas, odd creations, and true breakthroughs. And despite the combination of fawning prise and snide skepticism that Japanese robotics evoke in the international press, only time can really separate the true breakthroughs from the dead ends. Today, we sit down with Tez Sawanobori, the founder of Connected Robotics, and we talk about how robots are being adopted in the restaurant industry here in Japan. Connected Robotics already has two lines of consumer-visible robots being used in restaurants in Japan, and the reaction from the owners, the employees, and the customers has been overwhelmingly positive and quite a bit different than similar experiments run in America. We talk about the strong economic and social pressures affecting the adoption of robots in restaurants and discuss the changes he had to make before chefs and robots can really work side by side. It's a great conversation, and I think you will really enjoy it. Show Notes The real reason we need robots chefs The unlikely founding of Connected Robotics Why the restaurant business is so hard to disrupt Looking at the real economics of food prep robots What’s holding back robotics in restaurants Can robotics really solve the labor shortage in Japan? How Japanese employment practices make it harder to use robots but increase the need for them How Japan can catch up to the US and China in robotics research The best way for American and Japanese robotics engineers to work together The future of foreign workers in Japan Links from the Founder Everything you wanted to know about Connected Robotics Watch a video of the OctoChef in action Follow Tez on Twitter @tezsawa Friend him on Facebook Connect on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we’re going to be talking about the OctoChef. “What the hell is the OctoChef?” you might ask, and that would be a good and quite reasonable question. The OctoChef was created by Connected Robotics and it’s a robot that makes Takoyaki, and we’re going to sit down with founder Tez Sawanobori and talk about why it’s important. It’s important to understand that the OctoChef is not just some crazy side project of Tez and the team, although I guess it was the very first time I met them, but no, now, the OctoChef is being used in both small scale, single restaurant installations and industrial scale factory installations. Tez and I talk in detail about how Japanese react to robotics and work with robots very differently than westerners do. We also sit down and eat some pretty good robot-cooked Takoyaki and take a hard look at the question of whether the OctoChef is just a novelty or a fad, or if on the other hand, it’s solving a real problem. The answer turns out to be yes but the reason why is pretty surprising. But you know, Tez tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: So, I’m sitting here with Tez Sawanobori from Connected Robotics, the maker of the OctoChef, so thanks for sitting down with me. Tez: Yeah, thank you for having me in this great show. Tim: Thank you. What is the OctoChef? Tez: OctoChef cooks Takoyaki. Takoyaki is octopus ball popular in Japanese festivals, you see a lot of Takoyaki stalls. Tim: Yeah, the round little – and they’re awesome, it’s great food. Tez: Yeah, yeah, it’s a popular Japanese fast food, and a robot cooks Takoyaki and it’s from pouring oil to serving to the dish, all the process the robots do. Tim: Okay, so in the process, the humans still have to create the batter? Tez: Yes. Tim: And, I guess deliver the cooked Takoyaki to the customer. Tez: Yeah. Tim: The robot handles everything else? And you actually launched the first commercial use of this in Nagasaki a while ago, so how’s been the reaction of the customers to the robot Takoyaki chef? Tez: Customers look very pleased to eat Takoyaki cooked by robots and this is a special occasion for them, and especially in Nagasaki, there’s a theme park called Huis Ten Bosch, so they enjoy looking at robots working. Tim: Okay. Yeah, I want to talk about like the business model in detail in a few minutes, but before that, let’s back up a bit and talk about you. Tez: Okay. Tim: So, you founded Connected Robotics in 2014 but before that, you started a restaurant right out of college, right? Tez: Yeah, right. I studied Robotics and Computer Science in the University of Tokyo and later, I went to Kyoto University and researched Computer Science, but when I graduated, I wanted to start my own business. Of course, I tried some web services, but I didn’t get satisfied with this kind of IT. Tim: Really? Tez: So, first thing I wanted to do was making a cool restaurant. Tim: It’s a lot of work! What kind of restaurant was it? Tez: Oh, at first, I really liked jazz music so I wanted to make like a jazz club, but at the same time, I want to make some family-friendly restaurant with good music. I really want family and small children to come to our restaurant and enjoy our food and atmosphere. Tim: So, what happened to the restaurant? Tez: Oh, actually, I didn’t have much money, obviously, because .. – Tim: You just graduated, right Tez: Yeah, yeah, I just, yes, started working after grad school, so I planned several restaurants and brought my idea to many presidents of restaurant chains, and one of them was very interested in me and the plan, so I joined this company and set up several restaurants, including Italian, American, Japanese food restaurants. Tim: Oh, wow. Tez: Yeah. Tim: Why did you decide to leave the restaurant business? Tez: Until then, I had several experience in restaurants, like during summertime, I worked in izakaya and my grandparents owned their restaurant, and I thought I know a lot of restaurants, but actually, I worked in the restaurant and found that, well, all the work are very hard, very long. Tim: It’s hard, hard work. Tez: Yeah, yeah, so I found myself working like, 100 hours per week. Tim: Oh, wow. Tez: And exhausted. So, I wanted to come back to technology side. I belonged to a robotics club in the University of Tokyo and won a competition called RobotCon for the first time for the university. Tim: How many years were you working with the restaurants? Tez: Oh, just one year. Tim: Oh, just one year? Tez: Exactly one year, yes. Tim: Okay, and so during that time, you’re still active and interested in robotics? [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Tez: Oh, yeah, yes. Yes, for sure. Tim: So, did the idea for food robots come to you while you were working at the restaurant and that’s why you quit or you just had to get out of the restaurant? Tez: Oh, yes, yes. Many people, while I was working in the restaurants, recommended me to start this kind of business, robot restaurant, but at that time, I thought it was too difficult to deploy robots in restaurants because all the operations are so complicated. It’s really difficult. Tim: Yeah, yeah, cooking is an incredibly complicated process and kitchens are tiny. Tez: Yeah, usually, tasks are not so organized and oh, yeah, so I couldn’t find any good work for robots. Just, I felt overwhelmed. Tim: But you gave it a try anyway. Tez: Yeah, yeah, yeah. Tim: Actually, I saw you guys at Maker Faire a couple years ago. Tez: Oh, yeah, yeah, yeah, yeah. Tim: And it was the same – I mean, it has gotten a lot better since then, but it was the same Takoyaki-making machine. Tez: Yeah, yeah, yeah. At that time, we showed our first prototype. Tim: Maker Faire is actually, it’s a really fun place to go. There’s so much creativity in robotics and automation in Japan right now. Tez: Yeah, yeah, that’s true. Yeah, everybody is trying and challenging something new. Some of them look very strange, but – Tim: Yeah, there’s a lot of strange crazy stuff, but to be fair, when I first saw you guys there, I was thinking, okay, Takoyaki-making robot, that’s kind of strange, you made a business of it. Tez: Yeah, at first, my ex-colleagues always told me that, “It’s really strange,” and “You shouldn’t do that,” and “It’s crazy!” and something like that. Tim: Yeah, and I’m sure you still hear that occasionally, but let’s talk about the business model. So, what is the revenue model? Are you selling robots or selling services, or selling Takoyaki? Tez: Okay, basically, we don’t make the robot itself. We integrate this robot and make it as a package and sell this to our customers, that is restaurants. Firstly, we sell this package, but from the second time, we will lend this robot and charge monthly. Tim: Okay, and what does the OctoChef cost monthly? Tez: ¥250,000 per month. Tim: Okay, so $2000 a month? Tez: Yeah, roughly. Tim: Okay, I know the OctoChef makes Takoyaki, but does it do the work of like, a full-time staff? $2000 a month is not much compared to what you have to pay employees and things to do same work, but how much work does it actually do? Tez: Actually, Takoyaki requires high skill, and Takoyaki restaurants usually train the employee, and it costs a lot. It takes time and costs a lot. With the robots, they can save this training and hiring process. Tim: For the restaurants that are buying this, is the motivation saving money or is the motivation the novelty, the kind of the cool factor of people watching the robot make Takoyaki? Tez: Yeah, of course, at first, their first purpose is to get novelty and show this robot,

Those of us who spend our lives working with startups live in a bubble. Whether you spend your days programming at a startup or investing in new ventures, you and I see things differently than “normal” people. It happens to everyone to some extent. We all tend to interact with people who are like us, who care about similar things and who work in similar industries, so of course, we frequently hear the same ideas and opinions.  The startup bubble, however, is particularly strong and particularly opaque. We founders have a bad habit of believing our own bullshit. Well today, we step outside our bubble and sit down with Mone Kamishiraishi, the star of the new film Startup Girls. We talk about what she learned as an outsider interviewing startup founders to get ready for her role, what most Japanese find surprising about founders and startup culture, and what Japan can do to to make starting a company more mainstream and accepted. It's a great conversation, and I think you will really enjoy it. Show Notes What most Japanese people think about startup founders The similarities between startups and acting Why family support and role models are so important in Japan right now What’s holding entrepreneurship back in Japan What we need to do to create a broader acceptance of startups in Japan Links from the Founder Check out Mone's official homepage Follow her on Instagram The Startup Girls official site See the trailer Pre-order tickets Follow Startup Girls @startupgirlsmov Startup Girls on Instagram  Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, I’ve got a very different kind of interview for you. It’s shorter than most but it’s going to be an interesting one. You and I talk a lot about innovation in Japan and how things are changing for the better here. But as many of my friends point out, I live in kind of a bubble. Not in an economic bubble but with all the startup unicorns we see prancing around these days, we’re probably living in an economic bubble too. But no, no, I mean more of a filter bubble. Disrupting Japan is a podcast about innovation in Japan so naturally, we talk a lot of Japanese innovators. Most of my friends are startup founders and venture capitalists. So, while we are seeing all kinds of innovation and increased risk-taking in this group, maybe that’s not really reflective of Japanese society as a whole. Well, today, we’re going to step outside our bubble and see what’s there. We’ll still be talking about startups, of course, and we’ll be doing it with Mone Kamishiraishi. Now, Mone was the star of the megahit anime, Your Name, and she is co-starring in the new film Startup Girls which focuses on startups in Japan. So, when Mone accepted the role of playing a startup founder, she had to figure out exactly what they were and how they were different from, well, let’s just say how they were different from normal people. It’s a great discussion about how people outside of our bubble see us and Mone and I also talk about the similarities between startups and acting, the general attitude towards creativity in Japan and how to foster a greater acceptance of startups and innovation in Japan. But you know, Mone tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: You know, the idea of startups is kind of new in Japan, right? Mone: Yeah. Tim: So, before you started this project, before you started working on Startup Girls, what was your image of startup founders? Mone: To be honest, I didn’t even know what the word “startup” stands for. Tim: Really? Mone: Yes, I could imagine very, very vaguely but, yeah, start something, I thought. But yeah, I didn’t know and also, my image for the founding businesses are quite far from me and only genius can do that. Tim: You know, I think a lot of Japanese think the same way about starting companies. Mone: I think so too. Tim: So, you thought it was kind of like only a special kind of person in a startup company? Mone: Yes, and I will never do that in my future. Yeah, I thought it before I started shooting this film. Tim: Okay. And so when the role was proposed to you, how did you get ready for it if you’ve never heard about startup founders before? Mone: Yeah, first I Googled the meaning of startup. That was the beginning. Tim: Really? What’s a startup? Mone: Yeah, yeah, yeah, startup. Search. That was the beginning, very low level. But after that, I began to interview to the real founders of businesses, especially the people who founded their business when they are young like university students. I could find the similarity between us and that was they had to manage both study and business at the same time, right? And actually, I go to university at the same time I work as an actress, so I understood how hard it is to cope with both things at the same time. We don’t have to do reports. We cannot go to school enough and there are many difficulties, so I could feel sympathy. Tim: You know, I guess when you think about it, this startup life, the life of a startup founder and the experience of being an actor or a singer is actually kind of similar in a lot of ways. Mone: Yeah, we have to create new things always. Yeah, I thought it is the same too. But yes, the thing is that we need to change our minds right away. For example, if director said no, we have to change our plans for the acting no matter how hard I prepared for that. Tim: Okay, in the same way like in the marketplace if the customers don’t react the way you think they’re going to, even if you think you’ve got the right idea. Mone: Yeah, you need to change it immediately, right? Tim: Right. Mone: Yeah, it can be said for any other jobs in the world but I found it too. Tim: So, when you were interviewing these startup founders, particularly founders around your own age, did you end up making friends with them and are you still in touch? Mone: Yes, one of them, Miku Hirono. She is actually a model of Hikari, the role I played in the movie. Tim: Oh okay, Miku has been on the show. Mone: Yes, yes, yes. I hope she were here. But yeah, after finished shooting the film, I went to her home and played with their children. Yeah, that was a very happy time for me. She was pregnant before we started shooting and after that, the baby was born so I felt, “Oh, the life, amazing.” Tim: And so many responsibilities. Mone: Yes. Tim: Getting back to the similarities between acting and startups, one of the most common things that startup founders who come on the show mention, one of the hardest things about starting a company is often what your family thinks. Mone: Yeah, I think it’s hard for them. Tim: Japanese families are so conservative. Did you have a similar experience? Did your family want you to do more traditional things or were they very supportive when you decided to become an actor? Mone: Yeah, they really support me. I really appreciate them. They say yes for everything I do and they watch everything, my movie or a TV drama or my musicals or so on. Tim: That’s fantastic. I think that’s so important and I think with startup founders as well, most of the successful ones have at least one parent or one family member who was a role model or who is really supportive and helped them. [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Mone: Yeah, yeah, I think so too. And I really respect my mother. Tim: Was she also kind of creative? Mone: She was a teacher of music in junior high school and so I began to sing when I was 2 years old. Tim: Oh wow. Mone: I was taught by my mother. Tim: You were singing basically at the same time you were talking. Mone: Yes, right like ABBA song. Do you know? Tim: Of course. Mone: Yeah, and even now, I ask my mum to give me advice and she really supports me for everything. Tim: That’s fantastic. I mean, I think that’s so important for longterm success, at least in the startup world but probably in entertainment too. Mone: Yeah, yes, yes. I think so too. Tim: Well, you mentioned that Miku is one of your inspirations for Hikari. So, do you think Hikari is kind of a typical startup founder or did you want to focus on one particular aspect of startup founders personalities? Mone: She is likely to be seen as a unique girl because of her characteristic but basically, I think she is very typical. She has what she wants to do and she does what she thinks right, and she has a difficulty in communicating with others, so maybe she’s likely to be misunderstood. But basically, she’s a very pure girl and she really wants to help others by founding businesses. So, I think she is very nice girl and working so purely. Tim: Just really focused on a girl with a vision and a dream. Mone: Yes, yes, yes, that’s right. Tim: In your research in getting ready and talking to startup founders and comparing them to the rest of the people you know, what did you notice that was really different, both good and bad, but different about startup founders that you had to model? Mone: I thought their vitality and energy is so big, maybe bigger than us. If they find anything they can do, then immediately, they move and do what they want to do. It’s a very difficult thing, isn’t it? Tim: Yeah, well I think that is difficult to do anywhere. Mone: Yeah. Tim: But I think it’s especially difficult in Japan. Mone: Yeah, do you think so? Tim: Yeah. Mone: In your country? Tim: Well, I think anywhere. I mean, it’s start difficult to be the one person who steps forward and says,

I’ve got a special bonus episode for you this week. Last month I was part of a panel discussion hosted by Stanford University and the Japan Society of Northern California. It was part of this year’s Japan-US Innovation Awards, and it was a great conversation, so I thought I would share it with you. The panel was moderated by Dr. Richard Dasher and was a discussion between me and Allison Baum who is an investor and a prolific writer about startups and innovation. We talk about a surprising source of innovation in Japan, discuss why there are not more Japanese unicorns, and peer into our crystal balls to predict what Japan’s startup ecosystem will look like in three to five years. It’s was a great discussion, so I packaged it up for you as is, with no editing or commentary. I think you’ll really enjoy it. Leave a comment

Startup founders claiming their company is going to “change the world” has become a cliche. But rarely do we see a product that could clearly and significantly make someone’s life better. D-Free is one of those products. However...

Japanese university and government venture funds play a much larger role in Japan than in the West. I've always considered this difference to be, on balance, neutral, today's guest makes a convincing case that these funds are actually hurting the startup ecosystem here. Today we sit down and talk with Hiroaki Suga, co-founder of PeptiDream.  PeptiDream is now a $7 billion biotech company, but it started out as a couple of university faculty members funding operations out of their own pockets. PeptiDream succeeded by using a very different model than that used by either the current generation of university spin-outs or biotech startups in the West. It's an interesting blueprint that other biotech firms might want to copy, but only if they are really sure that their technology will actually work. It's a great conversation, and I think you will really enjoy it. Show Notes Japanese Univstities' problems with applied research The challenge in moving from academia to startup operations How to hire a CEO What most professors don't know they don't know about business How to land large sales contracts as a small startup How to sell new technology to Japanese pharmaceutical companies Why biotech investment is so hard in Japan Why you want to step away while you are on top Japan's next biotech unicorn Why most Japanese government startup money is misused Links from the Founder Dr. Suga's Lab Everything you ever wanted to know about PeptiDream Hiroaki's new project MiraBiologics  Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. We’ve talked a lot before about how there are not many life sciences startups in Japan and what can be done to change that. But there are, of course, some and some incredibly successful ones. PeptiDream is one of those startups. Founded by a small team at a university lab, PeptiDream has grown from nothing to a $6 billion company. Today, we sit down with the founder of PeptiDream and fellow guitarist, Hiroaki Suga, and he’ll explain how they’re working with pharmaceutical companies all over the world to discover new drugs and new treatments. We also talk about the rather unusual business strategy that allow them to scale up with relatively little financing and to land deals with global drug companies a lot sooner than most biotech startups can. And I’ve got to say, my conversation with Dr. Suga really changed my mind about the role the Japanese universities and the government should play in fostering startups and innovation here. It’s a fascinating and unique perspective from inside the system, and I guarantee you, it’s not what you think it is. But you know, Hiroaki tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: I’m sitting here with Hiroaki Suga, the cofounder of PeptiDream. So, thanks for sitting down with me today. Hiroaki Suga: Sure. Very welcome. Tim: PeptiDream is a peptide discovery platform but what is that exactly? Hiroaki: So, the technology started from over 25 years ago. I had idea. Is that okay? I want to develop RNA catalyst. The so-called ribozymes. I did a post doc with Professor Jack Szostak in Harvard Medical School. I run the techniques for the in vitro selections but I didn’t really get major success, but I was fortunate enough that I get an academic position in State University in New York Buffalo. So, I succeeded in developing we call “flexizimes” so that the first two patents are owned by SUNY Buffalo, but it wasn’t really quite useful yet. Tim: So, you were working on this for 20 years plus? Hiroaki: Pretty much, yeah. Tim: Did you have an end target in mind saying, “This is how I’m going to commercialize it, this is why it’s useful”? Hiroaki: Right, right. I already envisioned that we can apply this to the in vitro transition system. Once we have this in hand, we can do a lot of things, a lot of interesting things, right. So, I developed this flexizime prototype in the US. I came back to Japan by the invitation of the University of Tokyo. I got back to Japan and immediately we succeeded in real practical version of the flexizime. Tim: That’s interesting because Japanese universities have a reputation of really prioritizing pure research over applications. Hiroaki: Right. But this is actually pure research stage. Tim: Okay. Hiroaki: It’s really pure research but I was reminded to make it very practical. So, having this flexizime allows us to rewrite the genetic code. We call it “genetic code reprogramming.” Tim: It sounds like from pretty early on, you were thinking about how to commercialize this at some point in the future. Hiroaki: Yeah, at some point but not – I don’t know when. I didn’t know when. Tim: So, was the drug discovery an early and obvious target or was that something that — Hiroaki: No, no. I was not interested in an obvious target or anything. This is just platform technology. So, idea is I want to rewrite the genetic code but at the time peptide is containing the amino acids which you don’t see in a protein, then I can mimic the secondary, metabolize the various organisms like bacterias and fungus and yeast and whatever they make. And it is very often used for antibiotics or something, other things. But natural products are very important drug source for a long, long time. So, if you can mimic the natural product, then you can synthesize artificially natural product like molecule will be useful for drug discovery. Tim: So, the PeptiDream platform and this technology, in general, allows the synthesis and analysis of a huge variety — Hiroaki: Of natural product-like molecules. Tim: Right, and it can do it very quickly and very cheaply? Hiroaki: Right. Tim: Let’s talk about that. Hiroaki: Yeah. Tim: Because, I mean, now PeptiDream is a $6 or 7 billion company but you found it very recently. It was 2006, right? Hiroaki: Yes. Tim: So, back in 2006, you had a long successful academic career, you had academic accomplishments and the proof of the value of the technology. Hiroaki: Yeah. Tim: But how did the company come together? Hiroaki: So, I envisioned that okay, if I further develop, I try to prove this system works for the drug targets. If I succeeded it, I’m pretty sure pharmaceutical companies will come to me to develop the drugs together. I really want to because I know if I do with them, if I get something very nice product, and then I cannot publish. My mission in academic, we need to publish. If it’s bad ones, maybe we can publish it. But if it’s good ones, we cannot publish it. And I was really confident that we can get something really good ones. Tim: So, how did you get that initial founding team together? Hiroaki: I wasn’t really intending to make a company but I was disclosing the patent through the – it’s called Todai TRO which is Technology Transfer Office in the University of Tokyo. They said, “You know, this sounds like really good technology. Are you interested in forming a company?” I said, “I may if I can find a good CEO. I don’t want to be CEO. I don’t think I can do CEO. Business is not easy.” And so they started screening the people I interviewed, maybe four or five people, then I found one, Kiichi Kubota. So, before forming a company meeting with him many times, mostly drinking together, to know him very well, otherwise, I cannot trust. I developed a good friendship. I can see his vision. It wasn’t easy that he said yes but eventually, he said yes, we do. Tim: I mean, that’s a technology transfer office working exactly the way they’re supposed to. Hiroaki: Yeah, exactly. Tim: But rarely the way they do. So, were you worried that you would have to give up a lot of the academic research or that the time demands would — Hiroaki: No. That’s why I need the CEO, right? If I start a company and by myself, it’s going to take up a huge amount of time. At the time, I was still a researching professor, so less duty from the Institute or University duty, so it was much more time. And I was not quite famous at the time yet. Tim: So you were really trusting the entire business side of the company to him? Hiroaki: Yes. Tim: And you were just focusing on the technology. Hiroaki: Uh-huh. 100%. Tim: That takes a lot of trust. Hiroaki: Yeah, yeah, yeah. That’s why I did. I need to know him. Then also, it’s one other important person which is Patrick Reid, who is also CEO of the company now. He used to be a Science Director. He was also Associate Professor in a different lab. He’s staying one floor down of my floor but we met each other in faculty meetings. So, we started talking and then I found he is interested in starting company. I didn’t know about the time, first time. Before I decided to start a company, I said, “Ah, it’s going to be very tough in Japan. Japan is not a very good place to start a company.” Tim: So, is Patrick an American? Hiroaki: He’s American. Tim: I think that’s got to be one of the biggest difference between American university professors and Japanese university professors. Hiroaki: Yes. Tim: So many American science professors are dreaming about wanting to start a company and so few Japanese do. Hiroaki: I think all Japanese professors also somewhat thinking about or hoping to do it but they don’t know how and they don’t understand how the business is and they think they can do the business. That’s a big – I know I grew up in the family having a business, own business. I know how hard it is. Tim: So you’ve got this really good team together that trust each other and you got a foundation but selling this technology,

Startups and venture capital work differently in Japan. The rounds are smaller, the priorities distinct, and while the same terms are used, people quickly discover that the definitions are often subtly different. The game is played differently in Japan. Today we get a chance to clear up a lot of the confusion as we sit down with James Riney, founder of Coral Capital and head of 500 startups Japan. We talk about some of the most significant changes that Japanese venture capital has seen over the past five years, and we look at how things are going to develop going forward. James and I also break down the business model behind venture capital funds themselves. It's something that all serious startup founders should understand, but few do. It's a great conversation, and I think you'll enjoy it. Show Notes How venture funds raise funds Why Japanese banks and corporates are changing their attitudes towards Japanese startups The tradeoff between sector-specific and general VC funds What the hell is a Series-A anyway? How VCs try to appeal to the "right kind" of startups The real problem with IPOs in Japan How Japan's new, bigger funds will change Japanese VC in the long term What you never want to tell a VC when you are raising money What VCs do with their portfolio companies that don't work out How Softbank's Vision Fund is changing the market Advice to foreign founders who want to raise money in Japan Links from the Founder Everything you wanted to know about Coral Capital Check out James' blog Follow him on Twitter @james_riney Friend James on Facebook  Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we’re going to do something a little bit different. We are going to talk about the state of venture capital in Japan. If you are raising money in Japan or thinking of investing in Japan, you really want to listen to this. Now, normally don’t interview VCs on Disrupting Japan. It’s not that VCs are not interesting. I’ve got nothing against VCs. I mean, some of my best friends are VCs. No, it’s just that VCs have a tendency to talk in the abstract. They talk about general trends and their portfolio companies, and I have always found that it is far more informative to go straight to the source, to talk to the founders about what they specifically are doing to capitalize or respond to those market trends, to have them tell you about the real challenges that startups are facing right now, and how that fits into the bigger more important society-wide stories. Well, today, we’re going to do both. Today, we sit down and talk with James Riney of Coral Capital, and we examined the business of venture capital, how VCs view advertising and customer acquisition, and what causes some VCs to make money and others to lose money. It is not exactly like it is for startups, but it is surprisingly close. We talk about the most important changes happening in Japan’s startup community, of course, but we also dig into the challenges facing venture capital funds in Japan, and Coral Capital in particular. We talk about what VCs look for when evaluating a pitch, things you should never tell a potential investor, what the next few years of venture funding in Japan will look like, and hopefully, we will clear up some of the confusion about the difference between seed and pre-seed, and pre-series A and series A rounds. But you know, James tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: So, we’re sitting here with James Riney, the founding partner and CEO of Coral Capital and former head of 500 Startups Japan, and we are going to be talking about venture capital. James Riney: Yes, it’s good to be back, Tim. Tim: It’s great to have you back on. Now, a lot has changed since – when was that, four years ago? James: Yeah, it must have been three, 3 ½ years ago, something like that. 2015, right? Something like that, yeah. Tim: Now, so much has changed about venture capital and startups in Japan. We will get into that, but first, I want to dig into venture capital as a business, what the business model behind venture capital? Because that’s something that many startup founders understand. James: Yeah, I mean, I think especially in Japan, but even broadly as the venture ecosystem, the fundraising side for venture firms is a little bit opaque, and maybe some founders don’t necessarily realize that especially the sort of startup funds like us, we have to go out and raise our own capital. Tim: Yeah, yeah, in much the same way startups do, but actually, even before that, so stepping back before that, when someone decides to start a fund, what do they do? Do they start with investing theses, do they start with a couple of high net worth individuals? James: Yeah, so in a lot of ways, we have to tell a story as to how we are going to win in the market, and in our case, money is our product and money is commoditized. So, what we have to sell to investors is why we have some sort of unique advantage and why entrepreneurs are going to take our money as opposed to the other 10, 20 guys in the market, right? And then also, the founding team, the partners of the fund, they may or may not have history together, so in a lot of ways, it’s similar to a series A startup in the sense that we don’t know the dynamics among the managing team they are going to go and how are they going to market and what kind of investments they are going to make? Tim: So, in the case of like Coral or 500, what is the pitch to the investors? What is that advantage you are selling them? James: So, in our case, we launched our first fund under the 500 Startups brand, for the first story for us was selling the fact that there were not brand name Silicon Valley firms really investing in Japan, and so the selling proposition was PR a Silicon Valley style firm operating in Japan, and because we are bringing that sort of know-how in that brand, entrepreneurs will choose us over others. Tim: Who are the investors? Are they banks? Are they pension funds? Are they other startup funds? James: Yes, so this is a dynamic that is sort of unique to Japan, so in Silicon Valley, one of the firms will raise from institutional investors. In fact, most of the capital is from institutional investors, so that includes pension funds, insurance companies, endowments, etc., whereas in Japan, a lot of the capital for startups come from corporate, and so that is in the form of corporate venture capital or in the form of funds like us that have to raise from corporate. Up until recently, there has not been a lot of institutional capital be invested into the market, but now, some of the funds including us are able to raise from these institutional investors, and so it is starting to move and starting to change. Tim: Why is it changing? Do you think it is just because institutional investors feel that startups are a more safe or valid investment or that the number of startups have grown big enough that it is an investable asset class for them? James: It’s a bit of both, right? So, institutional investors want to – I mean, unlike corporate, they are investing for purely financial return, right? And, for institutional investors, they have seen the likes of Mercari that grew to multibillion-dollar IPO within just five years, and then we have like Rakusul and a few other pretty big exits in the ecosystem, and so institutional investors look at those returns and they feel that there is actually something here domestically. Mind you, a lot of these managers in the institutional firms have invested outside of Japan into the top tier firms in Silicon Valley, so they are familiar with it as an asset class, but they have not really look to Japan as a place to get similar returns. Tim: Okay, and when you are pitching these investors, so obviously, you have to pitch your strategy or the advantage you have. Do you or do most funds pitch a specific target, say we are going to be investing in B2B software or we’re going to be investing in life sciences, we’re going to be investing in anything we think is interesting? James: We are a sector agnostic firm. If you look at all the top tier firms in the world, almost all of them are not sector specific. They don’t focus on a particular area. Now, that said, if from a marketing perspective on both the fundraising side and be investing side focusing on particular area could be important. For example, AI or blocking are like hot topics in Japan right now. Because it is a specific mandate and it checks boxes for a lot of these corporate executives, they feel more comfortable investing in a fund like that, whether or not viable in terms of creating superior returns. Tim: So, are most funds general or are they focused? James: I would say most funds are general, but I think the sort of trade-off you have here if you focus on a particular area is that even though you might see all the AI and blocking companies, you might not see any of the other companies, right? That is sort of the trade-off that you have, and in Japan specifically, I don’t think that the market is big enough to specialize in a particular area. There is only a handful of really big accident and they vary across multiple different areas, and so you don’t really know where the great companies are going to come out of, and if you are pigeonholed into a particular area, you are going to miss out. Tim: There do seem to be a lot of these targeted funds in Japan. That is a drone fund, there is a couple of AI funds. James: Right. It’s probably more feasible to have a broad perspective because if you have an idea of where you want to invest,

Startup culture has crazy and contradictory views about failure. As founders we are told to fail fast, but also to never give up. We are told to follow our vision, but be ready to pivot. Somehow this macho-bullshit culture of “I never really fail and ‘m not afraid of failure.” has become dominant amount founders. But it’s the result of denial. Trivializing failure is a way of not thinking about it’s effects. The truth is that failure sucks. Failure is painful. Failure ...

I’ve got a special bonus episode for you today. Last month, I moderated a panel discussion at Coral Capital’s “Bilingual’s and Gaijin in Startups” event.' Our panel focused on what foreigners should expect when working at Japanese startups and what Japanese startups should start doing to better support their international employees. It was a great conversation with four amazing people from four of Japan’s most interesting startups. Tetsuya Sawanobori of Connected Robotics Jordan Fisher of Zehitomo Takanori Sato of Shippio Tatsuo Kinoshita of Mercari This is a bonus episode, so the recording is straight off the board. There is no editing, no transcription, and no witty summary at the end alluding to the larger significance of the discussion. But a lot of good ideas were shared on stage, so I really wanted to share it with you. If you’ve ever thought about working for a Japanese startup, I think you’ll really enjoy this. Leave a comment