Disrupting Japan

Blue Innovation attracted a lot of international attention last year when they announced the  T-Frend drone system. This dystopian drone flies around offices after hours reminding staff not to work overtime, and taking pictures of those who violate overtime policy so that management can be alerted. We’ll talk about this particular drone, of course, but Blue Innovation's technology is much broader and is making an impact an many more important, if perhaps less visible, areas. Founder and CEO Takayuki Kumada explains the early days of the company and why they decided to pivot into drones in the first place. We also talk about the future of drones in Japan and globally, about what’s really holding the industry back, and why the Japanese government crackdown on drones might have actually forced the industry to focus on a very specialized and very lucrative niche. It’s a great conversation, and I think you’ll enjoy it. Show Notes What is a drone integrator, and why are they important? How Blue Innovation pivoted from environmental consulting to drones How drones navigate with no WiFi no GPS and no light What kinds of jobs drones should not do Why flying drones make more sense than swimming or crawling drones Which industries will be most affected by drones What's really holding drones back How Japan can overcome China's lead in drones Links from the Founder Check out everything Blue Innovation is doing Blue Innovation's Facebook page Japan Drone 2018 on the Blue Innovation blog Friend Takayuki on Facebook [shareaholic app="share_buttons" id="7994466"] 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. One of the ideas I've talked about a lot over the past few years and one that's finally gaining some acceptance is that the bulk of meaningful innovation in Japan is going to come not from startups but from midsized companies. Of course, Japanese venture capital and the ecosystem will adapt to include these players but things are going to develop differently in Japan than in the United States. With this in mind, perhaps you won't be too surprised to learn that Japan's leading drone company is not a traditional startup but a midsized company that pivoted into drones from a completely different industry. Today, we’ll sit down with Takayuki Kumada, founder and CEO of Blue Innovation, Japan's leading drone integrator. Now, Blue Innovation attracted international attention last year with the announcement of their T-Frend drone. Now, this drone is designed to reduce overtime by flying around the office taking pictures of staff and telling them to go home, and yeah, we talk about how effective this is likely to be but we also talk about the integrator strategy, the one that's being pursued by a lot of the most successful high-tech startups in Japan. It's a strategy that allows them to quickly collaborate across industries and brings an immediate cash flow, but it does come at a cost and it might not be stable long-term, but we’ll get into that. We also talk about the future of drones, both in Japan and globally and what's really holding the industry back, and why the Japanese government’s crackdown on drones might have actually forced the industry to focus on a very specialized and very lucrative niche, But you know, Takayuki tells the story much better than I can, so let's get right to the interview. [Interview] [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Tim: So I'm sitting here with Takayuki Kumada, the CEO of Blue Innovation, and Blue Innovation is developing civil engineering services using drones. So thanks for sitting down with me. Takayuki: Thank you very much. Tim: Okay. On your website and in interviews, I've heard you describe Blue Innovation as drone integrators. I was wondering if you could explain, what exactly does that mean? What is a drone integrator? Takayuki: Ah, I see. So drone integrator means hardware and a software, and a solution. We manage each component. Tim: So you work with various different companies in different industries to sell drone technologies, right? Takayuki: Yes, that's right. Tim: Before we get into all of the different systems you're developing, let's step back a bit because Blue Innovation, it didn't start out making drones. Blue Innovation started in 1999. Takayuki: Yes, that's right. Tim: And you were focusing on environmental issues or coastal erosion? Takayuki: Yes, yes, that's right. First, our business side is power protection to disaster, so we developed the countermeasure against beach erosion and tsunami. So we need some aerial photograph because we try to understand the cause of disaster, so aerial photograph is very, very important. So we bought the aerial photograph for some company in the past but we could not gather it after the disaster. After the disaster areacs photograph, we could not get that, so we thought, so how to get and how to take a photograph after that disaster at a point. Tim: So it turned out that at the time when it was most important to get that information, to get the photographs, you couldn't get it? Takayuki: Yes, yes, that's right. Right after the disaster, yes. Tim: So at that time, did you contract out to drone companies? Did you buy drones yourself? How did you start using your own? Takayuki: 10 years ago, we searched the technology for how to take a photo, aerial photograph. We found the technology in University of Tokyo. So the University of Tokyo developed the drone system. So we met the professor, so Professor Suzuki developed the UAV, or unmanned aerial vehicles. Tim: So he was developing the hardware or the software that controlled it? Takayuki: Both. Tim: Both? Takayuki: Yes, hardware and software. The main part, the main research part is software. Tim: And this was in 2000 – what year was this? Takayuki: 2006. Tim: That was pretty early in the drone - Takayuki: Yes, so we try to – "Please print the area robot," so Professor Suzuki said, "Okay, let's together try the research." So first time that we used the coastal monitoring by this UAV, we developed the coastal monitoring system using the UAV. Tim: At that time, you were still a coastal erosion environmental company just using drones, so when did you make the pivot to become a drone company yourselves? Takayuki: So ICAO decided their own concept to aircraft, so many company developed the Revised Aviation Law all over the world. At the time in Japan, the government didn't move the Revised Aviation Law, but some maybe IT venture, the Yahoo, Google moved very faster, then maybe some IT venture company contact us, they said, "So we want to develop the UAV system, drone system. Do you have the drone system, UAV system?" So maybe about four or five years ago, maybe companies contact us about drone system because there are some drones on our website. Tim: So these startups and venture companies were contacting you, hoping you would be a customer for their photography services or were they contacting you to be a partner for developing drone systems? Takayuki: No, case-by-case, so development and they were service, and the aerial photograph, security. So many, many company contacted our company. So the contact number of drone is very larger than the coastal problems so we decide that we focus on the drone business maybe five years ago, yeah. Tim: Okay, your background when you were in university, your whole career was on studying that coastal erosion, so that must've been a hard decision to make. Takayuki: Yeah. About 10 Years ago in Japan, the big tsunami attacked Japan. Tim: Right, the big earthquake and tsunami. Takayuki: Yeah, yeah, yeah, so at the time, so we had so many, many jobs as a countermeasure against tsunami. So many, many jobs, and after three years, the coastal problems gradually smaller. Yeah, yeah. Tim: So the environmental and coastal monitoring business was going down at the same time drone business was going up? Takayuki: Yes. This is a very crosspoint. So our company, this is a big chance to re-contract our company. Tim: Okay. Well, you've certainly done a lot since then. So let's talk about some of the use cases because you're working with companies and organizations in so many different industries right now. So one of the ones that you've announced recently is that tunnel inspection projects with Mitsubishi. Can you talk a little about that? Takayuki: Yeah, Mitsubishi project, this system is a very narrow space in atomic, and no GPS and no radio waves, okay? So how to fly area? So our team drone can fly without GPS and without radio waves. So this drone, so some sensor on the drone, so  … . Tim: A lot of your use cases are indoor drones and as you mentioned, it's very challenging to navigate without GPS, without Wi-Fi or radio waves and sometimes, even in the dark. So what technology do you use to do that? Takayuki: This is a very, very secret system. So for example, in office and the factory, and the tunnel, we select a different sensor unit. This is a very, very secret system there. In the factory and in the office, we use a different sensor. This is very, very difficult to select the sensor and the sensor fusion is very difficult. This is our technology. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Tim: Can you talk about the general base of the technologies, is it like infrared, is it sound? Is it too secret even to give that level of description? Takayuki: So it's a secret system because before the announcement, okay? Tim: When are you planning on announcing? Takayuki: Maybe April. Tim: Okay, alright, we’ll have to follow up for later. Well, actually,

Have you ever been at a crowded and noisy party and heard a conversation across the room? You catch pieces of it, and you know it is interesting, but you can’t quite make it out and you can quite push your way over to that side of the room to be a part of it. Well, that was the situation a lot of our guests found themselves in a few weeks ago, so today we are going to set things right. Last month 500 Startups and Disrupting Japan held a joint event that focused on how Japanese and foreign staff can work best together at startups. As the event, I had a great discussion with three startup founders who are leading multi-cultural teams.  They candidly shared their stories and advice and even told us about some of their biggest mistakes. It was a great discussion, the event was a huge success, and we’ll definitely be doing it again very soon. But in a way, the event was too successful. Way more people showed up than we expected and the place was packed. Everyone had a good time, but the room was so packed and noisy that only the people close to the front got a chance to hear some amazingly good advice and life experiences. So I thought I would release the entire conversation as a special in-between episode of Disrupting Japan. There are no show notes for this one and it's not transcribed, but it is a great conversation with three experts on how startups can recruit, retain and get the very best out of multi-lingual, multi-cultural staff.  Leave a comment

Hardware is hard. In fact, sometimes the simplest and most straightforward ideas turn out to be the hardest to implement. Today I’d like you to meet Kyohi Kang the founder and CEO of Atmoph. Atmoph is a programmable window which can display the sights and sounds of hundreds of scenic places from all over the world. It's an exciting project, and the team attracted a great deal of early interest. They even ran one of the most successful Kickstarter campaigns and a smaller, but still successful, Japanese campaign on Makuake. But this success almost bankrupted them. Kyohi and I discuss how this happened and how other startups can avoid falling into the same trap. We also discuss Kyoto and the fledgeling startup ecosystem that is just starting to spread its wings there. And we'll dive into detail about why, unlike most other startups, Atmoph has decided to remain a hardware startup rather than pivoting to software and licensing when presented with that option. It’s a great discussion, and I think you’ll enjoy it. Show Notes What are digital windows and who wants to use them? What happens when the Kickstarter money runs out? What are the important differences between crowdfunding in Japan and the US What hardware startups really need to know about crowdfunding How you can be bankrupted by crowdfunding too well How to maintain sales momentum after the crowdfunding period ends Why you have to choose to be a hardware company or a software company. The dangers of trying to do both. Why the founders left Tokyo to start a company in Kyoto How the Osaka and Kyoto startups communities are different Links from the Founder Check out Atmoph - You won't really get it until you see it. Friend Kyuhi on Facebook Follow him on Twitter @kyohik Atmoph's Social Sites AtMpoh on Twitter AtMpoh on Facebook AtMpoh on Instagram [shareaholic app="share_buttons" id="7994466"] 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. You know, I was moderating a discussion panel at the big Hakusuka event last month and before things kicked off, I sat down at a café with Kyohi Kang, the found of Atmoph. Now, Atmoph is one of those ideas that is so obvious once you see it that you're sure that someone has thought of it before. In fact, you're pretty sure that you've thought of it before. We did, right? And yet, Atmoph seems to be the only company in the world that is producing this product. What is it? Well, I'm getting to that. You'll hear a lot of the details during the interview and it's always challenging to describe something so intensely visual on an audio podcast, but Atmoph is literally a window onto the world. It's a 27-inch diameter monitor that's mounted in a picture frame and it displays the sights and sounds of, well, anywhere, really: a window onto a Polynesian beach, a Roman Piazza - anywhere. Kyohi and I also talk about how Atmoph's very successful Kickstarter campaign almost bankrupted his company and since the team has run crowdfunding campaigns in both the US and Japan, we'll go over some of the most important differences between the platforms in both countries, and more importantly, the important differences about the customers and the customer expectations in both countries, and even though we met in Osaka, we talk a lot about Kyoto. Kyoto has the potential to become one of the most important startup communities in Japan. It's not quite there yet but there's a lot of promising signs and a lot of promising startups, for that matter. But you know, Kyohi tells that story much better than I can. So let's get right to the interview. [Interview] [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Tim: So I'm sitting here with Kyohi Kang of Atmoph and it's kind of a digital window, so thanks for sitting down with me. Kyohi: Thank you for inviting for this interview. Tim: I think you guys have got a really, really interesting product but you can probably explain it a lot better than just a digital window, so tell us a little bit about what Atmoph is. Kyohi: We are calling "digital window" but the concept is very simple and you can hang on your wall, and it's a 27-inch display and once you hang it on your wall, you can see a view of the world, and every content is filmed by us in 4K and you can see such as views in Iceland, France, Germany, and also Hawaii, Japan, anywhere in the world. Tim: And it also has sound as well, right? Kyohi: Right. It has one speaker inside so that you can feel as if you are actually there like Hawaiian beaches, sound of the waves, sound of the birds. Tim: Now, I've noticed that - I mean, looking around the world, there are lots of kind of digital picture frames for still images, but Atmoph seems to be one of the very, very few companies that has brought a video window type of a concept to market. Why do you think that is? Kyohi: There are many digital art frame companies out there but we wanted to have a window, like a virtual window. In nature, everything is moving, like wind and also the fires and birds flying, so to feel as if it's real, we thought it should be moving. Tim: So the idea is kind of the window out into the world, so if I had Atmoph installed and it was looking out into a Hawaiian beach, would I see like, the scene changing at different times of the day? Kyohi: Yes, yes, indeed. There are many locations and also many seasons, and many different times, so you can see in the morning or sunset, or nighttime. Tim: So tell me about your customers. Who is using Atmoph? Kyohi: From last year, we started shipping and about half of our customers is purchasing our window because there is some kind of closeness in their environment, like from their window, they can only see the next buildings or highways. Tim: So most of your customers, I mean, is it consumers or is it office space? Kyohi: 70% is consumer. The rest is restaurants, bars, and clinics, offices. Tim: Well, I could see why this would be very attractive to restaurants in particular, especially in Japan. There’s so many basement Italian restaurants that you could have a window out on Florence or something. Kyohi: Actually, there are many, really many places, café or bar without any window, so yeah, they should be all our targets. Tim: That seems to be almost a perfect target for you. So let's back up a bit. So this started out, well, it started out as an idea, but back in 2015, you launched a very successful Kickstarter campaign. Kyohi: Yes, we did. Tim: How did that go? Running a Kickstarter campaign from Japan has got to be somewhat challenging. Kyohi: It was all about challenging because at that time, doing Kickstarter in Japan was very rare, so it was hard to do, and for us, that was our first crowdfunding project, so everything was very tough. The reason we needed to do crowdfunding was we didn't have enough money to do the manufacturing production. Also, many people are asking, nobody would want a digital window, everybody said. So I needed to prove at least some customers should buy. Tim: And how much did you raise on Kickstarter? Kyohi: About US$160,000. Tim: Okay, so that's a substantial raise, more than enough to get the product through the first batch of production. Kyohi: Yes, we thought, but we needed more money because making injection molding, it costs a lot, and also, to do a project for crowdfunding, we need to reduce the price because it's a kind of presale. Tim: Well, you mentioned that it wasn't quite enough money but you did deliver the products, so how did you do that? Kyohi: Yes, Kickstarter campaign was good and also, after that, we did another crowdfunding in Japan too. Tim: That's right, you ran a Makuake. Kyohi: A Makuake. Yes, we did that too but it seemed okay, but to make enough products, we needed to collect more and we asked for some governmental bank for startups’ loan, and also, one year later, we did first round of VC funding, US$1 million, approximately. Tim: Was the VC funding after you delivered the product or while you were still in – Kyohi: While. Tim: Oh, wow. So you needed that funding in order to fulfill the Kickstarter promises.l? Kyohi: Right, right. Tim: What turned out to be a difficult part? What did you underestimate? Kyohi: We underestimated too many things. First, it was our first time doing production, so we needed to find good manufacturers but it was very hard, so each time we visit and find, they said, "We can't do this, we can't do this in small batch,” or something. Tim: So did you do your manufacturing in Japan or in China? [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Kyohi: Yes, in Japan. Tim: In Japan? Kyohi: Yes, actually, but we have about five manufacturers coordinating each other. So assembling is in Nara, next to Kyoto, and the board production is in Osaka, and some plastic parts and cable are near Shanghai, so all products gathered in Nara and assemble. Tim: Almost all of the hardware products on not just Kickstarter but the hardware startups tend to outsource to China. Kyohi: Yes. Tim: Why did you decide to have your manufacturing in Japan even though you knew the costs were going to be much higher? Kyohi: Yes, because actually, it sounds we are better, because we didn't have enough money. To do manufacturing in China, we needed to travel often to do the negotiation or see actual product going on, but we didn't have money. We needed to save our money, so we were based in Kyoto, so there are many manufacturers in Kansai area because in the past, Panasonic manufacturing, there are many bunch of them, so we thought it's easier and also cheaper,

Right now, it looks like the most profitable business models that are emerging from the mapping of the human genome are not in the field of medicine, but in a variety of B2C business models focused on consumer marketing. That may be a surprising claim, but if the past 40 years of life sciences have taught us anything, it's that our genetic information will be both more valuable and harder to understand than we expect it to be. Today, I’d like you to meet Tomohiro Takano, CEO and founder of Awakens.  Awakens is opening up the genome to make it more accessible and understandable to you and me. They are designing a genetic marketplace that will serve both B2B and B2C clients, and they are working with other startups to develop applications that will leave some readers impressed and excited, and others appalled and concerned. So it’s probably best to let Tomo tell you about it. Show Notes Why people will share their DNA information How to choose your customers as a genetics startup Why developing B2B clients is different in Japan and the US Why people you would not suspect want access to your genome The true accuracy of consumer DNA analysis DNA for dating and social networking What an accelerator must do to validate a startup Why there are so few life sciences startups in Japan Links from the Founder Everything you wanted to know about Awakens Tomo's genetics blog (Japanese) Follow Tomo on twitter @mr3tiago Friend him on Facebook Genome Link Online Hackathon [shareaholic app="share_buttons" id="7994466"] 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 mining the genome, because if the last 40 years of life-sciences has taught us anything, it's that the information we take from our DNA is always more valuable than we think it's going to be, and why wouldn't it be? I mean, innovation and efficiency, and profit, and money in general are all just proxies for some greater and deeper human need. Most innovation is a more efficient means to the same ends, but DNA, well, that's different. That is who we are. It literally defines us, so naturally, it's something we all care about deeply whether we know it or not. Today, I'd like you to meet Tomohiro Takano, CEO and founder of Awakens, and Awakens is trying to open up the genome and to make it more accessible and understandable to you and me. How exactly they plan on making money doing that, well, Tomo will explain in just a moment. It's a combination of a B2B and B2C DNA marketplace that some listeners will find exciting and some will find it infuriating. But you know, Tomo 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! Tomohiro: Cheers! Thanks. Tim: We are sitting here with Tomo Takano of Awakens, a genomic startup here in Tokyo, so thanks for sitting down with us. Tomohiro: Yeah, it's my pleasure to be here today. Tim: Okay, let's do a quick overview of what Awakens is. So you developed the Genome Link software and you say you have a vision of everyone being able to access their own DNA data. Why would we want to do that? Tomohiro: We create a service called Genome Link which is the kind of API solution for companies to develop their own DNA personalized products. So we see that in the near future, in five or 10 years, every single people will have access to their own DNA data then make use of that data for like, they are choosing in fitness, nutrition, food, medicine. Tim: Does Awakens do the DNA testing as well or do you just link to work that's been done by like, Ancestors or 23AndMe? Tomohiro: Right, so at this point, we are simply focusing on existing genetic testing users, so we don't do the sequencing operation because in United States, there is already 10 million genetic testing users, then uniqueness of US market is actually this user can download their data, then this user actually looking for the opportunity to make use of the data by accessing to other products. Tim: Tell me about your customers. Who are your customers in this model? Is it the software companies who are making new software that can take advantage of this genetic information, or is it consumers who want to explore their own genome? Tomohiro: Sure, so basically, we are trying to connect both users and companies, so right now, everyday, 100 people uploading their DNA data to our platform so we come out like, 100 genetic traits information, some are covered by 23AndMe or other genetic testing products. So people are looking for the opportunity to know more, right? Tim: What sort of traits are people looking for? Tomohiro: Famous one is something like fitness or like, personality, or sometimes like some intelligence type traits. We are simply enabling users to connect their own DNA data - it's the latest science - to know more about their identity. Tim: Okay, before we dive deep into the DNA and the genetic science, I want to back up a bit and talk a bit about you. So before you founded Awakens, you used to run G-TAC which was M3's division for healthcare and genetic testing, right? Tomohiro: Yeah. First of all, I really love M3 and then actually, M3 is an investor of Awakens too. Tim: Oh, excellent. Tomohiro: So we have a really strong relationship with M3 too. So Awakens initially started asked like a weekend project. We, I don't know, kind of wanted to do something we really cannot do in previous company, but we see this is going to be the future of genomics. So we wanted to do three things, so one is the - we wanted to do something with whole genome. Existing genetic testing products need only small portion of DNA data which is like, 0.03% DNA data, and then over 300% of DNA data gives more information, a higher accuracy. Tim: My understanding is that a lot of our genome, we don't really know what it does. So I mean, being able to read 100% of the genome doesn't mean you can understand it, right? Tomohiro: Yeah, so maybe 100% DNA data doesn't necessarily to have, doesn't seem to be known for the future but what's really happening right now is that people started targeting small portion of this DNA data called snips. We started products like 23AndMe, AncestryDNA. Right now, in the research for the last three or five years is our research is not for  like a whole genome or whole exnome which is like a 3% to 5% of the DNA data, or even like snips, they see the different location, right? At the end, research kind of revealing that we have more information than what we are using to take the same products. Tim: So right now, like what percent of our genome do we have a good understanding of what it does? Tomohiro: It's really small I would say. Tim: Is it like, 1% or 5%, or? Tomohiro: we have like a 3% of DNA data has functional meaning, then people say that 97% or 98% is like junk DNA or something, right? It's got an ocean with DNA, right? Tim: Sure. We can't really say it's junk DNA. It's just, we don't know what it does yet. Tomohiro: Exactly, so we having new research showing that this data could be related to this kind of phenomenon which we call like a phenotype, so there are so many research I'm going and there is so many progress and how we strategically analyze this DNA data by using AI in the new method, right? We have like an inner universe in DNA, right? DNA is kind of galaxy and people try to understand what we can know from those bunch of letters, and there is history ongoing. Tim: So basically, what Awakens is doing is you are providing a very user-friendly program or friendly API and on the back end, you are correcting all the latest research from around the world of people looking into different parts of the genome and what they might be doing, and then presenting that to the users? Tomohiro: One of the key value our API is the annotation database. Annotation means how we interface each DNA data. So for users, people upload their own existing 23AndMe, AncestryDNA data. The original data is only 0.03%, right? But based on annotation database or the research actually found that there are some letters that could be related to somebody traits which is not covered by data that 23AndMe, AncestryDNA are looking up, right? But at the same time, we provided this data base as an API solution to the company so the company can develop their own products. Tim: That makes sense. Getting back to when you were leaving M3, so you mentioned that they are one of the investors in your company, so obviously, you left on very good terms. That's hard to do in Japan. How did you leave one such good terms and get them excited enough to not only continue speaking to you but to put money in your company? Tomohiro: No, it's more like just personal relationship. It's really doesn't have any competition on what they are doing, right? Tim: Yeah, but wasn't there some pressure, didn't people come to "Hey, that's a great idea, why don't you do that inside the company and will give you support and staffing?" Tomohiro: I think Awakens was a real exceptional case for the company to put the money in that stage. They are more likely trust me and then supporting me, right? Tim: So sort of the personal relationship you've built. Tomohiro: Yeah, yeah. Tim: That makes sense. Well, and it's important for your next phase. You've put out an API but it's much, much easier to make an API than to get other programmers programming against that API. So what kind of development partners do you have? What kind of companies want to make software based on Genome Link?

We startup founders and investors like to talk about “moonshots”. It points out startups that have huge dreams, those that are solving hard problems, and those that will actually change the world if they succeed. Usually, the term moonshot is used metaphorically, but today I’d like to introduce you to a literal moonshot. Takeshi Hakamada, founder and CEO of ispace, plans on landing commercial payloads on the moon in the next two years. Ispace is in the process of developing lunar landers and lunar rovers, and they plan on using the increasingly inexpensive commercial launch companies like SpaceX and Blue Origin to send them to the moon. Ispace has secured a partnership with Japan’s space agency, and they have attracted more than $90 million in investment. It’s a great conversation and I think you’ll really enjoy it. Show Notes Why Japan's space program is being privatized How a lunar lander can be commercially viable by 2020 An overview of ispace's first ten lunar missions How much it costs to put one kilogram on the moon What's worth mining on the moon What a lunar economy could look like Why lunar advertising is a possibility Links from the Founder Check out ispace Connect with Takeshi on LinkedIn [shareaholic app="share_buttons" id="7994466"] 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. “Boys, be ambitious. Be ambitious not for money or selfish aggrandizement, not for that evanescent thing which men call fame. Be ambitious for the attainment of all that a man ought to be.” That was a parting advice given in 1867 by William S. Clark to the students of what would become Hokkaido University. While Clark is not widely known in his home country of the United States, both he and the phrase “Boys, be ambitious” are legendary here in Japan. And yet so few Japanese boys or girls, for that matter, really are ambitious, at least in the way that Clark intended it. Of course, many of Japan’s most ambitious boys are girls are the very ones out there starting startups, and today, I’d like to introduce you to the most ambitious Japanese startup in existence. They are a literal moonshot company and they’ve just raised over $90 million to pursue that dream. Takeshi Hakamada, founder and CEO of ispace plans on landing commercial payloads on the moon in the next two years. Now, ispace is not making rockets like SpaceX or Blue Origin, they're creating lunar landers and lunar rovers, and they are making plans for a commercially viable lunar economy. I'll let Takeshi tell you all about it. Oh, but before I do, you should know about the Google Lunar X Prize. This was a global $25 million competition sponsored by Google and open to any companies that could land a rover on the moon and send data back to Earth. Now, no one ended up winning the main prize but Takeshi’s Hakuto project was one of the five companies from around the world that won an intermediate milestone prize. But you know, Takeshi 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 Takeshi Hakamada of ispace who is going to commercialize the moon with exploration mining and eventually tourism, so thanks for sitting down with me. Takeshi: Thank you for having interview with me today. Tim: I really appreciate this and I love big dreams, and I think that no company in Japan has bigger dreams than ispace. Takeshi: Really? Tim: Yeah. Well, I mean, you've recently raised $90 million for a literal moonshot. Can you explain what you're planning on doing? Takeshi: We are trying to provide a commercial transportation service to the moon in the next few years. Starting from that service, we want to get into the mining business in space and then the human beings living in space. Our company vision is expand the planet, expand the future. We want to create a world where human being can live in space. Tim: So when you talk about mining on the moon, what is there to mine? Takeshi: There is many of the opportunity for the mining business on the moon. There also in space, however, the first target is water, h2o is going to be split into Hydrogen and Oxygen, and then it become appropriate for spacecraft with rocket satellite, and then if we can create a gas station in space, we can transform the space transportation system. Tim: Let's dive deep into the lunar economics in a bit, but just so our listeners understand how ambitious your goals are, in the next two years, you plan on two mission: one to send a lunar orbiter and a second mission to actually soft land and deploy a lunar rover on the moon. Takeshi: Yes. Tim: 2020 is two years away. Do you feel confident you'll be able to do that? Takeshi: Yes. First of all, we have already experienced. We have already developed a lunar rover already, and then we've already started the lunar lander development one year ago. We have already the background to accomplish our development. However, even the – we have one year already experience for the lunar lander development, three years is still a short time, especially in space industry. Tim: Yeah, yeah. Takeshi: Usually, the space program will take about five years to 10 years, so the three years is very, very aggressive, a short time. However, there's a technology already that has many of the components available so the only thing we have to do is design the system properly and then assemble the component. Tim: Okay, and after the second mission which is scheduled to be a lunar lander, then you guys get really aggressive and you're planning seven or eight missions over the next year to basically construct an infrastructure, right? Takeshi: Yeah, our ultimate goal is to construct the mining plant on the moon but the first few years, our focus is to transport a small craft. Our transportation capability is just a 30-kilogram payload, so compared to the governmental missions, they transport more than 100 kilograms or more than that at one time. Our service is just to bring 30 kilograms. We are going to leave a small sized payload in many times. Tim: And you think over that time, missions three to nine, those payloads will mostly be autonomous robots to build this infrastructure? Takeshi: We think that past few years, also the payload will be a scientific payload, like sensors or the exploration goggles, things like that, and then also, we can provide opportunity for the space agencies to the most right technology to building something on the moon. Tim: Well, listen, before we talk about that in detail, let's step back a bit and talk about you. This has been kind of a dream of yours for a long time because even before ispace and the Lunar X prize, you started a company called White Label Space back in 2010, was it? Takeshi: Yes. Tim:  Can you tell us a bit about White Label Space, what was that about? Takeshi: White Label Space [is the team entered for Lunar X prize. White Label Space itself was founded in Europe in 2008 when people worked for European space agencies and then they got together to create the team for Lunar X prize. They are start planning to develop lunar lander by themselves. However, there's no person who can develop lunar rover for the mission, and then while the person knows about Professor Yoshida, he kind of decided interested in the contribution to that team and then I also had a contact from the team to support Japanese activity and also raise some of the funds from Japan. Tim: Oh, I see, so your involvement was sort of the Japanese branch of that organization? Takeshi: Yes. Tim: When you started the Hakuto project, that broke off from White Label Space or why did you rebrand it? Takeshi: So we started actually at the activity in Japan as White Label Space in 2010. However, almost end of the 2012, White Label Space unfortunately decided to stop the activity in Europe. The major reason is financial situation. They couldn’t raise enough money to continue. Tim: Both these organizations were striving to compete in the Google Lunar X Prize. How much money is required to create a lunar lander like this? Takeshi: At the time of White Label Space, basic plan is to raise about $50 million and then develop lander and then purchase launch service. The entire mission cost me a share about $50 million. Tim: The Hakuto project just had this huge outpouring of support in Japan, both from individuals who are like crowd funding and corporate sponsors as well. That must have felt really rewarding after working on it for so long. Takeshi: From the beginning, plan to raise  funds is to utilize the sponsorship or to collect more money from a large number of people. However, it's very, very difficult at the beginning. Anyway, we kept doing and then we started to show our progress, and then many of the people start interested in our challenge. But the most important concept is challenge. When the other people start understanding the core of the challenge, we started get more support. Tim: So most of the support come after you won the intermediate challenge? Takeshi: Yes. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ]   Tim: That’s always the way it is though, isn't it? Takeshi: Yes. So the Lunar X Prize announced the milestone prizes in 2014 and then we are awarded as one with the milestone prize winner. We proved our technology to that milestone prizes, so that kind of the event is very, very important, the people recognize which team has bigger reliable technologies. Tim: Well, no, I can understand. It really,

Using artificial intelligence to change the way the education system works seems like a fool’s errand. When you combine the fluid and opaque nature of AI technology with the slow, bureaucratic decision making of education, you usually wind up with the perfect storm of stagnation, frustration, and rapidly burning through investor capital. Out guest today, however, thinks he’s found a way to make it work. Daisuke Inada, founder and CEO of Atama+, left a promising career at Mitsui to start an EdTech company he believes will change the way children learn. Interestingly, Daisuke’s vision is not the standard EdTech dream of online classes and automated learning. It’s one where human instructors are still very much involved and critical to the success of both the students and the programs. Of course, their role will change and the overall structure will look quite different from what we know today. It’s a fascinating discussion, and I think you’ll really enjoy it. Show Notes How to find a customer willing to fund changes in education The challenge in exporting the Japanese education model How to find co-founders when you are a mid-career executive What most people over 35 misunderstands about starting a startup Why education is hard to disrupt Why online education will not work in Japan or any other country How Japnese AI companies can compete against their better funded foreign rivals How to convince more Japanese to start companies Links from the Founder Check out Atama+ Follow them on Facebook [shareaholic app="share_buttons" id="7994466"] 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 talk about artificial intelligence and natural intelligence. In fact, we're actually going to talk about using artificial intelligence to improve natural intelligence, so yeah, and tech. Education is one of our institutions that is both most in need of disruption and most resistant to disruption, and there's probably no small amount of cause and effect in that statement. I mean, the reason education is in such need of disruption is because it has been so hard to change for so long although almost every other aspect of our lives has been transformed. Education has changed over the past 100 years, not just in Japan, mind you, but all over the world. Well, today, we're going to talk about exactly why that is and what the hell we can do about it. So I’d like to introduce you to Daisuke Inada, founder and CEO of Atama-Plus. Now, Daisuke left a long and lucrative career at Mistui because he believes he has a better way to help people learn. Now, in the interview, Daisuke and I talk about jyuku and for those of you outside japan, I should probably explain what jyuku are and why they're important to innovation and education. Jyuku is usually translated as cram school. They don’t really have a parallel in the west, but they're very common in Japan and in other parts of Asia. Jyuku are school run by private companies and Japanese high school students attend jyuku after they finish their regular classes and on weekends, and on holidays. The purpose of these schools is to help the students score higher on their college entrance exams or in the case of junior high school jyuku, to increase student scores on their high school entrance exams. Unlike the high schools and junior high schools themselves, however, jyuku are private companies and some are even publicly traded. Jyuku compete fiercely for students and they're evaluated based on how well their students do on the tests. It's no surprise that they're willing to try new technology and why most education innovation in Japan focuses on jyuku. Now that you have that background, our conversation with Daisuke will make a lot more sense. Of course, we also talk about the challenges he faced when deciding to leave Mitsui and he has some practical advice for how people who are not plugged into the startup scene can find co-founders. But you know, Daisuke 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: So we're sitting here with Daisuke Inada of Atama-Plus which is AI for education. So thanks for sitting down with me today. Daisuke Inada: Thank you very much for coming to our company. Tim: Well, listen, AI for EdTech is really vague and there's a lot of companies doing it so why don’t you explain what Atama-Plus does? Daisuke: We are trying to provide AI program to high school students and junior high school students in Japan. We provide a personalized curriculum which consists of video lecture, exercises, and tests analyzing the data of the students such as proficiency, learning history, consideration level, and so on. Tim: Okay, well, what kind of classes are you targeting? Is it like Mathematics or Language, or History? Daisuke: At this moment, we provide Mathematics contents to high school students but we are preparing other subjects, so we will launch our new products of English grammar, Physics, and so on. Tim: Tell me about your customers. Who’s using Atama-Plus products now, is it the government or jyuku, the cram schools, or universities? Daisuke: Our business model is based on B2B2C, especially B to jyuku to students. I don't know if you are familiar with the term of jyuku. Tim: It's, for our listeners overseas, a jyuku is – prep school doesn’t quite get the intensity of how cram school is good. So it's for students, many, many Japanese students go to cram school after their regular lessons to study for university exams. Daisuke: The last year of high school, almost 70% of students go to jyuku after their regular schools and almost 80% of third-year of junior high school go to jyuku. The concept of jyuku is very popular in Japan. Tim: Yeah. Well, later on, I want to talk in detail about innovation and education, and EdTech, but I find it interesting that in Japan, jyuku will be innovative. They are private companies that are competing with each other. It's not like high schools or universities, so jyuku seems to be the ones that will try new technology in education. Daisuke: Yes, that’s why we want to innovate the education together with jyuku. Tim: Well, listen, before we dive into EdTech and AI for education, I want to talk a little about you. So looking at your history, you seem like a very unlikely entrepreneur. So you graduated from University of Tokyo, you worked at Mitsui which is a well-established, well-respected Japanese company for like, 11 years, why leave Mitsui to start a startup? Daisuke: During Mitsui, I had been in Brazil for five years. I started education business in Mitsui. Firstly, there was no education business in Mitsui. We founded a joint venture between Mistui and Benesse which is the largest education company in Japan, in Brazil, so that’s why I started education business. We tried to bring Japanese education know-how from Japan to Brazil. Tim: How did that work out? Daisuke: Unfortunately, financial result was not good. They decided to close the company so we closed the company and I stayed in Brazil and I started another business of education in Brazil again. Tim: With Mitsui? Daisuke: With Mitsui. Actually, we invested in EdTech company in Brazil and I was working there. Tim: But what was the trigger that made you leave Mitsui and start Atama-Plus? Daisuke: I returned to Japan, I was trying to start new education business inside Mitsui but it was difficult and slow to innovate education in a huge company so that’s why I thought it would be better to start from scratch. Tim: Let’s talk about that because I think it is – I work with a lot of different Japanese companies. Some are startups and some are really huge companies, and the larger companies, the problem is not that there aren’t creative innovative ideas. There's plenty of people with great ideas but they have trouble getting the ideas to go sort of up the chain of command so that people will make a decision and act on them. Was that your experience in Mistui as well? Daisuke: If I continued to work in a traditional huge company, I wouldn't have any option to work in another huge company, but compared to a startup company from scratch, I thought it would be more speedy, it would be more creative because we could start from there. Tim: Was your family supportive of that? because that’s a pretty big change from going to like, University of Tokyo and Mitsui, that’s a definite sort of lifestyle track and then leave and join a startup. It must have surprised a lot of people. Daisuke: Yes, it was surprising but for me, much more important to realize my dream. Tim: So are you married? Daisuke: No, no, I'm single, yeah. Tim: That must make it easier to make the decision. Daisuke: Yeah, I think so, and also, I started the company together with my co-founders and we then thought that it would not take a huge risk. Tim: So after 11 years in Mitsui, how did you meet your co-founders? Daisuke: Actually, my friends at the university, I called my friend who his the best guy of business who worked for Recruit as a CEO in China. Also, I called a best guy of engineering who studied together with me in same class. Tim: So was this part of just like the University of Tokyo alumni association or were these people, you were calling them for like, the first time after 10 years of graduating? Daisuke: The co-founder from the business side (our COO), I was talking with him about the possibility to start a new business always even during the time of the universities. When it comes to the co-founder for engineering (our CTO), I spent a lot of time to get his decision.

The global energy markets are transforming themselves right before our eyes. Very little fundamental change has occurred over the past 70 years, but 10 years from today the Japanese and global markets are going to look completely different.  Today we sit down with Yohei Kiguchi CEO in Enechange, Japan’s largest retail energy switching platforms, and we dive into detail about how these markets are changing. We talk about Enechange’s business model, of course, but we also discuss the most effective strategies for startups who need to compete against large incumbents, and that advice holds true for startups in Japan or anywhere else in the world. Yohei also has some interesting observations on why Japan is a better place to start a company than the UK or Europe. It’s a fascinating discussion, and I think you’ll enjoy it. Show Notes How to identify a promising startup opportunity in Japan What’s driving change in Japan’s energy markets How to appeal to Japanese investors from overseas The importance of TV advertising in Japan How to make money in a slow-growth industry When Japan's nuclear plants will be turned back on How Japan's IPO markets gibe Japan a strategic advantage Why enterprise upper management is leaving to join startups in Japan Links from the Founder Check out Enechange SMAP Energy's website [shareaholic app="share_buttons" id="7994466"] 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. I surprised a lot of my friends and fans last year when I joined TEPCO, Japan's largest electric utility. I admit, at first glance, it seems a pretty radical departure from my history in startups and in most ways, it is. However, there's a transformation going on right now in energy all over the world, and while there's been very little disruption in the energy markets over the past 70 years, 10 years from now, the markets will look nothing like they do today. Well, today, we sit down with Yohei Kiguchi, CEO of Enechange, one of the more innovative startups building a business in the new energy markets. Now, before you understand what Enechange does, I need to give you a little bit of background on how energy deregulation is working around the world and the story of the coming disruption is quite similar in all developed nations. Since the days of, well, Thomas Edison, really, the power company was responsible for creating the electricity, building and maintaining the power grids to transmit that electricity across the country, and then billing the customers for the electricity they used. Because of the cost involved and the importance of universal and reliable electricity, it made sense for this to be done by a single, tightly-regulated monopoly and that's how things stayed for about 100 years, but over the past decade, around the world, the cost of generating electricity have dropped and we've seen smaller, more affordable plants, and a proliferation of sore. On the retail side, smart meters and the internet has made it easier to collect data and to be bill customers, and so markets around the world are being deregulated with power generation, power transmission, and retail billing all being handled by separate companies. While power regulation gets most of the press, most of the market disruption has focused on the retail side with hundreds of companies entering the market and many offering steep discounts. Around the world, electricity consumers have never had this much choice, and that's where Enechange comes in. Enechange is by far Japan's largest energy-switching website. It provides tools that allow consumers and businesses to shop for the best or the cheapest energy supplier, but as Yohei explains, the cheapest is not usually the best and Yohei also has some interesting observations on why Japan is a better place to start a startup than Europe, but you know, Yohei 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 Yohei Kiguchi of Enechange, an energy price comparison site, so thanks for sitting down with me. Yohei: Yeah, thanks for having the time with me, Tim. Tim: What I find really interesting about Enechange is you started this business in 2015 and that was even before the retail markets were deregulated which happened in April 2016. What attracted you to the business? Yohei: We set the company exactly one year before the market deregulation, just one year to prepare for the market deregulation, so that's why we just intentionally set up the company in April '15. Tim: That makes sense but investors typically don't like to make big bets on unknown companies and unknown founders, and markets that don't exist yet, so what attracted you to the whole idea and how did you get the investors on board with this? Yohei: Basically, two points, so one is, the energy deregulation is happening all over the world. The UK is doing it when I was living there. All the European countries, signed the EU treaty in 2008 or 2009, like all the EU nations need a deregulation in the market. Every country, when the market was deregulated, like similar company, like similar energy-switching company kind of imagine, this business model which was not happening in Japan yet, but it was basically set to happen anyway. Tim: Yes, so you could point to the success in foreign markets and say, "This is how it happened overseas, so of course, it's going to work the same way in Japan"? Yohei: Yes. Tim: Excellent. Tell me about your customers. So how many people visit your site every month? How many people are really interested in changing energy retailers? Yohei: So let me give you the big picture first. So basically, like 70 million customers in Japan, which is basically the half of the total energy consumption in Japan. The other half is commercial customers. Tim: So half residential, half commercial? Yohei: Yes, the half residential, half commercial, yes. For the latest sale sectors, like 70 million, and then the industrial sector is roughly one million customers. Tim: And of those 70 million, how many are coming to your website every month? Yohei: Our site average monthly visitors is like, two million. Tim: That's really high. For a potential market of 70 million, if you have two million users visiting your site every month, that's fantastic penetration. Yohei: Yes, then like other country, like there's over 10 million energy-switching has already happened since the market deregulation. We are the number one company in the switching market - the number makes sense. Tim: What is your business model, exactly? Do you sell leads to companies? Do you get a commission when customers switch? How do you guys make money? Yohei: Pretty much like in everything like in energy comparison website in the world is having like same business model, basically like, free for the customer, and then you get commissions from the new suppliers. If you acquired a customer. Tim: Okay. So if 10 million people out of a potential market of 70 million have already switched in the last year and a half, that's a pretty active market. Are people mostly switching based on price? Yohei: Yes, like we were dreaming like people want to use a greener company or cleaner company, or like local regional company, but actually, at the end of the day, like 95% of customers say like, just cheaper. Tim: Just price? Yohei: Yes, and then another thing, like on the UK, like UK got the same starting sect, 90%, like just cheaper. Tim: I think it's an interesting market right now in that energy is a commodity and it's been interesting watching how people have tried to differentiate, and so you see a lot of advertising that's focused on, like you mentioned, green and community supply, but looking at how people switch, that's not important to them? Yohei: But actually, not that true. I'm saying like, the cheaper, but I'm not saying cheapest. Tim: Oh, okay. So consumers need a lower price to switch but they're not looking for the absolute lowest? Yohei: Yes, true, yes. Tim: Huh. Yohei: So when the market became open like one and a half years ago, it is the 10 company who's supplying electricity in Japan, but it's not like 400 companies. They just started themselves to be energy retailers. So all of a sudden, it gets really crowded, but now, it's kind of shrinking down as well, mergers and acquisitions is happening right now, so now, only 30 to 50, probably a maximum of 100 active players right now. Tim: How many companies are listed on your site? Yohei: 70. Tim: And how do you choose which 70? Because on paper, there's 400-ish companies in Japan in this market. Yohei: So one is, need to agree with our commission model, and second, we also interview the companies to see the quality of the company. If the company doesn't have any kind of experience or got a good criteria to be an energy supplier, we actually don't put them on. Tim: You know, I want to get back and dive deeper into the market a little later on, but right now, I want to talk a little bit about you, because you're running - you're involved in a number of different companies, so you also run SMAP (Smart Meter Analytics Platform) and both companies were spun out of an organization called the Cambridge Energy Data Lab. Can you tell us a bit about those two organizations? Yohei: I actually still live in the UK. My main home is actually in London and being taxed for the UK, pretty much. I went to UK back in 2012 as a Cambridge student and I started Masters Degree and carry on to the phD in the energy technologies in Cambridge University. I was examining smart meter data analytics, so I'm like,

Having a free product tier is a time-proven way for startups to get a foot in the door by giving potential customers a low-risk way of evaluating your product. However, there are times when it's easier and much more profitable to simply make the sale. Yu Taniguchi s CEO of Vesper and creator of TableSolution.TableSolution is a SaaS product similar to OpenTable. It helps restaurant owners manage their reservations and better understand their customers. You might not have heard of them yet, but you will. Today they have thousands of paying customers including some of the world's largest hotel chains, they are profitable, and they are expanding globally. Yu and I talk aboutTableSolution's business model, of course, but you Yu also has some great advice and some counterintuitive insights about selling to mid-sized companies, expanding into new verticals and recruiting great staff. It’s a fascinating discussion, and I think you’ll enjoy it. Show Notes Two ways to differentiate your startup in a crowded industry How Freemium can hurt your B2B sales How restaurants are using bid data to learn more about you How Tokyo restaurants secretly raise prices together The advantages of having a multi-lingual product from day one How to keep customer churn low in a competitive marketplace Is it more profitable to go deep or to go wide? How is selling to enterprise different from selling to startups and smaller firms Links from the Founder Check out TableSolution Follow TableSolution on Facebook Friend Yu on Facebook Vesper's TableCheck site [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening. Startup investing follows trends and following these trends is an easy way to raise money. Two years ago in Tokyo, everyone was starting food delivery businesses. A year ago, it was AI-related companies, and now, of course, at coffee shops around the world, founders are trying to figure out how to graft a cryptocurrency onto an existing business model and launch an ICO. Of course, after you raise the money, you got to grow the business, and that's always hard, but it's even harder when you are competing against 100 other funded startups with the same business model, no. Long-term, the companies that went out are either those who are doing something no one has thought of before or those doing something so boring that everyone has thought of it but they are doing it in a way that puts them out in front. Today, I'd like to introduce you to one of those companies. Yu Taniguchi is CEO of Vesper, the creator of Table Solution. It's a SaaS service similar to OpenTable in that it helps restaurant owners manage their reservations better and better understand their customers. You might not have heard of them yet but you will. They have thousands of paying customers, including some global chains, they are profitable, and they are beginning to expand globally. The business model itself is interesting and you also have some great advice and some counter-intuitive insights about selling to mid-sized companies and the dubious value of the freemium model in general. But you know, Yu 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: So I'm sitting here with Yu Taniguchi, the founder and CEO of Vesper, makers of Table Solution in the online restaurant management platform. So thanks for sitting down with me. Yu: Thank you. Tim: Table Solution is in a super competitive space so let's talk a bit about what it is. Yu: Super competitive, a lot of people think that Table Solution's competitors are companies such as GuroNavi, Tebelog, OpenTable. That's totally different, actually. The current situation is that restaurants accept reservations from various sources such as phone reservations, reservations from Tebelog, they have to manage all these reservations. It's usually done by a notebook, paper and pencil, so our competitors, direct competitors are paper and pencil. In that regard, OpenTable is actually our competitor. They not only provide media for the consumers but also, they provide reservation and customer management system which would be used by the restaurants. Tim: Right, so your model is similar to that, right? I mean, you are providing a customer CRM solution or reservation solution, a general table and guest management solution for restaurants, right? Yu: Yes, so the difference between OpenTable's business model and our business model is OpenTable charges cover fees which means that every time a customer makes reservations using OpenTable website, the restaurants have to pay a fee to OpenTable whereas we charge nothing, so the restaurants would usually link to our reservation page from their website, from their Facebook page, from their Instagram account instead of linking it to OpenTable. Tim: Right, and you charge a flat monthly fee of like, 12,000 to 30,000 Yen depending on the size, right? Yu: 12,000 to 20,000. Tim: And you don't have like a free tier, right? All your customers are paying customers? Yu: Yes, exactly, yes. Tim: I really like that business model. There's a certainty to it and I'm interested in your opinion on this because I think in B2B sales, it's just as hard to get a customer to switch to a free product as it is to get them to switch to a product that costs 10,000 Yen a month, I mean, because they have to invest - it's not the 10,000 Yen a month - I mean, they've got to retrain staff, they have got to spend a lot of their time. Has that happened in your experience or did you experiment with like a free tier in the beginning? Yu: That's a good question, actually. We did think of various scenarios such as charging advertisement fees to companies who want to approach the restaurants and provide our solution completely free to the restaurants, but instead, every time they log in, they have to see an advertisement. Well, our conclusion was that we interviewed 300 restaurants prior to releasing our product and they all said they would be willing to pay roughly $100 a month if their operations become smooth, if their operations become automated, so we decided that it's better to start charging the restaurants rather than going for a freemium model which usually, the conversion rate is really low. Well, to be honest, we didn't have so much cash in our bank account, so we wanted to charge the customers. Tim: Revenue is nice. Yu: Yes. Tim: You are also offering CRM solutions to the restaurant. Is it mostly simply retaining and organizing information about the guests or do you offer services, like connections to social media, more marketing-focused features as well? Yu: Right now, we are still providing a very fundamental CRM which is, you can see how many times the guests have visited your restaurants or your chains or what their allergies are, what their likes and dislikes are, etc., or customers who have spent more than x amount of money in their history. In the future, we do plan to enhance the CRM feature and we want to help the restaurants' marketing or even suggest a better marketing resource distribution. The restaurants currently don't know how much the customer's spending, how many times they are repeating, what their lifetime value is. Tim: Right, a couple of years ago, during the Groupon phenomenon, it took restaurants a while to realize that the customers they were bringing in weren't providing long-term value. Yu: Well, exactly, yes. I mean, Groupon model is not working. Tim: No, no, but it took them a while to figure it out. Yu: It's a steep discount. It's a bargain hunter's - more than just gathering the bargain hunters, I wanted to help the restaurants convert the customers into repeat customers. Of course, it's a very good way to advertise restaurants. Prior to that, it was almost impossible for restaurants to advertise on any other media, but on the internet, it's free and you can access millions of consumers. So that was innovative, and also, the other thing that shocked me was that people were paying upfront for restaurants for dinners. This never happened prior to Groupon. Tim: On kind of the Groupon and daily deals business model, do you think that it can be saved or is it just fundamentally flawed? Yu: It can be enhanced. You can access the consumers, this is a very beneficial thing for the restaurants, but what's lacking, what's completely missing is that there is no technology to convert these customers into repeat customers, so the system is completely for users who are looking for steep discounts, so if you could change this value proposition. Tim: So capture information about the user, reach out to them directly in the future, things like that, rather than just relying on other next steep discount? Yu: If you say the Groupon business model is based on the premises that value proposition be a steep discount, in that sense, it's completely not working. Tim: Okay, tell me about your customers. So how many restaurants are you guys serving now? Yu: We serve 2,000 restaurants right now including global hotel chains like Hilton, InterContinental, Hyatt, also Michelin 3-star Sushis and Michelin 2-star French restaurants. Tim: So with 2,000-plus customers, are they all using Table Solution for their table management and guest management, or have you also integrated with existing systems? Yu: Yes, all the restaurants are using our service as restaurant and table management system, and sometimes, we do integrate with other existing systems that restaurants are using, such as POS, Point of Sales system, but not too deeply because we are essentially,

Japanese labor law is very different from what is standard in the US or Europe, and more than a few foreigners have made simple mistakes that have cost them their jobs or their entire companies. Terrie Lloyd has started more than a dozen companies in Japan over the past 30 years and has hired hundreds of people here. Today Terrie shares a number of personal stories and also offers a lot of practical advice for westerners in Japan who need to hire, manage and retain Japanese staff, either for their own startup or as part of a larger organization. Of course, we talk about Japan Travel, Terrie’s latest venture, but we also cover the state of Japanese startups in general, how to best raise money from Japanese VCs, and we go over a few real-world examples of how you can protect yourself when things go horribly, horribly wrong. It’s an interesting discussion, and I think you’ll enjoy it. Show Notes One mistake all founders need to avoid when building a platform business Why Japanese VCs have a blind spot to the travel industry How you know when to bootstrap and when to raise funds Why loyalty points are stronger than blockchain Why Japanese companies are afraid of open data The best way to recruit and manage Japanese staff How to find a startup niche as a foreigner in Japan How to get rid of problem employees without getting sued What you need to watch out for when getting legal advice in Japan Links from the Founder Check out Japan Travel Terrie's Take is a weekly newsletter that is definately worth reading Japanese Labor Law for startup founders A general overview of Japanese Labor Law JETRO's Guide to Japanese Labor Law Some good advice to startup founders from a Japanese Lawyer [shareaholic app="share_buttons" id="7994466"] 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. Okay, I want to explain in advance, this one is going to be a little long, but believe me, you are going to be glad you spent the time, and you know, you might even find yourself listening to this particular episode a couple of times. There's so much good stuff coming. Terrie Lloyd has started more than a dozen companies in Japan and he has hired hundreds of people over the past 30 years. Now, Terrie and I have known each other for a long time. In fact, when I was first starting out in Japan, I did some programming for one of his companies back in the 90s. I wrote for one of his magazines in the early 2000s, and you know, I'm not sure what took me so long to invite him to sit down and talk, but I'm glad I finally did. Of course, we talked about Japan Travel, Terrie's latest startup, but our conversation also turns into a brutally practical guide for any foreigner who wants to run a business in Japan. I will warn you in advance, our conversation lacks most of the startup hype and pep talking most founders exude, but you're about to hear some fantastic real-world advice about how foreigners can hire, manage, and occasionally even fire Japanese staff. Japanese labor law is well, different than it is in the US or Europe, and more than a few foreigners have made simple mistakes in this area that ended up killing their companies. Terrie has some great advice both on how to attract and to keep Japanese talent, and a few real-world examples of how you can protect yourself when things go horribly, horribly wrong. But you know, Terrie 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 Terrie Lloyd, the founder and CEO of Japan Travel and LINC Media, and BiOS and quite a few other companies, so thanks for sitting down with me. Terrie: It's my pleasure. Tim: Yes, I'm amazed how long it's taken us to get around to doing this interview because we've known each other for a couple of decades now. Terrie: Yes, that's right, absolutely. Tim: And I want to talk to you about Japan Travel, but there's a lot I want to dig into about the ecosystem itself and how it's changed, and some real practical advice for foreigners doing business here. So let's talk about Japan Travel. Can you explain how it works? I think it's a really interesting model. Terrie: Well, I started off as portal. I've been interested in media for a long time as you know, and so I wanted to create a community-driven media brand, basically. The impetus for making Japan Travel, of course, was to help with disaster, and so I wasn't really thinking too hard about turning it into a business per se. I thought it would be kind of like a good way to contribute to help rebuild Japan. As you recall, back in 2011, I went to meet people looking at the traveling to Japan. Tim: Oh, I see, so I mean, but you always envisioned that as an inbound travel portal, right? Terrie: No, actually, originally, I created a piece of software which we called ACQ2 which is a community management platform, and I went out and tried to get funding for it, and it was obvious that nobody really understood what I was trying to do. I don't know that I understood. So I realized I would have to make something that was more solid that people could identify with, and actually, originally, I started off with a dog site, and then it was called doglovers.jp, and roughly at the same time, of course, the earthquake happened. I had a very powerful dream, actually, and it woke me up. I started writing down furiously what I remember and I decided that I would do something to contribute to help Japan. I've always been a firm believer that money follows quality, so if we did a good job, maybe we could turn it into a business. Of course, that's always in the back of my mind. Tim: What exactly is the platform? How does it work? Terrie: Yes, okay, so originally, as I said, we started off trying to build a portal. I've always been in the publishing business where we are very concerned about quality, but at the same time, we had all these constraints, and one of the constraints is having to hire people to create the content and so on, and so I decided that I would try to do something more on the community basis by building this whole quality control method. The the earthquake turned out to be kind of like a blessing and a curse. It was a curse because, of course, the damage it caused], but it was a blessing because there were other people like me who felt like they wanted to do something to help Japan. So the first stage, I was running around and emailed friends, my network, basically, of foreigners living in Japan. I must have contacted about 500 people. I had a great response, and so on the basis of that, we started building this community. We ran it on the platform and today, their community is about 30,000 people, so it is quite large. Tim: And the platform itself allows for crowdsourced content generation with some editorial control and some editorial direction as well, right? Terrie: Yes, I took two patterns out, actually, which I have successfully received just recently. One was an insight into human behavior, so when you have people who are contributing to a crowd in the cloud, it's as hard for - Tim: It's hard to get that in Japanese, yes. Terrie: That basically, if you ask them what kind of job they want to do right at the start and they nominate the role out of a pull-out, generally, they will stick to that. So I have people who first signed up as people who created the original content, of course. They are kind of like travel journalists, and then we had people above that who are editors, and people who are fact-checkers and people who are translators, and so on. So each layer, those people kind of stick to their role, so you get this kind of like 360 coverage for each article. You don't get just one person's view, you get at least two or three other people on top of them, and by the time you come out of that process, that article is actually transformed. Tim: So what is the motivation for people to participate? I mean, for writers, I think both you and I can attest to this, writers are willing to write for free to get their ideas out there, to be heard, but editors and fact-checkers, much less so. So what brings them onto a platform? Terrie: Well, first of all, we have this points and awards system which is kind of like, imagine Facebook rewarded everyone for all the work they do to make it worth all those billions, that's the first thing, and then secondly, as people become skilled and their reputation goes up, we ask them commercial work. So we have lots of commercial work coming in: regional governments, large corporations, advertising companies, travel agencies, and so on, and so we basically ask those people to do that work. Tim: Okay, and the first application you used this for was, you mentioned a dog site? Terrie: Yes, that's right, for people who were dog lovers, basically. Tim: Well, what happened with that? Terrie: Well, I had two sites running in 2013 and Abe got voted into power, then suddenly opened up all the visas, the floodgates for tourism, and the Tourist Act just took off. The dog site was also doing well. In fact, we were number four in the country when we decided to close it down. I just couldn't afford to run two things at the same time, so I decided to focus on the travel side of things, but I still have the dog lovers domain and at some point, I may actually resume. Tim: Bring that back to life? Well, the travel industry is an interesting one, particularly with startups in general, so it's a huge growth industry, one of the few growth industries in Japan, but there seems to be relatively little venture investments in travel. Why is that? Terrie: Yes, so I have of course,

Japanese fashion is unique, and so is the entire Japanese fashion industry. Today I would like to introduce you to a Japanese fashion startup with a genuinely unique business model. Tsubasa Koseki and his team at Facy, have created a fashion marketplace based on instant messaging and relationship building between shops and consumers. Interestingly, this market is not dominated by major labels or global companies, but by more local, mid-market brands. Tsubasa and I talk about his plans for Asian expansion, Facy’s chances for global domination in this niche, and the major differences between fashion retailing in Asia and in the West. It’s a fascinating discussion and a great inside look at fashion retailing. Show Notes What is the last untapped fashion market The reason behind the recent boom in startup founders from Todai How SNS use differs between Asia and the West Why you may not be able to trust Japanese e-commerce reviews The biggest mistake fashion startups keep making Why the global fashion brands will be at a disadvantage over the next 10 years Links from the Founder Check out Facy Follow them on Facebook More about Facy on The Bridge [shareaholic app="share_buttons" id="7994466"] 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. Every once in a while, I come across a startup with a business model that only exists in Japan. Now usually, this is because the startup is responding to a market need or a consumer behavior that also only exists in Japan. Occasionally however, only occasionally, I come across a unique startup with a genuinely good idea that has potential to make a global impact, and today, I'd like to introduce you to one of those companies. Tsubasa Koseki is the CEO and founder of Facy, and Facy has developed a fashion marketplace based on, believe it or not, text messaging. Consumers with questions about fashion can ask for advice, and fashion brands and stores respond to those questions. Yes, yes, I know, messaging is already widely used in the fashion e-commerce industry, but Facy has a wonderful and minimal approach to it that really deserves attention. Now, I grant you that the fashion industry as a whole is a bit outside of my core competence and in truth, I have a fashion sense that is perfect for podcasting, but Facy's results really speak for themselves, and Tsubasa and his company have big plans for expansion as well, but you know, Tsubasa tells that story much better than I can, so let's hear from our sponsor and get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] [Interview] Tim: Okay, so we're sitting here with Tsubasa Koseki, the CEO and founder of Facy. So thanks for sitting down with us today. Tsubasa: Yes, thank you, Tim, too. I'm very happy to present our project. I'm a big fan of your podcast. Tim: Well, thanks. Let's get right into what Facy does, so you talk about o-to-o means in offline-to-online support services for fashion and apparel stores, so how does this work exactly? Tsubasa: On our service, user can ask their fashion needs like Quora. Tim: Quora? Like the Q&A site? Tsubasa: Yes, yes, yes, yes, yes. User can ask their own fashion needs. For example, I'm looking for sneakers for the office, shop staff can reply to the post by uploading their item in their stores. User can ask additional questions. If it's okay, they can buy or reserve item. Tim: I really think you got an interesting approach to e-commerce in general, but fashion in particular where it is this kind of calling response where you got customers texting like just random questions, and how detailed are these questions? Are they simple things like, "I'm looking for a new pair of sneakers for basketball"? Or do you get people saying, "I want a blouse that feels more like spring"? Tsubasa: We have a lot of customer. They ask unique question. In this year, the most interesting question to me, 14 years old, Junior High School student asked, "I am a fashion beginner. I start to running fashion. What do I have to buy fast?" She asked. Tim: Okay, and so how did the shops respond? Tsubasa: So many shops respond to her. One of the shop respond, which is Levi's 501, branch respond, "Wear sneaker." Tim: But I can see that being really interesting. It's bringing commerce back to a more one-to-one relationship and that's great, and so the business model is, you take 20%? Tsubasa: Yes, yes. Tim: Do the shops ship directly to the customer or do you handle the shipping? Tsubasa: Yes, we are handling shipping and payment. We ask Yamato, Yamato is the biggest logistic service in Japan, to pick the item directly to customers. Tim: That makes sense. Tell me about your customers. How many customers do you have and how many stores are a part of this system now? Tsubasa: We have 500,000 users but one of our unique points is user can find favorite item by just watching fashion communication of our user and shops. Tim: So the text that customers post if they're looking for new sneakers or a new fashion, these are public and everyone can see it? Tsubasa: Yes, the other user can read. Most of the user don't post. Tim: Just read? Tsubasa: Yes, just reading. Tim: Of that 500,000 users, how many are active? So how many log in, say weekly? Tsubasa: Weekly, about 100,000 users to 200,000 users. Tim: Okay, so it's a very active community? Tsubasa: Yes. Tim: Alright, and who are they? Are there more men or women, young, middle-aged? What's the typical user profile? Tsubasa: Men and women in same percentage. Tim: Really, 50/50 split? Tsubasa: Yes, 50/50. Yes, there age, 25 to 35. They have their job and their salary is increasing but they're available time is decreasing. Tim: I can imagine that that 25 to 35 age audience hs incredibly valuable audience to the fashion industry. That's the age where people are making branded decisions, when you go onto the business world, you kind of have to throw away your style from college. Tsubasa: They have free cash to buy fashion item. Tim: And what about on the business side, is there any particular type of story that is popular? Are they like high fashion brands, are they chain stores, are they like outdoor stores? Tsubasa: Our main clients, in Japan, there are so many middle-priced brand. In US, apparel market is divided, luxury brand or fast fashion, but in Japan, a middle-priced brand is so strong. Tim: Okay, and it's these middle price brands that are the most popular stores on the platform? Tsubasa: Yes. General startup, one of the biggest fashion brand in Japan using our service and the 22% of sales is from Facy. Tim: Wow, but you know, that does kind of make sense because these mid-market fashion brands in Japan now, in some ways even hurt by the e-commerce revolutions. The major fashion brands, the Chanels and the Louis Vuittons, they have huge marketing budget. The fast fashion retailers have - Tsubasa: Huge marketing budget. Tim: Yes, they've got this special system, but yes, these mid-market brands are sort of stuck in the middle. They can't steak out a brand for themselves so this ability to communicate and have a conversation is really interesting. Tsubasa: Yes, and I think in Asia, they have a big opportunity because people get more money, so people want to buy better product. Tim: Yes, I think so. I mean, there's two things. If you look at a lot of the markets in Asia, there are two things that could work in your favor. First is you mentioned, there's this growing middle-class of consumers who have money to spend on fashion, and second, there's a lot of Asian economies where there's a much larger younger demographic in that 24 to 34 year-old range. But before we talk about that, let's back up a little bit and talk about you. So you graduated from Todai and you worked in banking, Mitsubishi, and Lloyds as well? Tsubasa: Yes, after graduating from Todai, the University of Tokyo, I studied in the University role on the Internet Technology, and therefore, I like to launch a financial service, utilizing internet technology in Mitsubishi Tokyo UFJ, but you know, in most of Japanese company, I think the best way to success to the business development or marketing for huge company. Tim: Well, yes, I think all companies value sales, so you went into Mitsubishi with an idea that you were going to launch a new product for Mitsubishi? Tsubasa: Yes. Tim: Oh, you poor thing. [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Tsubasa: Yes, but later, internet is not a good career, so I decided to work as a relationship manager for a huge automotive company, and do you know Suzuki? Tim: Of course. Tsubasa: Yes. Tim: Were you just trying to find a career and a job that you enjoyed, or was this part of kind of a long-term goal of starting your own company? Tsubasa: Of course, working in financial industry, I think it's easy to make more money but I would like to launch our service, so there, I became 30 years old. I decided to quit job. Tim: So why fashion? I've never really followed fashion - I mean, you can tell by the way I'm dressed - but you mentioned in an earlier interview that you've always been interested in fashion. If you're always interested in fashion, why the big detour into banking? Tsubasa: Fashion market is very interesting because users wearing items more frequently in the other market. This reason is same to Amazon. In US. there is frequency of user are using Amazon. I think 14 times per year, so fashion is very important. User buy item more frequently than there is a market. Tim: I guess it's an interesting point. The business of selling fashion,