Disrupting Japan

There are a lot of passionate opinions about Japanese design. From the beauty and subtlety of the best Japanese anime to the design horrors of most corporate Powerpoint presentations, Japanese design covers a huge range. Things are changing though, and today we sit down and talk with Naofumi Tsuchiya, the founder and CEO of Goodpatch, one of Japan’s leading, and most richly valued, UI/UX design startups. We talk about how Japanese design is evolving and why we might be seeing (for better or worse) a more global design standard and sensibility. Goodpatch is one of the new breed of Japanese design firms, and they’ve been able to raise substantial venture funding. Nao and I also talk about how that venture money has forced his startup to move in very specific strategic directions. It’s a fascinating discussion, and I think you’ll enjoy it. UPDATE: The conversation below on the future of Goodpatch's two products is a bit confusing. Goodpatch has stopped development of Balto, but is continuing development on Prott. They are now in the process of a major rewrite and will soon launch a revamped Prott 2. Show Notes How you can choose your customers in Japan, and why most startups think you cannot How a life-threatening illness actually turned Nao's life around What makes a product meaningful How to discover passionate teams hiding inside large enterprises Why it's hard for a startup to move from services to products Why design in Japan is so different today How to improve user acquisition by over 50% (at least in Japan) How we should be raising the next generation of designers Links from the Founder Learn more about Goodpatch on their homepage Check out Nao's blog Follow him on Twitter @tsuchinao83 Check out the Goodpatch blog In English In Japanese Listen to the Goodpatch podcast (sorry, Japanese only) [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 design in Japan and it’s going to be good. Because Japanese design is a topic that people have a lot of strong opinions about. From the subtlety and nuance you see in the very best of Japanese anime to the visual horrors of Japanese corporate PowerPoint presentations. The topic covers both the wonderful and the terrible. And so, to dance us through this minefield is Nao Tsuchiya of Goodpatch. Now, Goodpatch is one of Japan’s fastest growing and most highly valued design startups. We’ll talk about Japanese design not only as it exist today but why we might see a global convergence of design, style, and UI sensibilities in the coming decades. Even if it’s inevitable, it’ll be sad to see the current global diversity disappear. And though we don’t talk about it during the interview, I first ran across now a while back when I recommended Goodpatch to one of my larger consulting clients. Before providing an estimate or drilling down into the requirements, Goodpatch sent back a detailed questionnaire, asking this enterprise about their dreams for the project and who their ideal users were, and how they normally communicated with them. Now, these are great, in fact, even common sense questions for designing a user experience. They show that the designers really do care about what they’re building over at Goodpatch. But the enterprise employees running this project simply did not know how to deal with it. And rather than trying to answer the questions and challenge their own assumptions about the project, they went with a more traditional and more obedient vendor. The final product was definitely the last because of that decision. I’ve been a fan of Goodpatch from the day I saw that corporate client questionnaire. But you know, Nao tells the story much better than I can. So let’s hear from our sponsor and 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 Nao Tsuchiya of Goodpatch, one of Japan’s fastest-growing digital design firms. Nao: Thank you. Tim: Now, normally, I avoid service companies because the demand for web and mobile app design, this demand rises and falls with venture investment but Goodpatch is doing things a little bit differently. You’re actually creating your own products, Prott & Balto. Nao: Yeah. Tim: So tell me a bit about those. Nao: We decided to stop making those. Tim: That’s interesting. When did you decide that? When did you make that decision? Nao: We made the decision last month. They’re already some released to the public. Tim: So just announced? Nao: Yes. Tim: A little later on, let’s talk about why you made that decision and the challenge of product versus service. Because I think that’s really important. Tell me about your customers. Who are your main customers right now? Nao: Our customer not really the big or small. They want to make meaningful product. Tim: A meaningful product? Nao: Meaningful product. Tim: So what is a meaningful product? Nao: Market and the people need – they also want impact for the society. Tim: Not just making money? Nao: Yes, not only. They have to be profitable, of course, but not only. Tim: It’s interesting. One of the companies that I work with actually sent you a request. They wanted to work with you. What was interesting is you sent them back a very detailed list of questions. Not about their product but about their vision and how they wanted to – what their relationship was with their customers. I’ve got to say, it scared of scared them off. They didn’t know how to answer. So when you say companies that just want to make money versus having a vision for a better society, let’s dig into that. What does that mean? Because I think most people, whether it’s a company or an individual, they think they have a vision. They believe they have a vision. How do you tell the difference between a company that has a vision and wants to make money and a company that just wants to make money? Nao: Company has strong vision. They have the passion, strong passion. If I can feel the passion, I want to work there. Tim: Does that mean you’re usually working with startups? My image of large Japanese companies isn’t very passionate. Nao: Yes. Tim: Does that mean you’re mostly working with startups or do you work with big companies who have passion as well? Nao: The big company has the passionate people. I don’t know there are few people. But they have. Tim: So sometimes you can find maybe like a passionate team inside a big company. Nao: Yes. Tim: Okay. Nao: And we send a message for market. Tim: Are you approaching people you want to work with or--? Nao: Yes or through broad media. Tim: So you attract people you want to work with? Nao: Yes. We attract the kind of people we want to work with. Tim: Okay. That makes sense. Before we talk more about the Goodpatch story and why you changed from product to pure service, I want to back up and talk a little about you. You have a rather interesting history. You left college for health reasons. And after you recovered, you went back to school but decided to quit again. Why is that? Nao: When I was 21 years old, I had a very big health emergency. Then I heard tomorrow cannot come. Tim: You were worried you’re actually going to die or you were just worried about your future in general? Nao: I actually was worried about dying. I am not alive a long time, I felt that time. Tim: Okay. After you recovered and you went back to school for a brief period of time, you moved to Silicon Valley to, as they say, follow your dream. You moved to Silicon Valley to learn and you even worked at B-Trax for a while. What did you learn in Silicon Valley? Nao: Manage motivational people and how to work Silicon Valley people. Tim: Why Silicon Valley? Nao: I thought I have to go to Silicon Valley. It’s a gut feel. Tim: But at that time, you didn’t speak English at all. Nao: Yes. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Tim: What did you learn there? Nao: Work environment, different. People, more international people. Japan is only Japanese and I heard most impressive is weather. Tim: The weather? Nao: Weather. Tim: Okay. Nao: Silicon Valley, I was wondering why talented people and smart people go to Silicon Valley. I live in Japan so I don’t know. But when I went to Silicon Valley, I understand. The clear sky, the blue sky, and comfortable temperature. Tim: Okay. Very nice weather, especially if you like fog in the summer times. You left and came back to Japan and started your own company. Nao: When in worked in San Francisco, summer school is very popular, startups. Many startups launched -- Tim: Yes. More in San Francisco than probably the rest of the world put together. Nao: Yes for experience, Uber, that time, maybe it has only around 10 people, maybe has only 30 people. Tim: Right, right. Nao: Instagram has only 10 people. Tim: Right. That first generation of cloud-based startups was just getting started in 2011. Nao: Yes. Very small. But the first growth in the five years. Tim: In 2011, in Silicon Valley, the startup boom was moving along fine. It was growing. Nao: Yes. Tim: But in 2011 in Japan, things were still pretty slow for startups. It was before the boom really started. So why come back to Japan and start a design company at that time? Nao: Silicon Valley and San Francisco startups, they knew the importance of design. The UX and UI. They put so much effort. They were aware of user-centered design. Tim: Okay.

Video is taking over the internet, but in many ways, it has not changed significantly in the past 40 years. The way we discover and pay for video content has changed significantly, of course, but we still consume video in a continuous, linear sequence, and that’s about to change. Sandeep Casi and his team at Videogram are using deep learning to change the way you and I discover and watch video. They’ve already had success in the enterprise realm, and they are now bringing the technology to consumers. Interestingly, Videogram was not founded the way most startups are, and Sandeep’s approach to leveraging the intellectual property locked up inside Japan’s large corporations might represent a unique and important avenue for innovation here in Japan. One that might become every bit as important as traditional seed-funded startups. We also dive into the paradox of enterprise innovation, and Sandeep explains a few things that all startups need to understand about corporate accelerators before joining. It’s an interesting discussion, and I think you’ll enjoy it. Show Notes Why the key-frame model of video presentation is broken How General Motors pioneered VR in the early 90s Why there are fewer breakthrough technologies than you think What a startup can do when you are too early to market Why technology companies need to be content companies Why we might see more spinouts from Japanese enterprise How to raise funds as a foreigner in Japan How the Olympics will force Japan's video market and culture to change How to overcome the aversion some Japanese VCs have to foreign founders Links from the Founder Learn more about Videogram Check out Sandeep's home page Follow Sandeep on Twitter @sandeepcasi Friend him on Facebook The Increasing Interplay of Video and Social Media How Machine Learning Unlocks the Value of Video [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 the future of both how we create and how we consume video. Now I grant you, this may sound like something that’s pretty hard to do in an audio format but I think is some ways it’s actually easier. After listening back to this interview after I recorded it, it became clear that imaging the possibility in your mind’s eye us much more powerful than laying it all out for you in two dimensions. But we’ll get to all of that in just a little bit. You see, today we sit down and talk with Sandeep Casi, founder and CEO of Videogram. We talk not only about the future of video but also about a new model for unlocking some of the intellectual property that’s currently locked up in large Japanese companies. Sandeep and his team followed a very different startup model than what we see in Silicon Valley. It’s something we might be seeing a lot more of in Japan because the model is so well-suited to conditions here in Japan. Sandeep also has some really practical advice for participating in corporate accelerators and for new things startups absolutely must keep in mind when trying to sell innovative products to large enterprises. There are definitely tradeoffs. In fact, you could say there’s almost a built-in conflict of interest. We also share some real-world suggestions on how foreign founders can successfully raise multiple funding rounds in Japan. But you know, Sandeep 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: So I’m sitting here with Sandeep Casi of Videogram, which is an amazing video product. Thanks for sitting down with me. Sandeep: Thank you, Tim, and thanks for the opportunity to talk to your audience. Tim: It’s so hard to describe video on an audio podcast. But if I understand it correctly, you use AI to create paneled previews of videos. It’s kind of a storyboard or a comic book view. Sandeep: What you see as an end product is what you just described which is more of a pictorial summary of a video. But what’s going on in the backend is a much more deeper technology. We actually use machine learning to understand the context of a video, whether the video has scenes that’s of interest, celebrities that have certain status that we think we should be surfacing for discovery, as well as objects which might be interesting for monetization within the video. Tim: As it scans through the video, it could actually recognize not just there is a person here but wow, that’s Angelina Jolie or -- Sandeep: Yes. Tim: Wow. Sandeep: Or it recognizes maybe something she’s wearing, maybe sunglasses that she’s wearing. And if you have trained the system, we can also recognize brand of that sunglass. So what we do is we index the video down to its most atomic level. If you look at what Google does with text indexing, it indexes and brings in contextual results when you type in the key word. So we de very similar things for video. We break a video down into the most atomic level by understanding what’s inside of the video, not only from the perspective of the scene, the clip, the music, the lyrics, and object, as well as context. For example, beach, a car on the beach. Once we get that metadata, it’s almost like a lego block. Once we have all of these lego pieces, then you could construct different use cases from that lego. Tim: Okay. You put those together in an engaging panel format. Sandeep: That’s right. Tim: It’s really cool technology but why is it important? What’s it good for? Sandeep: There are many different use cases. The first use case is a discovery piece. If you notice with online video from its inception, it’s usually one frame with a play button. That one frame, it has no context because by definition, a video is a bunch of frames. And then a publisher picks one frame in order to create an advertisement of that video, so enticement frame, as we call it. That frame is what enables you to click into the video. Most of the times, that frame is actually a click bait. Tim: Yes. Of course, like any headline. Sandeep: Like any headline, right. What happens is that even people click into that, they kind of drop off immediately because there’s no instant gratification. They licked into that frame because they want to consume that frame but they don’t see it. Or even when they scan it, maybe they don’t see it and they drop off. So what we do in terms of discovery is by surfacing the storyboard of the video, a contextual storyboard, everybody has a choice of their interest in the video. Somebody might actually see a dog in the video that they might be interested in or somebody might see sunglasses of a celebrity that somebody is wearing. So everybody has a choice and then they can click on to that frame and there’s an instant gratification because what they clicked on is what they see. Tim: Okay. It certainly makes sense that when you’re providing more variety, you should get a higher level of engagement and higher level of people watching the videos. Do the numbers bear that out? Sandeep: Yes, it does. Usually a click-through rate for a single frame video is in the range of 15%. We are actually seeing anywhere between 40-60%. Tim: Okay. So three times plus. Sandeep: Three times. And it’s very simple. The reason that we see a larger click-through rate is because there’s more choices to click on. So imagine a website which has one headline and that’s the only headline you have. If I don’t like that headline, I don’t click on it. But imagine an article with multiple headlines. Each headline going into a certain paragraph of that article, I’ll be more interested in choosing the paragraph that I want. So by nature, we were actually not trained to watch content from end to end. This is an issue that for some reason platforms like YouTube and Facebook have created, that a video should be consumed from beginning to end and [publisher] have bought into it. But if you look at how a newspaper or a magazine is consumed. Let’s go into the analog world. You don’t read the newspaper from the front page to the back page or a magazine -- Tim: No. it’s very nonlinear. Sandeep: Nonlinear. So you jump into the parts that actually entices you. You scan or browse and you jump in. You consume and you comment on it, maybe, to you friends, whatever you want. So why can’t video be the same way? That’s basically the vision behind Videogram, to create at random access into video so that you can consume the parts that you like. And once you like that part, you should be able to share that part or clip or segment with other. And then number 1, you don’t have to consume end-to-end. Tim: Right, right. And so you’re mentioning sharing. So if I decided to share a video, I could share just a particular snippet of it? Sandeep: That’s right. Tim: Interesting. Tell me about your customers. Who’s using Videogram and how? Sandeep: We have variety of customers that are using Videograms. We actually ran a few trials with almost close to 29 studios globally, in India, in Los Angeles, and even in Japan. Out of that, we came out with verticals. The first vertical is called Videogram Music. If you notice SoundCloud, SoundCloud is all about commenting on a certain clip or a certain segment of the audio. So we provide same type of features for music videos where you could stop at a frame and then you could basically comment on that frame and that comment is attached to that particular frame. And when you’re scanning, you’re able to jump into that and clearly engage on that. The second vertical we do is Videogram Live which is mostly focused on sports, e-sports. And the third is Videogram Ads.

Today I have a special in-between episode for you. At this year's big Tech In Asia Tokyo event I moderated a panel on artificial intelligence with some of the leaders in the field in Asia. We talked about how to separate the AI hype from reality, where companies can and are finding competitive advantage in AI, and whether in the decades to come artificial intelligence will be serving us in the future or whether we will be answering to our robot overlords. Joining me on the main Tech in Asia stage were: Alexis Zheng - Product Lead, Uber Toshitada Nagumo - CEO, Fenox Japan Takahiro Shoji - Venture Partner, Zeroth.ai It was an interesting conversation, and I thought I would package it up and bring it to you exactly as it happened. [shareaholic app="share_buttons" id="7994466"] Leave a comment Apologies, but there is no transcript of this show.

There is far more to startups in Japan than SaaS software and IoT hardware companies. Biotech startups are beginning to make a mark here. Today we sit down and talk with biotech pioneer Mitsuru Izumo and talk about his ground-breaking work at Euglena. In many ways, the team at Euglena succeeded where even NASA failed. They have developed a process to cultivate this microorganism, also called Euglena, affordably and at industrial scale. And Mitsuru and his team use using Euglena to create everything from inexpensive nutritional supplements to biological jet-fuel. Mitsuru tells an amazing story of how he took his startup from inspiration to proof of concept, to IPO, and how the real innovation is just getting started. I think you’ll really enjoy this one Show Notes Why the same organism can produce both food and fuel Why Euglena has been impossible to cultivate at industrial scale The world does not have a hunger problem; it has a nutrition problem How to move forward when no one believes in your vision How small companies can get to scale in Japan Why Japanese startups must IPO sooner than those in the West Why NASA gave up on Euglena, and why they were wrong Links from the Founder Learn about Euglena, the company Learn about the  Euglena, the organism Follow  Euglena 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 slime. Well, actually no, not slime exactly we’ll be talking about algae. Well, actually, the biology nerds out there and I think it’s awesome if you are one, will point out that technically, we aren’t actually talking about algae but a unique organism called euglena, that has both animal and plant characteristics. And we’ll also be talking about a unique company, also called Euglena, that is cultivating this organism at scale and turning it into everything from nutritional supplements to jet fuel. In fact, in this episode, we drink our opening toast not with our usual Anchor Steam beer but with a glass of euglena. Now, I know what some of you are thinking and yes, university research labs and crowdfunding sites are packed with companies claiming that their pet organism is the key to solving a wide variety of mankind’s problems. But Euglena is not operating in a lab but commercially and at massive scale. And today, we sit down with the founder and CEO, Mitsuru Izumo, who explains how he overcame initial market skepticism to get financial backing. How he was able to achieve what NASA could not. And how and why he decided to take his company public. But you know, Mitsuru 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: Cheers. Mitsuru: Yes. For starting. Cheers. Tim: That’s pretty good. So, I’m sitting here with Mitsuru Izumo, the founder of Euglena. Thanks for sitting down with us today. Mitsuru: Thank you for coming today. Tim: I think most of our listeners are not familiar with Euglena, either the company or the organism. First, what is the organism? Mitsuru: Euglena is a kind of tiny microorganism. You can’t see it directly. You have to see through microscope because the length is only 0.1 mm. Tim: So that’s about the diameter of human hair? Mitsuru: Yes. Exactly. Very similar to the human hair. Little bit smaller than the hair. Euglena is green colored microorganisms and euglena have a lot of chlorophyll. Euglena can do photosynthesis by capturing carbon dioxide to produce oxygen and carbohydrate. Tim: Euglena, it’s a single cell organism. Is it a type of algae or is it its own unique type of organism? Mitsuru: It’s difficult to answer. Euglena is a kind of algae, green colored and categorized as a plant. What makes euglena unique is that euglena is a kind of algae and at the same time, euglena can move by itself. Tim: Okay. Mitsuru: Euglena has both plant and animal characteristics. Euglena have both plant and animal genes. And Euglena can produce both plant and animal nutrition. Tim: So it’s a difficult organism to classify. But if we think of it as kind of a single celled algae, we won’t be too far off? Mitsuru: Mm-hmm. Tim: What’s it good for? Mitsuru: Euglena can produce plant, dietary fiber, fruits and vegetable vitamins, animal protein, dietary fatty acid. You can see in fish oil, every 59 types of nutrients, euglena can produce at one time. Tim: So as a food supplement for people or as a standalone food? Mitsuru: Yes. Standalone food. And it can be cultivated under the sunlight like normal plant. Every plants your see in nature have are very flexible so it’s difficult to be digested. Euglena can move by itself, doesn’t have [flexible] at all therefore the nutrition can be very easily be digested. Tim: So far, the euglena company has been focused on applications in food and cosmetics primarily, right? Mitsuru: Right. Tim: But you’re researching a huge spectrum of applications as well, right? Mitsuru: Right. So there are so many different strains of euglena, over 100 different types of euglena. There are 100 different types of euglena. Tim: Okay. So it’s the euglena strains you use for food are completely different from the euglena strains you would use for fuels or for fiber. Mitsuru: Exactly. So every day, I check and test many kind of euglena. And after the screening process, we cultivate special series of euglena. Tim: A little while later, I want to dive deep into the specific applications that you’re working on and that other companies are working on around the world for this. But just to give me an idea of the scale, you’ve been in production for several years now. So annually, how much euglena are you producing? Mitsuru: The last five years production is doubles every year. 2017, we can produce 100 tons of euglena in a year. Tim: 100 tons per year? Mitsuru: 100 tons as a dry powder. Tim: And your major manufacturing facility is in Okinawa? Mitsuru: In Okinawa. We have a major cultivation factory located in Okinawa, and the most southern part of Japan, Ishigaki Island. Tim: Why did you choose Ishigaki and Okinawa? [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Mitsuru: Of course, we need a lot of sunlight. Carbon dioxide is everywhere but we need a lot of sunlight. Tim: Okay. But theoretically, this could be cultivated almost anywhere? Mitsuru: Yes, theoretically. But since 1980s, a lot of scientists in the United States and in Japan, they were very interested in the cultivation of euglena because euglena has wide range of nutrients. But it was absolutely impossible. Euglena has wide range of nutrients than every kind of bacteria, planktons, they love to eat euglena in nature. So it’s tremendously difficult to cultivate euglena purely and it’s impossible to prevent from biological contamination. They had set up special facility like green dome, you can see in the semiconductor factory to prevent from other biological contamination. But it’s very expensive and the production capacity was extremely limited. Tim: So what did you do differently? How did you achieve production at scale? Mitsuru: At the time, only 100 grams euglena can be cultivated in a year. This year, 2017, we cultivate 160 tons of euglena. The turning point is 2005. We invented the new cultivation liquid, preventing biological contamination. We don’t need expensive green dome or facilities. Tim: Okay. So the broth or liquid allows the euglena to feed, to thrive but doesn’t allow the other bacteria and the other organisms that would eat it to grow there? Mitsuru: Exactly. Tim: You’ve been ramping up production almost doubling every year, is the doubling of production due to new technology developments or are you simply increasing the scale of your facilities? Mitsuru: We simply expand the capacity of the cultivation or other facilities every year. Tim: Okay. Before we get further into the technology and the applications, I want to back up a little bit and talk about you. Before you were mentioning that the whole inspiration for this project started on a trip you took to Bangladesh in your student days. Mitsuru: Yes. When I was a student, 18 years old, the first grade in the University of Tokyo, I visited Bangladesh in 1998. Bangladesh was regarded as the poorest country in Southeast Asia. The visit was a very shocking experience for me. In Bangladesh, there were a huge amount of rice curry and rice, rice, rice. So many rice are there but the people couldn’t access fresh vegetables, egg, milk, fish, and meat. Tim: So the problem wasn’t one of hunger. It was on one of nutrition? Mitsuru: Yes. The problem was malnutrition. I came back to Japan and I decided to solve the malnutrition program in developing countries. Tim: Okay. But you took a bit of a detour from there because before founding Euglena, you graduated from Todai. You went to work for Mitsubishi Bank. Why the detour into banking? That seems pretty far away from international aid and nutritional problems. Mitsuru: It’s very simple. The lack if fund. It’s financial program. I didn’t have any reputation for solving the malnutrition program. Everyone couldn’t believe that euglena can solve the malnutrition program and the mass cultivation of euglena was regarded as impossible. Tim: This is something I think so many new college grads are struggling with in Japan. Was your decision based on an inability to get funds?

There’s a very good reason most Japanese hardware startups fail. Today we sit down with Takuro Yoshida CEO and founder of Logbar, and we dive into the reasons and also go over Logbar’s strategy for avoiding the mistakes that have killed off so many other Japanese IoT startups. Takuro is the creator of one of the most successful Kickstarter campaigns and two of the most successful IoT projects in Japan, the Ring Zero, which is VR controller in wearable ring form and the ili automatic translator, which is just starting to gain real traction. Of course, we dive into how he managed to create and bring these products to market, and we also talk in detail about Takuro’s unusual journey from professional bartender to successful startup CEO. It’s a great conversation, and I think you’ll really enjoy it. Show Notes How to go from bartender IoT startup founder Why a successful Kickstarter campaign can be a danger to your company Why the Ring failed as a hardware controller Why hardware translators will succeed where software-based translators have failed How hardware devices will survive in the world of a standardized mobile phone platform Why even in Japan all publicity is good publicity Why Japan has fallen behind in hardware and how it can catch up Why Japanese VCs don't want to invest in hardware startups Links from the Founder Find out about Logbar Info on the Ili translator  The video that got Logbar so much attention [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. One of the biggest changes I’ve seen in Japanese startups over the last 20 years, in the increasing number that are coming out of Japan’s top universities. I’ve got to say there’s both a positive side and a negative side to the large number of new startups being founded at these universities, particularly at the University of Tokyo. On the positive side, it’s great that so many of Japan’s top students, students who have the option of a fast track career in government or a Japanese industry are choosing to take a risk and start a company. It’s a concrete sign that things really are changing in Japan. However, the fact there there’s been such a large number of founders from the University of Tokyo in particular, shows that in some ways, not that much has changed. The fact is that when Todai ramped up their entrepreneurship program, they brought resources to bear that only they could. Todai students have access to government connections, funding, and industry programs, and alliances that no one else in Japan had. Some founders in Todai rely heavily on these connection, some almost exclusively, and others barely use them at all. And in the end, of course, outside of a small handful of startups that rely primarily on government investment, all startups will succeed or fail in the same public marketplace. Still, however, sometimes the most inspiring founders are those who come from somewhere you don’t expect, someone who takes an unusual and u likely path to entrepreneurship. And Takuro Yoshida of Logbar is a founder in that mold. When I first met him four, five years ago, he was tending bar and trying to innovate bartending. Over the past few years, he and his team have run one of Japan’s largest Kickstarter campaigns and developed, released, and secured national and international distribution for two completely hardware products. And I think you can learn a lot from him. But you know, Takuro tells that story much better than I can. So let’s hear from our sponsor and 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 Takuro Yoshida of Logbar, one of Japan’s most creative internet of things startups. So thanks for sitting down with me today. Takuro: Thank you. Tim: Logbar has created both The Ring and ili automatic translator. So before we get started, why don’t you just tell me a bit about the company an about your products? Takuro: Okay. So we started our company from since like 2013. Actually, Logbar comes from real bar. Tim: Right. Takuro: I was a bartender and then I was making a cocktail -- Tim: Well, actually, that’s right. The very first time we met, I was running EngineYard and you were running the bar and you just developed a system that would let people order drinks on the iPad. Takuro: Yeah, that’s right. Tim: Yeah, I remember. Takuro: Okay. Yeah. We are doing that. That was fun. You can order a cocktail in the bar and then you can communicate with people. Tim: I want to talk about your history in a little bit. But first, tell us about The Ring and tell us about the automatic translator. Takuro: Okay. So Ring, you put in the finger and then if you do the gesture, maybe you can turn on the TV or you can control the music in the app or maybe you can play the game. And so that ring is kind of a gesture control device that we made. Tim: Is it Bluetooth? Takuro: Yes. You connect with Bluetooth to an app on a smartphone like iPhone or Android and then you can use that. Tim: To control just about anything? Takuro: Yes. Tim: And you also released the ili automatic translator which is a hardware device that translates which languages? Takuro: Japanese, Chinese, and Spanish, and we are supporting Korean too. Tim: Cool. Let’s back up to your bartending days. Takuro: Yes. Okay. Tim: That’s bit of a job. What got you interested in programming in startups and side projects? Takuro: Each year, I go visit Silicon Valley because I used to live in there for one year and a half. I was a student. And then after I came back to Japan, I always dream of like, I want to be an engineer or I’m going to make like entrepreneurs in Silicon Valley. So every year, I kind of do the presentation. I make some idea and then presenting to the VC in Silicon Valley. But most of the time it doesn’t work. It didn’t work, yeah. But I always challenge that. Tim: What kind of ideas did you have before Ring and before ili? What were the ideas that didn’t work out? Takuro: Before, I had a girlfriend. I lived in New York and then my girlfriend is in Japan. So it’s a long relationship, right? So I made web services. It’s like Facebook or MySpace.com but only for two people. Only me and girlfriend. So that’s a kind of SNS like social network service I built. It was great. In Japan, I got some users but in the US, none. It’s kind of hard to get it. So that is the one idea. And then next one is like a Twitter, like one sentence each time and then you can communicate with random people, something like that. So I kind of made some web services mainly focusing on communication. Tim: You were saying you were talking to VCs and making these presentations and not getting a lot of success that way. But when you started Ring in 2014, you didn’t use a VC money. You ran one of the most successful Kickstarter campaigns. So before Kickstarter, was this an idea the VCs rejected? Takuro: Before the Kickstarter, we raised some angel fund. It’s not that big amount but amount that is enough for making prototype. And then after we made the prototype, almost ready for the mass production, we started Kickstarter and then we could raise the money for the mass production. Tim: Okay. So the Kickstarter was a combination of fundraising and marketing? Takuro: Marketing, yes. Tim: I mean, you raised over $800,000 on that campaign but the production didn’t go as smoothly as you expected. Takuro: No. Tim: What happened during production? Takuro: Hardware is kind of hard to mass produce always. One change takes some time, two or three months. So at that time, we were expecting to ship it maybe July but we shipped there like October. So three months late. Tim: By Kickstarted standard, that not too bad. Takuro: It’s not too bad actually, yeah. Tim: Were the delays caused just because this was your first time building a hardware or was there any particular problem you ran into? Takuro: I think that was because maybe we have lack of experience with making hardware because I’m the first time to actually build the hardware that time. So we couldn’t know the risk each time. If I do this, maybe it takes more time or something like that. I don’t know. Tim: Did you do the manufacturing here or in China? Takuro: We did the Ring in Japan, actually. Tim: Really? Takuro: Yes. Tim: So all the manufacturing local? Takuro: Yes. So made in Japan everything, yes. Tim: Actually, that should reduce a lot of the risk. A lot of the problems that other founders have had with hardware have been dealing with suppliers and quality control issues. What advice would you have for other hardware startup founders or other internet of things founders so they can avoid these kind of delays? Takuro: I think to avoid the delay, you need to experience the hardware. So we have to trust the factory all the time. The factory, our partner, it’s not their fault actually. Tim: Right. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Takuro: Always our fault, most of the time. I always say, “I want to do this. I want to add new function.” And then they said, “Okay. But it takes time. Is that okay for you?” We always try to improve the hardware. Tim: Okay. For a software startup, development cycle might be one week. You’re doing weekly sprints. You might have monthly and quarterly goals but your basic cycle is a week. Takuro: Yeah. Tim: For hardware startup, we are dealing with factory. What’s the ideal cycle time? Takuro: To make the prototype, usually takes three or four months.

Disrupting Japan is three years old, so we decided to invite a few hundred movers and shakers from Tokyo's startup community over to have few drinks and to hear three of Japan's most successful startup CEOs talk about what it takes for Japanese startups to succeed globally. Our panel included the CEOs of some of the most innovative startups in Japan. Ken Tamagawa (@kentamagawa) - CEO, Soracom Takuma Iwasa (@cerevoglobal) - CEO, Cerevo Shin Sakane (@laundroid_0 ) - CEO, Seven Dreamers We talk about strategies for global growth, how to best manage multi-cultural teams, and the likely future of hardware and IoT startups in Japan. In fact, we talk a lot about the challenges hardware startups are facing in Japan today. Japanese hardware startups are at a crossroads. The old model of hardware innovation is failing, but there is a new model, unique to Japan, that might just take its place. But, as our guests explain, things are far from certain. It's a great conversation, and I think you'll enjoy it. On a personal note, thank you for reading and listening and for being a part of Disrupting Japan. When I started this project three years ago, I never imagined how big it would become, or how large, passionate, and global the interest in Japanese truly is. I want to offer a sincere thank you to everyone who has pitched in to help make Disrupting Japan a success. There is no way I could have built this by myself. I have access to a bottomless well of innovative and genuinely interesting Japanese startup founders, and I look forward to continuing to introduce them to you and to bring you their stories. Thanks for listening! [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 guys are joining mw. You guys are awesome. Audience: [Cheering] Tim: I’ve got to admit, that is the exact response I hear in my head every time I say that phrase. Audience: [Laughing] Tim: Before we get to the kampai and to the panel discussion proper, there’s a few people I really want to thank, who without them I couldn’t have put this show together. The first of which is Creww. What Creww does is they run about 80% of the corporate accelerators in Japan. So if your startup wants to hook up with a large corporation or you’ve got a big company who want to hook up a startup, you need to talk to Creww and Segawa-san is hanging around somewhere. Where is Segawa-san? Waive. I can’t see you from up here, so. There he is in the back. Talk to Segawa-san and also, Creww is opening a new co-working collaboration space to help startups connect with enterprises. It’s just up the street. Second, I want to give a big shout out to the Carter Group. Dominic Carter is here somewhere, himself. There is Dominic over there. And so, for those of you who have done business in Japan, which is pretty much everyone here, the things never quite work out as you expect them to. The Carter Group provides market intelligence and market research that help companies grow their business here or come here in the first place. Their processes and the prices are extremely startup-friendly. So if you want to grow your business here, talk to Dominic. And last but certainly not least, I want to give a big shout out to Digital Hub. Now, you’ll see these guys running around with cameras and microphones, documenting this for all of posterity. Don’t talk to the guys with the cameras. But they also do some great corporate video work. So if you’re looking for video — and who isn’t these days — talk to Steve, who is over there. Audience: [Applause] Tim: So, I’d like everyone to raise their glasses and thank you guys so much for being with me for three years and over 100 episodes. And I hope you come along with me for the next 100 episodes in the next three years. Thank you so much. Kampai! Audience: Kampai! Tim: Cheers! All right. Audience: [Applause] Tim: Now, we get to the meat of the show. Now, I want to introduce the panel myself because I know these guys. If I just let you talk about your companies, you’re going to use up all the time. So, on my far left is Shin Sakane of Seven Dreamers. They have been one of the most innovative in aggressively exporting hardware companies in Japan. You’ve done everything from carbon fiber golf shafts to a medical device that fits in the nose for some reason. But you’re most known for the Laundroid, laundry-folding robot, which you’re releasing overseas and Japan at about the same time. Shin: Right. Tim: In the center is Ken Tamagawa of Soracom, who makes extremely affordable and flexible connectivity for internet of things and connected devices, and who is in the process of selling his company to KDDI. Nothing’s been officially launched but it’s been leaked all over creation. And on my immediate left is Takuma Iwasa of Cerevo, who is one of the most innovative device makers in Japan and one of the leaders in the maker space here. I will say you’ve got one of the most interesting models for global expansion that I’ve ever heard of. So, let’s hear it for the panel. Audience: [Applause and cheering] Tim: So first and foremost, I want to talk about going global. In all of your cases, the global market has been extremely important to you. How soon in your company history did you decide to go global and why did you do it at that time? Shin, let’s start with you. Shin: We have three products and two of them are already launched. Our strategy is initially start marketing in Japan. Japanese market is one of the, I shouldn’t say easiest, but really kind of the warmest, is the nicest marketplace I ever think. So, if we cannot be successful in Japan, forget about global expansion. Just like we test market in Japan, and once we found it successful and immediately go global. That’s our strategy. Tim: So basically as soon as you find that that product market fit, you’ll take it global? Shin: Right, right. Tim: Okay. Shin: It’s about like one year or a little bit less than one year after we launched in Japan that we just go global. Tim: And do you think the Japanese market is easy because you’re Japanese or is there something unique about the market that makes it easy? Shin: So good thing about Japanese market is, I think — maybe I skip this. Tim: We’re going to come back to that question. Audience: [Laughter] Tim: Ken, How about you? You took a different route but the international markets are really important. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Ken: Yeah. Actually, let me talk about my background. So, I used to work for Amazon Web Services (AWS). I really like the business model, kind of, global platform business. So when we started Soracom, we want it to make naturally global platform. So when we started the company, actually, I registered entity in the data ware first then we tried to fundraise money but we couldn’t. So we switch to Japanese company. What I actually understand is what our team has unfair advantage is in Japanese market. Because I knew a lot of people, VCs and also the many, many CIO, CTO of the companies, so we changed our strategy. First, we start Japanese company. Then after we demonstrated our product strength, immediately, we started expanding our business to the global. So we started our business is 2015 September then last year 2016 December, we started business in the US, then EU. Tim: It sounds like it’s pretty much the same strategy. As soon as you validated the product, you went overseas. Ken: Exactly. Tim: Why? Why was that important? Because so many Japanese companies are Japan-focused. It’s much easier and it is a very big market. Ken: Because if we demonstrated our product is very good, somebody might copy our business. But before other doing that, we want to go global. And also, if you look at the technology like AWS and other smartphone and platforms, it’s not that difficult to go global in terms of technology. Tim: True. For the technology going global and the company going global are really different. Actually, let’s talk about that in a minute because before then, Takuma, why don’t you explain your global strategy? Because I think it’s a very interesting one. Takuma: Yeah. I just understood why I invite here, because of my companies. I have to explain about my company’s very curious strategy because every startup company is focusing in the mass market or future mass market. Laundroid is like this. I think the second is on product. It’s future, the washing machine or future something but my company doesn’t focus to any mass market. Our product is a really niche product. I worked I Panasonic for years, and Panasonic is really focusing on the consumer market. That was very tough for me and very tough for the Japanese startup companies. That’s why the Japanese startup company doesn’t have huge money compared to Silicon Valley. Then I changed my company strategy to the global niche. That means we are slicing very, very small the users in India, in US, in UK, in Japan like this. Tim: You’ve developed a lot of very, like you say, global niche. Things like smart snowboard bindings and streaming video that clips on to video cameras. So for WiFi and strange anime connected gun looking things. I don’t know what it’s called. Takuma: The name is dominator. Tim: Dominator. That was it. Takuma: Raise your hands. Anyone knows dominator? Oh, very small quantity. So let’s see the anime. The name is Psychopath. Tim: But this is interesting. So Shin and Ken were saying that they find product market fit in Japan first and then go global. But it sounds like what you are saying is that you didn’t get that much interest in Japan, and you got greater interest overseas. Takuma: Yeah.

Corporate Japan is about to go through a major transition in its approach to computer security. In the past, Japan-only payment systems and the Japanese language itself provided a barrier that kept international fraud and attacks at a very low level. All that is changing now. With payment systems becoming increasingly global, and free, instant translation available to anyone with a browser, fraud is on the rise in Japan. Today we sit down with Atsuyoshi Shimazu of Caulis, and he’s going to both explain the new threats and explain exactly what he plans to do about them. He’ll also explain why Japan’s current approach to the internet of things means that things might get worse before they get better. It’s a great conversation, and I think you’ll enjoy it. Show Notes Why 50 million accounts are at risk in Japan Why some Japanese companies avoid taking security measures Toyota's vision of connected cars in the gig economy What security looks like in an IoT world Why online fraud is about to skyrocket in Japan Japan's susceptibility to ransomware attacks Why hacking insurance might be the future of security Why Japanese CSOs and CIOs are so bad at their jobs Links from the Founder Connect with Atsuyoshi on LinkedIn Friend him on Facebook Find out about Caulis Follow them on twitter @CaulisJP Visit them on Facebook Find out if your account has been hacked at Have I Been Pawned [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 fraud. Online fraud, hackers, scams, identity theft in Japan, and what exactly we can do about it. Now, I’ve been involved professionally in IT in Japan for more than 20 years, and that includes both enterprise scale big IT and startup scale little IT. Corporate Japan has always had a strange relationship with computer security. On one hand, companies are very sensitive to security concerns and they’ll pay top dollar for security hardware and software systems and evaluations. But on the other hand, day-to-day security practices are often neglected. Operating systems remain unpatched, firewalls are set up and then never touched again, and backup systems are rarely tested. Right now, however, Japan is going through a bit of a security transition in both their understanding of fraud and how susceptible their systems are to fraud and hacking, and walk you through some of these important changes. Today, we sit down with Atsuyoshi Shimazu, founder and CEO of Caulis. Now, Caulis offers a distributed online fraud prevention service called Fraud Alert, and it’s solid technology that has a special appeal in the Japanese market. Now, Atsuyoshi also explains how the internet of things is going to force all of us to radically change the way we think about online security and security in general. He also explains why the instances and losses due to online fraud is set to skyrocket in Japan over the next two years. But you know, Atsuyoshi 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="1404"  info_text="Sponsored by"  font_color="grey" ] [Interview] Tim: So I’m sitting here with Atsuyoshi Shimazu of Caulis, the makers of Fraud Alert, which is an online security and fraud prevention tool. I’m sure you can explain it much better than I can. Thanks for sitting down with me. Can you tell me a bit about what Fraud Alert does and what Caulis is? Atsuyoshi: Fraud Alert protect the corporate website from the fraud attack such as brute force attacks. At first, we protect the log-in page and also conversion page such as money transfer pages. Tim: You’re preventing unauthorized access to web pages and monitoring the behavior on those pages as well? Atsuyoshi: Yes. Also, we protect the smartphone apps. We check how to type the word and the behavior. Tim: So like behavioral profiling? Atsuyoshi: Yes. Tim: Okay. So how does it work exactly? Do the systems make an API call to your systems? Is there code level integration? Atsuyoshi: Yes. Tim: How does the system work? Atsuyoshi: First, the client should introduce our JavaScript in their log-in page and also client should set the API connection to our website. Tim: There’s a different JavaScript callback in every page so you could track users’ behavior? Atsuyoshi: Yes. Tim: What type of things qualify as unusual user behavior? Atsuyoshi: Now, I’m using the MacBook and using the Google Chrome in the location of the Otemachi area. So this is an unusual behavior. But if the hackers use the same ID and password but they use Windows 10 and Internet Explorer outside, this user’s behavior is not normal. Tim: Okay. Right. So someone is coming in from a new location or if the same IP address tries to log in with a bunch of different user names, that’ll look suspicious? Atsuyoshi: Yes. Tim: Does Fraud Alert provide authentication and authorization services as well or is it simply -- Atsuyoshi: Focusing on detection. Tim: Detection. Tell me about your customers. In previous interviews and on your website, you talk about 50 million accounts being protected but who are your actual customers? Are they ISPs or banks or small e-commerce sites? Atsuyoshi: Now, we are focusing on the banking and the credit card coverage and also telecom carrier. Tim: I want to dive into more detail about security in Japan. But before we do that, let’s talk about you for a minute. You found Caulis in December 15. So it’s been a really crazy two years, I’m sure. Atsuyoshi: Yes. Tim: And before that, you were working with Okada-san. Atsuyoshi: Yes. Tim: At the captcha company, Capy. Atsuyoshi: Yes, that’s right. Tim: Capy is also in security. They do this kind of advanced captcha technology. Atsuyoshi: Yes. Tim: What made you decide to leave Capy and start your own company? Atsuyoshi: I have two reasons. Captcha just only focusing on the protecting bots but humans log-in, it cannot protect. This is the first reason. Tim: Actually, is captcha still effective? Because it seems like at least the text-based captcha, I think AIs are better than humans at it. At least they’re better than me. Atsuyoshi: Second reason, captcha itself, old hackers user account sees a captcha but the hacker would solve the captcha solution. Some hackers show this is the way to hack and bypass a captcha. Captcha is just only additional authentication but many authentication will be hacked so we want to focus on the detection, not authentication. And also, many electronics and also automatic will be connect it to the internet. So connecting would have the password and ID but captcha is just on a web browser. So we want to spread the security command to IOT industry. Tim: That’s a good point. It’s dangerous to have a startup that’s really too focused on a specific technology. Atsuyoshi: Yes. Tim: All right. That makes sense. Atsuyoshi: In the beginning of this month, NHK broadcasted the collaboration with Toyota and startups. Tim: How is Toyota going to use your products? What are they going to use them for? Atsuyoshi: Toyota is now using the sharing economies business model. Drivers can ride so many automotives. So ID and password, identification is very important. Tim: Let’s look into this a little more. What will Toyota be doing in the sharing economy? Are they talking about having individual cars that different people can use, sort of like a car sharing program? Atsuyoshi: Both, yes. They want to transit the business model, human-centric automotive car ride providers. Tim: So when we move from the traditional web and mobile internet, which is primarily username-password-based, and we’re all used to typing those in -- Atsuyoshi: Yes, right. Tim: When we move to IOT, when we move to something like an automobile, you’re not using username and password anymore. Atsuyoshi: But they have so many apps. The apps need to input the ID and a password. After input of Toyota ID and password, the apps shows the users the right way to the destination or you drive so many kilometers so you should go to the car check. Tim: Okay. You’ll be providing fraud detection for their web applications and mobile applications? Atsuyoshi: Yes. This is the future strategy of Toyota. Car-centric is 20th century business model, in this century, and they will transit to human-centric car provider. Tim: Customer-centric. Atsuyoshi: Yes. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Tim: So it’s a relationship not just with the driver but with everyone in the family that might be driving the car or different people in the company who are driving the company car. Interesting. Atsuyoshi: Yes. Tim: That is going to be a big change for them. Atsuyoshi: Yes. Tim: It certainly makes sense that fraud detection is going to become more and more important as we move towards internet of things and more integrated services across a lot of different devices. Atsuyoshi: Yes. Tim: Let’s talk a bit about the problem of fraud in Japan. Atsuyoshi: This is a very serious situation in Japan. Japan government did a survey in June of 2015, 1/3 IPO company have damage from fraud. Tim: Yes. I’ve seen that number. So 1/3 of all public companies have said they’ve suffered damage from fraud but that’s a really broad statement. Does that mean internet fraud or credit card fraud? Does that include things like employees stealing from them? Atsuyoshi: Online banking was 3 billion Yen in 2015. It has been 0.3 billion charge back damage.

Welcome to our 100th show. If you are new, welcome to Disrupting Japan. If you are a long-time follower, thank you for being part of the community and helping to make Disrupting Japan what it is today. This is a special, and rather short, episode. Today I'm going to tell you a very personal story of startup failure, and let you in on what's coming next. Both for me, and for the show. Thank you for listening, and I think you'll enjoy this one.   [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Disrupting Japan episode 100. Welcome to Disrupting Japan. Straight talk from Japan's most sucessful entreprenuers. I'm Tim Romero and thanks for joining me.  Wow. One hundred episodes! That’s right Orson Wells only made 64 movies.  The Rolling Stones have only recorded 53 albums. Lord Byron only published 83 poems. But Disrupting Japan has now released 100 episodes. And I’m pretty happy about that. When I started this show, almost exactly three years ago, I never imagined it would grow into the big international community it has become, and I want to thank you for being part of it. Wether you were one of our 14 original listeners or one of the thousands who have signed up more recently, thanks for joining the conversation about some of the truly amazing things going on in Japanese startups and innovation today. I knew I had to do something special for our 100th show, and gave a lot of thought to exactly what that should be. I thought about doing a clip show with many of Japan’s startup founders saying a word about startup in Japan and wishing us a happy 100, but that seems kind of, I don’t know vain and self-congratulatory. I thought about getting a big name on the show. There are a couple of world-famous Japanese founders who I could have probably brought on for the big anniversary, but that didn’t feel quite right either. I mean, we’ll definitely get those guys on later,  but what you’ve been telling me  — pretty consistently — over the past three years, is that it’s the human stories of success .. and failure  and challenge that really meet to matter. And that makes sense. It’s not the dot.com billionaires that are diving innovation in Japan.  It’s the thousands of individual innovators and the millions of Japanese people newly willing to take chance and try out these new ideas that are really driving the change.  In a way, the billionaires are just as much a result of these historic changes as they are a cause of them. The real change, the real engine for innovation in Japan is the creative people who are willing to take some very real social and economic risks to follow their dreams and try to create something new. I mean, they are not selfless. Very few of them are doing it for the betterment of Japan.  No they have their own reasons some financial, some personal, but they are willing to put themselves out there, both economically by starting a company, and socially by, among other things, coming onto this show and talking very frankly about what they feel, and what they fear … and what they really want. This kind of public openness about true hopes and fears. This kind of sharing. It’s never really been a part of Japanese culture, but that’s changing. At least among startup founders. And that’s a great thing. So, in that spirt of openness about failure and success and hopes and dreams, for this special 100th episode, I’ve decided to share a personal story of my own. I’m going to tell you about one of my startup failures, and then I’ll tell you about my new job. I can talk about it now, and if you haven’t heard yet, you are in for a surprise.  Ah, but before I tell you about dreams of future success, I owe you a story of past failure. This is adapted from an article I wrote a little more than a year ago about why I decided to shut down my latest startup a few weeks before launch. The article was originally titled “Why I Turned Down $500k, Pissed off my investors, and shut down my startup.”  That article went viral. For a while it was the top story on Medium and Pulse. It was reprinted by Venture Beat and Quartz, and many others. It’s been read by over 3 million people and translated into four languages — that I know of. And let me tell you, its strange spending two weeks as the worlds most famous failure. I got more than 4,000 emails and messages during that time. Most were supportive, but the experience was overwhelming and a bit surreal. But I would like to tell the story to you, and as a member of the Disrupting Japan community, I think you will enjoy it, but you will actually —- understand it. You know, a few weeks ago a close friend told me that between my articles and my blog and Facebook and Disrupting Japan and my general oversharing, that I was living my life as some kind of performance art.  Now, me being me, I came up with the perfect response to him about a week later, but at the time I just kind of laughed and said something stupid like “Yeah, maybe.” Well, the truth is, we are all living our lives as a kind of performance art.  It’s just that most people have not realized it yet. Ah, but I still owe you a story, so let’s her from our sponsor and then get right to it.       [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] I just did what no startup founder is ever supposed to do. I gave up. It wasn’t even one of those glorious “fail fast and fail forward” learning experiences. After seven months of hard work and two weeks before we were to start fundraising, we had a good team, glowing praise from beta users, and over $250k in handshake commitments. But I pulled the plug. My team and most of my investors are pissed, but I’m sure I did the right thing. At least I think I’m sure. The business had what I considered to be an unfixable flaw. My investors and my team wanted us to take the funding and figure out how to fix the problem before the money ran out. I’ve started companies in the past with a mixture of exits and bankruptcies, so I understand that this is what startups are supposed to do, but I just couldn’t do it this time. This is in part my explanation to the various stakeholders, in part self-therapy, and in part a call to other founders and investors to let me know what they would have done in my situation. I began work on ContractBeast, a SaaS-based contract lifecycle management offering, last October. Unless you’ve worked in big IT, you’ve probably never heard of Contract Lifecycle Management or CLM. In brief, CLM covers the authoring, negotiation, execution, and storage of both physical and digital contracts with strict access control. It also does things like let you know what contracts are about to expire or automatically renew, and who is responsible for those deals. CLM is a highly fractured, $7.6 billion global market with over 80 established companies fighting for market share— and that’s not counting the dozens of e-signature startups that have popped up in recent years. Almost all of these companies are clustered in the enterprise space, where sales-cycles are long and top-down, and where revenues are driven by consulting and customization. It’s a big market begging for disruption. The mid-market of small and medium businesses is grossly underserved and the enterprise market is grossly overpriced. ContractBeast was going to deliver a low-cost SaaS product with no consulting required. We would focus on the mid-market first, and then work our way up to the enterprise.     [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Our target users responded positively to the mock-ups, and many excitedly asked when they could start using it. I was on the right track. I spent the next few months working evenings and weekends developing an MVP and getting feedback on features as they were implemented. I left my job in January so I could work on ContractBeast 70+ hours a week. The rest of the team kept their day jobs. That was fine. It made my final decision easier. We started private beta in early March, and things looked solid. About 35% of our users continued to use the system at least three times per week after completing registration. The UI needed work, but our users raved about how ContractBeast would save them time and worry in the future. The team was excited. Our potential investors were excited. But something was wrong. It seemed trivial at first, but it bothered me. Despite glowing praise, our users were only using ContractBeast to create a small percentage of their total new contracts. I spent the next two weeks visiting our beta users, looking over their shoulders as they worked, and listening to them explain how they planned on using the product. Pressing them directly on why they were not using ContractBeast to create most their contracts resulted in a lot of feature requests. Now, talking with customers about features is tricky. Often you receive solid and useful ideas. Occasionally a customer will provide an insight that will change the way you look at your product. But most of the time, customers don’t really want the features they are asking for. At least not very badly. When users are unhappy but can’t explain exactly why, they often express that dissatisfaction as a series of tangential, trivial feature requests. We received a lot of ideas like integrating alerts with various messaging platforms, using AI to analyze contract content, and building more sophisticated search features. These aren’t necessarily bad ideas, but they had nothing to do with why they were not using ContractBeast more extensively. I might write an article someday on how to tell these tangential feature requests from useful feature requests. Your customers mean well, but implementing these kinds of features will not make your users any happier in the short term. In any event,

Fewer than 1% of Japanese consumers have ever purchased a product or service from a sharing economy platform. It's actually quite puzzling. Social and economic factors all seem to indicate that Japanese cities would be ideal for sharing economy businesses, but for a number of reasons sharing economy startups have not really taken off here. Today we unravel a bit of this mystery as we sit down with Chika Tsunada, founder of Anytimes and the Director of the Sharing Economy Association Japan. Anytimes is a P2P sharing economy startup with a unique and participatory business model. Chika explains why she chose that model and the challenges it presents. Even under ideal circumstances, building a P2P marketplace is hard. It's one of the most challenging business models to execute, and to succeed today requires doing something truly unique. Chika has chosen an unusual path both for herself and for her business. It's a great discussion, and I think you'll enjoy it. Show Notes The best strategy for building a two-sided marketplace Why even Japanese entrepreneurs discourage their children from joining startups How to start a web-startup when you are not a programmer or designer Is it better to go deep or go wide in creating a marketplace? One technique for fighting online review fraud Why the Japanese labor market is unique in regards to the sharing economy Why freelancing has not yet taken off in rural areas The spark that will ignite the sharing economy in Japan How licensing and administrative guidence stifles innovation in Japan Links from the Founder Friend Chika on Facebook Follow her on Twitter @chikageena Check out the Anytimes homepage Anytimes for Andriod Anytimes for IOS [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, when I run startup workshops and classes on entrepreneurship, by far, the most popular business model used by the students for their startup ideas are two-sided marketplaces. Everybody wants to be a marketplace. Why not? There’s a lot to love about being a marketplace if you can pull it off. Aspiring founders imagine themselves running a platform that matches up buyers and sellers and takes a small piece of each transaction. They imagine dozens of other ways to monetize both the relationships they have with the participants and the data and the insights they gather about the market itself, and they all scale up easily and can be run with a relatively small staff. Really, online marketplaces seem like the ideal business model, and on paper they are. The reality, however, is that marketplace businesses are hard. I mean, really hard. Sure, once you have millions of users, marketplaces can be insanely profitable. The problem is getting that first 1,000 or maybe 10,000 active users. That’s hard. To do that, you need to be doing something unique. Well, today, we sit down with Chika Tsunoda, the CEO of Anytimes and the director of the Sharing Economy Association of Japan, and she explains how she’s been building a P2P services marketplace with a unique Japanese twist. It’ been a bit of a crazy journey for Chika so far but she thinks that Anytimes is positioned to take advantage of a unique aspect of the Japanese labor market. But you know, Chika 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="1404"  info_text="Sponsored by"  font_color="grey" ]   [Interview] Tim: I am sitting here with Chika Tsunoda, the director of the Sharing Economy Association in Japan and the fearless founder of Anytimes. Thanks for sitting down with me. Chika: Thank you for coming and thank you for interviews. Tim: Anytimes is a skill-sharing and a skill-matching platform but I think you can probably describe it much better than I can. Chika: Anytimes is a skill-sharing platform to connect people who need help and those who want to work in the neighborhood such as everyday household chores, pet care, assembling furniture, language lessons, and so on. Tim: Tell me a bit about your customers. Who uses it? What are the most popular services people are sharing? Chika: Yes. Most popular customer is housewives, and university student, and seniors. Tim: What kind of skills? What are people doing? Are they putting together furniture for people? Are they cleaning homes? What are the services that are being offered? Chika: Most popular category is house cleaning, and next cooking, and next assembling furniture. But we also have other categories. For example, pet care, English lessons, Chinese lessons, guitar lesson. Tim: How much does something like that cost? Chika: The price average is one hour ¥2,000. Tim: Okay. Chika: So, not high cost. Tim: Right, right. The platform takes 15% commission? Chika: Yes. Yes, 15% commission is our sales revenue. Tim: Okay. How many active users do you have now? Chika: Active users is our secret. I cannot say that. I’m sorry. Tim: Okay. Chika: But our user is 30,000 users. Tim: How many people do you have that are offering skills? Chika: Yes. 30,000 users because if you register Anytimes, you can be client and supporters, both of them. Tim: But like for example, right now, today, on the website, how many different offerings are there? Chika: There are also clients and supporters. Sometimes, they will be clients but sometimes, they want money, they will be supporters. Tim: I see. So the idea is really that everyone on the platform should be both buying and selling something on the platform? Chika: Yes, that’s right. Thank you. Tim: All right. Do most people do that? Are most people buying sometimes and selling sometimes? Chika: Yes. This rate is really important so next, our KPI is this late. Tim: That’s an interesting design for a marketplace. Most marketplaces have many, many more buyers and only a few sellers. Has it been difficult to get everyone to get everyone to be a seller? Chika: Yes. Our first KPI was seller KPI. First, we need seller. Especially in Japanese labor market, there is few labors. So, this is Germany’s big social program. So if we get sellers, this is very important thing. Tim: I would imagine most of your users are not professionals, they’re just using it to earn a little bit of extra income. Is that right? Chika: We also have professional and only hobby. But the people, they use as hobby but the hobby will be work and monetized. Tim: Is it more men or more women? Is it more based in cities or in rural areas? Chika: Men-female is 50-50 percent, so same. And then, areais 70 percent user living in Tokyo. Tim: I guess that makes sense. You need a certain density of people before you can do this. Chika: Yes. This is very important. Yes. Tim: Right. Okay. Actually, before we dive into more detail about Anytimes, I want to back up a bit and talk about you. You graduated from Keio Law School. You worked at Nomura for a while and CyberAgent. These are big stable companies. What made you want to go out and start a startup? Chika: Yes. This is a long story. When I was little, I wanted to work about 82 developing countries. I wanted to work in United Nations, like UNESCO, UNDB but after graduate university, I thought I should have experience. I wanted to learn business and finance. I thought there is many social programs in Japan. Tim: But on a personal level, why did you decide instead of there’s a lot of things you could have done, you could have gone to work for an NPO like you were planning, you could have joined a division of a company that’s focused on those problems. Why start a startup? Chika: In Japan, there is many social programs. I thought I should serve these programs in Japan. That’s why I decided to found this company, Anytimes. Tim: Okay. But it’s a big change. What did your family think of the change? Chika: Actually, my parents didn’t like founding a company because my father was also an entrepreneur and my mom was a programmer. Tim: Okay. So seems like they would be more excited and supportive of you starting your own company. Chika: No. Because my father knew about how it’s hard to -- Tim: He knew how much work it really is. It’s true. Chika: Yes. And because he was also an entrepreneur. First, he said he that he worried about me, and my mum too. But if I decide one thing, they know I don’t accept other opinions. ; Tim: You’re stubborn.   [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ]   Chika: Yes. Tim: That’s actually very useful, for a startup founder to be stubborn. What do they think of it now? Have they come around and they think it’s a good idea now or do they still worry about you? Chika: I think a little worried but they always support me and always care about my health. Tim: That’s good. When you were starting to put the company together, you’re not a programmer or a designer yourself. Chika: No Tim: How did you build the team? How did you pull the team together? Chika: Yes. The first year, I did only me and crowdsourcing services. But after one year, I started to hire people. The first employee is my sister-in-law, my brother’s wife. And then, my other friends, my friends’ friends. Tim: So just your personal network? Chika: Yes, yes, yes. Tim: How did that work? Because I know a lot of people who are not programmers or designers but have an idea and they want to start a startup, it seems in theory very simple to go unto lancers or freelancer.com and say, “I want this done and this done.” Chika: This was very difficult because I didn’t have experience of direction.

The financial services industry in Japan is pretty unsophisticated. There are relatively few options for brokerages and mutual funds, and what options there are tend to be expensive. Furthermore, since pensions and taxes are generally handled by the employer there is not much reason for the average Japanese to think much about investments. Jin Nakamura of  Money Design is trying to change that with a very interesting strategy. In a market that is dominated by price competition, Money Design has set out to create a premium lifestyle brand that has nothing to do with finance. And it’s working. Money Design has become the largest robo-advisor service in Japan and is partnering with some of the largest banks here. It’s a fascinating story, and I think you'll really enjoy it. Show Notes Why young Japanese are not investing Why it takes so long to launch a financial product in Japan The danger of using AI in investing How to reach $1 billion assets under management How to avoid competing on price in a price-sensitive market What it will take to get the Japanese public to believe in startups Links from the Founder The Money Design homepage Check out Jin's blog Friend Jin on Facebook Check out THEO. It's pretty cool. [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Disrupting Japan episode 98. 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 money, about investment. It’s not about exciting things like venture funding and ICOs but about simple somewhat stuffy stocks and bonds. Jin Nakamura cofounded Money Design as a way to introduce millennials and other young Japanese to investing. Money Design has created THEO, one of Japan’s first robo-advisors. Now, robo-advisors are a lot simpler than their name implies. Basically, all that’s happening is that you contribute a small amount of money each month and the robo-advisor will invest a certain percentage of that in stocks and another percentage in bonds and will make some adjustments if the allocations get too far out of alignment. I t’s a simple concept, really, but as Jin explains, young Japanese have shown very little interest in this kind of investing. So to reach them, Money Design created a lifestyle brand, one that had absolutely nothing to do with finance or money, and it worked. Young investors have been flocking to the THEO system and have made it the largest robo-advisor in Japan. In fact, Jin shares some of the insight that will be very important to anyone running a fintech startup or trying to sell financial services in Japan. But you know, Jin 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] Time Romero: So I’m sitting here with Jin Nakamura, the CEO of Money Design and creator of THEO, a robo-advisory for retail investors. Thanks for sitting down with me. Jin Nakamura: Thank you very much. Thank you for coming in our office. Tim: Delighted to be here. I described Money Design in a very simple way but I think you can explain what you guys are doing much better. Jin: Our product is very simple. We are providing a robo-advisory service in Japan. And then our global competitor is Betterment and Wealthfront. We are one of the first venture company to provide robo-advisory services in Japan. Tim: For those of our listeners who don’t know, robo-advisory just means that individual investors can give you a relatively small amount of money and you invest it automatically for them. Jin: Yes. We are providing the very simple financial product by smartphone. Once you access our website and then you answer just five questions. We showed the portfolio for each customer. Currently, we are providing over 230 portfolios for the customers. Once customer put their money into our portfolio, after that, we manage that discretionally. Tim: Okay. You’re saying that there’s five questions. Jin: Yes. Tim: What kind of questions do you ask? Jin: The first question is, ‘How old are you.’ And then second question, ‘Do you have any experience in investment?’ Third question is, ‘Are you a conservative or aggressive?’ Fourth question is, ‘What would you do if the market is going down? Are you going to put your money more or do you withdraw the money?’ And then the last question is, ‘Are you afraid of inflation?’ Tim: It sounds like basically, you’re trying to get a sense of the customer’s risk profile and sensitivity to inflation which is probably like how long they plan to invest, right? Jin: Yes. But even you answered the very simple five questions, we put some kind of algorithm for the profiling, then we analyze not only the risk return but also your tendency for investment. Tim: Okay. Actually, I want to dig deep into that a little later on. But before that, tell me a bit about your customer. Who’s using THEO? Who are Money Design’s customers? Jin: Yes. Actually, 51% of our customer is under 30s and then 15% of our customer is 20s. Compared to our competitor like a large financial institution, when we look at the THEO customer, only 5% or 7% of customer is 20s. So we provide our service for the younger generation. Tim: For example, you used to work at Nomura, which is the largest, probably most conservative securities firm in Japan. Do you think that the interest traditional financial companies have and these kind of robo-advisors is the new technology or do they think of it more as a way to reach millennial and younger investors? Jin: That’s a good question. When we talk about the robo-advisory service, it is very easy to create. You can put some algorithm for their profiling. It’s very easy. Actually, in Japan, there’s over 20 robo-advisory services; however, almost all of the services is just providing for their customer. There’s no new customers. For instance, 89% of our customer doesn’t have extensive investment. 43% of customer has little experience for the investment; however, maybe they fail investing in FX. Tim: Sure. Almost everyone fails at FX. Jin: When we look at our customer, very young generation started the investment services for the first time and then choose THEO. That’s our customer demographic. Tim: Okay. So it’s reaching a whole new and important customer base. You mentioned that robo-advisors themselves can be made using very, I don’t want to say, low technology but it’s simple algorithms. Jin: Yes. Tim: You guys were founded in 2013. You didn’t raise the first ground until the end of 2015, and you’ve launched THEO, congratulations, February 2016. Jin: Thank you very much. Yes. Tim: What took so long? What was going on during that time? Jin: Before that, we didn’t have any license, local transfer license. We can advise to the clients but we cannot provide a product to the clients. First, we studied advisory services. Clients opened account in the United States and then we advise them how to invest. We got the license 2015, and then we can provide here in 2016. That’s the reason. It’s very tough to get the license in Japan. Tim: So strictly for compliance reasons? Jin: Compliance reasons. Tim: I would imagine that with your first minimum viable product, it must have been very hard to reach that millennial demographic. Jin: We differentiate, two strategy. First is a UI and the UX, second is the branding. Our UI/UX is very simple. Large finance institutions maybe put something and put something and put something and then the website get complex. Almost all of our competitors provide a very complex UI and UX. First, we make it very simple and easy to register and easy to start. That’s our first differentiate strategy. And then second is the branding. THEO is the name of Vincent Van Gogh’s younger brother. Vincent Van Gogh could sell just one picture when he lived. However, Theo supported for the mental side and also the money side. That’s the reason Gogh could write a picture for his whole life. Our concept of the THEO is we care about the money, you can enjoy the life. Tim: Well, I can certainly see the appeal. You’re telling people who are confused by the complexity, “No, no, it’s very simple. We’ll handle it,” easy to understand interface, doesn’t cost much to get started. Let’s talk about that complexity. On the website, you’re talking about over 6,000 ETFs around the world. Is your trading universe really 6,000 ETFs, because most robo-advisors stick to between 20 or 40 ETFs. Jin: Our ETF universe is 6,000; however, we traded about 30 to 40 ETF per customer. Tim: So THEO really looks at 6,000 ETFs? Jin: Of course. Tim: All over the world? Jin: Yes. Tim: Wow. Some are denominated in yen, some in dollars, some in pounds? Jin: Of course. Now, we use almost New York-listed ETF. Currently, we didn’t use Tokyo-listed ETF because the liquidity is poor and the cost is too much for the trade and the performance is not good compared to the New York -- Tim: Management fees are very high in Japan. Jin: Yes. Tim: Most robo-advisors like Wealthfront, for example, they seem to be based on very traditional asset allocation models with as you’re mentioning X% to US equities, Y% to international equities and bonds, and then they rebalance once a quarter or once a month. Jin: We rebalance allocation every month. We set that balance first, right? Maybe growth 40%, income 40%, and inflation hedge 20%. And then maybe next month, the market collapse or up and then we rebalance it 40:40:20. Tim: You mentioned that THEO uses AI to do portfolio construction. Is it actually an AI or is that something that’s more aspirational,