Disrupting Japan

Ride sharing works differently in Japan. Hailo lost the global market-share war to Uber and Lyft, but Hailo won the battle in Japan. Today, Ryo Umezawa details Hailo’s Japan market entry strategy and explains how they were able to succeed  where Uber has failed. While Uber vowed to disrupt transportation by taking on both government and industry, Hailo worked within the system. They designed and launched a platform that was completely legal and made life better for all major stakeholders, including the taxi companies. This was a battle between Uber’s disruptive innovation and Hailo’s sustaining innovation. On the global battlefield, Uber won. Uber is the world’s most valuable startup and is still growing fast, while Hailo had a cash crunch in 2016 and was acquired by Daimler. In Japan, however, Hailo won. Hailo’s sustaining innovation soundly trounced Uber’s disruptive innovation, and Hailo remains significantly larger than Uber in Japan. Of course, as you probably suspect, both companies had very different strategies in Japan than they did in the rest of the world, any Ryo explains it all in the interview. [shareaholic app="share_buttons" id="7994466"] Leave a comment Links & Resources Check out Ryo's blog Follow him on twitter @umemac Transcript Disrupting Japan, episode 68. Welcome to Disrupting Japan, straight talk from the CEOs breaking into Japan. I'm Tim Romero and thanks for listening. Today we once again turn our attention to ride sharing, but surprisingly, we won’t be talking about Uber—at least not very much. No, today we get a chance to sit down and talk with my old friend Ryo Umezawa, who is responsible for Hailo’s market entry. Now, listeners not familiar with Hailo, let me explain. Hailo is, in a way, Uber’s quiet and somewhat neglected little brother. Hailo did not make the same impact as Uber worldwide, because they followed a very different strategy. While Uber vowed to disrupt transportation by taking on all-comers, both government and industry, Hailo had a different approach. Hailo wanted to work within the system. They wanted to design a platform that was completely legal and that would make life better for all stakeholders, including the governments and taxi cab companies. In fact, their model involved working with taxi companies directly. This was very much a batter between Uber’s disruptive innovation versus Hailo’s sustaining incremental innovation. And on the global battlefield, Uber won. Uber is the world’s most valuable startup and is still growing fast, while Hailo ran into a cash crunch in 2016 and was acquired—for quite a healthy sum, mind you—and it’s still an ongoing concern. In Japan, however, Hailo won. Hailo’s sustaining innovation soundly trounced Uber’s disruptive innovation and Hailo remains significantly larger than Uber in Japan. Of course, as you probably suspect, both companies had very different strategies in Japan than they did the rest of the world. But Ryo Umezawa 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: I’m sitting here with Ryo, the former country manager of Hailo. You’ve since moved on from Hailo, but we’re going to back up a couple of years because I think your experience with Hailo is something that a lot of people who are coming into Japan now can learn a lot from. Thanks for sitting down with us. Ryo: Thanks for inviting me to speak. Tim: Hailo is very popular in Europe and it made a good run in Japan, but I think a lot of people in the U.S. aren’t familiar with it. So can you just give a brief overview of what it does? Ryo: Okay, sure. Hailo is a British company started up in 2012. It’s a smartphone hailing app. So we basically connect drivers and users who want to ride a taxi through the app and we also help drivers basically raise revenue by utilizing our unique algorithm to efficiently connect users to the driver. And then for the consumer side of the experience, we help them hail the taxis very easily. Tim: Okay, so it sounds very much like Uber but with one important difference. You guys were dealing with actual cab companies? Ryo: Yes. So we only work with licensed taxis. So for example, in London, it’s a black cab. There are 6 founders in the company. 3 of them are black cab London taxi drivers, so they wanted to create more revenue while driving around and create efficiency doing their job because their time is limited. Tim: So, back in 2013, I believe is when it came into Japan, right? What was Hailo’s main motivation for coming into Japan? What did they see in the market? Ryo: Actually, I’m the second person for Japan, so there was a predecessor before me. In Japan, yearly, there is about 1.8 trillion yen market size. This includes taxis and private vehicles. But in Japan, taxi companies own most of the private hired vehicles. That’s why the market basically size is 1.8 trillion yen, as big as the entire Europe market put together. So it’s a very big market and it’s actually twice or three times bigger than the New York Taxi market. Tim: Okay. So it was simply the size of the market; they knew they had to be there. It wasn’t a particular trigger event. Ryo: Yes, and also in addition, Hailo tends to focus on market that has high number of concentrated taxi in that area, and then in addition, the average fare is higher than other cities where we look at. Tim: That makes sense. How did you structure the market entry? Was it holding a subsidiary? Did you set up a joint venture? Ryo: In the beginning, when they came in with the predecessor, he came in with 100% subsidiary, so it was a wholly owned subsidiary of the UK headquarters, but when I was taking over as the new country manager/president, we had a lot of difficulties acquiring new drivers because penetration from the smartphone, where our business was, it launched also from the beginning. The penetration for the smartphone drivers was about 10% because our driver’s age was about 50 years old. So by looking at all this data and then looking at the speed of acquisition of drivers, I was thinking that we need a Japanese local name that can kind of vouch for us in order to create our brand, as well as get trust, because trust is very important. And when foreign companies come in, in some cases, in some industries, people see us as a black ship coming in, just like wartime. So my strategy was to basically change the black shit to either grey or white, by raising money from a conglomerate, the company called Hikari Tsushin. We kind formed a type of joint venture. Tim: So Hikari Tsushin invested in the subsidiary or you created a new entity for them? Ryo: We created a new entity for them, that we can jointly put money in. Tim: And what was the split, was it—how much did Hikari Tsushin own and how much did the parent company control? Ryo: I can’t disclose, but we had the majority of the shares. Tim: Meaning Hailo? Ryo: Yes, Hailo has the majority of shares. Tim: Actually, before we get into some of the marketing techniques you used and how you built up some of that trust that you said is so important, I’m going to take a quick step back. You made some big changes to Hailo when you came on since Japan’s CEO. What was the reason for the change? Ryo: Most of it was that we weren’t seeing the growth that HQ projected or predicted in the beginning, and also our business is all about platform, so matching drivers and users. And it’s always chicken or egg in these kind of platform businesses. You might have a certain point of time, more taxi than users, more users than taxis, but in this business, I thought having more taxis was more important because the user acquisition could be done online but all the taxi acquisitions are done offline. Tim: Well, yeah, also, since you’re working with the taxi companies, you can do one deal with a company and get a few hundred taxis on the service. Okay, so to set the scene, how big was your team at that time when you were just taking over? Ryo: When I was just taking over, I think the team was about 10, 12 people. Tim: So not small for a new company coming in. Did you make changes to the team as well or did you make just strategic changes when you came in? Ryo: Yeah, I made changes to the team and strategy. We weren’t doing that many rides a day but we had actually full customer support. Tim: Well, customer support is important in Japan. Ryo: Sure, but back then, we would have one customer support for few rides. Of course, I think they were looking at the scalability, but the service works. The service started in 2012; we were in Dublin, Spain, Singapore, and we even had a US operation, like we were operating in New York and it was proven that this really works. Of course, customers are thought of as kings in Japan, but in the beginning—I’m more of a startup guy, so I am happy to pick up calls from customers and I was actually picking up calls from drivers as well because I really want to know what is going on and what their concerns are, rather than hearing it from customer support. Of course, they will probably have a better voice and better service than I do, but market entry in Japan, I just thought it’s better as a lead startup to have more flexibility. Tim: And I’m sure the fact that they are talking to the Japan CEO carries a lot more weight, even if you are not doing support perfectly correctly, right? Knowing they have that attention is far more valuable to them. What sort of changes did you make? How did you go about acquiring both the supply side, acquiring those taxis, and on the demand side, acquiring users? Ryo: So originally, our operation was based in Osaka.

Cerevo wants to be a “global niche” player. That makes sense for this Internet of Things company. The IoT has become so pervasive and so successful that the terms ha become almost meaningless. Today we simply except and accept that almost everything should naturally be connected to the internet. Of course, it wasn’t always that way, and today Takuma Iwasa, founder and CEO of Cerevo tells us of how he started his career at one of Japan’s big consumer electronics companies trying to force the internet into devices where it really didn’t belong. And how that experience forced him to find a better way and to found his own company. Takuma also explains Cerevo’s innovative business model. In fact, the company is structured less like a hardware manufacturer and more like a hardware startup accelerator. He and Cerevo are aiming for a series of niche-market successes which will be acquired by large mass-market firms. And his strategy seems to be working. It’s a fascinating discussion, and I think you will really enjoy it. Show Notes for Startups Why Japan's first "smart devices" failed The foundations of the "global-niche" IoT strategy Why startups should build rather than license How to get media attention for cool, new IoT devices How IoT startups really should be using crowdfunding Will Japan ever regain the lead in robotics? Why Japanese companies were afraid of the Roomba Links from the Founder Learn more about Cerevo at their home page [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 67. Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I'm Tim Romero and thanks for listening. The internet of things is unstoppable. It’s so broadly defined these days, connectivity is cheap, and they can be added to just about anything. Of course, whether it should be added or not is another matter entirely. That question is near and dear the heart of Takuma, founder and CEO of Cerevo, one of the most innovative and connected device makers in Japan. Takuma started his career at Panasonic and he had high hopes of creating all manner of consumer devices that could take advantage of internet connectivity. What he found, however, was that his job consisted mostly of finding ways of trying to force internet connectivity into existing products. Genuinely new products and innovations were being dismissed out of hand. Well, Takuma did what everyone should do, but very few people actually do in that situation, he quit his job, took some of the best engineers with him, and he started his own company. Now, there are a lot of gadgets and IOT devices being built in Japan, but Cerevo has a genuinely interesting and methodological approach to it. During the interview, you’ll hear Takuma try to downplay that strategy as just gut instinct, but as you listen, you’ll understand the very rational method of what, from the outside, might look like madness. We’ll talk about plenty of cool devices, but I think you’ll find the strategy that underlines Cerevo’s success to be at least as interesting. But, you know, Takuma tells that story much better than I can. So let’s hear from our sponsors and get right to the interview. [Interview] [pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ] Tim: So I’m hitting here with Takuma Iwasa of Cerevo. Now, Cerevo, I’m tempted to call it a gadget company, but that’s not really fair because you guys do a lot more than just make little gadgets. So can you tell us a little bit about what Cerevo does? Takuma: Okay, so my company’s name is Cerevo and we say Cerevo is a consumer electronics start up company, not gadget, right. We are really focusing to the connected consumer electronics devices—connected robot, or connected camera, or connected, of course, gadgets. Sometimes we try connected toys, connected sports equipment. Tim: You guys make so many different kinds of internet of things products, we could spend the whole podcast just listing them all. There’s a huge variety of them. You make everything from tools for IOT developers, to connected sports equipment, to video streaming equipment, but first, let’s back up a little bit. You started— Takuma: From 2008. So my past background is a spent time Ritsugaku Kyoto University studying computer science, but I’m not good with the software programs. Tim: So you studied software development, but you just weren’t very good at it? Takuma: Yes, but I’m working into the very small startup company and in the college student generation, I spend a long time to make a website and I received a job from the boss and I managed many of my friends. I received the job from the client and broke it up. Tim: So kind of project management? Takuma: Yeah. I’m also a programmer and manager. In that time, I spent a long time to make a computer programming, that my friend started to from 1 to 100. They spent just 5 days. At the same time, I started almost the same to-do’s that I already spent one week, but I already, I can’t do just only 20 or 25. But I can really easily manage my friends. Then, after college, I decided to go to product manager—not program. Tim: And you were with Panasonic? Takuma: Yes. I really like 021 timing. That means in 2001, that timing, the dot com bubbling the years. Tim: Yeah, just as it was starting to burst. Takuma: The web-based, internet-based companies are already growing into a big company. And I look to the internet or computer job. But my aptitude is not good for programming. Then, I’m looking for the money, not the purely internet companies. So automotive company, consumer electronics company, I tried some other fashion company, or so many different type of business area. Tim: So when you were saying you were trying all of these companies, was this— Takuma: Just looking for. Tim: Just checking them out? Takuma: Checking and just go into the interview, then I find the consumer electronics is almost all the blue ocean from the internet deal. So consumer electronics is just born from the 2001 or 2002. Tim: Well, that’s true. Going back to 2001, almost no companies were seriously trying to connect. They weren’t seriously trying to make smart appliances. There were a few gimmicky— Takuma: Yes. And also some of the R&D departments, the Panasonic R&D department or Sharp R&D department, that tried an internet refrigerator or microwave. Tim: Microwaves that could access recipes. Takuma: And people have to connect the phone cable to the microwave. So that’s really ugly in the really early stage of the internet connected consumer electronics. Then I go to Panasonic, and start to produce internet connected devices? Tim: What kind of devices? Takuma: First my job is remote the TV programming, reserving the website for the old style mobile phone. It’s not a smartphone, but people can reserve the recording of one of the TV programs from the mobile phone. After that, the TV, I discussed with Google and YouTube guys, and built in a Google function to the Panasonic TV. And finally my job is connected camera, the camera with the Wi-Fi in the systems. Tim: So you were working with that at Panasonic as well? Takuma: Almost all of my business background is IOT, IOT, and, IOT. Tim: Your first product, Cerevo, is also video streaming. What made you decide to leave Panasonic and start up your own company? Takuma: That story is very difficult to translate from Japanese to English but I am going to try. So into Panasonic, one or two years, I’m very happy to touch the huge consumer electronics business with the internet business, but I faced on the huge war from the internet based side guys and the consumer electronics business guys’ side. Tim: So just politics? Takuma: Not only politics, but their completely different approach or thinking pattern of politics. The image, like Google guys and Bank of America guys, of course they are trying to improve every year, but the two guys, the thinking pattern— Tim: So they just think differently. Takuma: Yeah, completely different pattern. But Bank of America, and Google, no need to collaborate with them, but the internet company and the consumer electronic company—my job is connected, so I have to merge to the business area. I faced on this war and finally, the Panasonic is not so innovative and not so user friendly from the internet user vision. From consumer electronics, the cost over vision is okay, it’s almost okay. Tim: Well I think the biggest difference is that first generation of connected devices, it didn’t really change anyone’s behavior. It was just adding features to a product. Takuma: Correct. It’s just adding in a different culture, in a different function. I like to make merge the product, internet merged with consumer electronics, not add It’s very difficult to merge because that’s why the war is available. Then I’m looking for the job off and I talked with the Sony guys, the Sharp guys, something guys, but they are completely same culture as Panasonic. Tim: So they were just trying to figure out how to put the internet into their existing products? Takuma: Yes. Then I decided to start the new business, start the company with internet side guys and consumer side guys. [pro_ad_display_adzone id="1653" info_text="Sponsored by" font_color="grey” ] Tim: So did you start the company with friends from Panasonic? Takuma: At first, I started the company with two investors, the names, Mine-san & Yamada-san. Miene-san is ex-Sony. He go out from Sony and start the investment business, so he knows what is internet company and what is consumer electronics. Tim: Since you didn’t have a background in engineering or programming, where did you recruit the first engineers from? Takuma: Also, I have to talk about Yamada-san.

Stripe’s Japan market entry did not go according to plan. Things worked out worked out well in the end, but they did not go according to plan. Stripe is one of the world’s largest payment processing companies, but they remained flexible and agile enough to take advantage of some of the surprises they faced in Japan. Today we sit down with Daniel Heffernan, the Japan head of Stripe, and he walks us through what happens when a technically sophisticated and streamlined FinTech company comes face-to-face with the very low-tech and slow-moving processes that make up FinTech in Japan, and how they made it all work. They faced complex, lengthy technical specifications delivered in three-ring binders and un-copyable, printed documents, and they dealt with the Japanese aversion to integrating directly with banks and financial institutions. They even planned to support some of Japan’s more unique payment methods until surprises during development made them change course. Stripe’s entry into the Japanese market is both an essential case study for any FinTech company considering coming into Japan and an entertaining story for those of us with an interest in business in Japan. It’s a great discussion, and I think you’ll enjoy it. [shareaholic app="share_buttons" id="7994466"] Leave a comment Links & Resources Check out Daniel's blog Follow him on twitter @danielshi Find out more about Stripe Transcript Welcome to Disrupting Japan, straight talk from the CEOs breaking into Japan’s. I'm Tim Romero and thanks for listening. Stripe is one of the largest credit card payment processing companies in the world and their Japan market entry did not go according to plan. It went well, mind you, but it just did not go according to plan. Stripe was agile enough to take the changes and surprises in stride. Today, we sit down with Daniel Heffernan, the Japan head of Stripe, and he walks us through the process where one of the most technically sophisticated and streamlined fintech companies in the world came face-to-face with a very low tech and manual nature of fintech in Japan, and he explains how they made it all work. From detailed, extensive technical specifications that were delivered as uncopiable, printed documents in three-ring binders, to the Japanese aversion to interacting directly with banks and financial institutions, to trying to support some of Japan’s more unique payments, and some of the surprised they discovered once they began work. Stripe’s entry into the Japanese market is both an essential case study, for any fintech company looking at Japan, and an entertaining story for those of us with an interest in business in Japan. But you know, Daniel tells that story much better than I can. So let’s hear from out sponsor and get right to the interview. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: I’m sitting here with Daniel Heffernan of Stripe and we’re going to talk about Stripe’s market entry into Japan. And you guys have just officially launched officially but let’s back it up and talk about when you first came in. What was Stripe’s main motivation of coming into Japan in the first place? Daniel: Well, when we started looking at Japan, we looked at it kind of like we do every other market that we considered. There are a few things we look at when we’re trying to decide whether to go into a market. One of them is the size of the e-commerce economy. Japan is pretty big. Last year it was about $130 billion, which is significant. That’s actually number 4 in the world. So you have China and U.S., are giants at the top, then it’s kind of a big jump down, and you have the U.K., and Japan is actually just behind the U.K. If you think about it from a population point of view, it’s really weird because the population of U.K. is like half of Japan. Tim: Yeah, I find that surprising from both a population and an economy point of view. Daniel: Right. If you think about why that is, it’s because of the number of online transactions that are happening online, or aren’t. So in Japan, I think it was 4.7% of all transactions are online, which is really small. As someone who uses the internet 4.7% feels tiny. Tim: Yeah, so what is a comparable number in the U.S. for example? Daniel: The U.S. is actually pretty much in line, but if you look at the U.K., it’s jumping over 10% and it’s up around 14%. So in the U.K., lots of transactions are happening online, even though the absolute value of commerce is smaller. So there’s this sort of gap between Japan and the U.K. in how much is happening online. And there’s an even bigger gap within this generation of our expectation how of much transactions should be happening online and what it actually is. Tim: So Japan is still very much a cash-based society? Daniel: Yeah, it’s cash-based, it’s offline. People aren’t buying things on the internet. These numbers include cash on delivery and things like that, so it’s transactions which are happening in the supermarkets instead of online shopping platforms. Tim: Okay. So I take it Japan was not Stripe’s first overseas market? Daniel: No. We look at the amount of e-commerce that’s happening online as one thing and it’s number 4, so it’s like, what is the 4th market you’re in. If you look at China, which is way up there at the top, it’s not a market we’ve gotten into yet. So another important thing is complexity and Japan is relatively complex. If it wasn’t, I don’t think you would have this podcast. There wouldn’t be enough to talk about but I think there’s plenty to think about when you’re thinking about trying to get into Japan and that’s because of all this complexity. So China is incredibly complex and Japan is pretty complex. Tim: All right. So when you first came into the market, Stripe ran in stealth here for a good year, year-and-a-half or so? Daniel: Yeah, we first got moving on Japan probably around January 2014. That was I was on the scene before, even, but we had identified SMCC, Sumitomo Mitsui Card Company, as a partner. We knew we were going to make it happen. We started opening the box and looking at what the technical integration might look like, what the deal would look like, what kind of agreement it is, but we haven’t started executing on it. So when I joined, which was April 2014, three months in, the first thing to do was to figure out this contract and then make a local entity so that we could sign the contract, and then we had a whole bunch of local vendors we would have to work with on things like data centers and things like credit card authorization switching networks. Tim: You finally officially launched in September 2016, was it? Daniel: October 4th. Tim: October 4th, 2016. So in that two-and-a-half years, was that the expectation going in, or        what took so long? Daniel: So Japan actually wasn’t a long time for us. We have other markets where we’ve been in beta for longer. I think we approach new markets as engineers, so whenever we come into a new market—and I think this was true in Japan as well—we are working towards launch, and our partners are saying to us, “When is the launch? When is all the PR going to happen? When are you going to do the big reveal? When is the launch party?” And for us, that’s not something that we’re thinking about from day one. The first thing we should think about is getting to first charge. So the first live payment transacted in the local country. So it’s sort of a step by step process. We get to first charge, we bring in the first user, we run a private beta, and we just use invite-only, and we pick who comes into that. After that, we sort of move towards a public beta, where anyone can sign up, and for that, we need to be a bit more confident about the stability of the system, our risk in underwriting and KYC, (know your customer), ID verification plots. Once we have everything in place with the product market fit, then we move towards launch, so it’s a very careful step by step deploy. It’s not like doing this huge fork in your code, having this enormous branch, hitting deploy and praying that it will work. Tim: Okay. Payments are particularly local. Every single market seems to have its own set of payment processing companies. And when you came into Japan, where there specific regulatory licenses you needed to get and how did you go about that? Daniel: On the regulatory side, there are actually no specific relation yet, which covers credit card payment processors, and there is regulation coming, and it’s something where we’re sort of chatting with the Ministry of Economy Trade and Industry, making sure we’re in the loop there, we can see these things coming, and it’s interesting when you talk about payment methods. When we started working on Japan, the top of our list were things like Konbini, the convenience store payments where you, when you’re buying something online, you say you want to pay for the convenience store, they give you a number, or they give you a piece of paper to print out, and you go to the convenience store and you key it into the kiosk, or you scan the bar code, and you give them cash. Then the convenience store will tell the online seller that the cash has been accepted. JCB is a large Japanese credit card brand. And it’s not the largest in Japan anymore these days, but it’s still significant. And we were looking at these as sort of critical payment methods which we needed to have. We launched without them and what we realized while we were verifying that our product market fit was strong, was that these kinds of methods are critical for the businesses which are already in existence. I mentioned $130 billion a year of e-commerce in Japan. That is obviously generated by companies who already exist and I think this gap between this 4.7% and our expectation, for me,

Startup M&A is changing in Japan. In August, Naoki Yamada sold his startup Conyac to Rozetta for $14 million. It was an unusual journey of alternating cycles of rapid growth and near bankruptcy, and today Naoki explains how he managed to make the deal happen and also how M&A is changing in Japan, and it seems that change might come much sooner than anyone had been expecting. Naoki talks very openly about some of the mistakes he made and give solid advice on how you can avoid making the same ones. And of course, he explains how he handled the negotiations for the acquisition, and why he decided the exit now rather than continue to grow the company. It’s a great story, and I think you’ll enjoy it. Show Notes for Startups How two quick pivots saved Naoki's company The risks for startups hiring (and firing) too quickly The temptation and danger of focusing on investors at the expense of the team Why M&A made more sense than another round of fundraising What Japanese acquiring companies are most worried and most excited about The struggles of post-M&A integration Advice for large companies who want to acquire startups Links from the Founder Learn more about Conyac at their home page Rozetta's Home page Read Naoki’s thoughts on Nakoki’s personal blog  Follow him on Twitter @naokey Friend him on Facebook [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan   Disrupting Japan, episode 65. Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I'm Tim Romero and thanks for listening. Today, Naoki Yamada, founder of Conyac, joins us for a second time. Long-term listeners may remember that he first came on the show a little over 2 years ago and he’s been very busy since then. In August, 2016, Naoki sold his company to Rozeta for about 12 million dollars. But that deal almost didn’t happen and today Naoki joins us again to tell us the story of massive growth, followed by near bankruptcy, followed by massive growth, followed by near bankruptcy, followed by recovery, followed by M&A. So you already know the ending but it’s the story that’s important. Naoki talks very openly about some of the mistakes he made and gives solid advice on how you can avoid making the same ones. And of course, he explains how he handled the negotiations of the acquisition and why he decided to exit now, rather than continue to grow the company. But, you know, Naoki tells that story much better than I do, so let’s hear form our sponsor and then get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Tim: Cheers. It’s great to see you again. I’m sitting here with Naoki Yamada and we’re going to talk about Conyac. And it’s an exciting story of starting up and growing, and almost going bankrupt, and growing, and almost going bankrupt again, and having a happy ending. So thanks for sitting down with us. Naoki: Thank you. Tim: So let’s back up a bit—let’s back up a lot. Tell us about what Conyac is. Naoki: When was the last time we talked? Tim: A little over two years ago. Naoki: Okay. It’s been a while and we’ve changed a lot. We started Conyac as a social translation and we slightly changed our service from customer service to business service in 2013. Tim: So let’s start from the beginning. In 2009, you started it. What is consumer translation? Was it like peer-to-peer translation? Naoki: It was more like a community-based translation service. At that time, there were only two options for the translations. One is traditional translation entities and the other one is Google. We wanted to make our service in between those two options, so we asked people who could do the translations outside of the community. We added many translators in our platform and we did translation through those people. Tim: So was it just very small batch translations of 10 words, or a tweet, or that kind of thing? Naoki: Most of the translations are for 3,000 small sentences, like letters and stuff. It worked for pleasure but it didn’t work for business? Tim: Just not enough demand? Naoki: Right. And it was hard to find people who pay for that. Tim: Okay. So once you learned that, you’re saying you pivoted to more of a B2B model? Naoki: Right. It was 4 years after it started, so it took a long time. Tim: It took a long time to realize that. Naoki: Yeah, and since 2013, we supported that B2B service and the sales increased 20 from that point. Tim: At that point, as you were pivoting to B2B, how big was your company? How much revenue? How much staff? Naoki: The revenue was like about $50,000 a month. And the staff at the time was like 10 people. Tim: Okay, so that’s back in 2013. Well, it sounds like you’re on your way. Naoki: In that year, we got investment from several venture capitals and we used a lot of money for the people we hired. Tim: That’s what start-ups are supposed to do. Naoki: I was thinking that if I had more people, we can raise more sales and revenue, but I did not know. Tim: Okay, so how big was the round? Naoki: It was not that big for the current variation. It was like 0.6 million dollars. Tim: Okay, $600,000. And you went out and you hired how many people? Naoki: About 15 people. Tim: Oh, wow. So you went from about 6 people to 20 people. 20 people, that’s a lot of people for 600,000 investment. Naoki: For that much revenue. Tim: You had to be burning through cash. How did you do that? Let’s talk about that because that is—having to hire that many people in how short a timeframe? Naoki: Like a year. Tim: So what kind of people were you hiring? Mostly sales staff? Naoki: We hired a couple salespeople, and also we hired engineers. It was good to create new features but it didn’t lead to the sales, so that function, it lead to that real money. Tim: So the engineers were generating new features but it wasn’t helping to drive revenue. When you’re growing that fast, how do you maintain a corporate culture, when you triple the size of the company in one year? Naoki: It was a big mistake I had. I didn’t think that much about the culture and stuff, so everyone thinks differently and teams were spreading into many parts. Tim: So different teams just going in different directions? Naoki: Right. After a year and a half, many of the members decided to leave the company because of a lack of culture, and a lack of a big vision. And at that time, we decided to pivot ourselves a bit to more like a general crowd sourcing service. It was a crowd sourcing translation service at that time and we decided to a more varying kind of service, so that we can order things besides translations, like research, marketing. Tim: So if someone wanted to create blog posts? Naoki: Right. It worked well but many of our members think that we lost our culture and our vision at that time because— Tim: But I can understand that, right. The company is pivoting a bit, you’ve got different teams going in different directions. So how did you try to pull it together? Naoki: Actually, we couldn’t get it together. The teams were about to explode and many people left the company. Less than 10 people were left. [pro_ad_display_adzone id="1653" info_text="Sponsored by" font_color="grey” ] Tim: Okay, so you went from like 6 people to 20 people— Naoki: Going down to about 6 people again. Tim: So the people who left, was that people who left because they were frustrated and tired, or did you have to lay people off because you were running out of money? Naoki: I was actually not laying off people. They left. Tim: They left? But you didn’t hire replacements for them? Naoki: It was hard to replace people because we were actually losing money, so if we replace people, the money went. Tim: I can imagine this is a very frustrating situation. Naoki: Right. For about one year, it was tough. Tim: So you went to 6 to 20, to 6 again. Was it the same 6 people? Naoki: No. Only a couple people were the same. Tim: That sounds like a really difficult thing to go through. Looking back at it, now that you’ve kind of come out the other side, what would you do differently? Naoki: I could do many things differently. If I were there right now, I would just create a [UNCLEAR 9:31] culture and tell people more about what we are doing and why we are doing that kind of stuff. Tim: So communicate the vision and the activities? Naoki: Right. I didn’t talk much with the members at that time because of—I can’t remember why I didn’t talk, but— Tim: Well, believe me, I understand. A lot of it is, as a CEO, the job is very stressful just by itself and sometimes talking to staff, talking to all the staff, it always seems like something you can delay. You can do it next week or there’s no urgency to it. Naoki: And also I was actually considering that the money is—we were losing a lot of money so I was thinking to get investment, I mean in the next round, at that time. So I was talking a lot with the investors, so I didn’t have that much time with the members. That was my excuse. Tim: So did you know things were going wrong or did you just have not enough time to deal with it? Naoki: I was noticing frustrations but I was not looking at it directly, so that was my biggest mistake. Tim: Your advice to other founders would be like— Naoki: Talking with the members. Tim: Deal with the members, first priority. Okay. At this point, you’ve pivoted a bit, you’re doing translation, you’re doing general bilingual content creation, you’re back down to 6 people. What was the company looking like? What were your revenues? Naoki: We were almost bankrupt at the time, within three months or so, then one of the sales members got a big deal from a big company and then we survived.

Expedia had a hard road to travel when they decided to come into Japan. The Japanese market turned out to be nothing like they had ever experienced before. Not only were consumer attitudes and behaviors towards travel booking completely different than it was in their home market, but they were up against some very powerful and well entrenched companies, including both online giants Rakuten and Yahoo and traditional powerhouses like JTB. Today Hidemaru Sato, or “Maru" as his friends call him, will explain to us how Expedia managed to overcome the odds on a ridiculously tight deadline and how a few tweaks to the core product turned out to be key to their success. Maru also shares some great advice for both western companies looking to hire a Japan country manager and for people who are Japan country managers and want to do their jobs more effectively. It’s a great discussion, and I think you’ll enjoy it. [shareaholic app="share_buttons" id="7994466"] Leave a comment Friend Maru on Facebook Connect with him on LinkedIn Maru's advice on successful market entry Maru's advice on how to hire a country manager Partial Transcript Disrupting Japan, episode 64. Welcome to Disrupting Japan, straight talk from the CEOs breaking into Japan. I'm Tim Romero and thanks for listening. Travel giant Expedia has their work cut out for them coming into the Japanese market. Not only was the online travel game played very differently in Japan, but they were up against some very strong, very entrenched competition in Japan, both from the major online players like Rakuten Travel and Yahoo Travel, and from traditional players like JTB as well. Today we sit with down with Hidemaru Sato, or Maru, as his friends call him, and he explains how he had to change both Expedia’s marketing message and he product itself to make it attractive to Japanese consumers. In both cases, you’ll see why less is actually sometimes more. Maru also provides framework for both western companies looking to higher a Japanese country manager and for people who are Japanese country managers and want to do their jobs more effectively. Once you get to know Maru, you won’t be surprised to see that he has a very personality-driven approach on both counts. But you know, Maru can explain that much better than I can, so let’s hear from our sponsor and then get right to our interview. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: So, we’re sitting down with Maru Sato, and you’ve brought a number of companies into Japan, but today we’re going to talk about Expedia. It was a while ago but let’s go back to when Expedia was first thinking of coming into Japan. What did they see that was important about the Japanese market? Why did they want to be here? Maru: Okay, I think back to maybe the early 2000s, and basically it’s kind of the boom. It’s a lot of successful U.S. companies who enter the Japan market because Japan was still strong. Tim: Well, it still is. The Japan market is still pretty big. Maru: Then also, the Japanese market is something like new IT technology or internet-related business just starting. The first company I just helped come into Japan market is America Online, AOL. This is 1999, so this is when AOL was the world’s biggest internet service at that time. So they expand to Europe first, U.K., Germany, France, and also the Asia Pacific. Tim: In both AOL’s case and Expedia’s case, it was just part of the natural global expansion. Maru: And then U.S. companies, or global companies, they expect the Japanese market is big. So now it’s the same thing. Basically the Japanese market is big but usually they do not understand the cultural difference, and also business difference, and also user difference. So a lot of our conflict— Tim: I want to talk about that a lot. Before we get to that, though, how did Expedia pick you? How did you end up running this organization? Maru: My experience, AOL launching experience here, and also more than 10 years experience in Japanese companies and U.S. business. Tim: You had a track record here in Japan, and also you had had operational experience in America as well? Maru: Because a U.S. company, or a global company, tries to find a person who understands western style business and Japanese style business both. Tim: Actually, let’s talk about this because this is such an important point. What do you think makes a really good country manager or local Japan CEO? Because so many foreign companies fail here. Maru: From my experience, and also from my friends’ experience, the reason why it’s not easy to find a right person for GM or country manager. It’s not so easy to find the person who knows both cultures. Tim: Well, it makes sense. Almost everyone’s incoming from one culture or another and there has to be a bridge. Maru: It’s many, many people who speaks much better English than be, but how long does a person understand society over in the United States? Business and school, and life, everything. For me, I just spent 2 years at university and also 10 years in business in California. Also I talked to a lot of U.S. based companies for Japanese based companies. During 10 years, I just learned how to debate them, how to fight with them. Tim: I think that right there—fighting is one of the most important aspects. It seems like so many companies will choose someone who’s in late 20’s, early 30’s, went to school in the U.S., speaks English very well, gets along with headquarters, but had never had to fight for resources inside an American company. Maru: Fighting is, my years of fighting is how to understand each other. That is sometimes fighting, and sometimes discussing, how to pursue them based on trust and also based on respect. So when I was in my first 10 years of business experience in the United States, it was as the country manager of a Japanese company in the United States. That was a citizen watch company. We have a lot of mechanical engineering and also precise engineering technology, but how to get the business for Japanese headquarters—that means I need to talk to Hewlett Packard, I need to talk to Motorola, their computers, these people. The lucky thing for me is, “Hey, Maru, you understand it both ways.” It’s much better than a person who does not understand U.S. culture, who has come from Tokyo, to talk to Hewlett Packard, or Dell computers, or HP,” so that is totally different. Also, 2 years in Stanford makes me know how to collaborate with people in the United States and also the international. So that two years of experience in grad school at Stanford is very, very important for me. Tim: But operating in English in a university setting is very different from managing staff or trying to make sales. Maru: Yeah, yeah, because the business is based on communications anyway. All my friends, general managers, country managers here in Tokyo—very successful people—listen very carefully and also try to understand each other type person. The most difficult person is moving, or talking, or acting under the order from top management. Tim: Yeah. I’ve seen this happen. It seems to me that the Japan head is really the representative of the Japan office at headquarters, it’s not the other way around. So the Japan head is not there to explain to the Japan to the Japan team what headquarters wants—the job is to explain to headquarters what the Japan team needs. I think a lot of people don’t do it that way. Maru: They try but it needs the training and practice. Business school never teaches how to do that. I did many, many mistakes and I did many, many faults, but all mistakes and all faults are better after, to the next stage. Tim: Right. You learn. Maru: Yeah. I learn. Also, I always talk to U.S. headquarters, to my boss. Usually my boss is sometimes head APAC or head of intelligent business in the United States. I just talk to them. Anyway, come to Tokyo for 2 weeks. It’s just a blink to a prospect but on the other hand, I just try to bring them to a Japanese bar or Japanese drinking place, trying to introduce my other friends. Tim: Right, to build relationships with headquarters and to get the CEO or the APAC head thinking about Japan. Maru: And also I usually just teach my boss how to give your business card to them. It’s always, I just teach them, “No, no, 30 degrees.” But this makes business fun. And also, it’s a lot of each meetings and each meeting is sometimes, the law of headquarters is different. So I always make clear, “Okay, this week, I have the meeting, two meetings tomorrow, and two meetings the day after tomorrow, so this one is your law is like this, this, this, this.” Tim: You know, it sounds like what you’re doing, you’re just making a very strong emotional connection for the visitor. Maru: It’s very important. Tim: I mean, they’re doing business, of course, but you’re making it much more emotional and engaging than a normal business meeting. Maru: And also, sometimes, the family tries to make a relation. You know, when he comes, I just introduce my wife, and maybe some dinner or something, and try. My wife is always shy but I sometimes try. Tim: To build those personal and emotional connections? That makes sense. Maru: And also, my management style is always bad things first, good things later. Tim: Get the bad news out of the way early. Maru: The business is always dynamic here. The general manager, the country manager here, we have a big backbone in the United States, but Japan it’s only two, three people at start up time. The important point is business is dynamic, always, ongoing. And a lot of the problems, first 2 or 3 years, many, many problems, and then some problems are solvable if they understand earlier, understand how to solve it—

This is a rather personal episode. We have no guests this time. It’s just you and me. From the outside, it looks like Airbnb is crushing it in Japan. Listings and rentals are both increasing at an unbelievable rate, and Japan is loosening her room-sharing (or minpaku) laws. The future looks bright for Airbnb here, but behind the scenes a resistance is secretly growing. You see, Airbnb has a real problem in Japan. At first glance many of the issues look familiar. They seem to be the same kinds of challenges Airbnb is facing all over the world, but things are different in Japan, and today we're going to take a look at how important these differences can be.  It's worth noting that so far, Airbnb has not taken steps to address their Japan problem, or even publicly acknowledged that it exists. But it's a situation they will be forced to deal with over the next 18 months, and it's something that we can learn a lot from. [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan Episode 63 Welcome to Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for listening. Once again, I’ve got a special show for you today. There will be no guests, no beer, no playful banter with someone speaking English as a second language. Today it’s just you and me. For the next 20 minutes I’ll be whispering in your ear about something I consider very important, but that not enough people are talking about. Airbnb has a serious problem in Japan. They may or may not have recognized it yet, but there has been something massing behind the scenes, getting stronger and stronger. And it’s something that will become very visible over the next 18 months. Now, to the casual observer, and lets face it, most journalists and bloggers are casual observers. To the causal observer, it seems ridiculous to even claim that Airbnb has a problem in Japan. In fact, if you rely on what’s written in the English-language press, any rational person would conclude that Airbnb is crushing it in Japan. Let's look at the facts. Japan is Airbnb’s second largest and their fastest growing market. In fact, listings are up over 500% from last year. Furthermore, Airbnb are way out in front of their local competition. They have far more listings, and using publicly available data, it looks like Airbnb’s Japan site is getting more than 15x more traffic as the most popular local competitor.  In fact, I’ve had several different investors speculate that the Japanese companies providing cleaning services to Airbnb hosts are probably making more money than the Japanese companies competing with Airbnb. And yet, Airbnb is dancing through a minefield in Japan. Whether they are doing it blindfolded or with their eyes wide open, well that’s anyone’s guess. But if you read Japanese and you care about such things you can see that there are powerful forces lining up against Airbnb in Japan, and next year we are going to see the start of a real public backlash. Now, I know what you are saying. This is nothing unique to Japan. Airbnb is fighting this backlash all over the world. I mean New York and Berlin just passed strong anti-Airbnb legislation, and Airbnb’s lawyers are suing and pushing back hard. San Francisco recently added new restrictions to Airbnb rentals and Airbnb is suing the city, of course. [pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ] Airbnb is used to handing that kind of backlash and legal challenges. They are good at it. It’s in their DNA. No, what is happening in Japan is different. It’s quieter. More secret, and in some ways far more dangerous than the challenges they’ve faced in other markets. But i’m getting a bit ahead of my story. We will get to all of that. First let me set the stage and explain what is actually playing out on the ground here in Japan. So lets walk though what is happening around Airbnb in Japan and the drama that will be unfolding —  whether they want it to or not — over the next 18 months. We’ll talk about what Airbnb has going for them in Japan, then we’ll take a look at the strange coalition of powers that are quietly aligning against them, and then finally, we’ll take a look at what Airbnb can do to counteract it and examine the three most likely ways this story will play out over the next few years. OK. To be sure, Airbnb actually has a lot of things going right for them here in Japan.  Most important of all, Japan needs Airbnb — or something very much like them — to handle the inbound tourist traffic that will be coming to Japan over the next few years. Last year, a record 19.7 million foreign visitors came to Japan. That’s up 47 percent from the previous year, and quite frankly Tokyo’s existing hotel infrastructure simply can’t handle the load. Both occupancy rates and the cost of a stay are both extremely high right now. [pro_ad_display_adzone id="1653" info_text="Sponsored by" font_color="grey” ] But that’s not all, the Japan National Tourism Organization (or JNTO) has announced their goal is to double that number to 40 million by the 2020 Olympics and then to triple that number to 60 million by 2030. The JNTO even went as far as announcing that revising the minpaku laws, those that regulate renting private accommodations, is a major part of their initiates. Of course the JNTO is not actually in charge of minpaku regulations. That would be the Ministry of Health, Labour, and Welfare, which overseas the whole hospitality sector. So don’t expect the changes to come quickly or smoothly, but in fact, we have already seen some loosing of the minpaku laws in parts of Tokyo, and  overall, this is a very positive sign for Airbnb and from room-sharing in Japan in general. Another thing Airbnb has going for it in Japan, and this is possibly even more important in the long run, is that the team in Japan is handling the market here with a much softer touch than they used in other markets or that was used by fellow sharing-economy unicorn Uber, here in Japan.  If you missed our podcast a few months ago on the Real Reason Uber is Failing in Japan, you’ll want to go back and listen to it. It’s a pretty good one, and it will give you a lot of background info for what we are talking about right now. So Airbnb has has not filed lawsuits in Japan and they have been saying that they really do want to obey all applicable laws and work with, rather than fight, the Japanese regulators. The Airbnb team in Japan has also reached out and set up projects with local governments. Earlier this year, for example, they ran a joint tourism promotion with the city of Kamaishi in Iwate Prefecture. Airbnb & seems to be far more aware of the importance of winning the hearts and minds than many foreign companies coming into the market. Now, that’s all good news for Airbnb in Japan, and much of that information —you can find in the English language press. But now, let’s take a hard look at some of the pressures building up against Airbnb in Japan, and why we are going to start to see a backlash against them in the next 12 months. Listeners who follow Airbnb closely might recognize some of these as problems Airbnb has faced, and largely beaten, elsewhere in the world, but there is a dangerous undercurrent that is unique to Japan — and we will get to that. First, estimates are that about 90% of the Airbnb listings in Japan today are illegal. By illegal, I don’t mean in violation of the tenant’s contract not to sublease the apartment. I mean that about 90% of these listing are in violation of Japanese statute. For comparison, New York authorities claim that about 50% of the Airbnb listings there are illegal. Airbnb’s response to this in Japan, is much the same as it is everywhere else in the world. Airbnb insists that they are  just a technology platform, and that they require all hosts to abide by all local laws. They insist that they are Shocked! Shocked! to find illegal rentals going on in here.  They then vow to do everything that the local law absolutely forces them to in order to help resolve the matter. [Checkle] Now, it’s obvious that no one believes that. It is defensible in court, and such fictions do well in highly litigious societies like the US, where the question of whether Airbnb is legal is the most important one to answer. In Japan, however, the law is a much fuzzier thing, and intent often counts just as much as the actual actions. and that can be good or bad depending own who you are. Over the past year in Japan, neighborhood associations and landlords have been increasingly vocal in their opposition to Airbnb. Well, no kidding, I hear you say. Building managers and neighbors all over the world vocally oppose Airbnb. Local regulators around the globe are passing regulations designed to change Airbnb’s behavior. So what? Airbnb eats these people for lunch. This is nothing for Airbnb to worry about. That’s absolutely true. And it’s certainly possible that Airbnb will be able to stonewall until Japan comes around to their way of thinking. Possible, but not likely. On the surface, it seems like there is nothing unusual going on in Japan, but digging below reveals three trends that indicate that a large, visible, Airbnb backlash is coming. First, building management companies are being very aggressive about evicting tenants for being Airbnb hosts. In my apartment building alone I know of five such evictions. These people were all evicted within six weeks of hosting, and lost their security deposits. I’ve heard that other managers have been demanding to see rental contracts and even confiscating keys from from Airbnb renters, telling them they are trespassing, threatening to call the police, and then telling them they need to find somewhere else to stay. I don’t have any real stats on this. Its all anecdotal evidence. If you are from New York or Paris,

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness and product evangelists throughout Japan. They did not so much push their way into the Japanese market, so much as they were pulled into it. Even under the best conditions, however, Japan market entry is not easy and Derek Sorkin explains some of the challenges they faced with their distribution plans and the original go-to-market strategies. Managing to salvage a great ongoing relationship from what could have been a very ugly incident. Derek also explains why even in this age of Skype and go-to-meeting it’s absolutely essential to spend the time and money on airfare in managing international offices and to maintain trust and credibility. It's a great conversation, and I think you'll enjoy it. [shareaholic app="share_buttons" id="7994466"] Leave a comment Links & Resources The GitHub homepage Connect with Derek on GitHub @dsorkin Follow him on twitter @thesorkin Connect with him on LinkedIn Partial Transcript   Disrupting Japan, episode 62. Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening. GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness, and product evangelists throughout Japan. They did not so much push their way into the Japanese market so much as they were pulled into it. Even under the best conditions, however, Japan market entry is not easy, and Derek Sorkin explains some of the challenges they faced with their distribution plans and their original go-to-market strategies. And how they managed to salvage a great ongoing relationship from what could have been a very ugly incident. Derek also explains, even in this age of Skype and GoToMeeting, it’s absolutely essential to spend the time and money in airfare in managing international offices and to maintain trust and credibility. But Derek explains all of that much better than I can, so let’s hear from our sponsor and then 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 Derek Sorkin, the Asia Pacific for GitHub, who spearheaded GitHub’s entry into Japan and that’s what we’re going to talk about today, so thanks for sitting down with me. Derek: No problem, Tim. Good to talk to you again. Tim: Excellent. So listen, you guys have been here a while and you’re doing really well. Let’s step it back a couple of years. What did GitHub see in Japan? What was the motivation for coming here? Derek: We had quite an interesting background with Japan. Our co-founders had been coming here for some time for different conferences; working with companies like Digital Garage back in the day, talking to them; and open source has always had a strong foothold in Japan, things like many of the contributors to the Ruby Project, which GitHub is obviously built on to a certain extent. In Japan and Japanese. Tim: Ruby is from Japan. Derek: Right. So we always had a good core base of those Ruby developers that were interested in open source, that were using GitHub since very early days of GitHub, back in 2009 and 2010. So when we started in the B2B space and working with enterprises—and I think we’ll get into this a little more later, around how decisions are made in Japan—but that really helped us here. There were lots of the forward thinking internet companies. I say “internet companies” broadly, but internet gaming companies like that, that immediately took a hold with organizations on GitHub.com Tim: Okay, so even before you guys were here, you had brand awareness and you had users here in Japan. That’s a huge leg up in the market. Derek: Yeah. It makes it very interesting, especially at that time, a little more than three years or so, we didn’t have any staff in Japan. So all of our efforts in Japan to continue to raise that awareness and give back to the community were us coming over from San Francisco, from the U.S., or from wherever we happened to be around the world, for about a week at a time. Tim: You had one guy out here, Daisuke. Derek: Yeah, so that’s why I said three-and-a-half years ago. Three-and-a-half years ago, we hired Daisuke—Dice as we affectionately call him—and he was great. And still is great for GitHub. Tim: So let me ask you, you had brand awareness, you had a user base here from the very beginning, which is fantastic—so what was the trigger that finally made headquarters say now it’s finally time to set up headquarters in Japan for real? Derek: I think if I can point to one specific event, I was here back in early 2014, with one of the co-founders. We were going around and meeting with some of our existing customers here, and we were also invited to an event that one of the larger trading companies was putting on in Japan, where they had invited lots of other trading companies in and were asking lots of questions and we were on a few panels there. And I think that trip was really the catalyst in the co-founder’s mind that Japan is a very real market opportunity for us, and given that we had the brand recognition here—and that was obvious from the things we were doing like meetups around Tokyo or Yokohama, and that we had now people on the ground with Dice—we made the decision to put more of our investment in Japan and actually get some people on the ground here so we could continue to grow our business. And not just our business, but also the community and our engagement with that community. Tim: All right. That makes sense. It was a gradual and natural result of what you’ve been doing so far. Derek: Absolutely. I think just as a natural progression, we were at a point as a company where international expansion was imminent and we were at a point with Japan where Japan seemed like a very logical option for us to move towards. Tim: So how many users, how many customers did you have here when you pulled that trigger and said, “Let’s go into the market?” Derek: It’s hard for me to say exactly, but I could ballpark for you that we had around 75 customers on the B2B side, so certainly enough to be able to come out here and establish ourselves a little bit. And tens of thousands of paying users on GitHub.com and close to 750,000 on GitHub.com in general. Tim: So it sounds like GitHub was really more pulled into the market than trying to force its way into the market. Derek: Yeah. I would say we were in a very unique position, based on other that I’ve talked to, especially others that have done market entry into Japan, which certainly raised some unique things in our process of opening up the office here and expanding that presence, and working with that community. But we were in a very good position from the beginning. Tim: Excellent. How did you structure the initial entry? Was it through partnerships, was it a joint venture? Derek: We originally were intending to open up a small office here that was mainly going to be a sales and marketing arm for GitHub. We quickly realized that in the Japanese market, there is a necessity to have partnerships. Everything is done through partners. Or at least it certainly seems that way, on the surface, when you talk to companies that have recently made a market entry. Tim: It seems like across the board, most B2B software companies do a much higher percentage of their business through their partners Japan than they do in the rest of the world. Derek: Certainly, and I can see where that makes sense. Especially if you’re a U.S. based company accustomed to doing direct sales regularly, it almost seems foreign to—no pun intended—to come into a foreign market and work almost exclusively through the channel. That was further complicated by the fact that we had existing customers here but we decided to move forward with the partner approach and eventually we were brought on with a distributor here, and decided that instead of trying to manage 20 or 30 partners individually, we wanted one central distributor that could help us manage those partner relationships and help us drive sales to the enterprise here. Then we could continue to manage directly, the community side, community growth, active user growth on GitHub.com—some of the other metrics that are important to us. Tim: And is it okay to talk about who the partner was or do you want to— Derek: Sure, I think that’s public knowledge. We partnered with Macnica Networks to come into Japan. Tim: So you mentioned you have a lot of customers before your market entry. Were those customers also being handled through Macnica or was Macnica something you did during the market entry? Derek: It was something we did during the market entry. The customers that we had before—we had maintained and still do maintain relationships with almost all of them, with the exception of ones that had a strong desire to work with Japanese companies directly for things like invoicing, being able to transfer into Japanese bank accounts—lots of things that as we found out, we continued in the process of building out this market. [pro_ad_display_adzone id="1652" info_text="Sponsored by" font_color="grey” ] Tim: You ended up outgrowing that relationship pretty quickly. Actually—we’ll get back to that story a little later on because there’s a lot that happened between then and now. So the subsidiaries, the GitHub employees here were going to focus on community building and outreach support, and not so much work on the partner sales side. You already had a customer base in Japan, but after your market entry, did you discover anything about the product, or the services lined up around the product, that you needed to change for the Japanese market. Derek: Absolutely.

You don’t usually think of Japan’s geisha as being an industry, but it is. In fact, strictly speaking, it’s a cartel. A cartel that is now being disrupted by internet-based booking agencies and low-cost substitutes. It seems that even geisha are not immune to internet-based disintermediation. In this special interview Sayuki, Japan’s only geisha that holds an MBA, explains the business model behind geisha. We talk about the way things used to be, the current threats that have many geisha concerned that the traditional art form and the lifestyle will not survive, and how some geisha houses are trying to adapt. This is a rare, behind the scenes look at the business of being a geisha and a chance to see how Japan’s geisha might survive and even thrive in the coming digital age. It’s a fascinating discussion, and I think you’ll enjoy it. Show Notes for Startups How Sayuki broke 100 years of tradition to become a geisha How geisha are being challenged by both the entertainment and tourism industries Changing geisha from a private art to a public one Why geisha might not survive the modern era of tourism The geisha cartel is being challenged, any why that's not good for anyone The challenge modern geisha face on social media The changes in training for the next generation of Japan's geisha Links from the Founder Sayuki's home page  Follow her on twitter @sayukiofasakusa Become her patron on Patreon Follow her on Facebook Book a geisha experience Geisha Banquet in Tokyo Private Custom Shopping Tour with a Geisha Private Lunch with Sayuki Kimono Shopping Tokyo Tour [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 61. Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening. Today I’ve got something really special for you. We are going to talk about the kind of business that you’ve probably never heard any details about. Today we’re going to sit down and interview Sayuki, a Geisha. And since this is Disrupting Japan, we’ll be talking about the business side of being a Geisha. We’ll look at the Geisha business model and examine how it’s being disrupted by modern technology. And believe me, it really is. Now, listeners outside Japan might not understand how special this opportunity is. Traditionally, Geisha are not really supposed to talk about their business. Geisha create the illusion of comfort, beauty, and elegance, that is unsoiled by such base things as money. But make no mistake about it; it’s an illusion. Geisha is a very serious business and Sayuki, who also has an MBA from Oxford, has agreed to sit down and walk us through it. In fact, from a business point of view, Geisha are an established cartel that are being disrupted by new technology, the internet, and tourism websites in particular, and by low-cost substitutes. And there’s a very good chance that Geisha will not survive in their traditional form. In fact, many Geisha houses are proactively trying to adapt to this new market environment. But Sayuki tells this story much better than I do, so let’s hear from our sponsor and then get right to the interview. [pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: So today we’re sitting down with Sayuki, who is a bonafide Geisha here in Japan and we’re going to talk about the business of being a Geisha, so thanks so much for sitting down with me today. Sayuki: Thank you. Tim: First and foremost, a lot of our audience is either in Japan or knows a lot about Japan, but a lot of people don’t, so before I get started for the business can you clear up exactly what a Geisha is, what they do now, what they used to do? Sayuki: A Geisha means arts person, literally. So Geisha are traditional dancers or musicians, and most of the entertainment that we do is private entertainment. So we go to dinners and parties, which are usually in private rooms, and not large-scale public performances, although we also do those occasionally. Tim: Okay. You’ve been a Geisha now for about 10 years? Sayuki: Nearly. Getting there. Tim: Wow. Okay, so since this is an audio podcast, I should explain that you are Caucasian—you are not Japanese, which makes you very unique and I’m sure appealing in the world of Geisha. But can you back up a bit and tell us a story of why on Earth you decided to become a Geisha and how you managed to do it? Sayuki: Sure. I’m an anthropologist. I got my doctorate from the University of Oxford, and graduating, I started to lecture in Japanese studies, and also to make documentary programs for television for broadcasters like BBC or National Geographic Channel. And I took a slate of ideas one day to National Geographic Channel, including ideas about infiltrating the mafia and all of those kinds of things. And one of those ideas was to make a program about Geisha. Tim: So you started to infiltrate the Geisha? Sayuki: Instead, yes. Tim: Which sounds a lot more interesting and safer than infiltrating the mafia. Sayuki: My life could have taken a very different turn. Tim: I imagine so. I mean, but especially as an Australian, you can’t just decide, “I want to be a Geisha.” How did you get connected? How did you find someone willing to take you on? Sayuki: I looked first among my alumni and I was the first white graduate—the first female white graduate of Keio University in Japan, and it’s a school with a very strong alumni network. And it came in very handy in the Geisha world because many of the tea house owners are Keio graduates, many of the customers are Keio graduates, and it was a really great network, and they really looked after me and helped introduce me to the Geisha world. So I was very lucky in that sense. But it’s true that you can’t just walk into the Geisha world. There’s a lot of misconceptions. There was an American anthropologist in the 70’s, called Liza Dalby, who wrote an absolutely amazing thesis about the Geisha world, after researching in Kyoto for a year. She was living in the house of an ex-Geisha and somewhere along the road, in her research, they dressed her up and sent her out to a banquet to experience what it was like. And she wrote her thesis on the basis of that research. And some people have made the assumption that she became a Geisha because of that, but it’s actually very different to actually become a Geisha. For example, in Kyoto, to become a Geisha, they would have to change their rules, their constitution, to allow a foreigner in for the very first time in Geisha history. And that would be an absolutely major affair, as it was for me. It needed the agreement of all 45 Geisha in the Asakusa and of all the people who are connected to the Geisha world, and it was a very major decision, and there was absolutely no way possible that Kyoto would have made this decision in the 70’s. Tim: I’ve been in some hard negotiations before, but how did you manage to convince 40+ different Geisha houses to make this change? Not only accepting a westerner in but accepting—most people start off the Geisha training very young girls, right? So that’s a really big deal. How did you get them to make that change? Sayuki: I think I was really lucky and I had very good introductions and those people worked very hard on my behalf. Asakusa is a very conservative, very old fashioned district and a lot of people realize that Tokyo is very much more conservative in many ways than Kyoto is. Kyoto is very conservative in the look and the way they do things but they have many modern business methods that Tokyo still doesn’t have. So in that way, Tokyo is still very conservative. In that way, I think it’s surprising that I got permission to debut in Asakusa, knowing now what I know about the Geisha world. There’s other misconceptions that people make. They think that I opened the door and now suddenly the Japanese Geisha world welcomes foreigners in. That is very far from the case. That’s not true at all. To get in a proper town district now would be equally as difficult now as it was when I debuted 9 years ago. Since I debuted, there have been a number of foreigners who have worked as a Geisha in the countryside, or in former seaside resorts, or Geisha districts that have very casual standards, and they’re not at all the same thing as town districts. In some of those districts, they have fewer Geisha than they used to have and they have a lot of need of Geisha for tourists who suddenly come in at certain times of the year. So they recruit part-timers and all kinds of casual people. Tim: Geisha is not really a part-time job. In the town that—see, there is a very big divide between a town class Geisha district and a countryside, or seaside, or former lodging town. Though along the road from Tokyo to Kyoto, there were 52 stops, and every single one of those had some form of Geisha, but they were not high-class Geisha. Because they were servicing for people who stayed one night only. So the first one of those was Shinagawa. That wasn’t part of Tokyo in the old days. And it went on from there. Tim: So the further you got from either Tokyo or Kyoto, I don’t want to say the lower the standards got, but what is the right was to put it? Sayuki: They were just more casual because of the nature of the clientele. So there have been a number of foreigners that have debuted in countryside Geisha districts. Nowadays, I have to point out, anybody who is a Geisha nowadays is serious about their art and serious about their job as a Geisha. It’s not a profession that is very casual these days. But these foreigners, they were all married, and the ones that debuted in the countryside or seaside districts, and this is because you cannot work as a Geisha without long-term residency,

FinTech is one of the hottest startup sectors right now, but if you've been in the industry for a while, you know that FinTech is always one of the hottest startup sectors. And yet FinTech companies seem strangely local. Very few succeed outside their home markets. A complex web of regulations and local sensibilities almost always results in these firms struggling in overseas markets. PayPal wanted to make sure that did not happen to them in Japan. In this podcast, Jonathan Epstein explains how he brought PayPal into Japan. He talks in detail about how he got the Japanese regulators to sign-off on PayPal's innovative products, and also how he and his team had to throw out the US playbook and cooperate with other overseas divisions to build new retail and online markets from scratch here in Japan. Jonathan and I also talk about the exacting demands of Japanese consumers, and how those sensibilities convinced him to decide to start a project that drastically increased short-term costs, but might have saved the business in the long run. It's a fascinating discussion, and I think you'll enjoy it. [shareaholic app="share_buttons" id="7994466"] Leave a comment Partial Transcript If you read the news, you know that Fintech is one of the hottest start-up sectors right now and if you’ve got a long memory, you’ll also know that Fintech is always one of the hottest start-up sectors. Yet, Fintech companies seem to be strangely local. Very few succeed outside of their home markets. A complex web of regulations and local market sensibilities almost always ensures their failure. PayPal wanted to make sure that did not happen to them in Japan and today, Jonathan Epstein explains how he brought PayPal into Japan. He explains not only how he got the Japanese regulators to sign off on PayPal, but how he and his team had to throw out the U.S. playbook and build a new retail and online market from scratch in Japan. Jonathan also explains how the exacting demands of Japanese consumers forced him and PayPal to make a decision that dramatically increased costs in the short run, but saved the business in the long run. But Jonathan tells that story much better than I can, so let’s get right to the interview. If you’re a start-up thinking about Japan, you’ll never really understand the opportunities here until you start to take a serious look at what’s happening outside of Tokyo. Osaka in particular deserves your attention and this is especially true if you and your team are involved in smart cities’ technologies. Now Hankyu’s GVH#5 project is Osaka’s start-up central and it’s a great place for you to get started. They offer co-working space, bilingual business support, venture investment, and they’re at the center of a great international start-up and community. Now Hankyu’s GHV#5 in Osaka really deserves your attention, so pay them a visit at www.GVH-5.com/EN. You’ll be glad you did. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: So I’m sitting here with Jonathan Epstein, who led PayPal’s market entry into Japan. And you’ve done a lot since then but today we’re going to talk about PayPal and how all that came together. So thanks for sitting down with us. Jonathan: Thanks for having me. Tim: Delighted. Well, let’s get right into it. When PayPal was looking at the Japanese market, what was headquarters’ main motivation for coming into Japan? What did they see here? Jonathan: PayPal has actually been in Japan for several years and what they wanted to do was to expand their presence dramatically. Basically, the entire focus of their mission in Japan has just been on their existing internet based business. And that’s been driven by a lot of natural—people signing up for PayPal because they want to buy something at a shop that offers PayPal, they learn about it. Originally it’s been driven a lot by foreigners who came to Japan, and then it took off in Japan and reached a sort of critical mass, and has grown, has continued to grow. Actually grew quite well while I was at PayPal here, but not to the size or to the rate of some of the other— Tim: Okay. But when headquarters was deciding to put a little muscle behind this, when they were deciding to really focus on Japan, at any multisided market, the challenge is you need customers on both sides. In the U.S., eBay was originally the killer app for PayPal, but eBay never really took off here in Japan so what was the Japan strategy to get these initial users? Jonathan: eBay did not take off here, and really, the reason is because Yahoo Japan expanded so quickly as soon as it found the idea of what eBay could do. As a result, PayPal knew that it couldn’t rely on Yahoo Japan to achieve that same growth, and looked for other ways of doing it. PayPal has had a tough time in a lot of regions in developing beyond that original eBay franchise connection. It’s a great demand pull for a service like PayPal. Tim: So what was the key strategy to do that? Was the timing such that you thought eBay was going to be successful in Japan or did you know that that ship had kind of sailed? Jonathan: No, it was pretty clear that ship had sailed, and sunk. But at the same time, there were a number of different initiatives. First of all, it’s called the natural growth, which tended to be very unpredictable. That did very well and there were also technology-driven enhancements to the tools that we could offer merchants, that really didn’t exist in the market in Japan. The existence of those and the continual offering of those new products, like one-click and some of the latest best practices that teach retailers how to improve their flow through and decrease the number of people who drop off, that has done extremely well. The other piece of that was the PayPal Here device, which was basically a similar device to the square checkout device. Tim: That’s sort of a retail solution, right? Jonathan: That’s right. So they could do retail sales. So just as I was joining the organization, the thought was to launch that in Japan. Tim: How did that do? Jonathan: It didn’t do well. It launched to great fanfare but as it turned out, Rakuten beat us to the punch and also turned out that Rakuten had enormous sales resources that PayPal just didn’t have, unfortunately. Tim: Right. I think Japan must be one of the most competitive markets in the world for electronic payments. Even when you’re talking about on-site, JR, Japan Railways, has their own on-site solution, the Suica. Rokuten has got into the game, so it’s an incredibly tough market. Jonathan: It is. It is incredibly tough; that’s the right word. And very fragmented, so that makes it very difficult for a solution provider, or even for an individual merchant to decide what he should accept and what the best solution is. So price, inevitably, is one of the most important criteria, but price is only seen as—the whole added in price is not something people tend to look at. Tim: Right. It’s the first thing everyone asks about though. But I guess even an on-site solution—you’ve got the same multisided market problem you have online, where you need enough people with PayPal wallets who will spend it at the supported stores and you need enough stores to support the device that people will actually think to use it. Jonathan: Well, actually, with PayPal here or a square type device, you can use any credit card. It will accept absolutely any credit card, so you just stick it into the back of your phone and then swipe it. All you need is the software; it’s $20, and then a registration process to get going. Tim: That makes sense. So why you? Why did they select you to lead the company at this point? Jonathan: Well, I think you should ask them that. Tim: I’m sure it didn’t come as a complete surprise. Jonathan: I had come out of a heavily quantitative insurance background and had launched a very large, unique insurance product that’s cell phone insurance. It’s not the same market but there are fairly few people—at least who I can point a finger at—who have sort of the combination of Japanese language ability, plus strong enough English skills, and familiarity with how things work in the valley to be able to bridge that difference and sort of give some direction to a mixed team here. Tim: Okay. Well, as well as, introducing any new kind of financial product or financial service in Japan is, shall we say, non-trivial. Jonathan: Yeah, to say the least. Tim: So was PayPal up against some regulatory hurdles as well? Jonathan: The regularity situation was complicated and fascinating, and frankly, I learned a lot throughout the process. PayPal is, in many ways, more than just a product. It’s a toolkit; a variety of different services that you can offer to consumers and to businesses to help with transactions. It cut across legislation in almost every country that it works in, so depending on the regulatory structure of the country, that would be either a great thing for PayPal or a very difficult thing for PayPal. Tim: So in Japan, who has some kind of regulatory authority over PayPal? Jonathan: So in Japan, it was the FSA. And the word is—and I have no idea whether this is exactly true or not—the FSA actually designed this piece of legislation, the money transfer license, for PayPal. Not for it particularly, but as a result of the types of questions that PayPal was asking. Tim: Okay, so they designed this legislation before you went through the process or after? Jonathan: This legislation was designed. It had been rolled out with several other companies, but in very specific and limited ways, generally for transfer organizations like Western Union. So like a Western Union. Tim: What were the services that kind of put you under the jurisdiction of different agencies?

Spacee has staked out an interesting position in the sharing economy. Spacee enables companies and individuals to rent out unused meeting room space to people who need to hold a meeting. It's an interesting take on applying a sharing economy model to business. I’m generally very skeptical of startups who define themselves as “Uber for X” or “Airbnb for Y”, particularly in the B2B space, but Spaceee has already been in business for several years in Japan, and they are seeing strong traction and increasing revenues. They might really be onto something. Taku has some fascinating insights on why Japan, and Tokyo in particular, might be far more fertile ground for sharing economy startups than almost any other place in the world. It’s a great discussion and I think you’ll enjoy it. Show Notes for Startups Why the basic business case makes sense How large the meeting space market can grow The challenge of expanding outside of Tokyo Why Spacee turned down venture financing to bootstrap for three years Whats wrong with the current fundraising environment in Japan Which other companies are coming into the meeting room rental space Why Japan is uniquely suited for the sharing economy Links from the Founder Learn about Spacee Follow them on twitter @spaceejp Friend them on Facebook An interview with Spacee CEO on fundraising [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 59. Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. You know, the world is full of start-ups that define themselves as “the Uber of X” or the “Airbnb for Y.” Frankly, most of those business models don’t really make sense when you dig into them. Spacee, however, might just be onto something. Spacee rents out unused space around Tokyo to salesman, co-workers, or people who just need a quiet place to conduct a little business. As Takuya Umeda explains in the interview, it’s not just meeting rooms that are being rented out. The sharing economy is relatively new in Japan and Takuya and I talk not only about some of the problems its facing here, but why, in the long-run, Japan might be better suited for sharing economy companies than anywhere else in the world. He also explains why Spacee decided to delay taking outside investment for almost three years while they built their business and how that turned into an advantage later on. But you know, he tells the story much better than I can, so let’s hear from our sponsor and then 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 Takuya Umeda, co-founder of Spacee. Thanks for sitting down with me. Taku: Thank you, Tim. Tim: Spacee is kind of like Airbnb for meeting spaces, but that’s a really overly broad description, so why don’t you tell us a bit of how it works. Taku: Spacee is really like the Airbnb of business. In Japan, wherever you have a meeting, if you have an outside meeting, the only place you go is like Starbucks or a café. Tim: Right. Everyone meets in coffee shops. Taku: If there is a professional conference room, it costs really expensive. It’s probably like 5,000 yen per room, per hour. And at that price you can’t really do much, like brainstorming and start up some business plan. Stuff like that you can’t really do. And a café is not really good at it too. So we found that there is a gap between an expensive conference room and a Starbucks, so we fit into the gap. Tim: So something a little more formal and private than a coffee shop, but not quite as formal as a hotel meeting room or a service office. So tell me about your customers. Who is it that’s renting out these spaces and why are they doing it? Taku: You know, there is a lot of salespeople around and they stay locked in some business meeting, and I thought those people need some sort of private room. But we now run this firm for a little over three years and we found out that not only the sales guys are using it, but also like the regular firm, the marketing people, they don’t have enough meeting rooms in their office. So a bunch of business people are actually using our meeting space. Tim: Interesting. So people are using it for internal meetings? Taku: Yes. Tim: Do people usually rent it out for one hour or do they rent out a space for an entire day? Taku: Unusually they use like a little less than three hours. Tim: Okay. So morning or an afternoon. And on the supply side, what kind of places are renting space? Taku: We have three different types of rooms. One is like an office room, professional working space, and co-working space. There is a professional rental space and another one is a business office. Tim: So just someone with a little extra space in their office? Taku: Yes, or they have a meeting space but they have a new time. We have tutoring schools, language schools, karaoke places, and like an actual office. Tim: Karaoke spaces? Taku: Yes, karaoke spaces. Tim: Well that’s an interesting one. Who is renting out karaoke spaces? I go on a lot of sales calls and I’ve done a lot of sales meetings at Starbucks, but I can’t imagine doing sales in a karaoke booth. Taku: Right. Exactly, but sometimes they only need confidential, like they don’t want someone else to hear, or they need to quietly have a table so they can put the documents and stuff like that. So sometimes they don’t need a fancy conference room, they just need privacy. In that case, a karaoke room is fun to them. Tim: So in that case, are these people who are, “I need to find a place right now,” and they’ll find something locally? Or is it more people planning meetings in advance? Taku: It depends, but usually our customers book a room within 10 days. Tim: So 10 days in advance? Taku: Less than 10 days. Tim: Oh, okay. And do some people book it like 15 minutes in advance? Taku: Yes, sometimes they do that. Tim: Okay, that makes sense for those karaoke booths or small places but what about the offices? Isn’t there some resistance in these office of having people walking through? Doesn’t it disrupt the flow of everyday business? Taku: I think that happens too. So those people who care that they don’t [UNCLEAR 07:00], obviously. But think about it this way: a meeting room in an office used by employees to employees, employees to clients—those are the only two ways that normal office meeting space have use. But a known businessman and a known businessman has a meeting, you’re into the meeting room, but what’s the problem, right? If that is okay. And also, the room is like completely separated from your workspace. Those who use our website book the space. They don’t really come near your workspace. So the office way out, is like separated. Tim: Okay, so the companies who are renting out their own office space, are they companies that tend to have a receptionist who can guide the people too? All right, that makes sense. And of the three types you mentioned, the conference rooms, the individual offices, and the more general spaces, which are the most common? Taku: I forgot to tell the third one. We have another one, it’s like an Airbnb type. They rent out a small room and then post it on our website. Tim: So it’s a small room on a home? Taku: It’s like a one-room studio-type apartment. Like a SoHo mansion, really small Japanese studio type. Tim: Like 200, 300 square foot or 20, 30 square meters? Taku: Right. Tim: And of those three types, which are the most common? Taku: As amount, like professional rooms, maybe 50% of our rooms are from those of professionals. Then 10% are from those Airbnb type, but the most common user types are the everyday type rooms. [pro_ad_display_adzone id="1653" info_text="Sponsored by" font_color="grey” ] Tim: So most of the bookings are to these dedicated rooms that are just used for this? Is that because they’re so much cheaper than the conference rooms. Taku: I think there is two reasons. There is one that is location and the other is pricing. Because we basically use unused space, and unused space—we don’t know where it is. Sometimes it’s in a different location, sometimes it’s not. But the one Airbnb type, we put like 2 minutes from Shinjuku Station, or like one minute away from Shibuya Station, so it’s very close to the high-demand area. Tim: And it’s something that can be booked 15 minutes in advance, as needed. Taku: Like maybe 2 minutes or 1 minute is the least time that you could book. Tim: Okay, now you’ve clearly already got a lot of traction already. You’ve got over 700 spaces and over 300,000 bookings so far. My question is, how big do you think this market is? Taku: It really needs to change the game though, like let’s say, Uber. In the U.S., nobody raises their hand and catches a taxi anymore. You use a smart phone and tap the pin down, then call the taxi. Nobody has a booked room at the moment. Only a Spacee user does. Tim: Well that’s the interesting thing because with something like Uber, for example, they’re displacing the taxi industry. There is a behavior that the customers already have and they’re just substituting their product with another product. With Airbnb, people understand hotel rooms or bed and breakfasts, and they’re just replacing their service with another. But Spacee seems to be kind of different in that way, in that there’s not an existing market for people renting this kind of space. Taku: They already had a meeting in their business, in office hours, they have a bunch of meetings everywhere in there. They have meeting rooms in the office, fixed-cost meeting rooms, and if there is a valuable cost meeting room in an office,