Disrupting Japan

Today is the first episode off our new expanded format. From today, we’ll be covering both disruptive Japanese startups and detailed market entry case studies of global companies that are disrupting Japan from the outside. Oracle first came into Japan more than 25 years ago, but the challenges they faced and overcame then are exactly the same ones firms are facing today in executing their Japan market entry. Allen explains why Oracle needed a unique sales and marketing strategy for Japan, and how he managed to get buy-in from headquarters — even though Oracle already had a sales and marketing program that had proven fantastically successful in other markets. We also talk about how Oracle managed to negotiate a amicable exit out from their exclusive distribution agreements not just once, but twice. That’s an amazing accomplishment considering that many foreign companies have destroyed their Japanese business the first time they attempt it. But Allen, tells the story much better than I do. I think you’ll enjoy the interview. I know I did. [shareaholic app="share_buttons" id="7994466"] Leave a comment Partial Transcript Disrupting Japan, episode 58. I’ve got some big news for you today. Disrupting Japan is going to be twice as big, twice as informative, and twice as frequent. From today on, we’ll be sending out new episodes every single week. To do this, we’re going to be expanding the format. Half of our interviews will be with start-up founders, just like before, and half of our interviews will be with people who are disrupting Japan by bringing foreign companies, technologies, and innovation into Japan. This really makes a lot of sense because as fans of Japanese history know, foreign pressure has always been a powerful agent of change in Japan. I think you’ll find these additional episodes very interesting. And to kick things off today, we’ll get a chance to sit down and talk with my good friend Allen Miner about the challenges Oracle faced, and overcame, when breaking into Japan. I’ll warn you in advance that this episode is longer than most, and believe me, I cut things to the bone. But there is just too much great information about how to overcome both the personal and professional challenges that foreign companies face here. I felt like I would be cheating you if I edited out any more. In fact, Allen explains how Oracle successfully maneuvered out of an exclusive distribution agreement, not only once, but two separate times. This is something that has sunk more than one foreign company here. But Allen tells the story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] [Interview]   Tim: So I’m sitting down here with Allen Miner and Allen, you’ve been involved with the market entry of a lot of companies into Japan. But today I want to focus on the one that you led personally, which was Oracle Japan. So let’s back up. What was attractive about the Japanese market? What made Oracle decide that they needed to be in this country? Allen: Actually, that happened a few years before I joined Oracle. In, I believe it was 1982, Oracle was about a $5 million a year company worldwide, 5 years old as a company, and just released their first commercial version of the Oracle database software. There was quite a bit of press about, “How interesting is this relation to technology? It doesn’t require traditional programming to do data manipulation.” And the U.S. press got read by some technical geeks in Europe. And one in particular in Japan said, “This sounds really interesting. We ought to figure out if we can bring this cool new technology to Japan.” Tim: So it was a partner company pulling you in? Allen: Yeah, it was a company called Digital Computers Limited, that at the time was building DEC VAX clones. Because Oracle originally was released on the DEC VAX computer platform, the president of that company, a gentleman named Mr. Yamada had read an article about it. So this is when we reached out to Oracle and see if we can sell their software in Japan and that contact from an interested Japanese distributer was what got it all started back in 1982. Tim: Okay. Even today, I think that still a really common case. Allen: Yeah. I think it is. For companies that come into the market early, perhaps earlier than they are really ready, I think that’s the most common. It’s very common for a young company with really interesting technology to be found by someone in Japan, or other countries of the world. Everyone knows that Japan is potentially a big market. I don’t think there’s a question of the potential opportunity or the size of the potential market in Japan, but often it is the trigger of, “Oh, someone is interested in our software in Japan.” Tim: But it seems like that could really be a two-edged sword. Oracle was not a small company at that point. Allen: No we weren’t. It was 5 million in revenue, maybe 60 people. There was no international division at the time so the person who took the inquiry was one of, I think, 3 or 4 U.S. sales representatives. Tim: How did you guys vet this company? How did they make sure it was for real? Allen: The president and one of his technical staff, I understand, flew to Oracle’s headquarters in California, met with the sales team at length. I’m sure that because they were clearly well-informed about the DEC VAX environment, they had customers for their computer products, they clearly had some kind of understanding with what you could do with a relational database that I think was some technical vetting, maybe not a lot of time spent on what they might be able to do in the marketplace. I’m not sure that Oracle really, at that point, had really figured out how it was going to grow the market. Tim: So it just was a good strategic fit and it was a market they couldn’t have addressed anyway, so let’s give it a try. Allen: They weren’t even actively pursuing international opportunities yet so I think our initial entry into England, the Netherlands, and Japan all started that way, with some local geek who was always staying on top of the latest technology trends reaching out and saying, “We’d love to distribute your software in our country.” Tim: All right. So things obviously went well for them. They sold the product. Allen: Yeah. Tim: How did you get involved? When did they bring you on board? Allen: Well, as Oracle continued to grow, we expanded the platforms that the product ran on. It was initially on the VAX, then we introduced UNIX platforms, the PC, and even IBM mainframe computers. As we were expanding the platforms for Digital Computer Limited, the UNIX environment and the VMS environment were quite comfortable. But when we wanted to introduce a mainframe product, they didn’t know anything about the IBM space, they didn’t want to get involved with the IBM space, and by that time we had hired a vice president of international. I think he had one or two staff and their company was maybe a couple hundred people by then, worldwide. The decision was that we were now proactively trying to grow the business internationally and if the distributor in a particular country was not interested in the mainframe product, we believed at the time we were going to have a huge business in the IBM mainframe world. Turned out not to be the case but at the time that was what the folks in Oracle believed and because Digital Computer Limited didn’t understand, didn’t want to pursue the mainframe space, the decision was made to identify a second distributor in Japan that would focus on the mainframe products. This was in 1986 that this work was going on—or 1985 rather—and we added a second distributor called NESHEEN Products that had experience with the product out of Germany. Tim: So for the structure of this, did each of these distributors have an exclusive right to resell the product— Allen: So Digital Computer Limited had exclusive rights around the VAX line of computers. NESHEEN Products had exclusive rights around the mainframe and both companies were free to sell the UNIX and PC products. Tim: Okay. This is a challenge I think a lot of companies get themselves into coming into Japan, is if you give a distributer exclusive rights, and they’re successful, you’re going to want to come into the market yourself and that’s exactly what you did. Allen: That’s exactly what happened with Informatic. Tim: How did you deal with that? How did you kind of change the game for these exclusive arrangements you had? [pro_ad_display_adzone id="1652" info_text="Sponsored by" font_color="grey” ] Allen: Well, I think—remember we had the two distributers in Japan with distinct sectors of the market. I think between the two of them, the fact that we had those two distributers and we did not have a Japanese language product at the time, and the two distributers apparently were arguing about what the specs should look like and which of them should be authorized to build it for Oracle. Which of the two were technically more competent to advise us on building a Japanese version. That is the situation in which Oracle came and interviewed me on the campus university, and when they noticed that I was not only a computer science student, but I spoke Japanese, the recruiter said, “We want to hire you.” He said, “Oh, I see you speak Japanese.” I said, “Yes, but why is that relevant in a computer programming giant?” And he explained the situation, “We need someone to sort this out for us.” And it was the first time I realized that there was such a thing as making software work in the Japanese language. Tim: Right. It was a lot harder back then. Allen: And no one had really figured it out yet.

Material Wrld has found a way to innovate in online fashion commerce, and that’s no easy task. It’s a crowded market, with tight margins. Rie Yano and her team, however, have found success by going against common wisdom. While their competitors were focused on building platforms and reducing the amount of work required by their staff, Material Wrld went the other way. They began to take on inventory risk and doing some of the most labor intensive parts of the process in house. This is the kind of move that looks foolish on the spreadsheets, but it turned out to be instrumental in enabling Material Wrld to maintain quality, develop lasting relationships with their customers and ultimately control their own brand. It’s an amazing, and somewhat surprising story, and it’s best if you hear it directly from Rie herself. Show Notes for Startups Why people feel guilty throwing out clothes How a credit card provides a physical anchor for an online brand Why traditional recycle shops need to change The need for cross-brand data in fashion commerce How Material Wrld handles inventory risk, and why? What kinds of pieces are easiest to sell online. Why doing things that don't scale pays off when building a brand   Links from the Founder Learn about Material Wrld Check our Rie's articles on Medium Follow her on twitter @rieglobe Friend her on Facebook [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 58. Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening. It’s hard to innovate in online commerce today. It seems like everything has been tried before and now we’re just looking at variations on a theme. At first glance, Material Wrld seems like just another online fashion marketplace but that first glance is deceiving. There is something very interesting going on here, but before I tell you what that is, I want you to meet someone. Online marketplaces are usually designed to be low-risk, low-capital organizations that focus on marketing building a technology platform with the buyers and sellers doing as much of the work as possible. Rie Yano, the founder of Material Wrld, however, ended up taking a very different approach. By taking on inventory risk and shifting non-scalable labor requirements onto her own team, they were able to build and scale a unique fashion commerce brand, where so many before have failed. Her reasoning may surprise you a bit, but you know, she tells the story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: So, I’m sitting here with Rie Yano of Material Wrld and thanks for sitting down with me. Rie: Thank you, Tim, for inviting me. Tim: Great to have you here. So, Material Wrld is a fashion trade-in service and, well, rather than have me explain it, why don’t you explain a bit about what material world is and how it works. Rie: Sure thing. Material Wrld is based in New York. We are a service that helps women easily refresh their closets. Often times, we find ourselves waking up, looking into a closet and feeling a sense of guilt or frustration in that what’s in your closet may not be what you want to wear or how you feel that day. We created Material Wrld so that you can constantly evolve your wardrobe. One day you might be feeling like you want to be a powerful woman. Another day, you might feel like you want to dress with some beautiful, emotional colors. Making sure that our service can enable that idea or feeling that you have by making the refresh very simple. Tim: So, usually that’s done by just buying more clothes but Material Wrld has a little bit of a different approach. What are the mechanics? How does it work? Rie: Sure. Everyone thinks about shopping for new clothing when they think about trying to become different or refreshing. Where we’re quite different is really focus on the reuse of designer fashion pieces with quality that lasts long. We know that even if one piece of fashion may not be good for you anymore, if it’s a high quality, then there is definitely going to be someone else that is going to be excited to have that in their wardrobe. So we connect second-hand clothing by using this trade-in service where a woman can easily mail in their fashion pieces that they’re no longer wearing to us and instantly get an offer to go and shop new. In the meantime, the collected fashion pieces are then re-sold to our customers so that we can then excite them with these new pieces of merchandise. Tim: So what seems to be different about Material Wrld is you don’t simply give them store credit or send them a check. You have a very interesting system with sort of a pre-paid card, and you’re connected with several of the department stores where they can use that. Do most of your customers choose to use those credits to buy new clothing or do they choose to buy clothing that other customers have traded in? Rie: It’s actually both. We actually started by offering gift cards to retailers in exchange and we only launched this reloadable, pre-paid debit card last fall, in 2015. And we did so because we wanted to create this card—essentially it sits in your wallet once you register with Material Wrld and it becomes so instant and easy. You don’t even have to think about the chore and the pain of trying to clean up your closet and get rid of things. All you need to do is mail things in, do nothing else, and we’ll take care of everything for you. All you need to do is check your debit card because we’re going to continue to reload it with money real time, that can then be used with our retail partners. We think of it as like a fashion currency so you can’t use it at Starbucks. You can’t go and use it to fill up your gas. It’s really focused on continuously evolving your closet. Tim: I also love the idea of the card because it provides an anchor for your brand into your customer’s everyday experience. They’ve got this in their wallets, they’ve got some money on it, they’re constantly reminded to go spend that money, at your partners, or to send you more clothes. Rie: That’s right. So it’s really connecting the two experiences. When you think about it, shopping for new things is like this fun sport. It’s exciting; the day you shop something, you’re excited to show people, you want to wear it to work. But then the feeling of getting rid of things is horrible. It’s painful, it’s like a chore, it takes time, and whether you’re going to donate it, sell it, throw it away—it’s not easy. It’s not. So we thought is how can we make that getting rid of fashion part something that is rewarding, and exciting, and easy, so that you can feel great about it. And you can only feel great about it if you also feel that it’s doing you good. So the easiest thing to do is to throw it away. Tim: Right. And that’s that sense of guilt. Rie: Oh, absolutely because you’re going and buying new things and wasting precious pieces that could be worn for many more years. The sense of guilt, when you’re just throwing it away because it’s the most convenient thing to do, is quite awful. But if you know that someone else is going to take care of it and make sure it’s going to find a new home. Tim: It will be loved somewhere else. Rie: Exactly. That’s an exciting feeling that you don’t have to do the work but you have chosen a service that will allow that to happen so you can really focus on the fun part of going and deciding what else is exciting for your wardrobe. Tim: Do you find that your customers are using this service as part of their seasonal buying routine? Do you see the spike of returns from the same people every fall and every summer? Rie: That’s an interesting question because when we started this service, we thought it would be maybe end of season, following the trends in the retail cycle. Our repeat customers actually use this every 2 months. Tim: Every 2 months? Rie: Every 2 months, on average. What that means is, on average, our customers are mailing us about 10 pieces of clothing each time. So every 2 months, that cycle is happening. Tim: Huh. So that’s not seasonal. Rie: It isn’t. Tim: Is that just the time it takes someone to get used to or get bored with a particular piece of clothing? Rie: For us, what we recommend—and it’s actually what I do myself—is if you have something new in your closet, it’s time to let go of something else. It’s really not about waiting until that end-of-year moment when you really have to do your big cleanout in the house. It’s a constant refresh to just make sure you have a current closet that continues to speak to how you want to dress. Tim: Okay. And after 2 months, I guess that’s the time it takes before you realize that, no, this really isn’t for me. Rie: That’s right. Tim: Time to let it go. Rie: That’s right. And a lot of things trigger that feeling. Sometimes it’s obvious things like you’re moving apartments, or you got promoted, you got married, you had kids. There’s a lot of transition moments. It makes sense that you want to refresh your wardrobe for those transitions. There are other reasons. When we talk with our customers of why anyone would want to continue to evolve their closet, it doesn’t come with any kind of specific trigger. It really is a bit more emotional and that’s why, for us, we realize that letting go of pieces of clothing, even if you haven’t worn it for a year, is a very emotional experience for our customers. Tim: Okay. Actually, tell me about your customers because fashion in general, and even sort of the luxury consignment space, it’s fiercely competitive. So are focusing on a particular niche within that industry? Who uses Material Wrld?

The aerospace industry has been particularly resistant to disrupting in Japan. In the rest of the world, launch vehicle and spacecraft technology has made incredible gains over the past decade, but here in Japan its still mostly the same government contracts going to the same major contractors. Naomi Kurahara of InfoStellar, has come up with an innovative way to leverage existing aerospace infrastructure and to collaborate globally by renting out unused satellite ground-sataion time, Airbnb style. You see when an organization launches a satellite, they also build a ground station to communicate with it. The problem is, that as the satellite obits the Earthy, it’s only in communication range of the ground station for less than an hour a day. The rest of the time the ground station just sits there. By renting out that unused time ground-station operators earn extra income, and the satellite operators are able to communicate with their satellites as often as they need. It’s a great interview and I think you’ll enjoy it. Show Notes for Startups Why the Airbnb for satellites startup model makes sense The demand-side problem Why this market is much larger than it seems today The key growth drivers in the satellite market Why the Japanese aerospace industry can't innovate How to run a startup as an expectant mother What challenges women scientists still face in Japan How Japan could better support working moms Links from the Founder Learn about InfoStellar [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 56. Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. Aerospace in Japan is particularly resistant to disruption. Over the past decade, the rest of the world has seen incredible gains in both launch vehicles and spacecrafts. But Japan has been moving slowly. Sometimes it seems as if she’s determined to stay the course with the same government contracts going to much the same corporate heavyweights year after year. Naomi Kurahara of InfoStellar once had plans of changing the Japanese aerospace industry. But along the way she went out on her own with a plan that bypassed Japan’s major players and targeted the global market. You see, when an organization launches a satellite, they usually also build an antenna and a ground station to communicate with that satellite. The problem is that as the satellite orbits the Earth, it’s only communications range with the ground station for less than an hour a day. The rest of the time the ground station just sits there. So, Naomi decided to pool all of the unused ground station time together and rent it out to satellite operators, Airbnb style. Everybody wins by sharing resources. The ground station operators get income by renting out their facilities and the satellite operators get to communicate with their satellites far more often. But Naomi explains it better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: Cheers! I’m sitting here with Naomi Kurahara, the CEO and fearless founder of InfoStellar, so thanks for sitting down with me. Naomi: Thank you for inviting me. Tim: Now, InfoStellar is basically time-sharing for satellite ground station, or Airbnb for satellites, but it’s a complex idea so why don’t you explain a little bit about what InfoStellar does. Naomi: Okay, the reason I started this business is the aerospace space has an issue for cost. Like satellite is expensive, and rocket is expensive, and ground station is expensive because, maybe, not many people are using. Tim: Well, aerospace is incredibly expensive but actually I think before we get into InfoStellar’s business model, I think it’s going to be best if you explain what ground stations are and how they work. Naomi: Okay, so there is three main components for space business. That’s the ride, or spacecraft, and the rocket, which delivers the spacecraft from ground to space, and after the delivery, the operator has to control the spacecraft somehow because most of spacecraft doesn’t have people on board. It could be a space station, maybe only space station. But most of the spacecraft do not have an operator, so the ground operator has to control this spacecraft. So we need to send some commands. For that, we use radio and radio communication. So the antenna system and some computers to process the commands. Tim: So the ground stations, they’re what’s around the big parabolic antennas that everyone’s used to seeing on the ground and they both get data from the satellite? Naomi: And to the satellite. Tim: And give instructions back to it? Okay. Now that that’s clear, tell us about InfoStellar’s business. Naomi: To go back to the issue of this business, the cost. The cost is so expensive in this business, it’s difficult to launch or start. And for the ground site, one ground station, including one dish antenna, maybe it costs $300,000. So to reduce the starter’s price, there is only one way to reduce the cost, which is to increase the usage. Tim: So increase the usage of the ground stations? Naomi: Yes. If only one person uses, maybe 1% or 2% of the whole time is used. Tim: So InfoStellar allows the sharing of these ground stations, right? So, traditionally, if I’m putting up a satellite—I build my satellite, I pay someone to launch it into orbit for me, do I usually build a dedicated ground station to track that satellite? Naomi: I say yes because most of the satellites, the government requires you to stop anytime. Make sense? So the many operators have to have one ground station at least. Tim: Now, how much downtime does a ground station have? If I’ve launched my satellite and I’ve got my ground station, in one day, how many minutes, or how many hours are that ground station and that satellite communicating? Naomi: It depends no location. For Japan, I can get only 30 minutes per day of communication time. Tim: 30 minutes per day? So 23 hours and 30 minutes, it’s just not being used? And that’s the time that InfoStellar wants to rent out and to share. Naomi: To reduce the cost, I want to make the usage higher. Tim: Right. That makes sense, renting out that unused capacity. Now, I don’t imagine that all ground stations are the same. They must have different frequencies and different ways of communicating with the satellites. How does InfoStellar work with that. Naomi: Well, all satellites have different but I can still categorize some satellites because the frequency, there is an allocation amount for satellites. For example, there is a band called X-band, it’s about 8GhZ so for satellites, can use about 8 to 8.4GhZ, and the other X-band satellites cannot use. Tim: Okay. So it is fairly standardized. All right. The protocol used to communicate between a ground station and a satellite must be completely different for every satellite so how does it work? Naomi: Just a program. The many satellites have a protocol or an option. So I have to make sure that every station can process the many, many satellites. Tim: Okay, but I would imagine the stations themselves, they don’t have to understand the data they’re getting, right? They just have to collect it and send it into the cloud and get it to where it has to go. Naomi: Correct. I have to think about the analog side and the digital side; for an analog signal or digital signal. For the antenna, they take care of the analog and for analog it’s more easier. Many satellites can be categorized or they have some subbed out frequencies. Tim: It sounds like there’s enough standardization so you can at least attack the problem. So, for any multi-sided marketplace, you’ve got the supply side and the demand side. And the biggest challenge is always getting both sides on board together. So let’s first talk about the supply side. Have you been able to get a good collection of ground stations signed up for this service? Naomi: Okay, they need the dish antenna but also I need to have another type of antenna called Yagi antenna. The antenna looks like a fishbone on the buildings or the houses—that’s called a Yagi antenna. So other types of antennas can receive or can transmit the UHF or VHF frequencies. It’s not VHF or UHF, it’s a type of frequency category. Tim: So who owns the ground stations that are signing up? Naomi: So, for Yagi antennas, the individual person. For the dish antenna, maybe a private company or sometimes a university has. Tim: All right. You’ve gotten ground stations throughout Southeast Asia on board? And how did you make those sales? How did you convince people to join this? Naomi: Well people who have antennas, the people usually have their own satellite because the two operating their satellites, they have their antennas or their ground station. So they have the same issue, they have the antenna on one station but the usage is 30 minutes to 1 hour per day. Tim: I see. So I guess on the supply side it’s an easier case because they’re not using it for 23 hours a day. Okay. So it’s very appealing to them. [pro_ad_display_adzone id="1652" info_text="Sponsored by" font_color="grey” ] Naomi: Yes, they have a maintenance cost issue. Sometimes the Yagi antenna requires maintenance to change frequencies or get some new functions, so they still need maintenance and maybe $5,000 to $10,000 per year. Tim: So $5,000 to $10,000 per year for maintenance costs? Naomi: Yes. So it’s not big but it still costs. Tim: Sure, it makes sense. If they can get a little bit of income to pay for the maintenance, it’s a great idea for them. That makes sense on the supply side. So let’s talk about the demand side. I’m curious, how big is this market?

Disrupting Japan is two years old and ready to party.  To celebrate, we gathered the leaders of Tokyo's venture capital community together in front of a live audience of made up of the thought leaders of Japan's startup community. We all had a few drinks and talked about fundraising in Japan, the future of venture capital here, and how startups can best get in touch with and impress VCs. Our panel included some of the top VC investors in Japan, which naturally led to an amazing discussion. Shinji Asada (@asada23) - Japan Head, Salesforce Ventures Hiro Maeda (@djtokyo) - Partner at BEENEXT James Riney (@james_riney ) - Head of 500 Startups Japan We discuss the challenges or fundraising in Japan, growing a Japanese company as a foreigner, what Japanese VCs can learn from their foreign counterparts, and what kind of of pitch mistakes will ruin your funding chances. On a personal note, it's hard to believe that two years have gone by already. Disrupting Japan has grown larger, faster, and with a more engaged and passionate community than I ever imagined it could. Today, thousands of people from all over the world listen to each episode, and we are featured regularly in English-language and Japanese-language news and podcasts from all over the world. And to keep things fresh, I have some big surprises coming up in the next few months, so stay tuned. I want to offer a sincere thank you to everyone who has pitched in to help make Disrupting Japan a success. There is no way I could have built this by myself.  I'm lucky. I have great subject matter to work with. Japanese startups and Japanese startup founders are far more innovative and far more interesting than most in the West give them credit for. I look forward to continuing to bring you their stories. Thanks for listening!   [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for coming out tonight. You guys are awesome. All right, to our listeners at home, or wherever you might be in podcast land, we’ve got a special show for you tonight. We are broadcasting live from Super Deluxe in Roppongi with the most creative and dynamic group of people in the world, which is Tokyo’s start-up community. All right, and we’ve got an astounding panel discussion for you, and before we get to that and our kampai, I’ve got to call out three members of the start-up community who really helped put this together. There is absolutely no way I could have done it without them. They are start-ups themselves and you should know a little bit about them. So, first is Justa.io and I think Elena is here from Justa. Where are you Elena? Everyone wave at Elena. So, Justa is Japan’s, really, best start-up job board. If you’re an engineer or a programmer looking to work at a start-up, or if you’re a start-up looking to hire engineers or programmers, you want to talk to Elena. Second, I want to introduce Creww, with two W’s. And what Creww, with two W’s, does, is they run open innovation programs for Toyota, and Panasonic, and JTV. And these big companies really want to work with start-ups, but they’re bad at it. So that’s where Creww comes in to help out. They also have a start-up kit, which is a bundle of goodies from IBM and Microsoft and a bunch of big companies, that they give away for free. And Kozue is here from Creww. Kozue, where isKozue? Way in the back over there. Now,Kozue will pretend she doesn’t speak English but her English is really good so don’t be shy. And last, and certainly not least, is Digital Hub. You will see these guys running around with cameras and microphones, documenting this event for all posterity. And you want to talk to Steve, who is over there. So, these guys also do great commercial work. You can see it on the website or you can see it right now. They’re going to be producing this, you might be watching this on YouTube right now, and they do amazing work, don’t they? All right, so without further ado—is that yours? We seem to be one bottle short. Oh, James got two of them, did he? All right. [JAPANESE] A nd now, we will go back into English. And I’m going to break with convention here and I’m going to make the introductions because I know you guys and I know if I hand you a microphone and I tell you to talk about yourselves and your portfolio, I would not get that microphone back for a good 30 minutes. So, on the far left, we have Hiro Maeda, who is currently the head of B-Next. And before that he started Beenoes incubation and acceleration program. Before that, he started one of the very first, and still one of the most successful accelerators in Japan, Digital Garage’s OnLab. And, in the center, James Riney, who is Japan head for 500 Startups. And before that, you put in some time at DeNA as well. And, rounding out our group is Shinji Asada, who is now head of Salesforce Ventures Japan, and before that, you were working at Itochu  Techno Ventures and, quite frankly, probably has more years of investing and VC experience than the rest of us here on stage combined. So you can take that either way you like. I meant it as a compliment. So, let’s get started. [pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ] [Pannel Discusion] Tim: So, the first question I’ve got for you guys: Now, this is, Hiro, especially for you, but all of you, I think in the last few years there’s been a tremendous interest in investment in Southeast Asia. There has been a lot of funds, both from the U.S., that have focused not so much on Japan but on Chia and Asia, and even a lot of Japan funds that have been seemingly more interested in what’s going on in Southeast Asia rather than what’s happening in Japan. And so I’m wondering, what’s behind this? Why is this happening? Hiro: Yeah, I think 60% of our fund is allocated outside of Japan actually. Primarily India and Southeast Asia. And the reason why is mainly because of China. Over the last decade you see China’s GDP grow 4x and its rankings go, they were up from like 52nd, surpassing Japan and what’s happened is a lot of the Japanese investors, including ourselves, see that and like, “What the hell just happened and why are we not a part of that party?” And so when you think about where is the next China, where can we find the next Chia, you look at basically the companies with really high GDP growth, which is currently India, Southeast Asia primarily, Jakarta, or Indonesia, right, and that’s the reason why a lot of investors, including ourselves, are looking outside of Japan to invest. Tim: So do you think it’s mostly—it makes sense on the fundamental level or is this more of a herd behavior? Hiro: It’s more like fear of missing out. So, I mean, it sucks that we weren’t part of Alibaba, right? James: Kind of, I mean Japan was, right? SoftBank? Hiro: Yeah, I guess SoftBank was part of Alibaba, but that was the only Japanese entity that was part of it, right? And so, yeah, we’re looking for the next Alibaba. Tim: Well, James, your portfolio is only Japan. Are you worried about missing out? James: Well, actually at DeNA, I was doing investments in Southeast Asia, so I am familiar with Southeast Asia and our Southeast Asia fund has been doing quite well. So I think Southeast Asia is obviously a really important market to be in, but at the same time, I think, at least from the Japan side, part of it is that Japanese just like to be in Southeast Asia. I think there is definitely a little bit of like they just want to travel. Hiro: It’s fun to party there. James: But that’s important. I think Southeast Asia has a lot of soft power for VC’s in Japan. However, you don’t really see U.S. money in Southeast Asia and so the only exception is Sequoia and even Sequoia invests from their India fund, right. So it’s not really U.S. money. Tim: So do you think we’re going to see that kind of growth? Do you think that Japan has the kind of growth potential that Hiro was talking about for Southeast Asia? James: Well, listen, Southeast Asia is an emerging market, so comparing the macro side, obviously there’s going to be more growth in Southeast Asia, Japan is just a developed market, but there also are going to be other opportunities in Japan that aren’t going to come up in Southeast Asia. More on the technology side, for example, because you have much higher education levels, you have the infrastructure in place, things like that. So yes, maybe you’ll see something similar to what you’ve seen in China. But I think there’s sort of this thinking like, as you mentioned, probably infatuation with Southeast Asia but, I mean, Southeast Asia is a very fragmented market. In particular, when we’re talking about Southeast Asia, maybe it’s Indonesia actually. So, fourth largest country in the world in terms of population, so obviously there is going to be a lot of similarities between that growth that you saw in China, and now we’re seeing something in India, probably the next one is going to be Indonesia as well. And that’s probably getting faster, and faster, and faster, because there’s so much, as you mentioned, on each stage. Hiro: We are very fear-driven animals. James: Exactly. VC’s are very emotional, right. The best thing you can tell a VC is, “Oh, yeah, we’re not fundraising. No, we don’t need money.” But, like, “No, no, take our money!” Tim: So the spreadsheets are all just a front? It’s all a façade? James: Exactly Shinji: You know, looking at your question about Southeast Asia, I did some quick research but the facts are wrong actually. So 2014-15, the majority of investments of the VC money was pumped into Japanese start-ups. And for 2016 Q2, if you look at research that’s done by VEC, 67% of the money was invested into Japanese start-ups.

Ten years ago, everyone know that e-commence would drive most retail stores, especially specially stores out of business, and with the Amazon juggernaut plowing ahead, there were very few dissenters. But something very interesting is going on right now. Many e-commerce companies are opening physical stores. Even Amazon, going against all economies of scale, is opening up brick and mortar bookstores in expensive locations with full-time staff. And there a good reason for this trend. There is something very reassuring about holding a product in your own hands. And it’s something that can’t really be replaced with high- resolution photos and customer reviews. Tomohiro Hagiwara of Aquabit Spirals has committed both his company and a large part of his adult life to bridging this gap between the physical and the digital world and is helping online retailers jump into the physical world. Of course, Aquabit Spirals’ technology does much more than this, and Tomo tells an interesting story of how it took his company more than six years of work before they closed their first deal and became an overnight success. It’s an fascinating discussion and I think you’ll enjoy it. Show Notes for Startups What is SmartPlate, and why is it important? Why e-commerce offline needs to come offline How to close global deals as a small startup The difference between going global and being global Why Tomo abandoned his first business to follow his dream The value of accelerators in Japan Why founders can't work at big companies Links from the Founder Learn about SmartPlate Follow Tomo on twitter @hagi_w Friend him on Facebook SmartPlate pitch-deck SmartPlate explainer video Coverage on VentureBeat [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan   Disrupting Japan - Episode 54 Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening. Ten years ago, it was a common knowledge that e-commerce would drive most retail shops especially small specialty shops out of business. With the Amazon juggling up, moving it full speed, there's no reason to really doubt that opinion. But something very interesting is going on right now, many e-commerce companies are opening physical stores at expensive locations with actual products and full-time staff. Even Amazon is opening up Brick and Morter bookstores across the United States The truth is, there's something reassuring about holding a product in your own hands. It's something that can't really be replaced by high-res photos and online reviews. Tomo Hiro Hagiwara of Aquabit Spirals has committed his company, in fact, committed a large part of his adult life to bridging the gap between the physical and digital worlds. But before I'll introduce you to Tomo, let me introduce you to someone else. Now, Tomo once had a thriving, profitable app development business that employed over 30 people, but he was committed enough to his vision of connecting the physical and digital that he turned down work and laid off most of his staff so he could focus on it. After working on it in obscurity for 6 years, he's now becoming an overnight success. But, Tomo tells the story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] Tomo:          Okay, cheers! Tim:            Thank you. Tomo:         Thank you. I'm very glad to see that you're here Tim:                     I'm sitting here with Tomo Hagiwara, CEO of Aquabit Spirals, and thanks for sitting down with me. Tomo:                  Yes, thank you. Nice to meet you here, and I'm very glad to meet you today. Tim:                     Great! Now, Aquabit Spirals makes the smart play which is a physical device that allows bookmarking physical objects with your phone, I think you can explain it much better than I can. What is SmartPlate and who uses it? Tomo:                  SmartPlate is a physical bookmark, we call. It directly carries visual content to your Smartphone directory, just thriving only Smartphone on our device. Then, our SmartPlate can connect to certain places with internet services or content directly. Tim:                     Okay. So, I'm looking at two versions here. One looks like a card and one is about the size of your thumb. Tomo:                  Also, we have another type -- Sticker type. Tim:                     What's the technology that's going on when you wave your phone ever this? How is it communicating? Tomo:                  Ah, Okay. We use NFC technology - Near Field Communication, and also we can sample through QR code -- bar code technology to the labeled content. Not only QR code and NFC but also, we can sample Bluetooth Technology - BLE. We know it well as IPCon or something. Tim:                     On the technology level, what happens when I wave my iPhone over this SmartPlay? What's happening? Tomo:                  iPhone? Tim:            For example. Tomo:                  Please use android, at first. Tim:                     Okay. But, I wave my android phone over this SmartPlate -- what happens? Tomo:                  Our device can deliver, can connect to sync to the internet content as I told you. So, it opens an online content directly on your browser or launches some specific application directly from the plate. Tim:                     Okay. So, how is this different from, for example, the functionality of a QR Code? Tomo:                  Basically, the same and if she doesn't need to install the specific application in advance. No apps to use it. So, please imagine how to use QR code to get a content. You have to find the apps, bar code apps at first, and then, tap and launch it, and then scan the QR code. It's now easy for everyone. Tim:                     This requires no application to be installed on the phone at all. Tomo:                  Yeah, right. Tim:            And right now, it only runs on Android, not yet iPhone? Tomo:                  Right now, yes. But, iPhone started NFC technology already on hardware, but it's only protected on software right now. We were just waiting and we'll open the technology for everyone. Tim:                     Fantastic. Let's talk a bit about how this is being used now because you got some really interesting things going on. You're running a showroom in Osaka. Tomo:                  Yeah, okay. That case is a retail industry and we install SmartPlate into our partners, our Brick Store in Osaka. Actually, they don't have stock spaces in the store that means that's just a display for all our products in the store. Tim:            It's literally just a showroom? Tomo:                  Showroom, just showroom. Tim:            What kind of store is it? Tomo:                  It's a DIY stall store. Tim:            Okay. So, power drills and things like that? Tomo:                  Right. Actually, their business started in an e-commerce site, so they're main business is online selling DIY goods and that means we cannot pack and fill all products online. Tim:                     So, each item, each drill or saw would have a SmartPlate underneath it. You would tap your phone to fill your shopping card? Tomo:                  Then, if you would tap some drill in the showroom, it opens the landing page on your browser and it shows some buttons on that one screen, a youtube movie on how to use it. Another button, there is the product information from the manufacturer and another one can open shopping card online. Tim:                     Okay, so it's more than just e-commerce. So, a lot of information, product into --- Fantastic. Tomo:                  Right. Yes. Tim:                     I always find it interesting when companies move against the trend. So, all the Brick and Morter retailers are opening up on an e-commerce site. But, here we are, an e-commerce company, opening up a Brick and Morter Shop. Tomo:                  Right. There's no inventory and there're no cash registers.   Tim:                     Right. That's a very innovative use of this technology for a first customer or an early customer. How did you convince them to try this? Or did they approach you with the idea? Tomo:                  It's my idea. [pro_ad_display_adzone id="1652" info_text="Sponsored by" font_color="grey” ] Tim:            So, you approach them with the idea? Tomo:                  Yeah. Right. It's about 3 years ago, I got that idea of using NFC technology in the showroom so that we can sell all our items. I got that idea in the summer and that DIY store, the CEO of that company, is my old friend. And so, I remember him -- "This is good for him." I called him in that summer and I explained my idea and he was very excited. Tim:            And so let's give this a try. Tomo:                  Yeah. Tim:                     And how did that work out for him? Is it selling well? Is it popular? Tomo:                  In Japan? Actually, not so popular than now. This is a very brand new user experience, and probably as you know, NFC technology is not so popular in Japan. Currently, it's only for payment, as we know, -- FeliCa technology, it's part of NFC technology. In Japan, currently, we have only cases to use NFC technology for payment. So, it's not to give information for everybody or not for selling some items in a physical place. My case was faster in Japan, maybe not only in Japan but into the global market. Tim:                     But, I love the idea. I supposed right now, the fact that it doesn't run on iPhone yet is a bit of a problem for the showroom experience. Tomo:                  iPhone doesn't start reading NFC information right now. Probably,

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