This Is Why Japanese Startups Can’t Pivot

Japanese enterprises are particularly susceptible to disruption, and Japanese startups have a harder time than most pivoting. Both of these problems stem from the same root, and today we are going to dig up that root and have a look at it. Today we sit down with Shogo Kawada co-founder DeNA, and we talk about both the challenges of the company’s early startup pivots and the post-IPO difficulties they faced with new disruptive challengers. Shogo is now one of the most active and successful angel investors in Japan, and he explains how both the role and profile of Japanese angels is shifting. He also outlines the reasons why their presence is leading to several positive changes in Japan’s venture capital ecosystem. It’s a fascinating discussion, and I think you’ll really enjoy it. Show Notes How both eBay and DeNA screwed up auctions in Japan Why most business alliances fail Why startups will always have the advantage with new technology How to get started in angel investing The only thing the can force Japanese corporate VCs to change their structure Why the current startup bubble is different from the dot.com bubble What will happen when the current bubble bursts Why Japanese VCs never take technology risks Links from the Founder Follow Shogo on Twitter @shg A brief history of DeNA [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Disrupting Japan episode 97. Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Japanese startups have trouble pivoting. Business and social conventions make it really hard. Once the team, the company or the country has committed to a certain path, with Japan’s consensus-driven approach to decision-making and the importance placed on maintaining social harmony, it makes it very hard for an individual to stand up and say, “Hey everyone, I think we’re on the wrong path here.” Business convention in Japan requires you to simply pitch in and pull your weight. This is one of the reasons that Japanese companies, particularly the large enterprises are so susceptible to disruption. But some Japanese startups have been able to pivot their way through multiple business models and into a successful IPO and those are the ones that we need to study to find out how they did it. And today, Shogo Kawada, co-founder of DeNA takes us through the exciting story of one such case study. We talk about why DeNA was able to pivot relatively easily from auctions to commerce to mobile gaming but why it was unable to make the jump from web auctions to mobile auctions or from early mobile gaming to smartphone-based mobile gaming. We discussed the core reason for the problem and examine possible solutions. And we also talk about the rise of angel investors in Japan and how they’ve changed the way investing works here. But you know, Shogo tells that story much better than I can. So let’s hear from our sponsor and get right to the interview.   [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ]   [Interview] Tim: So I’m sitting here with Shogo Kawada, the co-founder of DeNA. Thanks for sitting down with me. Shogo: Thank you very much. Tim: I’m sure most of our listeners know DeNA. It was one of the most important gaming startups of the .com generation. You founded it with Tomoko Nanba in 1999 and you’ve become one of the most active angel investors in Japan now. So before we dig into current investment trends in Japan, I want to back up a bit and talk a little about you and DeNA. Shogo: Basically, we started DeNA as an e-commerce company. It first started, it’s PC-based auction service in 1999. Tim: Okay. So originally, the idea was to compete with Yahoo Auctions and eBay? Shogo: Yes, exactly. When we started, at that time, there’s no Yahoo Auction. Yes,