Disrupting Japan

There is far more to startups in Japan than SaaS software and IoT hardware companies. Biotech startups are beginning to make a mark here. Today we sit down and talk with biotech pioneer Mitsuru Izumo and talk about his ground-breaking work at Euglena. In many ways, the team at Euglena succeeded where even NASA failed. They have developed a process to cultivate this microorganism, also called Euglena, affordably and at industrial scale. And Mitsuru and his team use using Euglena to create everything from inexpensive nutritional supplements to biological jet-fuel. Mitsuru tells an amazing story of how he took his startup from inspiration to proof of concept, to IPO, and how the real innovation is just getting started. I think you’ll really enjoy this one Show Notes Why the same organism can produce both food and fuel Why Euglena has been impossible to cultivate at industrial scale The world does not have a hunger problem; it has a nutrition problem How to move forward when no one believes in your vision How small companies can get to scale in Japan Why Japanese startups must IPO sooner than those in the West Why NASA gave up on Euglena, and why they were wrong Links from the Founder Learn about Euglena, the company Learn about the  Euglena, the organism Follow  Euglena on Facebook [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. Today, we’re going to talk about slime. Well, actually no, not slime exactly we’ll be talking about algae. Well, actually, the biology nerds out there and I think it’s awesome if you are one, will point out that technically, we aren’t actually talking about algae but a unique organism called euglena, that has both animal and plant characteristics. And we’ll also be talking about a unique company, also called Euglena, that is cultivating this organism at scale and turning it into everything from nutritional supplements to jet fuel. In fact, in this episode, we drink our opening toast not with our usual Anchor Steam beer but with a glass of euglena. Now, I know what some of you are thinking and yes, university research labs and crowdfunding sites are packed with companies claiming that their pet organism is the key to solving a wide variety of mankind’s problems. But Euglena is not operating in a lab but commercially and at massive scale. And today, we sit down with the founder and CEO, Mitsuru Izumo, who explains how he overcame initial market skepticism to get financial backing. How he was able to achieve what NASA could not. And how and why he decided to take his company public. But you know, Mitsuru tells that story much better than I can. So let’s hear from our sponsor and get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] [Interview] Tim: Cheers. Mitsuru: Yes. For starting. Cheers. Tim: That’s pretty good. So, I’m sitting here with Mitsuru Izumo, the founder of Euglena. Thanks for sitting down with us today. Mitsuru: Thank you for coming today. Tim: I think most of our listeners are not familiar with Euglena, either the company or the organism. First, what is the organism? Mitsuru: Euglena is a kind of tiny microorganism. You can’t see it directly. You have to see through microscope because the length is only 0.1 mm. Tim: So that’s about the diameter of human hair? Mitsuru: Yes. Exactly. Very similar to the human hair. Little bit smaller than the hair. Euglena is green colored microorganisms and euglena have a lot of chlorophyll. Euglena can do photosynthesis by capturing carbon dioxide to produce oxygen and carbohydrate. Tim: Euglena, it’s a single cell organism. Is it a type of algae or is it its own unique type of organism? Mitsuru: It’s difficult to answer. Euglena is a kind of algae, green colored and categorized as a plant. What makes euglena unique is that euglena is a kind of algae and at the same time, euglena can move by itself. Tim: Okay. Mitsuru: Euglena has both plant and animal characteristics. Euglena have both plant and animal genes. And Euglena can produce both plant and animal nutrition. Tim: So it’s a difficult organism to classify. But if we think of it as kind of a single celled algae, we won’t be too far off? Mitsuru: Mm-hmm. Tim: What’s it good for? Mitsuru: Euglena can produce plant, dietary fiber, fruits and vegetable vitamins, animal protein, dietary fatty acid. You can see in fish oil, every 59 types of nutrients, euglena can produce at one time. Tim: So as a food supplement for people or as a standalone food? Mitsuru: Yes. Standalone food. And it can be cultivated under the sunlight like normal plant. Every plants your see in nature have are very flexible so it’s difficult to be digested. Euglena can move by itself, doesn’t have [flexible] at all therefore the nutrition can be very easily be digested. Tim: So far, the euglena company has been focused on applications in food and cosmetics primarily, right? Mitsuru: Right. Tim: But you’re researching a huge spectrum of applications as well, right? Mitsuru: Right. So there are so many different strains of euglena, over 100 different types of euglena. There are 100 different types of euglena. Tim: Okay. So it’s the euglena strains you use for food are completely different from the euglena strains you would use for fuels or for fiber. Mitsuru: Exactly. So every day, I check and test many kind of euglena. And after the screening process, we cultivate special series of euglena. Tim: A little while later, I want to dive deep into the specific applications that you’re working on and that other companies are working on around the world for this. But just to give me an idea of the scale, you’ve been in production for several years now. So annually, how much euglena are you producing? Mitsuru: The last five years production is doubles every year. 2017, we can produce 100 tons of euglena in a year. Tim: 100 tons per year? Mitsuru: 100 tons as a dry powder. Tim: And your major manufacturing facility is in Okinawa? Mitsuru: In Okinawa. We have a major cultivation factory located in Okinawa, and the most southern part of Japan, Ishigaki Island. Tim: Why did you choose Ishigaki and Okinawa? [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Mitsuru: Of course, we need a lot of sunlight. Carbon dioxide is everywhere but we need a lot of sunlight. Tim: Okay. But theoretically, this could be cultivated almost anywhere? Mitsuru: Yes, theoretically. But since 1980s, a lot of scientists in the United States and in Japan, they were very interested in the cultivation of euglena because euglena has wide range of nutrients. But it was absolutely impossible. Euglena has wide range of nutrients than every kind of bacteria, planktons, they love to eat euglena in nature. So it’s tremendously difficult to cultivate euglena purely and it’s impossible to prevent from biological contamination. They had set up special facility like green dome, you can see in the semiconductor factory to prevent from other biological contamination. But it’s very expensive and the production capacity was extremely limited. Tim: So what did you do differently? How did you achieve production at scale? Mitsuru: At the time, only 100 grams euglena can be cultivated in a year. This year, 2017, we cultivate 160 tons of euglena. The turning point is 2005. We invented the new cultivation liquid, preventing biological contamination. We don’t need expensive green dome or facilities. Tim: Okay. So the broth or liquid allows the euglena to feed, to thrive but doesn’t allow the other bacteria and the other organisms that would eat it to grow there? Mitsuru: Exactly. Tim: You’ve been ramping up production almost doubling every year, is the doubling of production due to new technology developments or are you simply increasing the scale of your facilities? Mitsuru: We simply expand the capacity of the cultivation or other facilities every year. Tim: Okay. Before we get further into the technology and the applications, I want to back up a little bit and talk about you. Before you were mentioning that the whole inspiration for this project started on a trip you took to Bangladesh in your student days. Mitsuru: Yes. When I was a student, 18 years old, the first grade in the University of Tokyo, I visited Bangladesh in 1998. Bangladesh was regarded as the poorest country in Southeast Asia. The visit was a very shocking experience for me. In Bangladesh, there were a huge amount of rice curry and rice, rice, rice. So many rice are there but the people couldn’t access fresh vegetables, egg, milk, fish, and meat. Tim: So the problem wasn’t one of hunger. It was on one of nutrition? Mitsuru: Yes. The problem was malnutrition. I came back to Japan and I decided to solve the malnutrition program in developing countries. Tim: Okay. But you took a bit of a detour from there because before founding Euglena, you graduated from Todai. You went to work for Mitsubishi Bank. Why the detour into banking? That seems pretty far away from international aid and nutritional problems. Mitsuru: It’s very simple. The lack if fund. It’s financial program. I didn’t have any reputation for solving the malnutrition program. Everyone couldn’t believe that euglena can solve the malnutrition program and the mass cultivation of euglena was regarded as impossible. Tim: This is something I think so many new college grads are struggling with in Japan. Was your decision based on an inability to get funds?

There’s a very good reason most Japanese hardware startups fail. Today we sit down with Takuro Yoshida CEO and founder of Logbar, and we dive into the reasons and also go over Logbar’s strategy for avoiding the mistakes that have killed off so many other Japanese IoT startups. Takuro is the creator of one of the most successful Kickstarter campaigns and two of the most successful IoT projects in Japan, the Ring Zero, which is VR controller in wearable ring form and the ili automatic translator, which is just starting to gain real traction. Of course, we dive into how he managed to create and bring these products to market, and we also talk in detail about Takuro’s unusual journey from professional bartender to successful startup CEO. It’s a great conversation, and I think you’ll really enjoy it. Show Notes How to go from bartender IoT startup founder Why a successful Kickstarter campaign can be a danger to your company Why the Ring failed as a hardware controller Why hardware translators will succeed where software-based translators have failed How hardware devices will survive in the world of a standardized mobile phone platform Why even in Japan all publicity is good publicity Why Japan has fallen behind in hardware and how it can catch up Why Japanese VCs don't want to invest in hardware startups Links from the Founder Find out about Logbar Info on the Ili translator  The video that got Logbar so much attention [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. You know. One of the biggest changes I’ve seen in Japanese startups over the last 20 years, in the increasing number that are coming out of Japan’s top universities. I’ve got to say there’s both a positive side and a negative side to the large number of new startups being founded at these universities, particularly at the University of Tokyo. On the positive side, it’s great that so many of Japan’s top students, students who have the option of a fast track career in government or a Japanese industry are choosing to take a risk and start a company. It’s a concrete sign that things really are changing in Japan. However, the fact there there’s been such a large number of founders from the University of Tokyo in particular, shows that in some ways, not that much has changed. The fact is that when Todai ramped up their entrepreneurship program, they brought resources to bear that only they could. Todai students have access to government connections, funding, and industry programs, and alliances that no one else in Japan had. Some founders in Todai rely heavily on these connection, some almost exclusively, and others barely use them at all. And in the end, of course, outside of a small handful of startups that rely primarily on government investment, all startups will succeed or fail in the same public marketplace. Still, however, sometimes the most inspiring founders are those who come from somewhere you don’t expect, someone who takes an unusual and u likely path to entrepreneurship. And Takuro Yoshida of Logbar is a founder in that mold. When I first met him four, five years ago, he was tending bar and trying to innovate bartending. Over the past few years, he and his team have run one of Japan’s largest Kickstarter campaigns and developed, released, and secured national and international distribution for two completely hardware products. And I think you can learn a lot from him. But you know, Takuro tells that story much better than I can. So let’s hear from our sponsor and get right to the interview. [Interview] [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Tim: So I’m sitting here with Takuro Yoshida of Logbar, one of Japan’s most creative internet of things startups. So thanks for sitting down with me today. Takuro: Thank you. Tim: Logbar has created both The Ring and ili automatic translator. So before we get started, why don’t you just tell me a bit about the company an about your products? Takuro: Okay. So we started our company from since like 2013. Actually, Logbar comes from real bar. Tim: Right. Takuro: I was a bartender and then I was making a cocktail -- Tim: Well, actually, that’s right. The very first time we met, I was running EngineYard and you were running the bar and you just developed a system that would let people order drinks on the iPad. Takuro: Yeah, that’s right. Tim: Yeah, I remember. Takuro: Okay. Yeah. We are doing that. That was fun. You can order a cocktail in the bar and then you can communicate with people. Tim: I want to talk about your history in a little bit. But first, tell us about The Ring and tell us about the automatic translator. Takuro: Okay. So Ring, you put in the finger and then if you do the gesture, maybe you can turn on the TV or you can control the music in the app or maybe you can play the game. And so that ring is kind of a gesture control device that we made. Tim: Is it Bluetooth? Takuro: Yes. You connect with Bluetooth to an app on a smartphone like iPhone or Android and then you can use that. Tim: To control just about anything? Takuro: Yes. Tim: And you also released the ili automatic translator which is a hardware device that translates which languages? Takuro: Japanese, Chinese, and Spanish, and we are supporting Korean too. Tim: Cool. Let’s back up to your bartending days. Takuro: Yes. Okay. Tim: That’s bit of a job. What got you interested in programming in startups and side projects? Takuro: Each year, I go visit Silicon Valley because I used to live in there for one year and a half. I was a student. And then after I came back to Japan, I always dream of like, I want to be an engineer or I’m going to make like entrepreneurs in Silicon Valley. So every year, I kind of do the presentation. I make some idea and then presenting to the VC in Silicon Valley. But most of the time it doesn’t work. It didn’t work, yeah. But I always challenge that. Tim: What kind of ideas did you have before Ring and before ili? What were the ideas that didn’t work out? Takuro: Before, I had a girlfriend. I lived in New York and then my girlfriend is in Japan. So it’s a long relationship, right? So I made web services. It’s like Facebook or MySpace.com but only for two people. Only me and girlfriend. So that’s a kind of SNS like social network service I built. It was great. In Japan, I got some users but in the US, none. It’s kind of hard to get it. So that is the one idea. And then next one is like a Twitter, like one sentence each time and then you can communicate with random people, something like that. So I kind of made some web services mainly focusing on communication. Tim: You were saying you were talking to VCs and making these presentations and not getting a lot of success that way. But when you started Ring in 2014, you didn’t use a VC money. You ran one of the most successful Kickstarter campaigns. So before Kickstarter, was this an idea the VCs rejected? Takuro: Before the Kickstarter, we raised some angel fund. It’s not that big amount but amount that is enough for making prototype. And then after we made the prototype, almost ready for the mass production, we started Kickstarter and then we could raise the money for the mass production. Tim: Okay. So the Kickstarter was a combination of fundraising and marketing? Takuro: Marketing, yes. Tim: I mean, you raised over $800,000 on that campaign but the production didn’t go as smoothly as you expected. Takuro: No. Tim: What happened during production? Takuro: Hardware is kind of hard to mass produce always. One change takes some time, two or three months. So at that time, we were expecting to ship it maybe July but we shipped there like October. So three months late. Tim: By Kickstarted standard, that not too bad. Takuro: It’s not too bad actually, yeah. Tim: Were the delays caused just because this was your first time building a hardware or was there any particular problem you ran into? Takuro: I think that was because maybe we have lack of experience with making hardware because I’m the first time to actually build the hardware that time. So we couldn’t know the risk each time. If I do this, maybe it takes more time or something like that. I don’t know. Tim: Did you do the manufacturing here or in China? Takuro: We did the Ring in Japan, actually. Tim: Really? Takuro: Yes. Tim: So all the manufacturing local? Takuro: Yes. So made in Japan everything, yes. Tim: Actually, that should reduce a lot of the risk. A lot of the problems that other founders have had with hardware have been dealing with suppliers and quality control issues. What advice would you have for other hardware startup founders or other internet of things founders so they can avoid these kind of delays? Takuro: I think to avoid the delay, you need to experience the hardware. So we have to trust the factory all the time. The factory, our partner, it’s not their fault actually. Tim: Right. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Takuro: Always our fault, most of the time. I always say, “I want to do this. I want to add new function.” And then they said, “Okay. But it takes time. Is that okay for you?” We always try to improve the hardware. Tim: Okay. For a software startup, development cycle might be one week. You’re doing weekly sprints. You might have monthly and quarterly goals but your basic cycle is a week. Takuro: Yeah. Tim: For hardware startup, we are dealing with factory. What’s the ideal cycle time? Takuro: To make the prototype, usually takes three or four months.

Disrupting Japan is three years old, so we decided to invite a few hundred movers and shakers from Tokyo's startup community over to have few drinks and to hear three of Japan's most successful startup CEOs talk about what it takes for Japanese startups to succeed globally. Our panel included the CEOs of some of the most innovative startups in Japan. Ken Tamagawa (@kentamagawa) - CEO, Soracom Takuma Iwasa (@cerevoglobal) - CEO, Cerevo Shin Sakane (@laundroid_0 ) - CEO, Seven Dreamers We talk about strategies for global growth, how to best manage multi-cultural teams, and the likely future of hardware and IoT startups in Japan. In fact, we talk a lot about the challenges hardware startups are facing in Japan today. Japanese hardware startups are at a crossroads. The old model of hardware innovation is failing, but there is a new model, unique to Japan, that might just take its place. But, as our guests explain, things are far from certain. It's a great conversation, and I think you'll enjoy it. On a personal note, thank you for reading and listening and for being a part of Disrupting Japan. When I started this project three years ago, I never imagined how big it would become, or how large, passionate, and global the interest in Japanese truly is. I want to offer a sincere thank you to everyone who has pitched in to help make Disrupting Japan a success. There is no way I could have built this by myself. I have access to a bottomless well of innovative and genuinely interesting Japanese startup founders, and I look forward to continuing to introduce them to you and to bring you their stories. Thanks for listening! [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. You guys are joining mw. You guys are awesome. Audience: [Cheering] Tim: I’ve got to admit, that is the exact response I hear in my head every time I say that phrase. Audience: [Laughing] Tim: Before we get to the kampai and to the panel discussion proper, there’s a few people I really want to thank, who without them I couldn’t have put this show together. The first of which is Creww. What Creww does is they run about 80% of the corporate accelerators in Japan. So if your startup wants to hook up with a large corporation or you’ve got a big company who want to hook up a startup, you need to talk to Creww and Segawa-san is hanging around somewhere. Where is Segawa-san? Waive. I can’t see you from up here, so. There he is in the back. Talk to Segawa-san and also, Creww is opening a new co-working collaboration space to help startups connect with enterprises. It’s just up the street. Second, I want to give a big shout out to the Carter Group. Dominic Carter is here somewhere, himself. There is Dominic over there. And so, for those of you who have done business in Japan, which is pretty much everyone here, the things never quite work out as you expect them to. The Carter Group provides market intelligence and market research that help companies grow their business here or come here in the first place. Their processes and the prices are extremely startup-friendly. So if you want to grow your business here, talk to Dominic. And last but certainly not least, I want to give a big shout out to Digital Hub. Now, you’ll see these guys running around with cameras and microphones, documenting this for all of posterity. Don’t talk to the guys with the cameras. But they also do some great corporate video work. So if you’re looking for video — and who isn’t these days — talk to Steve, who is over there. Audience: [Applause] Tim: So, I’d like everyone to raise their glasses and thank you guys so much for being with me for three years and over 100 episodes. And I hope you come along with me for the next 100 episodes in the next three years. Thank you so much. Kampai! Audience: Kampai! Tim: Cheers! All right. Audience: [Applause] Tim: Now, we get to the meat of the show. Now, I want to introduce the panel myself because I know these guys. If I just let you talk about your companies, you’re going to use up all the time. So, on my far left is Shin Sakane of Seven Dreamers. They have been one of the most innovative in aggressively exporting hardware companies in Japan. You’ve done everything from carbon fiber golf shafts to a medical device that fits in the nose for some reason. But you’re most known for the Laundroid, laundry-folding robot, which you’re releasing overseas and Japan at about the same time. Shin: Right. Tim: In the center is Ken Tamagawa of Soracom, who makes extremely affordable and flexible connectivity for internet of things and connected devices, and who is in the process of selling his company to KDDI. Nothing’s been officially launched but it’s been leaked all over creation. And on my immediate left is Takuma Iwasa of Cerevo, who is one of the most innovative device makers in Japan and one of the leaders in the maker space here. I will say you’ve got one of the most interesting models for global expansion that I’ve ever heard of. So, let’s hear it for the panel. Audience: [Applause and cheering] Tim: So first and foremost, I want to talk about going global. In all of your cases, the global market has been extremely important to you. How soon in your company history did you decide to go global and why did you do it at that time? Shin, let’s start with you. Shin: We have three products and two of them are already launched. Our strategy is initially start marketing in Japan. Japanese market is one of the, I shouldn’t say easiest, but really kind of the warmest, is the nicest marketplace I ever think. So, if we cannot be successful in Japan, forget about global expansion. Just like we test market in Japan, and once we found it successful and immediately go global. That’s our strategy. Tim: So basically as soon as you find that that product market fit, you’ll take it global? Shin: Right, right. Tim: Okay. Shin: It’s about like one year or a little bit less than one year after we launched in Japan that we just go global. Tim: And do you think the Japanese market is easy because you’re Japanese or is there something unique about the market that makes it easy? Shin: So good thing about Japanese market is, I think — maybe I skip this. Tim: We’re going to come back to that question. Audience: [Laughter] Tim: Ken, How about you? You took a different route but the international markets are really important. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Ken: Yeah. Actually, let me talk about my background. So, I used to work for Amazon Web Services (AWS). I really like the business model, kind of, global platform business. So when we started Soracom, we want it to make naturally global platform. So when we started the company, actually, I registered entity in the data ware first then we tried to fundraise money but we couldn’t. So we switch to Japanese company. What I actually understand is what our team has unfair advantage is in Japanese market. Because I knew a lot of people, VCs and also the many, many CIO, CTO of the companies, so we changed our strategy. First, we start Japanese company. Then after we demonstrated our product strength, immediately, we started expanding our business to the global. So we started our business is 2015 September then last year 2016 December, we started business in the US, then EU. Tim: It sounds like it’s pretty much the same strategy. As soon as you validated the product, you went overseas. Ken: Exactly. Tim: Why? Why was that important? Because so many Japanese companies are Japan-focused. It’s much easier and it is a very big market. Ken: Because if we demonstrated our product is very good, somebody might copy our business. But before other doing that, we want to go global. And also, if you look at the technology like AWS and other smartphone and platforms, it’s not that difficult to go global in terms of technology. Tim: True. For the technology going global and the company going global are really different. Actually, let’s talk about that in a minute because before then, Takuma, why don’t you explain your global strategy? Because I think it’s a very interesting one. Takuma: Yeah. I just understood why I invite here, because of my companies. I have to explain about my company’s very curious strategy because every startup company is focusing in the mass market or future mass market. Laundroid is like this. I think the second is on product. It’s future, the washing machine or future something but my company doesn’t focus to any mass market. Our product is a really niche product. I worked I Panasonic for years, and Panasonic is really focusing on the consumer market. That was very tough for me and very tough for the Japanese startup companies. That’s why the Japanese startup company doesn’t have huge money compared to Silicon Valley. Then I changed my company strategy to the global niche. That means we are slicing very, very small the users in India, in US, in UK, in Japan like this. Tim: You’ve developed a lot of very, like you say, global niche. Things like smart snowboard bindings and streaming video that clips on to video cameras. So for WiFi and strange anime connected gun looking things. I don’t know what it’s called. Takuma: The name is dominator. Tim: Dominator. That was it. Takuma: Raise your hands. Anyone knows dominator? Oh, very small quantity. So let’s see the anime. The name is Psychopath. Tim: But this is interesting. So Shin and Ken were saying that they find product market fit in Japan first and then go global. But it sounds like what you are saying is that you didn’t get that much interest in Japan, and you got greater interest overseas. Takuma: Yeah.

Corporate Japan is about to go through a major transition in its approach to computer security. In the past, Japan-only payment systems and the Japanese language itself provided a barrier that kept international fraud and attacks at a very low level. All that is changing now. With payment systems becoming increasingly global, and free, instant translation available to anyone with a browser, fraud is on the rise in Japan. Today we sit down with Atsuyoshi Shimazu of Caulis, and he’s going to both explain the new threats and explain exactly what he plans to do about them. He’ll also explain why Japan’s current approach to the internet of things means that things might get worse before they get better. It’s a great conversation, and I think you’ll enjoy it. Show Notes Why 50 million accounts are at risk in Japan Why some Japanese companies avoid taking security measures Toyota's vision of connected cars in the gig economy What security looks like in an IoT world Why online fraud is about to skyrocket in Japan Japan's susceptibility to ransomware attacks Why hacking insurance might be the future of security Why Japanese CSOs and CIOs are so bad at their jobs Links from the Founder Connect with Atsuyoshi on LinkedIn Friend him on Facebook Find out about Caulis Follow them on twitter @CaulisJP Visit them on Facebook Find out if your account has been hacked at Have I Been Pawned [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. Today, we’re going to talk about fraud. Online fraud, hackers, scams, identity theft in Japan, and what exactly we can do about it. Now, I’ve been involved professionally in IT in Japan for more than 20 years, and that includes both enterprise scale big IT and startup scale little IT. Corporate Japan has always had a strange relationship with computer security. On one hand, companies are very sensitive to security concerns and they’ll pay top dollar for security hardware and software systems and evaluations. But on the other hand, day-to-day security practices are often neglected. Operating systems remain unpatched, firewalls are set up and then never touched again, and backup systems are rarely tested. Right now, however, Japan is going through a bit of a security transition in both their understanding of fraud and how susceptible their systems are to fraud and hacking, and walk you through some of these important changes. Today, we sit down with Atsuyoshi Shimazu, founder and CEO of Caulis. Now, Caulis offers a distributed online fraud prevention service called Fraud Alert, and it’s solid technology that has a special appeal in the Japanese market. Now, Atsuyoshi also explains how the internet of things is going to force all of us to radically change the way we think about online security and security in general. He also explains why the instances and losses due to online fraud is set to skyrocket in Japan over the next two years. But you know, Atsuyoshi tells that story much better than I can. So let’s hear from our sponsor and get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] [Interview] Tim: So I’m sitting here with Atsuyoshi Shimazu of Caulis, the makers of Fraud Alert, which is an online security and fraud prevention tool. I’m sure you can explain it much better than I can. Thanks for sitting down with me. Can you tell me a bit about what Fraud Alert does and what Caulis is? Atsuyoshi: Fraud Alert protect the corporate website from the fraud attack such as brute force attacks. At first, we protect the log-in page and also conversion page such as money transfer pages. Tim: You’re preventing unauthorized access to web pages and monitoring the behavior on those pages as well? Atsuyoshi: Yes. Also, we protect the smartphone apps. We check how to type the word and the behavior. Tim: So like behavioral profiling? Atsuyoshi: Yes. Tim: Okay. So how does it work exactly? Do the systems make an API call to your systems? Is there code level integration? Atsuyoshi: Yes. Tim: How does the system work? Atsuyoshi: First, the client should introduce our JavaScript in their log-in page and also client should set the API connection to our website. Tim: There’s a different JavaScript callback in every page so you could track users’ behavior? Atsuyoshi: Yes. Tim: What type of things qualify as unusual user behavior? Atsuyoshi: Now, I’m using the MacBook and using the Google Chrome in the location of the Otemachi area. So this is an unusual behavior. But if the hackers use the same ID and password but they use Windows 10 and Internet Explorer outside, this user’s behavior is not normal. Tim: Okay. Right. So someone is coming in from a new location or if the same IP address tries to log in with a bunch of different user names, that’ll look suspicious? Atsuyoshi: Yes. Tim: Does Fraud Alert provide authentication and authorization services as well or is it simply -- Atsuyoshi: Focusing on detection. Tim: Detection. Tell me about your customers. In previous interviews and on your website, you talk about 50 million accounts being protected but who are your actual customers? Are they ISPs or banks or small e-commerce sites? Atsuyoshi: Now, we are focusing on the banking and the credit card coverage and also telecom carrier. Tim: I want to dive into more detail about security in Japan. But before we do that, let’s talk about you for a minute. You found Caulis in December 15. So it’s been a really crazy two years, I’m sure. Atsuyoshi: Yes. Tim: And before that, you were working with Okada-san. Atsuyoshi: Yes. Tim: At the captcha company, Capy. Atsuyoshi: Yes, that’s right. Tim: Capy is also in security. They do this kind of advanced captcha technology. Atsuyoshi: Yes. Tim: What made you decide to leave Capy and start your own company? Atsuyoshi: I have two reasons. Captcha just only focusing on the protecting bots but humans log-in, it cannot protect. This is the first reason. Tim: Actually, is captcha still effective? Because it seems like at least the text-based captcha, I think AIs are better than humans at it. At least they’re better than me. Atsuyoshi: Second reason, captcha itself, old hackers user account sees a captcha but the hacker would solve the captcha solution. Some hackers show this is the way to hack and bypass a captcha. Captcha is just only additional authentication but many authentication will be hacked so we want to focus on the detection, not authentication. And also, many electronics and also automatic will be connect it to the internet. So connecting would have the password and ID but captcha is just on a web browser. So we want to spread the security command to IOT industry. Tim: That’s a good point. It’s dangerous to have a startup that’s really too focused on a specific technology. Atsuyoshi: Yes. Tim: All right. That makes sense. Atsuyoshi: In the beginning of this month, NHK broadcasted the collaboration with Toyota and startups. Tim: How is Toyota going to use your products? What are they going to use them for? Atsuyoshi: Toyota is now using the sharing economies business model. Drivers can ride so many automotives. So ID and password, identification is very important. Tim: Let’s look into this a little more. What will Toyota be doing in the sharing economy? Are they talking about having individual cars that different people can use, sort of like a car sharing program? Atsuyoshi: Both, yes. They want to transit the business model, human-centric automotive car ride providers. Tim: So when we move from the traditional web and mobile internet, which is primarily username-password-based, and we’re all used to typing those in -- Atsuyoshi: Yes, right. Tim: When we move to IOT, when we move to something like an automobile, you’re not using username and password anymore. Atsuyoshi: But they have so many apps. The apps need to input the ID and a password. After input of Toyota ID and password, the apps shows the users the right way to the destination or you drive so many kilometers so you should go to the car check. Tim: Okay. You’ll be providing fraud detection for their web applications and mobile applications? Atsuyoshi: Yes. This is the future strategy of Toyota. Car-centric is 20th century business model, in this century, and they will transit to human-centric car provider. Tim: Customer-centric. Atsuyoshi: Yes. [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Tim: So it’s a relationship not just with the driver but with everyone in the family that might be driving the car or different people in the company who are driving the company car. Interesting. Atsuyoshi: Yes. Tim: That is going to be a big change for them. Atsuyoshi: Yes. Tim: It certainly makes sense that fraud detection is going to become more and more important as we move towards internet of things and more integrated services across a lot of different devices. Atsuyoshi: Yes. Tim: Let’s talk a bit about the problem of fraud in Japan. Atsuyoshi: This is a very serious situation in Japan. Japan government did a survey in June of 2015, 1/3 IPO company have damage from fraud. Tim: Yes. I’ve seen that number. So 1/3 of all public companies have said they’ve suffered damage from fraud but that’s a really broad statement. Does that mean internet fraud or credit card fraud? Does that include things like employees stealing from them? Atsuyoshi: Online banking was 3 billion Yen in 2015. It has been 0.3 billion charge back damage.

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

Fewer than 1% of Japanese consumers have ever purchased a product or service from a sharing economy platform. It's actually quite puzzling. Social and economic factors all seem to indicate that Japanese cities would be ideal for sharing economy businesses, but for a number of reasons sharing economy startups have not really taken off here. Today we unravel a bit of this mystery as we sit down with Chika Tsunada, founder of Anytimes and the Director of the Sharing Economy Association Japan. Anytimes is a P2P sharing economy startup with a unique and participatory business model. Chika explains why she chose that model and the challenges it presents. Even under ideal circumstances, building a P2P marketplace is hard. It's one of the most challenging business models to execute, and to succeed today requires doing something truly unique. Chika has chosen an unusual path both for herself and for her business. It's a great discussion, and I think you'll enjoy it. Show Notes The best strategy for building a two-sided marketplace Why even Japanese entrepreneurs discourage their children from joining startups How to start a web-startup when you are not a programmer or designer Is it better to go deep or go wide in creating a marketplace? One technique for fighting online review fraud Why the Japanese labor market is unique in regards to the sharing economy Why freelancing has not yet taken off in rural areas The spark that will ignite the sharing economy in Japan How licensing and administrative guidence stifles innovation in Japan Links from the Founder Friend Chika on Facebook Follow her on Twitter @chikageena Check out the Anytimes homepage Anytimes for Andriod Anytimes for IOS [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. You know, when I run startup workshops and classes on entrepreneurship, by far, the most popular business model used by the students for their startup ideas are two-sided marketplaces. Everybody wants to be a marketplace. Why not? There’s a lot to love about being a marketplace if you can pull it off. Aspiring founders imagine themselves running a platform that matches up buyers and sellers and takes a small piece of each transaction. They imagine dozens of other ways to monetize both the relationships they have with the participants and the data and the insights they gather about the market itself, and they all scale up easily and can be run with a relatively small staff. Really, online marketplaces seem like the ideal business model, and on paper they are. The reality, however, is that marketplace businesses are hard. I mean, really hard. Sure, once you have millions of users, marketplaces can be insanely profitable. The problem is getting that first 1,000 or maybe 10,000 active users. That’s hard. To do that, you need to be doing something unique. Well, today, we sit down with Chika Tsunoda, the CEO of Anytimes and the director of the Sharing Economy Association of Japan, and she explains how she’s been building a P2P services marketplace with a unique Japanese twist. It’ been a bit of a crazy journey for Chika so far but she thinks that Anytimes is positioned to take advantage of a unique aspect of the Japanese labor market. But you know, Chika tells that story much better than I can. So let’s hear from our sponsor and get right to the interview.   [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ]   [Interview] Tim: I am sitting here with Chika Tsunoda, the director of the Sharing Economy Association in Japan and the fearless founder of Anytimes. Thanks for sitting down with me. Chika: Thank you for coming and thank you for interviews. Tim: Anytimes is a skill-sharing and a skill-matching platform but I think you can probably describe it much better than I can. Chika: Anytimes is a skill-sharing platform to connect people who need help and those who want to work in the neighborhood such as everyday household chores, pet care, assembling furniture, language lessons, and so on. Tim: Tell me a bit about your customers. Who uses it? What are the most popular services people are sharing? Chika: Yes. Most popular customer is housewives, and university student, and seniors. Tim: What kind of skills? What are people doing? Are they putting together furniture for people? Are they cleaning homes? What are the services that are being offered? Chika: Most popular category is house cleaning, and next cooking, and next assembling furniture. But we also have other categories. For example, pet care, English lessons, Chinese lessons, guitar lesson. Tim: How much does something like that cost? Chika: The price average is one hour ¥2,000. Tim: Okay. Chika: So, not high cost. Tim: Right, right. The platform takes 15% commission? Chika: Yes. Yes, 15% commission is our sales revenue. Tim: Okay. How many active users do you have now? Chika: Active users is our secret. I cannot say that. I’m sorry. Tim: Okay. Chika: But our user is 30,000 users. Tim: How many people do you have that are offering skills? Chika: Yes. 30,000 users because if you register Anytimes, you can be client and supporters, both of them. Tim: But like for example, right now, today, on the website, how many different offerings are there? Chika: There are also clients and supporters. Sometimes, they will be clients but sometimes, they want money, they will be supporters. Tim: I see. So the idea is really that everyone on the platform should be both buying and selling something on the platform? Chika: Yes, that’s right. Thank you. Tim: All right. Do most people do that? Are most people buying sometimes and selling sometimes? Chika: Yes. This rate is really important so next, our KPI is this late. Tim: That’s an interesting design for a marketplace. Most marketplaces have many, many more buyers and only a few sellers. Has it been difficult to get everyone to get everyone to be a seller? Chika: Yes. Our first KPI was seller KPI. First, we need seller. Especially in Japanese labor market, there is few labors. So, this is Germany’s big social program. So if we get sellers, this is very important thing. Tim: I would imagine most of your users are not professionals, they’re just using it to earn a little bit of extra income. Is that right? Chika: We also have professional and only hobby. But the people, they use as hobby but the hobby will be work and monetized. Tim: Is it more men or more women? Is it more based in cities or in rural areas? Chika: Men-female is 50-50 percent, so same. And then, areais 70 percent user living in Tokyo. Tim: I guess that makes sense. You need a certain density of people before you can do this. Chika: Yes. This is very important. Yes. Tim: Right. Okay. Actually, before we dive into more detail about Anytimes, I want to back up a bit and talk about you. You graduated from Keio Law School. You worked at Nomura for a while and CyberAgent. These are big stable companies. What made you want to go out and start a startup? Chika: Yes. This is a long story. When I was little, I wanted to work about 82 developing countries. I wanted to work in United Nations, like UNESCO, UNDB but after graduate university, I thought I should have experience. I wanted to learn business and finance. I thought there is many social programs in Japan. Tim: But on a personal level, why did you decide instead of there’s a lot of things you could have done, you could have gone to work for an NPO like you were planning, you could have joined a division of a company that’s focused on those problems. Why start a startup? Chika: In Japan, there is many social programs. I thought I should serve these programs in Japan. That’s why I decided to found this company, Anytimes. Tim: Okay. But it’s a big change. What did your family think of the change? Chika: Actually, my parents didn’t like founding a company because my father was also an entrepreneur and my mom was a programmer. Tim: Okay. So seems like they would be more excited and supportive of you starting your own company. Chika: No. Because my father knew about how it’s hard to -- Tim: He knew how much work it really is. It’s true. Chika: Yes. And because he was also an entrepreneur. First, he said he that he worried about me, and my mum too. But if I decide one thing, they know I don’t accept other opinions. ; Tim: You’re stubborn.   [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ]   Chika: Yes. Tim: That’s actually very useful, for a startup founder to be stubborn. What do they think of it now? Have they come around and they think it’s a good idea now or do they still worry about you? Chika: I think a little worried but they always support me and always care about my health. Tim: That’s good. When you were starting to put the company together, you’re not a programmer or a designer yourself. Chika: No Tim: How did you build the team? How did you pull the team together? Chika: Yes. The first year, I did only me and crowdsourcing services. But after one year, I started to hire people. The first employee is my sister-in-law, my brother’s wife. And then, my other friends, my friends’ friends. Tim: So just your personal network? Chika: Yes, yes, yes. Tim: How did that work? Because I know a lot of people who are not programmers or designers but have an idea and they want to start a startup, it seems in theory very simple to go unto lancers or freelancer.com and say, “I want this done and this done.” Chika: This was very difficult because I didn’t have experience of direction.

The financial services industry in Japan is pretty unsophisticated. There are relatively few options for brokerages and mutual funds, and what options there are tend to be expensive. Furthermore, since pensions and taxes are generally handled by the employer there is not much reason for the average Japanese to think much about investments. Jin Nakamura of  Money Design is trying to change that with a very interesting strategy. In a market that is dominated by price competition, Money Design has set out to create a premium lifestyle brand that has nothing to do with finance. And it’s working. Money Design has become the largest robo-advisor service in Japan and is partnering with some of the largest banks here. It’s a fascinating story, and I think you'll really enjoy it. Show Notes Why young Japanese are not investing Why it takes so long to launch a financial product in Japan The danger of using AI in investing How to reach $1 billion assets under management How to avoid competing on price in a price-sensitive market What it will take to get the Japanese public to believe in startups Links from the Founder The Money Design homepage Check out Jin's blog Friend Jin on Facebook Check out THEO. It's pretty cool. [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Disrupting Japan episode 98. Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. Today, we’re going to talk about money, about investment. It’s not about exciting things like venture funding and ICOs but about simple somewhat stuffy stocks and bonds. Jin Nakamura cofounded Money Design as a way to introduce millennials and other young Japanese to investing. Money Design has created THEO, one of Japan’s first robo-advisors. Now, robo-advisors are a lot simpler than their name implies. Basically, all that’s happening is that you contribute a small amount of money each month and the robo-advisor will invest a certain percentage of that in stocks and another percentage in bonds and will make some adjustments if the allocations get too far out of alignment. I t’s a simple concept, really, but as Jin explains, young Japanese have shown very little interest in this kind of investing. So to reach them, Money Design created a lifestyle brand, one that had absolutely nothing to do with finance or money, and it worked. Young investors have been flocking to the THEO system and have made it the largest robo-advisor in Japan. In fact, Jin shares some of the insight that will be very important to anyone running a fintech startup or trying to sell financial services in Japan. But you know, Jin tells that story much better than I can. So let’s hear from our sponsor and get right to the interview.   [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ]   [Interview] Time Romero: So I’m sitting here with Jin Nakamura, the CEO of Money Design and creator of THEO, a robo-advisory for retail investors. Thanks for sitting down with me. Jin Nakamura: Thank you very much. Thank you for coming in our office. Tim: Delighted to be here. I described Money Design in a very simple way but I think you can explain what you guys are doing much better. Jin: Our product is very simple. We are providing a robo-advisory service in Japan. And then our global competitor is Betterment and Wealthfront. We are one of the first venture company to provide robo-advisory services in Japan. Tim: For those of our listeners who don’t know, robo-advisory just means that individual investors can give you a relatively small amount of money and you invest it automatically for them. Jin: Yes. We are providing the very simple financial product by smartphone. Once you access our website and then you answer just five questions. We showed the portfolio for each customer. Currently, we are providing over 230 portfolios for the customers. Once customer put their money into our portfolio, after that, we manage that discretionally. Tim: Okay. You’re saying that there’s five questions. Jin: Yes. Tim: What kind of questions do you ask? Jin: The first question is, ‘How old are you.’ And then second question, ‘Do you have any experience in investment?’ Third question is, ‘Are you a conservative or aggressive?’ Fourth question is, ‘What would you do if the market is going down? Are you going to put your money more or do you withdraw the money?’ And then the last question is, ‘Are you afraid of inflation?’ Tim: It sounds like basically, you’re trying to get a sense of the customer’s risk profile and sensitivity to inflation which is probably like how long they plan to invest, right? Jin: Yes. But even you answered the very simple five questions, we put some kind of algorithm for the profiling, then we analyze not only the risk return but also your tendency for investment. Tim: Okay. Actually, I want to dig deep into that a little later on. But before that, tell me a bit about your customer. Who’s using THEO? Who are Money Design’s customers? Jin: Yes. Actually, 51% of our customer is under 30s and then 15% of our customer is 20s. Compared to our competitor like a large financial institution, when we look at the THEO customer, only 5% or 7% of customer is 20s. So we provide our service for the younger generation. Tim: For example, you used to work at Nomura, which is the largest, probably most conservative securities firm in Japan. Do you think that the interest traditional financial companies have and these kind of robo-advisors is the new technology or do they think of it more as a way to reach millennial and younger investors? Jin: That’s a good question. When we talk about the robo-advisory service, it is very easy to create. You can put some algorithm for their profiling. It’s very easy. Actually, in Japan, there’s over 20 robo-advisory services; however, almost all of the services is just providing for their customer. There’s no new customers. For instance, 89% of our customer doesn’t have extensive investment. 43% of customer has little experience for the investment; however, maybe they fail investing in FX. Tim: Sure. Almost everyone fails at FX. Jin: When we look at our customer, very young generation started the investment services for the first time and then choose THEO. That’s our customer demographic. Tim: Okay. So it’s reaching a whole new and important customer base. You mentioned that robo-advisors themselves can be made using very, I don’t want to say, low technology but it’s simple algorithms. Jin: Yes. Tim: You guys were founded in 2013. You didn’t raise the first ground until the end of 2015, and you’ve launched THEO, congratulations, February 2016. Jin: Thank you very much. Yes. Tim: What took so long? What was going on during that time? Jin: Before that, we didn’t have any license, local transfer license. We can advise to the clients but we cannot provide a product to the clients. First, we studied advisory services. Clients opened account in the United States and then we advise them how to invest. We got the license 2015, and then we can provide here in 2016. That’s the reason. It’s very tough to get the license in Japan. Tim: So strictly for compliance reasons? Jin: Compliance reasons. Tim: I would imagine that with your first minimum viable product, it must have been very hard to reach that millennial demographic. Jin: We differentiate, two strategy. First is a UI and the UX, second is the branding. Our UI/UX is very simple. Large finance institutions maybe put something and put something and put something and then the website get complex. Almost all of our competitors provide a very complex UI and UX. First, we make it very simple and easy to register and easy to start. That’s our first differentiate strategy. And then second is the branding. THEO is the name of Vincent Van Gogh’s younger brother. Vincent Van Gogh could sell just one picture when he lived. However, Theo supported for the mental side and also the money side. That’s the reason Gogh could write a picture for his whole life. Our concept of the THEO is we care about the money, you can enjoy the life. Tim: Well, I can certainly see the appeal. You’re telling people who are confused by the complexity, “No, no, it’s very simple. We’ll handle it,” easy to understand interface, doesn’t cost much to get started. Let’s talk about that complexity. On the website, you’re talking about over 6,000 ETFs around the world. Is your trading universe really 6,000 ETFs, because most robo-advisors stick to between 20 or 40 ETFs. Jin: Our ETF universe is 6,000; however, we traded about 30 to 40 ETF per customer. Tim: So THEO really looks at 6,000 ETFs? Jin: Of course. Tim: All over the world? Jin: Yes. Tim: Wow. Some are denominated in yen, some in dollars, some in pounds? Jin: Of course. Now, we use almost New York-listed ETF. Currently, we didn’t use Tokyo-listed ETF because the liquidity is poor and the cost is too much for the trade and the performance is not good compared to the New York -- Tim: Management fees are very high in Japan. Jin: Yes. Tim: Most robo-advisors like Wealthfront, for example, they seem to be based on very traditional asset allocation models with as you’re mentioning X% to US equities, Y% to international equities and bonds, and then they rebalance once a quarter or once a month. Jin: We rebalance allocation every month. We set that balance first, right? Maybe growth 40%, income 40%, and inflation hedge 20%. And then maybe next month, the market collapse or up and then we rebalance it 40:40:20. Tim: You mentioned that THEO uses AI to do portfolio construction. Is it actually an AI or is that something that’s more aspirational,

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, there exist already eBay in US market but there is not C2C big market in Japan. Tim: That was a very interesting time for auctions in Japan because eBay very famously delayed their launch in Japan. Shogo: Yes. Tim: It took a long time to launch. In the meantime, Yahoo Auctions launched pretty quickly but DeNA was before them. Why didn’t DeNA dominate that market instead of Yahoo? Shogo: Because when we planned to start that the business, we had some alliance with Recruit and Sony. In 1999, Recruit was very strong in the internet area. Also, Sony was very still at that time more energized company, at that time. Tim: Yes, yes. In 1999, Sony was a incredibly powerful brand. Shogo: Yes, yes, yes. So we used their customer base to start our C2C market but in September, Yahoo started and they used their strong traffics into their new started C2C market. Tim: So it was just that you didn’t have enough of a lead to build up a market before Yahoo came in? Shogo: Yes, yes. So Yahoo Auction was the C2C number 1 market at that time. We chased a long time but still. Tim: They got further and further ahead. Shogo: It’s number 1 market. Tim: What made you decide to pivot to gaming? Shogo: Because C2C market, winner takes all. So if it’s profitable but we had a very serious time. So we decided to do business in also the shopping area, shopping mall area so we made our C2C market and we made a profit but not so strongly profitable. At that time, 2003, there’s no iPhone, no smartphone. So everybody did not believe that people buy something through mobile phone. But as you know in Japan, there are i-mode. Tim: Right. At that point, Japan was so far ahead of the rest of the world. Although I feel most of the commerce were things like ringtones and small virtual purchases. Shogo: Yes. And at that time, basically, they did a business with monthly subscribe the contents. So very simple business model but there is almost no e-commerce and at that time there is a kind of just the physical Bluetooth, small physical Bluetooth up here. So every IT business people and every entrepreneur did not believe that people can input their name and address through this small product. Tim: It was a definitely difficult interface to use. Shogo: Yes, yes, yes. But for example, young Japanese women high school students use feature phone, the mobile phone kind of the acrobatic skill. Tim: Right, right, right. Yes. Shogo: So they put very long mail and after that, I found that if you’re using that button, they can write a novel. So I found that kind of fact so we create a new C2C market in 2003. Tim: So DeNA was first to market, had a good product to solid user base in peer-to-peer marketplace on mobile and yet when the iPhones became popular, Mercari took the lead. I mean it’s a different technology, a different platform but the same business. Why do you think DeNA wasn’t able to capture that market on the new platform? Shogo: Yes. That’s a program. So basically I don’t know but the DeNA’s mobile auction market is basically based on the subscription model that was used in the i-mode or like old style mobile phone infrastructure. Tim: Right, right. With very, very limited billing options and payment options. Shogo: Yes, yes. And that is totally different from the smartphone. Basically, Yahoo Auction cannot come to the mobile and same the old style mobile cannot get into the smartphone business. Tim: It’s something we see a lot. So when you look at companies like, say, IBM or Intel and you say, okay Intel was really smart and they got out of memories to focus on CPUs at the right time but they missed the big shift into mobile CPUs. You’re talking about gaps of 20 years but these cycles were really fast. They were only 5 or 10 years apart. It still had some of the same people in place. There are very smart people at these companies that saw it. So you just think the company itself, the processes and the way of doing things became so strong that they couldn’t change? Shogo: Maybe another aspect is that numerically there’s lots of money, tens of millions. Tim: Tens of millions, yes. Shogo: Tens of millions, they get the money. That’s big risk taking. For DeNA, yes they are making profit hundred of million yearly but for them, tens of million investment is big. Tim: So they don’t want to put their main business at risk? Shogo: Yes. Maybe it’s a difficult decision at that time invest all the tens of million in mobile market. Tim: In mobile market. Well, let’s talk a bit about DeNA’s growth in gaming. So after the success in the mobile at the peer-to-peer markets, what drove DeNA into gaming? Shogo: At that time, we found that there is a big hidden market that are using the mobile phone to access the internet. Tim: But it seems the same pattern repeated in gaming as in peer-to-peer e-commerce. The strong gaming companies like Nintendo and Sega did not successfully make it into web gaming or mobile gaming. And when the iPhone and later the Google App Store was introduced, that changed the market again. So the distributors didn’t have so much power anymore and companies like DeNA were not able to make that shift. Actually, it’s not just DeNA. I mean we’re talking about DeNA because you’re here with us but across the board, it seems that even when these technological disruptions happen in 5 or 10 years, companies have a hard time making that transition. So from console to web mobile, and then from web mobile to the smartphone, almost no companies made those transitions. Shogo: Yes, yes, yes. It’s very difficult for every company. Tim: Yes. Why is it so hard? Shogo: Because the platform is changing. So situation seems to be stable as a investor viewpoint. Of course everybody use smartphone but every internet business player believe that next platform innovation will come so they are preparing for virtual reality or mixed reality.

FinTech in Japan is far more advanced than most outside observers imagine it to be, and based on new deregulation and government incentives, finTech in Japan is about to accelerate even more. Today we sit down and talk with Toshio Taki, co-founder of Money Forward, advisor to Japan’s Financial Services Agency, and the head of the FinTech Institute of Japan. He not only tells the story of the founding and growth of MoneyForward -- one of Japan's finTech success stories, but he outlines how the Japanese government’s plans to promote financial innovation while still maintaining the integrity and stability of the industry as a whole. The Japanese banking regulators are, at least in this sense, far less conservative than you think, and they are setting up a finical ecosystem in Japan that will lead to far more innovative finTech startups than we are seeing coming out of Europe of America. It’s a great discussion, and I think you’ll enjoy it. Show Notes How banking and credit card use is different in Japan Why most Japanese need multiple bank accounts Why finTech is evolving differently in Japan Who really controls household finance in Japan How Money Forward was reluctantly pulled into the B2B market How Japan's FSA is promoting finTech and financial innovation in Japan How the FSA is forcing Japan's banks to open up to innovation Links from the Founder The Money Forward homepage Japan's Financial Services Agency Connect with Toshio on LinkedIn [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for listening. Okay. For all of you fastidious followers and fanatical fans of all things FinTech, I have a fantastic show for you today. We’re going to sit down and talk with Toshio Taki, co-founder of Money Forward, about how the Japanese government is forcing the banking sector to allow startups to innovate. Well, perhaps forcing is too strong a word, let’s just say that Japanese banks are being strongly encouraged to work with startups. Now, Toshio studied under Peter Thiel at Stanford before co-founding Money Forward which has become the leading personal finance app in Japan. He’s also an advisor to Japan’s financial services agency and the head of the FinTech Institute of Japan. After listening to Toshio, you’ll understand why the Japanese banking regulators are far less conservative than you might imagine them to be and why the Japanese financial sector is about to become a whole lot more competitive than what exists in Europe or North America. Of course, this being Japan, risks must be understood and managed. And Toshio walks us through the Japanese government’s blueprint for fostering financial innovation while still maintaining the integrity and stability of the industry as a whole. This episode is required listening for anyone who wants to understand the future of FinTech in Japan. And you know, Toshio explains that much better than I can so let’s hear from our sponsor and get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] [Interview] Tim: So I’m sitting here with Toshio Taki, the co-founder of Money Forward and head of the FinTech Association of Japan. Toshio: Cancelled meeting today and I’m very excited for this podcast. Tim: I’m glad to have you here because I think FinTech in Japan right now and Money Forward, it’s pretty amazing space to be in. Before we get started on the overall market, let’s explain what Money Forward is. I know it’s online financial management software that you sell to individuals and small business but tell us more about what it actually does. Toshio: Sure. In brief, Money Forward operates two types of businesses. One for the B2C where probably the most familiar name would be mint.com. We automatically gather information from every single bank in Japan by having people put in their credentials about the internet banking account and then make themselves a very simplified P&L statement for their individualized -- we deliver that for 5 million users in Japan which makes us the largest personal financial management tool in Japan. So that’s half of our business. The other half goes to the B2B market where it’s very much again like another name called Quickbooks that goes to the U.S. market. We operate a cloud-based accounting SaaS service targeted towards the SMEs. Around half a million businesses have an account in our platform. They employ either their accounting software of maybe their invoicing package. So we provide all sorts of these back office automation tools for the very small businesses. Tim: Okay. What’s the basic revenue model? Is it like a freemium? Is it application upgrades? Is it consulting? Toshio: For the B2C part, it’s the good old freemium model but it turned out to be a little of an exception in Japan where Japanese people do pay for monthly subscription model. They pay around $5 a month for the premium service and a fraction of our 5 million users use this premium model. Tim: What percentage of your users are free versus the paid plan? Toshio: We don’t actually disclose numbers but we always target 5% to 10% people to join our premium economy. Tim: What is the biggest difference between the free plan and the premium plan? Toshio: The largest two would be one is that you can connect more than 10 financial institutions. In Japan, a typical user has four or five bank accounts and three or four credit cards. This comes from a very unique Japanese market environment where we don’t have this kind of account maintenance fee where even if you have very limited balance in your bank account, you don’t get charged. The same thing goes to the credit cards. In Japan, it’s fairly easy to create a new credit card. Tim: Why would a typical household open multiple bank accounts? Toshio: In many cases, just having you move around doing your life like you change your locations or you enter the university, you go to your first workplace. Tim: Okay. So just people accumulate accounts over time? Toshio: Yes. Tim: On the business side, is that also a freemium model? Toshio: For the business side, it’s much more like a SaaS model where we do provide a trial mode but you can only use that for trials. We have a $10 a month plan for the proprietors and we have up to $40 or $50 a month model for the more larger companies. And also if you want to automate payroll practices or other invoicing and reconciliation practices, then we have a little bit more higher end model. We do this add-on features to have this multiple revenue models. Tim: $50 a month for corporate accounting sounds incredibly cheap. What attracted you to Money Forward and how did you and Tsuji-san hook up? Toshio: Initially, I was looking for some members to potentially build a new company and was asking all of my friends whether they know a person who both understands the internet and the financial industry because I wanted to do something inside the financial industry in a very internet-driven context. Tim: Did you know what you wanted to build? You said you knew you wanted to do something in FinTech but did you know you wanted to build Mint for Japan? Toshio: Initially, I was thinking about doing a Mint-like service in Japan but it’s always the issue that when you try to just import a service into Japan, it doesn’t tend to work very well because different countries are different. That’s very, very evident in the world of B2C industry. Tim: Actually, let’s dig into this because I think this is a really interesting place. It would seem that like managing money, other than specific integrations with banks and things, it’s pretty much a universal activity. So what about the Japanese market is unique and made it unsuitable for products like Mint? Toshio: Mint model relies on two very basic facts. It’s that the American people take care about their credit scores and they do not want to miss out on their billing. That was the reason why Mint was able to deliver the service for free for a long time. Instead of taking money directly from the consumers, they made this lead generation model so that credit card issuers will pay instead of the users. So that demand is not as evident in Japan. Tim: Japan doesn’t have the U.S. equivalent of a credit score. Toshio: Yes, it’s very frank to say that Japanese people do repay their money. Statistically, it is very evident. That’s one point where credit card industry is very, very different in Japan and also at the same time because they fear about this sense of stigma that goes with debt. People really don’t use that much of credit card. Tim: Right. Well, actually until very recently, a revolving line of credit was not legal in Japan for credit cards who offer. By law they had to pay off at the end of every month. Toshio: Yes. A lot of the people think that credit card is just like one kind of a post-paid mechanism where they pay the entire month next month. Tim: In the U.S. the main driver of user adoption was consumers worried about their credit scores and credit balances and in Japan, what was it? Was it the access to multiple accounts? What was the main driver? Toshio: I think people are much more viewing us as a service that they could actually buy financial safety. Being able to look at your not financial numbers was like an option that was never available. Tim: In Japan, women control most of the household finance. In your customer acquisition strategy, did you do anything to specifically target women and housewives? Toshio: That was the hypothesis we had when we entered the market but it kind of proved wrong. Tim: Really? Toshio: If you look at a typical manga in Japan like Doraemon,

(Photo Credit: WurFi) This is a short and very personal episode. Things will be changing for me and for Disrupting Japan, and sometimes when you are facing a lot of big changes, it really helps to be able to share your thoughts with people you care about. That's you. There is no guest this time. It's a story about me and magic and chivalry and startups.  I hope you find something in it. Transcript Disrupting Japan Episode… well, that’s kind of complicated. Hi. Tim here. I’ve got some big news that I can only tease you with right now, but I wanted to share it with you in this special, short in-between episode.  There are no ads this episode, because … well, because this one is not brought to you by our sponsors, it’s too personal. It’s brought to you by me. Now, no one has ever been surprised to learn that I was a huge nerd in high-school. And this was back in the 1980’s, a very long time before nerds were even remotely cool, and female nerds simply didn’t exist. Actually, no I take that back. I’m sure there were female nerds back then, but social norms being what they were, they had to stay in the closet and hide their nerdy nature from the rest of the world while pretending to be interested in cheerleading and quarterbacks and what have you.  So I guess that the 1980s were a tough time to be a female nerd. Nerd liberation came later for girls than it did for boys, but the 80s were not a great time to be a male nerd either. Anyway,  I was on the debate team and spent my free time programming my Commodore 64, playing Dungeons & Dragons, and arguing the finer points of Tolkien's Lord of the Rings with my equally nerdy friends. Now over the years, I’ve given up on the idea of debate for debate's sake, upgraded my computer, and I haven’t played D&D since high-school graduation. However, I still enjoy Tolkien and find myself re-reading his books every decade or two.  The Lord of the Rings is a classic tale that is beautifully told, and generations of nerds have found in it not simply an enjoyable distraction, but as profound human insight and as inspiration on leading a life well lived. But recently, and as a result of this serial entrepreneur life I’ve chosen, the characters in The Lord of the Rings have been seeming a bit thin, and those of another novel have started to seem richer and richer. Back in high-school, I considered Cervantes’ Don Quixote an interesting enough story, but over the years as I’ve embarked on several radically different careers and started startup after startup, something about the novel started to resonate with me.  As the Lord of the Rings began to feel more and more like a well-told fairy tale, Don Quixote began to seem, well a little bit like me. For those of you who have not read the book in while or who have only seen one of the movies, all of which miss the core point of the book, let me explain Cervantes wrote Don Quixote more than 400 years ago, and he tells a story of a man who lived in a time of overdue bills, nosy neighbors and bickering politicians. It was a time when the world was filled with petty people with tiny dreams wasting their lives in mundane and meaningless pursuits.  Well, Quixote dreamed of a better world. A world where life had honor and meaning. He desperately wanted to live in an age of chivalry. A time of damsels in distress and knights errant, a time when there were still giants left to slay. He believed in his vision so passionately he began to see the world not as it was, but as it could be; as it should be.  Farmers became noble squires, peasant girls became princesses, and most famously, windmills became ferocious giants. Now Don Quixote is not a heroic figure. He never managed to change the world.  In fact, no one ever believed in his vision except for him.  The world viewed Don Quixote as a somewhat amusing, but a pathetic and pointless person.  When you read the novel, you get the impression that even Cervantes, himself, couldn’t quite make up his mind about whether he was on Don Quixote’s side or not. The author is ruthlessly cruel to the character, putting him through failure after failure and moving him from one manner of humiliation to the next. But every once in a while you glimpse the unmistakable theme that “Hey, Quixote is right. The world as he sees really is better. But this is what happens when one man is right and the rest of the world is wrong.“ Don Quixote spent his life following his vision and his passion to absolutely no avail. He led a life of failure and humiliation, but somehow managed a life well lived. And that is something that any startup founder should be able to admire. Now before you get the wrong idea, and before my investors get the wrong idea, I don’t pattern myself after Don Quixote, and I don’t identify with Don Quixote. I don’t seek out and pursue opportunities for failure or public humiliation.  At least not consciously. Cervantes story resonates with me more than Tolkien’s. It’s more real.  When we are young, we liked to imagine that we are on the hero’s journey. Being the chosen one, fulfilling a destiny that was prophesied in ancient times. Standing clearly on the side of good, struggling together with powerful allies to defeat an evil and seemly invincible enemy. But the world is not like that. As Don Quixote finds out, most people don’t share your vision or care to accompany you on your journey. You spend your life trying to shape the reality around you into something that vaguely reflects what you see in your head, and you fail at it most of the time.  And, of course, any giants you slay, are going to be ones of your own creation. Any startup founder who sees more of himself in Gandalf or Frodo than he does in Don Quixote is probably better off in another line of work. So, why am I talking to you today about fantasy novels? Well, there are some big changes coming up for me. I can’t announce the details just yet, but it will all come out soon.  All I can tell you is that I’m joining a startup team that is trying to solve a very important, but extremely difficult problem. .. and I’ve always been a sucker for those. It’s far from a sure thing, but if we execute right and are more than a little lucky, we’ll not only make a great deal of money, but we will fundamentally transform one of the biggest industries in Japan. The great thing about tilting at windmills in the startup world is that every once in a while, the windmill loses. So what does this mean for Disrupting Japan?  Don’t worry. The show will go on. The show must go on. I love producing this show. I love the conversations I get to have with some of the most amazing startup founders in Japan, and I love talking with you each week and with talking with listers when you reach out over email or when we bump into each other around Tokyo. Disrupting Japan has been one of the most challenging and rewarding projects I’ve ever started, and its going to continue. I will, however, be making some changes. I won’t be able to keep up the weekly releases so I’ll be going back to releasing every-other week, and I’ll be scaling back on a lot of the advertising as well. This will all be happening in the next month or two, and when it does I’ll let you in on all the details. And I promise I’ll do it without a single digression into the themes of 400-year old novels. —— Ah, Cervantes and startups….. Let’s get back to that…. You know, members of the startup community will tell you that it is important to embrace failure, that the startup community celebrates failure. There are at least two large international startup conferences built around celebrating startup failure.  But in our hearts, we all know it’s a lie. We don’t celebrate or embrace failure. We celebrate the winners who have bounced back from failure. We celebrate rich and powerful failures who brushed themselves off and then achieved great things.  This is not an acceptance of failure. Quite the opposite. It is a way of heaping additional glory on the successful by pointing out that they once were failures, but managed to overcome it. To society at large, failure is only celebrated in retrospect after future deeds prove to everyone else that you were not really a failure after all. Outside of, at best, a small circle of friends, no one but you will assign value to any of your failures unless you later succeed.  And as startup founders, we need to understand that’s the way it is. Truly accepting failure would mean embracing beautiful failures like Don Quixote. People who spend their lives pursuing their vision, taking risks, defying the odds, but failing time after time. You know, I think part of us really wants to admire people like that, but human nature just won’t quite let us. And, of course, inviting someone like that to speak at Failure Con of Fuckup Night would be unthinkable. We only want to hear from the successful failures. I suppose I do see a bit of myself in Don Quixote, or perhaps a bit of him in me would be more accurate. In fact, almost all of my adult life has been making the best out of one failure after another. With very few exceptions, I’ve never quite managed to achieve what I set out to do, but somehow over the long run, things seem to get better for me, and hopefully for those around me as well. I’m not kidding about that. I’ve been fired or pushed out of half the real jobs I’ve ever had.  I barely managed to graduate college because I ran out of money and had to graduate early. My music career. Well, we don’t even need to talk about my music career.  I’ve had more than a dozen startup projects flame out and even my two exists were quite modest and a tiny fraction of what they would have been if … if lots of things. There is always an if… I certainly don’t consider myself a failure, I consider myself to be quite successful,