Disrupting Japan

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

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

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

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness and product evangelists throughout Japan. They did not so much push their way into the Japanese market, so much as they were pulled into it. Even under the best conditions, however, Japan market entry is not easy and Derek Sorkin explains some of the challenges they faced with their distribution plans and the original go-to-market strategies. Managing to salvage a great ongoing relationship from what could have been a very ugly incident. Derek also explains why even in this age of Skype and go-to-meeting it’s absolutely essential to spend the time and money on airfare in managing international offices and to maintain trust and credibility. It's a great conversation, and I think you'll enjoy it. [shareaholic app="share_buttons" id="7994466"] Leave a comment Links & Resources The GitHub homepage Connect with Derek on GitHub @dsorkin Follow him on twitter @thesorkin Connect with him on LinkedIn Partial Transcript   Disrupting Japan, episode 62. Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening. GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness, and product evangelists throughout Japan. They did not so much push their way into the Japanese market so much as they were pulled into it. Even under the best conditions, however, Japan market entry is not easy, and Derek Sorkin explains some of the challenges they faced with their distribution plans and their original go-to-market strategies. And how they managed to salvage a great ongoing relationship from what could have been a very ugly incident. Derek also explains, even in this age of Skype and GoToMeeting, it’s absolutely essential to spend the time and money in airfare in managing international offices and to maintain trust and credibility. But Derek explains all of that much better than I can, so let’s hear from our sponsor and then get right to the interview.   [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: So I’m sitting here with Derek Sorkin, the Asia Pacific for GitHub, who spearheaded GitHub’s entry into Japan and that’s what we’re going to talk about today, so thanks for sitting down with me. Derek: No problem, Tim. Good to talk to you again. Tim: Excellent. So listen, you guys have been here a while and you’re doing really well. Let’s step it back a couple of years. What did GitHub see in Japan? What was the motivation for coming here? Derek: We had quite an interesting background with Japan. Our co-founders had been coming here for some time for different conferences; working with companies like Digital Garage back in the day, talking to them; and open source has always had a strong foothold in Japan, things like many of the contributors to the Ruby Project, which GitHub is obviously built on to a certain extent. In Japan and Japanese. Tim: Ruby is from Japan. Derek: Right. So we always had a good core base of those Ruby developers that were interested in open source, that were using GitHub since very early days of GitHub, back in 2009 and 2010. So when we started in the B2B space and working with enterprises—and I think we’ll get into this a little more later, around how decisions are made in Japan—but that really helped us here. There were lots of the forward thinking internet companies. I say “internet companies” broadly, but internet gaming companies like that, that immediately took a hold with organizations on GitHub.com Tim: Okay, so even before you guys were here, you had brand awareness and you had users here in Japan. That’s a huge leg up in the market. Derek: Yeah. It makes it very interesting, especially at that time, a little more than three years or so, we didn’t have any staff in Japan. So all of our efforts in Japan to continue to raise that awareness and give back to the community were us coming over from San Francisco, from the U.S., or from wherever we happened to be around the world, for about a week at a time. Tim: You had one guy out here, Daisuke. Derek: Yeah, so that’s why I said three-and-a-half years ago. Three-and-a-half years ago, we hired Daisuke—Dice as we affectionately call him—and he was great. And still is great for GitHub. Tim: So let me ask you, you had brand awareness, you had a user base here from the very beginning, which is fantastic—so what was the trigger that finally made headquarters say now it’s finally time to set up headquarters in Japan for real? Derek: I think if I can point to one specific event, I was here back in early 2014, with one of the co-founders. We were going around and meeting with some of our existing customers here, and we were also invited to an event that one of the larger trading companies was putting on in Japan, where they had invited lots of other trading companies in and were asking lots of questions and we were on a few panels there. And I think that trip was really the catalyst in the co-founder’s mind that Japan is a very real market opportunity for us, and given that we had the brand recognition here—and that was obvious from the things we were doing like meetups around Tokyo or Yokohama, and that we had now people on the ground with Dice—we made the decision to put more of our investment in Japan and actually get some people on the ground here so we could continue to grow our business. And not just our business, but also the community and our engagement with that community. Tim: All right. That makes sense. It was a gradual and natural result of what you’ve been doing so far. Derek: Absolutely. I think just as a natural progression, we were at a point as a company where international expansion was imminent and we were at a point with Japan where Japan seemed like a very logical option for us to move towards. Tim: So how many users, how many customers did you have here when you pulled that trigger and said, “Let’s go into the market?” Derek: It’s hard for me to say exactly, but I could ballpark for you that we had around 75 customers on the B2B side, so certainly enough to be able to come out here and establish ourselves a little bit. And tens of thousands of paying users on GitHub.com and close to 750,000 on GitHub.com in general. Tim: So it sounds like GitHub was really more pulled into the market than trying to force its way into the market. Derek: Yeah. I would say we were in a very unique position, based on other that I’ve talked to, especially others that have done market entry into Japan, which certainly raised some unique things in our process of opening up the office here and expanding that presence, and working with that community. But we were in a very good position from the beginning. Tim: Excellent. How did you structure the initial entry? Was it through partnerships, was it a joint venture? Derek: We originally were intending to open up a small office here that was mainly going to be a sales and marketing arm for GitHub. We quickly realized that in the Japanese market, there is a necessity to have partnerships. Everything is done through partners. Or at least it certainly seems that way, on the surface, when you talk to companies that have recently made a market entry. Tim: It seems like across the board, most B2B software companies do a much higher percentage of their business through their partners Japan than they do in the rest of the world. Derek: Certainly, and I can see where that makes sense. Especially if you’re a U.S. based company accustomed to doing direct sales regularly, it almost seems foreign to—no pun intended—to come into a foreign market and work almost exclusively through the channel. That was further complicated by the fact that we had existing customers here but we decided to move forward with the partner approach and eventually we were brought on with a distributor here, and decided that instead of trying to manage 20 or 30 partners individually, we wanted one central distributor that could help us manage those partner relationships and help us drive sales to the enterprise here. Then we could continue to manage directly, the community side, community growth, active user growth on GitHub.com—some of the other metrics that are important to us. Tim: And is it okay to talk about who the partner was or do you want to— Derek: Sure, I think that’s public knowledge. We partnered with Macnica Networks to come into Japan. Tim: So you mentioned you have a lot of customers before your market entry. Were those customers also being handled through Macnica or was Macnica something you did during the market entry? Derek: It was something we did during the market entry. The customers that we had before—we had maintained and still do maintain relationships with almost all of them, with the exception of ones that had a strong desire to work with Japanese companies directly for things like invoicing, being able to transfer into Japanese bank accounts—lots of things that as we found out, we continued in the process of building out this market. [pro_ad_display_adzone id="1652" info_text="Sponsored by" font_color="grey” ] Tim: You ended up outgrowing that relationship pretty quickly. Actually—we’ll get back to that story a little later on because there’s a lot that happened between then and now. So the subsidiaries, the GitHub employees here were going to focus on community building and outreach support, and not so much work on the partner sales side. You already had a customer base in Japan, but after your market entry, did you discover anything about the product, or the services lined up around the product, that you needed to change for the Japanese market. Derek: Absolutely.

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

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

Spacee has staked out an interesting position in the sharing economy. Spacee enables companies and individuals to rent out unused meeting room space to people who need to hold a meeting. It's an interesting take on applying a sharing economy model to business. I’m generally very skeptical of startups who define themselves as “Uber for X” or “Airbnb for Y”, particularly in the B2B space, but Spaceee has already been in business for several years in Japan, and they are seeing strong traction and increasing revenues. They might really be onto something. Taku has some fascinating insights on why Japan, and Tokyo in particular, might be far more fertile ground for sharing economy startups than almost any other place in the world. It’s a great discussion and I think you’ll enjoy it. Show Notes for Startups Why the basic business case makes sense How large the meeting space market can grow The challenge of expanding outside of Tokyo Why Spacee turned down venture financing to bootstrap for three years Whats wrong with the current fundraising environment in Japan Which other companies are coming into the meeting room rental space Why Japan is uniquely suited for the sharing economy Links from the Founder Learn about Spacee Follow them on twitter @spaceejp Friend them on Facebook An interview with Spacee CEO on fundraising [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 59. Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. You know, the world is full of start-ups that define themselves as “the Uber of X” or the “Airbnb for Y.” Frankly, most of those business models don’t really make sense when you dig into them. Spacee, however, might just be onto something. Spacee rents out unused space around Tokyo to salesman, co-workers, or people who just need a quiet place to conduct a little business. As Takuya Umeda explains in the interview, it’s not just meeting rooms that are being rented out. The sharing economy is relatively new in Japan and Takuya and I talk not only about some of the problems its facing here, but why, in the long-run, Japan might be better suited for sharing economy companies than anywhere else in the world. He also explains why Spacee decided to delay taking outside investment for almost three years while they built their business and how that turned into an advantage later on. But you know, he tells the story much better than I can, so let’s hear from our sponsor and then get right to the interview. [pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ] [Interview] Tim: So I’m sitting here with Takuya Umeda, co-founder of Spacee. Thanks for sitting down with me. Taku: Thank you, Tim. Tim: Spacee is kind of like Airbnb for meeting spaces, but that’s a really overly broad description, so why don’t you tell us a bit of how it works. Taku: Spacee is really like the Airbnb of business. In Japan, wherever you have a meeting, if you have an outside meeting, the only place you go is like Starbucks or a café. Tim: Right. Everyone meets in coffee shops. Taku: If there is a professional conference room, it costs really expensive. It’s probably like 5,000 yen per room, per hour. And at that price you can’t really do much, like brainstorming and start up some business plan. Stuff like that you can’t really do. And a café is not really good at it too. So we found that there is a gap between an expensive conference room and a Starbucks, so we fit into the gap. Tim: So something a little more formal and private than a coffee shop, but not quite as formal as a hotel meeting room or a service office. So tell me about your customers. Who is it that’s renting out these spaces and why are they doing it? Taku: You know, there is a lot of salespeople around and they stay locked in some business meeting, and I thought those people need some sort of private room. But we now run this firm for a little over three years and we found out that not only the sales guys are using it, but also like the regular firm, the marketing people, they don’t have enough meeting rooms in their office. So a bunch of business people are actually using our meeting space. Tim: Interesting. So people are using it for internal meetings? Taku: Yes. Tim: Do people usually rent it out for one hour or do they rent out a space for an entire day? Taku: Unusually they use like a little less than three hours. Tim: Okay. So morning or an afternoon. And on the supply side, what kind of places are renting space? Taku: We have three different types of rooms. One is like an office room, professional working space, and co-working space. There is a professional rental space and another one is a business office. Tim: So just someone with a little extra space in their office? Taku: Yes, or they have a meeting space but they have a new time. We have tutoring schools, language schools, karaoke places, and like an actual office. Tim: Karaoke spaces? Taku: Yes, karaoke spaces. Tim: Well that’s an interesting one. Who is renting out karaoke spaces? I go on a lot of sales calls and I’ve done a lot of sales meetings at Starbucks, but I can’t imagine doing sales in a karaoke booth. Taku: Right. Exactly, but sometimes they only need confidential, like they don’t want someone else to hear, or they need to quietly have a table so they can put the documents and stuff like that. So sometimes they don’t need a fancy conference room, they just need privacy. In that case, a karaoke room is fun to them. Tim: So in that case, are these people who are, “I need to find a place right now,” and they’ll find something locally? Or is it more people planning meetings in advance? Taku: It depends, but usually our customers book a room within 10 days. Tim: So 10 days in advance? Taku: Less than 10 days. Tim: Oh, okay. And do some people book it like 15 minutes in advance? Taku: Yes, sometimes they do that. Tim: Okay, that makes sense for those karaoke booths or small places but what about the offices? Isn’t there some resistance in these office of having people walking through? Doesn’t it disrupt the flow of everyday business? Taku: I think that happens too. So those people who care that they don’t [UNCLEAR 07:00], obviously. But think about it this way: a meeting room in an office used by employees to employees, employees to clients—those are the only two ways that normal office meeting space have use. But a known businessman and a known businessman has a meeting, you’re into the meeting room, but what’s the problem, right? If that is okay. And also, the room is like completely separated from your workspace. Those who use our website book the space. They don’t really come near your workspace. So the office way out, is like separated. Tim: Okay, so the companies who are renting out their own office space, are they companies that tend to have a receptionist who can guide the people too? All right, that makes sense. And of the three types you mentioned, the conference rooms, the individual offices, and the more general spaces, which are the most common? Taku: I forgot to tell the third one. We have another one, it’s like an Airbnb type. They rent out a small room and then post it on our website. Tim: So it’s a small room on a home? Taku: It’s like a one-room studio-type apartment. Like a SoHo mansion, really small Japanese studio type. Tim: Like 200, 300 square foot or 20, 30 square meters? Taku: Right. Tim: And of those three types, which are the most common? Taku: As amount, like professional rooms, maybe 50% of our rooms are from those of professionals. Then 10% are from those Airbnb type, but the most common user types are the everyday type rooms. [pro_ad_display_adzone id="1653" info_text="Sponsored by" font_color="grey” ] Tim: So most of the bookings are to these dedicated rooms that are just used for this? Is that because they’re so much cheaper than the conference rooms. Taku: I think there is two reasons. There is one that is location and the other is pricing. Because we basically use unused space, and unused space—we don’t know where it is. Sometimes it’s in a different location, sometimes it’s not. But the one Airbnb type, we put like 2 minutes from Shinjuku Station, or like one minute away from Shibuya Station, so it’s very close to the high-demand area. Tim: And it’s something that can be booked 15 minutes in advance, as needed. Taku: Like maybe 2 minutes or 1 minute is the least time that you could book. Tim: Okay, now you’ve clearly already got a lot of traction already. You’ve got over 700 spaces and over 300,000 bookings so far. My question is, how big do you think this market is? Taku: It really needs to change the game though, like let’s say, Uber. In the U.S., nobody raises their hand and catches a taxi anymore. You use a smart phone and tap the pin down, then call the taxi. Nobody has a booked room at the moment. Only a Spacee user does. Tim: Well that’s the interesting thing because with something like Uber, for example, they’re displacing the taxi industry. There is a behavior that the customers already have and they’re just substituting their product with another product. With Airbnb, people understand hotel rooms or bed and breakfasts, and they’re just replacing their service with another. But Spacee seems to be kind of different in that way, in that there’s not an existing market for people renting this kind of space. Taku: They already had a meeting in their business, in office hours, they have a bunch of meetings everywhere in there. They have meeting rooms in the office, fixed-cost meeting rooms, and if there is a valuable cost meeting room in an office,

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

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

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