Disrupting Japan

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

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

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