Disrupting Japan

The way we get our food is changing. Many are discussing how to make modern farming more sustainable, but this startup working to end it entirely. Ikuo Hiraishi is a serial entrepreneur and the Japan head of Infarm Japan, an urban-farming startup growing food at supermarkets. In fact, as Ikuo explains, a lot more of your food is grown indoors than you probably imagine. The future of food will look nothing like its past. t's a great conversation, and I think you'll enjoy it. Show Notes What is Urban framing, and why do it? Why Japanese consumer's first resisted urban farming The true value proposition for the supermarkets. The biggest costs in indoor farming are not what you think. Why, after 40-years. urban farming is finally taking off in Japan The two challenges to scaling indoor agriculture Three reasons Japan might be the perfect market for urban farming and one reason it may not be Why it's better to grow cheep veggies with expensive tech Is it better to be a founder or a VC? Links from the Founder Everything you ever wanted to know about Infarm METI visiting the Infarm Growing Center in Berlin Follow Ikuo on Twitter @ikuoch Friend him on Facebook Check out Ikuo's article about the Japan startup & VC landscape More about Ikuo Ikuo's consulting company Dreamvision and blog He's also a Professor at Entrepreneurship Department, Musashino University ... and an AsiaBerlin ambassador Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Food is complicated. That's why successful food related startups are so rare and so important when we do find them. Today, we sit down with an old friend after almost eight years. Ikuo Hiraishi is running Infarm Japan, an urban farming startup that is actually growing vegetables in supermarkets. Now, indoor farming or hydroponics has been fairly common since the 1980s, but the combination of rising global cost of food and the plummeting cost of technology and some innovative machine learning has resulted in urban farming not only becoming commercially viable today, but providing a very interesting value proposition for the supermarkets. And a pretty interesting value proposition for you and me as well.  We talk about the future of food, why you need expensive technology to grow inexpensive vegetables, and whether it's better to be a founder or VC in today's world. But, you know, Ikuo tells that story much better than I can. So, let's get right to the interview. Interview Ikuo: Cheers. Very nice to see you. Tim: I'm sitting here with Ikuo Hiraishi, a serial entrepreneur, angel investor, and new urban farmer. Ikuo: Thank you. Tim: So, thanks for sitting down with us. Ikuo: It's honor to be back here, to have a chat with you. Tim: It's been a while. It's been around eight years. Ikuo: Yes. I was kind of like test interviewee of Disrupting Japan. That was eight years ago. Tim: I think you were episode number four. Ikuo: Yes. A very early episode.  Tim: Very early. And we're closing in on episode 200 now.  Ikuo: Oh, cool. Congrats. Tim: But yeah, we're here to talk about urban farming. So, just so I can make sure I understand it correctly. So, the types of farming we have, like rural farming, which is just vegetables out in the field, like just farming. Ikuo: Yes. Soiled based farming. Tim: And then we have indoor farming, which is like plants and warehouses and things that are usually in the suburbs or in the outskirts of cities. And then we have what you and Infarm are doing, which is urban farming, where the veggies are grown like in the supermarkets themselves. So, what's the big advantage of urban farming overall, the other types of farming? Ikuo: So, of course there are lots of advantages, but so we can minimize the food mileage meaning delivery distance. So, it all depends on countries or markets and regions. For example, Europe, Germany actually Infarm originated out of Berlin. So, Germany is very cold country in general. And farming is possible only a four, five month a year. So, that's why they have to import lots of vegetables. Tim: So, when we're talking about food mileage, is the underlying concern cost? Is it CO2 emissions? Is it…? Ikuo: Transportation around Distribution has to consume lots of gasolines, lots of CO2 generated. So, meaning very big impact to global warming. So, urban farming can reduce those kind of energy consumption. And also the CO2 emission. Tim: And what type of vegetables is it good for? Is it good for growing just about anything? Are there certain types of vegetables that are better for this kind of farming?  Ikuo: Technically, almost all of the other vegetables can be grown as indoor farming, LED and hydroponics. But however, some vegetables, and they're not really good as they are the current technologies. For example, roots vegetables, like radish, carrot, potatoes, et cetera, are not really good to produce by the LED and the hydroponics. However, leafy greens, spinach and all the other herbs like basal coriander, et cetera. Tim: Lettuce and cabbage and… Ikuo: Right. That can be grown by LED and hydroponics. Tim: Why is that? Why are leafy greens so easy to grow and things like beets or carrots difficult? Ikuo: Beets, carrots, the roots have to be inside the water. So, the depth has to be certain amount. Tim: Okay. So, like root vegetables just require more space? Ikuo: I think so. I'm not the engineer, the LED and hydroponics, so maybe I am wrong, but as far as I have heard from the other engineers, technically we can produce potatoes and radish, et cetera, roots products now, but the quality maybe shaped, are not qualified as a commercial products. But leafy greens, they can grow very well. Tim: Okay, That makes sense. Before we dive deep into the business model, which I really, really want to do, because it's super interesting. I want to take a step back in how you got involved with the team and you mentioned Infarm is from Berlin.  Ikuo: Yes.  Tim: And you and I have both been back when I was at Teco, I was in Berlin an awful lot. It's an interesting city. There's a lot of innovation going on in Berlin. Ikuo: So, you've been to Berlin? Tim: Four or five times. Ikuo: Oh, nice. Good enough.  Tim: Yeah. It's a lovely town. I love it. Ikuo: So, when I was running a company called the Sunbridge Global Ventures, which we were running am event called the Innovation Weekend. We started Innovation Weekend back in May, 2011. The first three years we were only running such events in Tokyo and Osaka. However, the startup movement restarted after the financial crisis. So, we call the Lehman Shock. And then in Japan we had a Livedoor Shock. So, Tokyo Stock Exchange made that regulation very, very strict. So going public all of a sudden became very, very difficult. Meaning, exits are very difficult so that's why the investors hesitated. Tim: Now I remember the timing really well, but I'm curious, so after Livedoor, there was a lot of new regulations and a new… Ikuo: Yes. Tim: Actually, a lot more sort of guidance than regulations. But did the government change the regulations again to make it easier to IPO? Ikuo: Yes. Not the government, Tokyo Stock Exchange, because if they had kept the windows very narrow, only a few IPOs. Tim: So, when did they start loosening up again? Ikuo: I think 2009 was the bottom. And then 10-11 the time we studied innovation weekend and then kind of bounced back.  Tim: So, they started loosening up pretty much as the economy started recovering from the Lehman's Shock. Ikuo: And then after three years since we studied the innovation weekend, the startup market was kind of crowded. So, I thought we should reposition our innovation weekend. At the time, I always shouted we should go global. So, that's why we changed to host overseas, like Silicon Valley, New York City, Boston, Singapore, London, Berlin, et cetera, cetera. And then November, 2015 was the first very innovation weekend in Berlin. And Infarm was one of the setup who pitched. Tim: Right. I remember they won the Innovation weekend grand finale that year. Ikuo: Yes. Grand finale 2015.  Tim: So, was that the first time you'd met the team? Ikuo: Yes. In Berlin. Tim: You also led the Sunbridge Funds investment into them?  Ikuo: Yes.  Tim: That was after… Ikuo: So, that was after they won the other Innovation weekend Grand Finale 2015. But we also helped them conduct the other feasibility study of the Japanese market before we invested in. Tim: Atomico invested like a hundred million dollars. Ikuo: Yes. I don't remember the amount but Atomico, I don't exactly remember series A or series B. Tim: And then you brought them to Japan with partnership with Kinokuniya?  Ikuo: Yes. Kinokuniya and JR East. Tim: So, how has that gone? I mean, you brought them in about two years ago like right before COVID. Ikuo: Yeah, very good question. We seriously started operation to enter the Japanese market, Old Town, 2018. We eventually decided to enter the Japanese market maybe September or October, 2019. And then we established Infarm Japan as a legal entity 2020, February 27th.  Tim: Right, at the beginning of COVID. Ikuo: Right, right. So, we need to wait and suspend it. Tim: So, what happened, I mean, Japan's been opening up. Have the projects with Kinokuniya or with Summit, are they moving forward again? Ikuo: Kind of. The number of vegetables we can grow are more than a 75 or something. However, because Infarm studied from Europe, most of those varieties usually eaten by the Western people. Tim: Oh, so they're not necessarily what the Japanese consumers want to buy?  Ikuo: No. So, now we are growing and selling Italian basil, coriander, Italian parsley, wasabi, arugula, kale, of course lettuces.

We need to get the health care revolution right. Artificial Intelligence promises to reduce bottlenecks, improve quality of care, and allow our over-stretched healthcare systems to scale to meet the needs of the aging global population. But it's not going to be easy. Today we talk with Kota Kubo, founder of Ubie about the opportunities and challenges involved in the coming wave of healthcare innovation. And since Ubie just raised $27 million to  fund their global expansion, you'll be hearing a lot more about them in the future. It's a great conversation, and I think you'll enjoy it. Show Notes The right way to use and AI symptom checker Is founding a 50/50 startup with an old friend a good idea? How you can manage 150 employees without managers Why the team designed Ubie's UI in Hibiya Park The "karaoke interface" for medical data Why you should ignore your customers and listen to your users about design Why it's so hard to sell to doctors (and how to do it right) How to better support orphaned diseases Ubie's strategy for going global. Links from the Founder Everything you ever wanted to know about Ubie Check your symptoms with Ubie's AI Symptom Checker AN overview of Teal Management Follow Kota on Twitter @quvo_ubie Connect on LinkedIn Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Even if AI can't give us the right answer, sometimes it can help us to ask the right questions. It turns out, that's a lot more important than you might think. Today, we sit down with Kota Kubo, the co-founder of Ubie, an AI based symptom checker and hospital check-in tool that is being used at over a thousand hospitals and clinics across Japan. And as you'll see in this case, the questions, the AI raises are more important than those it answers. And since Ubie just raised 27 million to fund their global expansion, you'll be hearing a lot more about them soon.  We also talk about how Ubie manages 150 staff with no managers, why it's so hard to sell to doctors and how to do it right. How to bring attention to orphan diseases and why you really need to ignore your customer’s ideas about UI and listen to your users. But, you know, Kota tells that story much better than I can. So, let's get right to the interview. Interview  Tim: Cheers. Kota: Cheers. Tim: So, we're sitting here with Kota Kubo of Ubie, who is disrupting digital health here in Japan. So, thanks so much for sitting down with me. Health tech is so important in Japan. And so you've got two different products you offer.  Kota: Yes.  Tim: So, let's do just a real quick introduction to what those products are and then we'll dive deep. Kota: Yes, we have the two side of product. First, is for the patient product. It's our AI symptom checker Ubie and the users input their symptoms like headache or stomach ache or something. So AI asked some of the sort of questions. And after that AI suggest a disease name so their users can get to know their symptom, condition and disease. And after that, we also suggested the clinics or hospitals.  Tim: Okay. You know, one thing I'm curious about that, because I've used it. It's really interesting, but so like some sites like WebMD, for example, they have a really famous problem where someone will go on with like, I don't know, a runny nose and they'll start searching and asking questions. And 10 minutes later they're convinced they have like rabies or some brain eating parasite or some horrible disease. How do you stop that kind of unhealthy interaction at Ubie? Kota: Yeah, it's very difficult. I think so our end the point of the suggestions guide people to the appropriate clinics and hospitals and we suggest a specialist created to their symptom. So, I think their users feel they're safe. Tim: So, and again, you're really focusing on providing information, not diagnosing anything.  Kota: Yes. Yes. It's a very important point.  Tim: And your other product is the monshin, the check in functionality, right? Kota: Yes, exactly. So, second product is Ubie, health assistant it's called AI Monshin in Japan. The objective is to reduce the burden of their medical doctors. We save the time of their making the clinical record because our AI also ask a lot of questions about symptoms and AI summarize their medical record. Tim: This is really cool. So, let's take time to walk through the process. So, if someone's got an appointment at the hospital or at a clinic, they can check in and fill out the symptom forms at home on a mobile phone, right?  Kota: Yes.  Tim: And where does the AI come in? Kota: There a lot of questions from the AI and the AI is changed the question according to their patient answer. So, AI selected the question and also calculates their disease probabilities. Tim: So, what the AI's doing is it's figuring out the kinds of follow up questions a doctor would ask. Kota: Yes. Tim: And getting this information together and presenting it to the doctor all at once? Kota: Yes. Yes. Tim: So again, not diagnosing, but just getting the information together. Kota: Yes. Yes. Tim: Awesome. So, tell me about your customers. Who's using Ubie and monshin? Kota: First, is a medical doctors. Before using the Ubie, they have to make their medical record by themselves from scratch, but we support them to make the record. Before we are face to face medical consultation with their patient, also we suggest disease to the medical doctors. It prevents their doctors from overlooking the serious disease.  Tim: So Ubies is use in all 47 prefectures and 15% of all clinics and hospitals in Japan are using it now. Kota: Yes. Around 15%. That's the product that they use is either not the Ubie AI Monshin, it's a Ubie link. It's a connection between the B2C and the B2B app and in terms of the Ubie AI health assistant, we have just install the 1000 clinics and hospitals. Tim: That's fantastic. Okay, I want to dive deep into the product in the market, but before we do that, let's back up a little bit and talk about sort of how you got here. So, you officially founded Ubie back in 2017, right?  Kota: Yes.  Tim: And at that time, you were still a student? Kota: No. Before starting Ubie, I worked through Japanese data health company. I worked as a marketing engineer. Basically I did a light code, production code and also I do the marketing related things. Tim: But that was relatively briefly, right? Kota: Yes. And including the internship just three years. Tim: And your co-founder Abe-san, he was also at University of Tokyo, but you guys were like high school classmates or friends or something, right? Kota: Yes.  Tim: How did that happen? Did you reconnect in university or did you stay friends the whole time? Kota: Yes. He was my friend and from the high school, as you mentioned, we are friend of there just starting together. So, for the Jyuken. And we split when I entered the university and my bachelor's degree was in Kyoto University, but he entered the University of Tokyo. And from there graduate school, I moved to the university, the Tokyo and yeah… Tim: And reconnected. Kota: Yeah. We connected. And actually when I was in Kyoto University, there was angel investors who liked Abe-san company and his mission is to increase the number of students who want to become an entrepreneur. Tim: That's my mission too. Kota: Sounds nice. So yeah, I got interested in such entrepreneurship and also they're starting business. Tim: So Abe-san, I mean, he's a medical doctor.  Kota: Yes.  Tim: Did you pitch the idea to him or did you come up with it together? Kota: Yes. In 2012, I come up with the idea of diagnosis. I researched about such domains and I also developed a better version. I kept one year. And after that I understood, I lacked the knowledge of such a medical domain so I have to consult with him. So, I pitched. Tim: You pitched. Kota: I pitched him and he said, we can make it.  Tim: So, you were actually working on this from 2012? Kota: Yes. Tim: So, you were developing it for like five years before you started Ubie? Kota: Yes. Yes. That's a beginning phase is just for the research. Tim: It's interesting. So you and Abe-san are co-CEOs? Kota: Yes. Tim: Now this is something that's actually pretty common in Japan but pretty rare in the US. Does that ever cause problems? How does that work on the personal day to day? We've got to make these decisions under high stress situation. Kota: Yes. it's a very good questions. Yeah, sometimes I feel it's confusing for the employees too. So, who is the final decision maker? They don’t know. Yeah, I think there good point is we can advise the risk and there is a rules are between me and my co-founder. If there is an inevitable conflict between us after discussion, we can make the same decision. Tim: I like that. I mean, it's a very culturally different approach having 50-50 forces you to reach an agreement. I've always said in the deals I've done, like I'm perfectly happy with 49% or 51%, but I never want 50 because I don't like the ambiguity, but it is interesting because it does force you to sit down and get aligned. Kota: Yeah, yeah, yes. Yeah. Some of these investors advised us don't go for 50 and 50 too. Tim: Give someone 51 and… Kota: Yeah, yeah. It's our entrepreneur.  Tim: I mean it's different. I mean, what I would imagine would happen is it would definitely slow down decision making, but maybe those are the cases where it's good to slow down a bit and build a consensus. Kota: Yes. And we have also installed the framework of the sulture structurings it's a holocracy, it's a kind of Teal organization. You know Teal organization? Tim: I do. And I had a note to talk about this later, but let's talk about it now. I think the way you've structured your organization is super interesting.

World-changing trends can start anywhere in the world today. Because the social media platforms evolved differently in Northeast Asia, e-commerce developed differently as well. And because of recent shifts in regulation and social attitudes, Western social media is going to start to look a lot more like it does in Aisa, and e-commerce trends will follow. Today Masa Shimizu, founder of Zeals, explains the origins and structure of chat-commerce and how it might lead to a friendlier, more enjoyable, and more profitable internet. It's a great conversation, and I think you'll enjoy it. Show Notes An introduction to chat commerce How to teach a support chatbot to sell What the death or retargeting means for chat commerce Why some university startups get support, mentoring, and funding but and others do not $39 M fundraise in equity and debt, and why that's becoming a popular model Why Asian social media evolved differently Why Facebook and Instagram are about to become more chat-like How Japanese VC discourage startups from going global Links from the Founder Everything you ever wanted to know about Zeals Zeals on LinkedIn Coverage of Zeal's $39 M fundraise Follow Masa on Twitter @masa_zeals Friend him on Facebook Connect on LinkedIn   Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we are going to talk about a 290 billion eCommerce trend that is sweeping through Northeast Asia, but hasn't taken off in the US or Europe. Well, at least not yet.  You and I are going to sit down with Masa Shimizu, founder and CEO of Zeals. And we're going to talk about Chat Commerce. Now Masa will explain this structural reasons that this has been so popular in Japan, China, and Korea, and why it's about to take off in the West.  And it's not just Masa and me saying so, Zeals just raised 39 million to fund their US expansion. So, this is a trend you need to know about.  We also talk a lot about the Japanese concept of Omotenashi, which is usually translated as hospitality and yeah, kind of, I mean, that's probably the closest word we have for it in English, but there's more to it than that. It's kind of obsession and a giving of yourself honestly and wholeheartedly to make your guests comfortable and satisfied. It's kind of a satisfaction and happiness that you get from making your guests happy.  So, Masa and I talk about Omotenashi, about a structural change coming to global social network platforms. How we can get more Japanese startups to go global and why the third party cookie ban means the death of retargeting and the birth of the Chat Commerce boom.  But Masa tells that story much better than I can. So, let's get right to the interview.  Interview  Tim: I'm sitting here with Masa Shimizu the founder and CEO of Zeals, who is a driving force behind Chat Commerce. So, thanks for sitting down with us. Masa: Thank you for reaching out. Tim: To start out with, what is Chat Commerce? Masa: Chat Commerce is next eCommerce innovations. So, on eCommerce website many people feel concerned to purchase online, especially expensive items or complex items. We can support through communication experience and we believe this is Omotenashi experience. Omotenashi is Japanese word which means hospitality. It's very exciting and helpful experience I think. Tim: So, when you're talking about Chat Commerce is this interaction over social media? Is this interaction over like chat at corporate websites? What's the main channel where this conversation is taking place? Masa: Mainly is SNS. In Japan case, line platform is most important because many people use this platform. And as a country, other channel is very important. The example, WhatsApp, Facebook Messengers, WeChat and Instagram and so on. Tim: Okay. That makes -- and its funny people coming into the Japanese market often underestimate the importance that line plays in social media in Japan. It's huge. Masa: Yeah. Yeah. Tim: So, yeah, let's walk through an example from the customer's point of view. So, would a consumer start out by just saying, you know, I'd really like a new pair of shoes. Does anyone have any advice? How does the interaction start? Masa: Start point is website or Instagram case, Instagram story, if it a post or advertisement. So, user watch advertisement and click list, typical eCommerce experience, jump website. But Chat Commerce case user watch advertisement and the click list, jump chat experience and communication and understand item and buy item from chat. Tim: Well, that makes sense because in that way it's maintaining this social network experience rather than having to transition to a eCommerce experience or a website experience. Masa: Yes. Yes. So, this Chat Commerce experience have been invented and spread from Asia market. It very unique progress I think. Tim: Later on, I really want to dig down on why this seems to be so unique to Asia, but right now, like just understanding the flow so we keep the user, the potential consumer in a social media framework, in a mindset. And are they chatting with a chatbot or are they chatting with people or is it a combination of the two? How does that work? Masa: Important questions. It's very simple on the chatbot. First timing we provide chatbot and personal chat. We provide both, but we step by step focus on chatbot experience through smart reply. This new experience we invented from now more and more companies focus on only chatbot experience. Tim: That makes sense from the consumer point of view, but you've got over 400 businesses using Zeals now. Tell me about your customers. Why are they using it? What's a typical use case? Masa: Example NTT Docomo, the biggest telecom company in Japan and Asahi Beer the top beverage company in Japan and recently Estee Lauder, Mac Cosmetic and enterprises interested in this area. Before Zeals, many enterprises focus on chatbot for customer support. So, inbound areas, FAQ and answer only, but we have opened up outbound area to make conversion through chatbot experience. Tim: So, I agree chatbots in general tend to be viewed as customer support or maybe some, I don't know, very light presales at the website type of thing. Masa: Yes. Tim: What did you do to change that into a more sales focused, commerce focused application? Masa: Important background one point is third-party cookie ban. So, retargeting advertisement from our decreasing from now retargeting marketing will be limited by performance. Tim: That's a really good point. And for our listeners who are not involved with eCommerce retargeting is when you'll visit a site and then you'll see banner ads and display ads for that site for the next two weeks, everywhere you go. And it can be a little creepy but it's very effective.  Masa: Yes, or retargeting advertisement is very important for making conversion for any eCommerce customers. So, many eCommerce customers have big concern. What service say we will use about Chat Commerce? We don't use third party cookie but we can continually communicate with users through Chat Commerce. So, south party cookie bank is a big reason many company starting to use Chat Commerce. And second point line and Instagram and so on, invested a lot of money to grow this account but now those accounts cannot make actual sales only branding engagement. It's great but cannot make conversion or sales. Tim: So, if I'm understanding correctly, so one of the big advantages of Chat Commerce is that once a user initiates that conversation, they initiate that chat. You have a direct connection to them either via Facebook messenger or via line messenger. And so you don't need the retargeting and you don't need to pay Facebook to promote your post. You have that direct connection. Am I understanding it right? Masa: Yeah. Our strong point is 3 point. One point is huge conversational insight data for next revenue marketing. And the second is communication design specialist team to making great compensational experience. And the third point is Paypal performance fee business model. So, client use this with no risk. So, many case client have already line accounts or Instagram accounts and we'll connect with chat commerce. Tim: All right. I really want to dive into the overall market and the technology, but before we do that, I want to ask a little about you. So, you started Zeals back in 2014 when you were still a student, right? Masa: Yeah. Tim: Yeah. Originally you were focused on like robotics or you were doing something different. Masa: So, I established Zeals when I was a university student in 2014 and the first project was to develop a robot, but to be honest, we couldn't make this business profitable. This project needed a lot of money. We were very… Tim: Robotics is so hard. I mean… Masa: Yes, yes.  Tim: Was there any one problem or it was just, you didn't know what you were doing kind of first startup? Masa: Yeah. So, I think its crazy first project. Yeah, but we ran many things through this project and we transformed robotics technology into communication technology on smartphone and chat. Tim: Yeah. So, you pivoted just a couple years ago on like 2019 to the chatbots. But before that, like when you were at university, what kind of support did you get from the university? Did they help you on your startup journey? What was that like? Masa: Yeah, definitely nothing.  Tim: One of the most interesting things in Japan is the level of support that new founders get at different universities. So, at the university of Tokyo or KO or Kyoto, there's this huge amount of mentoring and funding support, but you went to a major university, right? Masa: Yeah. So, 2014, nothing and maybe Kyoto, Keio, Tokyo and so on recently more support for startups I think. They get support by university,

You never hear the names of some of the world's best SaaS startups. Why waste money building awareness among consumers when you can quickly and steadily grow your B2B business across Japan then across Asia? Today Yu Taniguchi founder of TableCheck returns to the show and answers that question. TableCheck is rapidly expanding their table-management system business by throwing out a lot of the traditional SaaS playbook, and Yu lays out a model for sustainable, scalable SaaS startups. It's a great conversation, and I think you'll enjoy it. Show Notes How the TMS market has changed in the last five years Why the first mover advantage is not really an advantage Maintaining differentiation in an increasingly competitive market The huge flaw in the current generation of SaaS "best practices" Demand-side vs supply-side startups Why you should only take the VC investment that you actually (desperately) need Why Japanese (and otter) startups need to be thinking about global markets from day 1 Concrete (and sad) examples of what's wrong with Japan's education system Links from the Founder Everything you ever wanted to know about TableCheck TableCheck Twitter @tablecheck LinkedIn Page TableCheck on Facebook Follow Yu on Instagram Friend him on Facebook Connect on LinkedIn Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Some of the most important and successful B2B startups fly under the radar. And that makes sense when you think about it.  When success depends on dominating a specific business niche, who really cares if most consumers have never heard of you? In fact, as we'll see, that can actually put your whole startup at risk. Today, Yu Taniguchi, old friend and founder of TableCheck joins us again on Disrupting Japan.  Now, TableCheck makes a table management solution for restaurants, and Yu and the team have taken a very different approach than most of the competition in this space.  The last time Yu came on the show, we talked about his business model and how to expand globally with very little capital. There's a link to the episode in the show notes, and I strongly recommend you listen to it because it was really a good one and we'll be covering a hundred percent new ground today. Today, as we catch up with Yu, we find his strategy has worked with some refinements, and TableCheck is expanding rapidly across APAC.  This is a great real world case study of how Japanese startups can go global. Yu and I also talk about how the current generation of SaaS business models is broken, how to protect your startup from market downturns, and some really good advice about the two kinds of fundraising plans you need to have to survive.  But you know, Yu tells that story much better than I can, so let's get right to the interview.  Interview  Tim: We're sitting here with Yu Taniguchi of TableCheck, who is making integrated reservations, CRM billing and more for restaurants. Yu, it is so good to have you back again. Thanks for sitting down with us. Yu: Thank you so much for inviting me. I'm very honored and excited to be here. Tim: It's been four and a half years since you were last on the show and so much has changed since then. You were growing fast then, you've continued to, so tell me about your customers today. Who's using TableCheck and how many are there now? Yu: We have roughly 7,000 restaurants using our solution both in Japan and overseas. Back then when we did the interview, I think it was around 2,000 restaurants. Roughly we've more than tripled since then and taking in consideration that out of the four years, two years have been during the COVID. Tim: Let's talk about what's changed in the market. Four and a half years ago, you were saying that your biggest competition was paper and pencil. Most of your customers were using these manual processes, but over the last four years we've seen this huge SaaS boom in every market. How was your market and your competition changed in that time? Yu: It depends market-by-market, but the Japanese market back then most of the restaurants were managing their reservation and customer data by paper and pencil. Nowadays, we have two, three competitors in the Japanese market. Globally we have, let's say, 10 major competitors. Now more and more restaurants are starting to use table management system, TMS. So now the market is becoming more mature and the restaurants are starting to use TMS as a standard restaurant operation. The competition is becoming more fierce, but at the same time rather than trying to educate the restaurants to switch from paper and pencil to TMS, convincing that our solution is better than whatever TMS they're currently using is, I would say, easier. Tim: That is so true. And I think so many startup founders misunderstand the first mover advantage. On one hand, it's great to be first to market, but on the other hand, you've got to convince your customers that they need you. Yu: Exactly. It's like going out to a country where nobody's wearing shoes, but once everybody starts wearing shoes, it's much easier to sell better shoes. Tim: You can compare yourself. And the biggest hurdle of like, do I need a table management system, that's already taken care of. There are some global companies like OpenTable, but is your competition the same in every market? Are there global players or is this really a country-by-country market? Yu: Good question. I think it has both aspects. Each market has strong local player. At the same time, there are some players which are going global, including ourselves, TableCheck. This is a good question, actually. Because some local players they tend to sell to smaller margins and global players like ourselves target, for instance, global hotel brands or larger restaurants. Tim: Okay. There's a lot more competition today. You're no longer having to convince people that they should not be using paper and pencil. What's your main differentiation? What does TableCheck do differently than most of the competition in the market? Yu: First of all, we support 18 different languages, which is by far the largest number in the market. And also, we invest a lot in localization. Localization, including functions and features. Not only that, but we integrate with major local players, such as POS vendors or payment vendors, because each country has strong players and dominant players in many areas. Some of our competitors, they enter different markets, but they only support globally usable POS vendor or payment vendors. Tim: Okay, that makes sense. Another thing I've noticed, or at least it appears to me from the outside, that TableCheck, you seem to work hard to avoid lock-in, whereas a lot of SaaS companies, the standard strategy is you want to own the marketplace, you want to own the relationships. And it seems like TableCheck, you guys have gone out of your way to ensure that you can take reservations from any platform. You can use a CRM and reach your customers through channels outside of our ecosystem. Am I reading that right? Is that unique to TableCheck or is this sector just different? Yu: Actually, we don't want to lock margins with contracts but with the value we provide to the restaurants. We want to be a sticky product, of course. We want lower churn rate, obviously, but we don't force the restaurants to keep using us. Some of the TMS are provided by OTAs, we call, online travel agents, restaurant websites like Yelp, in Japan that would be GuruNavi, in Singapore that would be Chope. Those players, they try to force restaurants to keep using their TMS with contracts, which state that the customer data belong to OTAs. And also, they don't allow the customer data to be exported when the restaurant decides to stop using their TMS and switch to another one. In our case, we allow data export at any time. We don't have any strong contractual limitations for the restaurants. Tim: Yeah. It seems like you guys are having a much more traditional software approach. You're selling tools rather than a ecosystem. Yu: That's a good point. Our current state is that we are just a tool for the restaurants. And also, like from the diner's perspective, when they try to make a reservation, visit the restaurant website, they happen to land on TableCheck reservation page. We are just a tool but our business strategy is that we want to evolve ourselves to provide more values in the ecosystem and connect the diners and the restaurants. We are going to build more functions and provide more values to the diners in the future phases. Tim: Have you found that your customers are getting more educated and more skeptical about some of this lock-in and these ecosystem claims? Yu: Yeah, exactly. I think that's why we are rapidly expanding our client base. We've been trying to deliver the message to the restaurants that using OTAs' TMS is very dangerous. They'll have to continue to use it. The longer they use it, the more customer data is stored in those OTAs' TMS. And finally, when they decide to stop using that, they have all these customer data as hostage. Tim: I think this is a real problem across almost the entire SaaS model. A lot of customers end up getting burned because the entry price seems so low. Yu: Yeah. That's exactly why we are expanding our market share. We let the merchants know what the risks are. Let's say restaurants want to accept online reservations. Okay, here's Chope, here's Yelp, here's GuruNavi. They're not even aware that the customer data belong to the OTAs or they're signing a contract where they cannot export their customer data. Tim: Well, yeah, because they always bury it on page 35 of this 75 paid license agreement, right?  Yu: Exactly. Tim: Does TableCheck bill on a transaction basis or is it a fixed monthly fee?

Manga is one of Japan's best known exports, but it's surprisingly hard to make money here. Today we dig into exactly why this is. We sit down with Sho Ishiwatari, founder of Mantra, who explains how is company is trying to expand the global market by streamlining the translation and global marketing processes. We also talk about why manga is so much harder than books for AI to understand and a few ways Japanese universities are trying to develop and inspire the next generation of Japanese founders. It's a great conversation, and I think you'll enjoy it. Show Notes The surprisingly complex manga translation process The real problem with fan-translated manga How to think about getting a 10x( or 100x!) improvement How the University of Tokyo supports startups and what other schools can learn from them Why translating manga is so different from translating novels The downside using contextual hinting wit AI/ML How to expand the global manga market What every Japanese university should be doing to encourage startups Links from the Founder Everything you ever wanted to know about Mantra Connect with Sho on LinkedIn Friend him on Facebook Follow him on Twitter @mantra_ja (Japanese) Sho's published academic research on machine translation of manga Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for listening. Manga and Anime have been two of Japan's most visible and influential exports. Japanese manga has earned its own section in US bookstores. And in the movie industry today, many of the world's most successful directors and cinematographers cite Japanese manga and anime artists as some of their biggest inspirations and influences. But surprisingly, despite manga's global popularity and influence, the global market is pretty small. There's not a lot of money in manga. A And today, we're going to dig into that. We're going to sit down and talk with Sho Ishiwatari, CEO of Mantra. And we're going to find out if a startup can disrupt or even survive in the manga industry. Mantra has created an AI that can translate manga. But, as is the case with so many startup stories, the journey is far more interesting than the destination. You see, before the AI could translate manga, Sho when the team had to teach it to understand manga. Not just read the words but understand the context and the layers of implied meaning.  Sho and I talk about the nature of human understanding, how Japanese universities can better inspire the next generation of startup founders, and AI's role in helping people understand each other. But you know, Sho tells that story much better than I can. So let's get right to the interview.  Interview  Tim: So we're sitting here with Sho Ishiwatari of Mantra, who's bringing Japanese manga to the world. So thanks for sitting down with us, Sho.  Sho: Yeah, thank you for having me, Tim. Tim: In the introduction, I give a really high-level description of what you guys do. But can you explain what Mantra is? Sho: Yeah, sure. So what we are doing is to deliver comics, deliver manga, across language barriers. So we are building two products. The first one is a manga translation tool that is based on our machine translation technology. And another product we're making is Langagku, which is a language learning tool based on manga. Tim: That's two really different lines of business.  Sho: Yeah. Tim: Let's dive into both separately later on. But the core tool, do you just translate Japanese into English or do you support other languages as well? Sho: We currently support for language peers, Japanese to English, and English to Japanese, and Japanese to Chinese, and Chinese to Japanese.  Tim: Well, that's interesting. So far, most of your business has been Japanese to other languages. But do you also have companies bringing in English or Chinese language manga to Japan?  Sho: So previously, almost all the Japanese comics read in Japan are made from Japan. But recently, there are more and more comic platform also in Japan, for example, from Korea or from China. They are having more and more content that have super high quality, so there are several contents coming in from outside Japan. Tim: So tell me about your customers. You mentioned that you're working with publishers and creators, but walk me through your use case. How would a publisher use this tool? Sho: Basically, Mantra Engine, it works on browser. Before Mantra Engine, people has to use Photoshop and Excel and Adobe Acrobat to create the translated manga. And there are several people are involved in the project, like translator, checker, and then designer, who put the characters on the images. So the process will be very complicated and you need to connect to others by using email and send the files to everyone who are involved in the project, which takes time. And the translation and design, all the process done manually. But in our product, they can do that on the browser, the same tool for everyone. And also, it is partially automatically done by AI. You put the image into the tool, it automatically translate that. So it helps people do each process as well as the communication between those different people. Tim: So it is AI translation but it's not completely AI, there's a post translation editing step too, right? Sho: Sure. Sure. You're right. Tim: So from a publishers point of view, what do they gain in terms of like how much faster is this process in the real world, or how much less expensive is the process compared to traditional way? What are the publishers gaining by using Mantra? Sho: One of our clients who is not a publisher but they're translation company of not only the comics, but also other media. But what they say is that they can accelerate the translation speed, whole process by 200%. Tim: So cutting the translation time in half.  Sho: Yeah.  Tim: And does that result in cutting the costs in half as well? Sho: I think so. Because they're hiring people, so I don't think that that's easy, but basically it should be. Tim: All right. Well, in the ballpark anyway, like customers often won't share those details. Sho: Yeah. And it works on browser. So previously, the translation had to be done by the professional translators. Because if you want to publish in different languages at the same time, you have to share your unpublished data to translators before you publish, like, one week before or two weeks before that. But the thing is there are so many fan translators who want to translate but they are not professional translators. So what Mantra Engine enabled was that you can share that to not only the professional translators but also to the fan translators. Tim: Have publishers been taking that up? Because I know there's far more fan translated manga out there than there are officially translated. So, have publishers been using that feature in Mantra? Sho: Yeah, one of the publishers, yeah, we are working with fan translators. And we let the fan translators use Mantra Engine. Tim: But if you're looking at an overall 50% reduction in price and time, that's really impressive. That's always been the promise of automation of any kind, right? Sho: Yeah, you're right. But we are not satisfied with this result, you know. It should be like 10 times faster or 100 times faster. Tim: How do you get to that number? So, I mean, in startups, we talk about the 10x a lot. It's a really good goal. And actually, you know, 50% is really impressive, honestly. But let's say we're going for that 90% reduction, right, what's the bottleneck? What do you have to change to make that happen? Sho: That's an interesting question. Yeah, we are thinking about that. And it's not an easy question. But as I had mentioned, there are three people who are involved in a single project — translator, checker, and then designer. So even if each process can be accelerated, but if you are working with other person, you need to wait for something. You need to wait until others finish, after which you can begin checking for designing. That is one of the bottleneck. Tim: So changing the workflow to allow these processes to happen in parallel to some degree. Sho: Yeah. And another idea is that if people can do multiple process, so let's say if a translator can also do the design part.  Tim: Yeah. I mean, it's a different skill set, right?  Sho: Yeah. But if we can assist the process, we can let the translators to do the design very easily. Tim: That's true. The more advanced AI becomes, the more likely it is you'll be able to do that. Well, I want to dig really deeply into the technology and the markets in a minute. But right now, I want to talk a little about you. And let's back up a bit. So, you founded Mantra when you were doing your post doc at the University of Tokyo, right?  Sho: Yeah.  Tim: Was this part of ongoing research you were doing? Was it a brand new idea that you and your co-founder had? How did you get rolling with this? Sho: The thing began when I was doing the last year of our PhD. I and my co-founder, we were talking about the idea of Mantra. We were trying to make prototype and we were finding customers. We've already decided to make a company then but we haven't made the company. We just did that as a side project. Tim: Why this particular area? Was it just you both were very interested in manga or was it directly connected with your research? Why this particular niche? Sho: Both, both. One strong motivation for me is to involve in entertainment area. I wanted to use artificial intelligence technologies to accelerate the cultural exchange. Very important culture of Japan should be manga or anime or video games. And also, I was doing research on machine translation. And my co-founder, he was very good at doing image processing and comics, consists of text and image, so we can make it.

Subscription boxes can be a tough business. Most of these startups shine brightly as they burn through investor capital and flame out well before becoming profitable. But there are exceptions. So today we sit down with Danny Taing, the founder of Bokksu, to learn what he and the team did differently, how they obtained substantial VC funding, and where they are going from here. We also talk about Japan's unique snack culture and the surprising insight is has to offer about Japanese culture in general. It's a great conversation, and I think you'll enjoy it. Show Notes Why the world needed one more subscription box startup What Japanese snacks (and food in general) are different Strategic storytelling: aka "When you are talking about snacks, you are not really talking about snacks." Meet the world's happiest QA team Why Bokkusu could succeed when so many subscription-box startups ad failed Growing from zero to 1,000 and then 1,000 to 10,000 What really goes into the box Which Japanese snacks are most loved overseas The strategic expansion to Bokksu Market and Bokksu Grocery How a food startup can raise real money in a world of software-focused VCs Why "Japanese culture" startups almost always fail   Links from the Founder Everything you evert wanted to know about Bokksu Check out some amazing snack pictures Follow Danny on Twitter @dannytaing Bokksu's amazing Maker Videos (seriously, these are great) Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for listening. Now, I'm going to warn you in advance. This episode is going to make you hungry. Danny Taing founded Bokksu to sell unique Japanese snacks to the world. And we spent a lot of time talking about sweet and savory snacks and all of the unique cakes and the baked goods so be ready for it. Now, both subscription boxes and e-commerce from regional foods are both very hard business models for startups. They're popular but almost all of them fail and fail fast. Danny explains that when he started, almost everyone was highly skeptical. And by the way, that includes your humble narrator as well. I knew Danny when he was just starting. Well today, Danny explains what he did differently. How he evolved from skirting the law as a snack smuggler to growing a trusted consumer base to receiving $22 million in investment to building $100 million dollar company. This episode is a masterclass on how you need to change not only your strategy, but also change who you are at every step of your journey. But you know, Danny tells that story a lot better than I can so let's get right to the interview. Interview  Tim: So we're sitting here with Danny Taing Bokksu, who is delivering tasty Japanese snacks to the entire world. So thanks for sitting down with us, Danny.  Danny: Thanks for having me, Tim. It's a pleasure to be here.  Tim: That was a really simple introduction of Bokksu. I'm sure you can explain it much better than I can. So what exactly is it that Bokksu does?  Danny: Yeah. So our mission is to kind of bridge cultures through authentic Japanese food and snacks and products. We do this by, as you just mentioned, delivering these delicious Japanese snacks worldwide in our monthly curated snack subscription box. We have a whole lot of products from there but I'm happy to get into that later.  Tim: Yeah, and I do want to dive into it. You guys have come a long way. It expanded a lot since you started, and you've delivered over a million boxes of snacks, which is awesome. So what exactly is a subscription box?  Danny: Many people already know about subscription boxes out there. But what makes box really special is that we directly partner with the centuries old family snack bigger businesses throughout Japan, everything from Hokkaido red bean buns to Kyoto matcha cakes and Okinawa chinsukos. These are products that are all Japan-exclusive, and a lot of times they're even region-specific. We sourced them all there, curate them into monthly themes, and then ship them directly from Japan to about 100 countries around the world to our customers. And what really gets customers excited besides the delicious snacks is the fact that we always include what we call a culture guide magazine that explains that month's cultural background, why these snacks are important, where in Japan they're from, interviews of the makers, there's just like a little discovery travel in a box that people love.  Tim: This is something I wanted to get in later but we might as well get into it now. How long did it take you to realize the importance of that storytelling and that cultural explanation?  Danny: So it was always something I actually sawed off to do from the beginning. For example, I founded the company in late 2015 and I solo bootstrap launched it in like early 2016. Actually, it was April, so it's our six-year anniversary right now. And at that time, it was just me so there wasn't a whole lot of storytelling I could do. And the first culture guide was like a two-sided postcard, because I did the copy myself and everything. So there was only so much I could really write and fit on there. But like from the beginning, I really wanted to tell their stories because all the snacks in Japan are so special. I lived in Japan for over four years, and every time I would receive one of these omiyage snacks, I would hear like, "Oh, this is like this famous Kagoshima, it's like 200-year-ld family business or something." And I was like, Holy God, we don't have that in America. That's very rare in the West to have something like that.  Tim: It is. I mean, both in terms of the cuisine and in terms of like a small family that has been making the same type of snacks for four generations. It just doesn't seem to exist in the US.  Danny: Yeah. First of all, US is not even that old a country. Some of our makers are over 300 years old, they're like older than America. And secondly, it's just not that same kind of direct lineage that we have in America. It's a little bit more, you know, Transia in some ways in that more modern and recent, but a lot of people love that. I love that. You see that even on Netflix documentary shows, where about food or people talk about Jiro, right, and his obsession with how long he has been practicing sushi and teaching it, and people get really into that craftsmanship. So from the beginning that was the goal, but I couldn't actually execute on it until probably like a year or two into the business.  Tim: You know, there's almost a cliché that, well, we're not selling x, we're selling the experience. It's horribly overused but I think you guys really nailed that.  Danny: Thank you. Yeah, we pride ourselves quit on that. It's actually advice I give other founders quite often when they ask me for help is that you have to sell an experience, a lifestyle, a brand. If you sell commodities, then Amazon will beat you every time and so you got to do something different.  Tim: When we're talking about snacks, we're not really talking about snacks.  Danny: Right. It's not just a box of random snacks, yeah, yeah. Tim: That's awesome. And you guys have worked really hard to kind of maintain all of your marketing, your photography, your storytelling, it's all in-house, right? Yeah, correct. Actually, the creative team is our largest team inside the company. We have two full-time photographers, we have graphic designers, art directors, and all of it is copywriting is all done ourselves. It's very important to us because it's not just, once again, the brand, it's also about the community and the kind of loyal following that our customers have for us and we don't want to disappoint them. We don't want to all of a sudden give them something that is subpar. And so a great example is I actually still final taste test everything that goes in the box six plus years later. Tim: I'd be looking forward to going to work for that. Today is taste test day. Danny: It is, exactly, we have a monthly snack tasting day and we'd like ship everything over to our New York office. Our Japan team curates the samples, we get about 30 samples and they get shipped over. And then a whole team gathers and we taste test it, and we curate it down to 16-ish unique products. And I kind of still final curate the thing to make sure it's on par with what would it should be. Tim: Awesome. Well, let's back up a bit. Because the subscription box model, it's a tough one. Most startups don't make it but you guys did. So let's back up and I want to walk through how you got your first 100 customers, and then how you move to the first 1,000, and then to the 10,000. And then we'll talk about where you're going next with box marketing brochure.  Danny: Sure. So as I mentioned before, when I kind of bootstrap launched April 2016, it was just me and I had no funding or external capital, really. I put some of my own savings in and so I couldn't do paid ads. I worked at Google before in kind of digital marketing so I knew that you need a certain amount of budget in order to make paid ads work. And so I didn't want to just waste money for no reason. Plus, I had no brands at that point so nobody would even trust what I was doing. So for the first 100, it was very much like scrappy guerilla marketing. The first 40 were pretty much all friends and family, and then them telling their kind of loved ones, etc.  Tim: So I mean, word of mouth can get you to 100 but how are you sourcing product? Were you had friends shipping it over from Japan or bringing back suitcases full of sembe or what? Danny: The early days were scrappy/kind of even maybe legally ambiguous. There were certainly some snacks smuggling. I mean, it's snack so I think it's totally okay, where I did actually bring back snacks in my suitcase from Japan to America.

There is a very good reason B2B SaaS is huge in Japan right now. Today we sit down with Chiemi Kamakura, co-founder and CEO of Agatha, and she explains why. Agatha is a Japanese SaaS company that has been global from Day 1, but is leveraging some unique strengths developed in Japan.  We talk about how Japanese SIs have responded to SaaS, why Japan is likely to see a lot more female founders soon, and  the fact that Japanese managers and regulators actually hate paper just as much as the rest of us, but there is one thing that keeps them from going digital. It's a great conversation, and I think you'll enjoy it. Show Notes The real reason Japanese hospitals can't get away from paper Why it's hard to innovate from inside a company Can Japanese SIs survive in the SaaS era Agatha's commitment to being global from Day 1 How global and Japan SaaS markets are different (and how they're not) How SaaS can thrive in highly regulated industries. The importance of a personal network in high-trust products How to develop more female founders in Japan Some good advice on going global with a SaaS product   Links from the Founder Everything you evert wanted to know about Agatha Connect with Chiemi on LinkedIn Friend her on Facebook A good Forbes article about Agatha Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs.  I’m Tim Romero and thanks for listening. Today, I'd like to introduce you to Chiemi and to Agatha. Actually, Agatha is the startup created by Chiemi Kamakura and her co-founders to solve a global problem in the record-keeping required for clinical trials that are run by pharmaceutical companies.  Chiemi tells a great story, and one that illustrates why SaaS is slowly taking over the business world. We talk about the challenges of launching a SaaS startup in a highly regulated industry, the advantages of thinking global from day one, and selling to Japanese customers who always seem to want customization.  And Chiemi also explains that contrary to the stereotype, most Japanese workers and regulators don't really like having to rely on mountains of paper. For the most part, they hate it just as much as the rest of us. And today, we'll explain the two things that are actually keeping them from going digital.  But you know, Chiemi tells this story much better than I can. So let's get right to the interview.    Interview  Tim: So we're sitting here with Chiemi Kamakura of Agatha, who makes clinical and regulatory document management for small early stage clinics and life sciences companies. And Chiemi, thank you so much for sitting down with us today. Chiemi: Of course, thank you for inviting me to this opportunity, that's a great honor for me. Tim: The honor is all ours. So I gave just like a really brief explanation of what Agatha does, but can you flesh that out a little bit? Can you explain in more detail, what is it Agatha does? Chiemi: We are offering Document Management Cloud Service for clinical trial for hospitals and pharmaceutical companies. Tim: So is it just for the research stage, just for the trials themselves, or is it more for operational support as well? Tim: Yeah. So main target is clinical trial business, but not only that, it's from research and also marketing and manufacturing. So we are covering all stages. What we do, especially in clinical trial, for clinical trial is operated between pharmaceutical company and hospitals. There are many, many communications on trial, those communication still paper is used. Tim: Okay. Well, let's get into some specifics. So maybe tell me about your customers. If you're improving the communication between the hospitals and the laboratories doing the trials, walk me through an example. How does that work? Chiemi: Yeah. In hospitals, that people who are managing clinical trials, so that's our user, and in pharmaceutical company side, also people in clinical trial department, they are our users. Let me explain what happens between pharmaceutical companies and hospitals. First, pharmaceutical company visit hospitals, and then request to conduct clinical trials at this hospital, and then send applications and other documentation. So there are really a lot of documents. I researched how much document is used in one hospital, two ton of paper are used in one hospital every year. Tim: The medical industry is famous for generating huge amounts of documents and huge amounts of paperwork. But I'm sure there's still a lot of actual paper being used, but it's 2020, how are these companies solving these problems now? They can't really be doing everything on paper now. Chiemi: After COVID, it's moving a little bit, but still, paper is used, because I think doctors and people at hospitals, they are really concentrate on patients and their family, so they don't have enough time to think about IT system or new technologies. They are really focused on patients. Because if you use paper, you don't have to think about anything. Tim: The reason that it's still on paper, it's not due to regulations, it's just the conservative nature of the industry? Chiemi: Yeah, I think so. It's a conservative -- I'm IT person, but even if company who wants to implement new IT system, you need to do a lot of things. You have to change the process, you have to keep training for users, those many staff, you have to do that. It's a barrier for hospital people, I think. Tim: Okay. I really want to dive into the market itself. But before we do that, I want to take a step back and talk about you. Yeah. You started Agatha in 2015, right?  Chiemi: Right. Tim: What motivated you to start a company? Chiemi: Yeah. Actually, I found this issue. There are so many paper in clinical trial. I found that in 2007, when I visited one of the hospital, at the time I was working at Hitachi. I was looking for a new business for Hitachi, and then I visited one hospital. And then in one meeting room, I saw that a lot of paper, like 30 centimeter paper per person, then they are for 20 people. So I was so shocked. What is this paper? And then I asked the person at the hospital, and then she answered, "This is a document sent from a pharmaceutical company, it's for application for clinical trial. And then next week, there's a meeting for that. And then after that, then everything will be destroyed." I was so shocked. Tim: I bet. But after that, did you go back to Hitachi and say, "Hey, we've got a great opportunity here to making new product"? Chiemi: Yeah. Right. Exactly. I'm so chocked. So Hitachi should be the company who sort of solves issues by IT. And then what was that? Then I talked to my colleague and then he said, "Yes, Hitachi has great product that costs 2 million USD. All right. They cannot buy, they are not afford.  Tim: So were beginning to see why these hospitals are using so much paper. Chiemi: Right. Tim: It's not that they're so conservative necessarily. It's just they can't afford to upgrade their -- oh, wow.  Chiemi: Yeah. That's how I met this opportunity about clinical trial papers. And then it was 2007, there are still on premise system was used. Then after 5 or 10 years, many service moving to cloud, then if you use Cloud, there are many systems downsizing. So not only hospital or life science. Tim: This is really interesting. I think, all over Japan now, we're in the middle of this SaaS Renaissance, this Golden Age of SaaS, where customers are realizing, enterprises realizing that wait, we don't need to go with RSI. We can bring in these little systems and we can experiment and we can try something new. Chiemi: Right. That's exactly what I thought. Hospitals are a little bit conservative. It's always as the industry go first, and then coming to healthcare or life science. I saw that many SaaS startup companies bringing new innovation to many business processes. Then in 2015, I thought it's the timing, we can bring the hospital and pharma. Tim: Well, looks like your timing was good.  Chiemi: Yeah.  Tim: Let me ask you, why Agatha? Does that have any special meaning? Chiemi: Agatha is a mission, is aspirations for good health and life. So there is a-G-A-T-H-A in that. Tim: Okay. All right, right. It's a very pleasant catchy name. Your blog is like Aggie's Blog. Chiemi: Yeah. I heard it from the name of a saint of ancient Greece. Tim: You've been very fast and aggressive in your international expansion. So you've got offices in Boston and Leon, France. Were you international from the very beginning? Chiemi: Yes, yeah. Co-founder is in Leon, France. So pharmaceutical companies are all working globally. So even if Japanese pharmaceutical company, once they go to market and then they sell their product as a country, they're working, pharmaceutical companies are working globally. So therefore, Agatha also have to provide our service globally, otherwise, it doesn't make sense for our clients. Tim: But it's a big challenge as a startup, how is the team spread out? Is it like most of the development in Japan or how many people do you have in each location? Chiemi: Yeah. Now we have 40 people in total, and one-third is outside of Japan, so like 10, 12 in Leon, that's our development team, and three, four people in US, that's the marketing team. Tim: And internationally, now obviously, in Japan you're marketing yourself as a Japanese startup, you are a Japanese company. But when you go international, do you present yourself as a Japanese company or do you try to present yourself more as a local company? Chiemi: Well, we really don't specifically introduce ourselves as a Japanese company. I think in France, they are saying we are just French company, and in US probably they are saying US company. I don't think that they know. Tim: I was just curious, because many Japanese startups when they go abroad,

Coming up with ideas is easy. Spotting the bad one early is a rare skill. Today we talk with Yo Shibata serial entrepreneur an investor about how you know if you really have a great startup idea. We chat about what it was like being acquired by Rakuten, and what can be done to improve M&A in Japan. Yo also talks publicly for the first time about is new startup and why the current B2B SaaS trend in Japan might have peaked and might be about to completely reverse itself. It's a great conversation, and I think you'll enjoy it. Show Notes The advantage of launching early on a new platform The reason for Japanese consumers' love for points systems What it's like to be acquired by Rakuten The birth of the Tokyo Founders Fund The weakness almost all Japanese VC Funds have How to know when you ave a good startup idea Te importance of "Founder-Market Fit" Is this new "anti-SaaS" platform the way forward Why most Japanese enterprises are bad at M&A The most important difference between Japanese and US startup culture Why the ecosystem is more important than the startups themselves Links from the Founder Check out Tailor Yo's big bet against the SaaS trend. ... and they are hiring Follow Yo on Twitter @yoyoshibata Be sure to give a listen to Yo's podcast START/FM Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. So, how do you know if your startup idea is any good? After all, coming up with ideas is easy, knowing how to evaluate them before spending a lot of time and money, well, that's that' a real skill, and we're going to get to that. Today we sit down with Yo Shibata, serial entrepreneur, investor, and well-known figure in Japan startup ecosystem. We talk about where Japanese startups are heading and the big bet Yo is making on his next startup. A big bet based on the idea that the current B2B SaaS boom in Japan has got it all wrong.  Now, Yo's theory flies in the face of all common knowledge about the Japanese market, but as long-time fans of disrupting Japan know, I am a hopeless contrarian. Anyone who can make a compelling case about why conventional wisdom is wrong always has my full attention.  I just love those stories and ideas, and I love bringing them to you. So Yo and I dive deep into why Japan's current SaaS trend might be about to reverse itself, and what might take its place. We talk about what it's like to be acquired by Rakuten, how corporate Japan is getting better at M&A, and of course, how to know if you actually have a good startup idea.  But you know, Yo tells that story much better than I can so let's get right to the interview. Interview  Tim: So we're sitting here with Yo Shibata, serial entrepreneur and investor. So thanks for sitting down with us, I really appreciate it.  Yo: Thank you for having me. Pretty excited.  Tim: I'm excited to have you here. And I mean, Yo, you've done so much here. You've started a number of companies, you've started your own fund, you even have your own podcast. It's a great opportunity to really dig in.  Yo: Yeah, yeah, pretty much.  Tim: Just for background, let's talk about your startups. There's been a lot of them.  Yo: Right.  Tim: Your first one you started in college, right?  Yo: Yes, that was when I was 19 or 20 years old. I started a small company with my friend. It was SEO consulting firm. That was back in 2005 or something like that.  Tim: Was that something you planned on like scaling into a big company or was that just beer money for you and your friend?  Yo: Back in 2005, in Japan, there was no venture capital, especially like seed stage, very rarely saw angel investors. They usually took majority stakes with like, $50,000 or something like that.  Tim: Yeah. And back then, angel investors, they were all doctors or lawyers, they weren't startup people at all.  Yo: Exactly. And startups didn't have any bargaining power. And so if they offer $50,000 with half of the company, the only choice is to accept. So that was the situation back then. We had ambition to become big, but there were no knowledge on how to scale a startup. So I don't know if SEO company is sufficient to go public or not.  Tim: Yeah, I could see that. That's the kind of, as you know now, I mean, that's the kind of startup that's really hard to scale. It scales linearly. As you get more clients, you need more experts.  Yo: Exactly, exactly.  Tim: So after you shut that down, you started Code Start.  Yo: Exactly. So after I left the initial startup, I joined McKinsey, and spent three years as a consultant. And then around 2010, so iPhone launched in Japan and I saw a lot of startups in the US. The AWS was available, iPhones taking off, so there were platform. So it became really easy to start a web service. I left McKinsey and started a small app that enables users to compare price by scanning barcode. It was a good timing, the great timing. I got almost like 1 million downloads when there were only like 4 million devices sold in Japan, so like more than 20% penetration to users. But there were no business model and so I sold that company, then I started a new startup.  Tim: So when you sold it to IMJ, right?  Yo: Yes, IMJ. Tim: What did they want to do with that product?  Yo: IMJ at the time was basically consulting business then. They wanted their own web service, not B2B but B2C service. They thought our service is good start for them to start direct to consumer like media business.  Tim: So they viewed it as a means of customer acquisition? Yo: Yeah, I think so. Yeah.  Tim: How did that work out for them? Did it work out?  Yo: It didn't work out for them. After spending several years, they again sold our service to Opt, I think. There were a lot of users still, hundreds of thousands users but no monetization?  Tim: Yeah. It's a clever use, people love it but it's really tough to put a business model around that. Yo: Exactly, exactly. There were lot of such mobile apps back then, no business model. Even Instagram didn't have any business model. So that was like-- Tim: That's true. It was this great experimental time, right? It was all this new technology. We were suddenly walking around with these supercomputers in our pockets. Cloud computing had made spinning up a business super cheap, and the whole world was trying to figure out what to do with it.  Yo: Exactly.  Tim: It was fun times.  Yo: Yeah, yea, yeah, it was fun times. For the initial version, I think we only spent $5,000 to develop, and then it got downloaded 1 million times. So that was a crazy time.  Tim: Okay. So after that sale, you dove right back in and you started Spotlight, which was a online points management, right?  Yo: Yes. It's a location-based service. You go to retail stores and check in and then you earn points just by walking into the stores.  Tim: Yeah. I've always been kind of amazed at how powerful the point system is, membership points. Yo: In Japan. Tim: Yes. Japanese consumers love these point programs.  Yo: Yeah, exactly, exactly. The interesting thing is that consumers will react, like giving 2% of the purchase demand and give back like 2% points to the customers. Then just discarding 5%, they don't react, but giving double points, they're going to buy, so strange.  Tim: This has been researched to death and the consumers even know. They'll tell you, yeah, that's not it. Yo: Yeah, exactly. Yeah. Maybe that's kind of like gamification or some sort of like, yeah, very interesting.  Tim: So that was rolled into Rakuten's massive Rakuten point system.  Yo: Exactly, yeah.  Tim: How did that end up? What was the end result?  Yo: It went well. Rakuten at that time, they were trying to launch a new point card to the real retail stores. So they wanted the unique feature to convince retail chain to join their ecosystem. So they used us to penetrate into retail stores, and it was successful. And our company merged with Rakuten Payment. It became also huge for Rakuten. It was a good acquisition, I think.  Tim: I want to get back to your Rakuten experience in just a minute.  Yo: Okay.  Tim: Because the next thing you did after you sold your company to Rakuten, you started the Tokyo Founders Fund.  Yo: Yep. The Angel Investment Fund.  Tim: And that was really unique and interesting at the time.  Yo: Yes, it was.  Tim: For our listeners who aren't in Japan, even now, but especially in 2015, most funds, the investment committee were finance guys. It was extremely unusual to have anyone with startup experience making investment decisions.  Yo: Exactly. Even now, I think we rarely see venture capitalists with a true real entrepreneurial background.  Tim: Yeah. I think that is one of the weaknesses of Japanese VC in general, the fact that they tend to be really smart finance guys.  Yo: Yeah.  Tim: And so there's a lot of things they overlook. But how was the Tokyo Founders Fund viewed by other VCs?  Yo: Well, we weren't competing against the Japanese VCs, because we wrote small checks to very early stages, and we focused on overseas investment at the time. It was very welcomed. I think Japanese startup community, including VCs are very supportive of successful entrepreneurs funding and helping the next generation of entrepreneurs.  Tim: Do you think there was a lasting impact? It seemed to me it had such potential to change the way VCs looked at investment.  Yo: Yeah, I hope so. I hope we had some impact. And also timing-wise, around that time, a lot of young entrepreneurs went public or got acquired and had some cash to invest in -- angel investing became kind of became mainstream in Japan, angel investing by successful entrepreneurs. And I think Tokyo Founders Fund was very symbolic of the times. It played a role model, I think, you know,

Once the disruptors become the incumbents they are ripe for disruption. Uber, Grab and rest of the ride-sharing startups have clearly disrupted the global taxi industry, but that doesn't mean they got it right. That doesn't mean their market position, or even their business model, is secure. Today we sit down with Sota Kimura, founder of SmartRyde, a Japanese startup focused on getting airport ground transfers right. We talk about building a business based on quality and brand in a traditionally price-sensitive, low-margin market, what Japanese universities are doing to support startups, and how getting ripped off at the airport inspired Sota to start a startup. It's a great conversation, and I think you'll enjoy it. Show Notes Why airport transfers are ripe for disruption & what Uber is missing Pivoting from B2C to B2B during the pandemic How getting ripped off at the airport inspired a startup Japan's University startup support outside the majors Entrepreneurship share-houses How to compete on quality in a low-margin business Can ridesharing work in Japan Why Hiroshima was an ideal launch market How to create more university startups in Japan Links from the Founder Everything you ever wanted to know about SmartRyde The SmartRyde video  Coverage of recent fundraising Follow Sota on Twitter @kimura5008 Friend him on Facebook Connect on LinkedIn The Entrepreneurial Sharehouse Fespa Kyoto Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we're going to talk about how to disrupt a fragmented market. I mean, that's a startup founder's dream, right? You find a market with low quality, confusing products, and no global coverage, and then disrupt it with an innovative business model and establish a trusted global brand.  That's the dream. But as you'll see today, sometimes markets are fragmented for a reason.  Today we sit down with Sota Kimura, founder of SmartRyde, who's trying to solve the problem of airport transfers and of foreign travelers being ripped off at local airports, and Sota's up against some strong competition, not only from business challengers but from human nature itself.  Let's face it, ripping off travelers has been a popular custom for a long time. Herodotus was complaining about it 2,500 years ago.  We talk about why Uber is not a threat, the new entrepreneurship share houses popping up in Japan, and how Japanese universities can better support founders. But most of all, we look into the question of whether quality can win if quality can act as a differentiator in a market traditionally focused on price competition.  But you know, Sota tells that story much better than I can so let's get right to the interview.  Interview Tim: So I'm sitting here with Sota Kimura, who is the founder of SmartRyde, who is changing the nature of airport transfer and ground transport service. So thanks for sitting down with us. I really appreciate it. Sota: Yeah, I appreciate too. Tim: So that's a really brief explanation of your company. But can you tell us a bit more about what SmartRyde does? Sota: We are operating airport transfer service around the world, mainly business-to-business sectors. For example, we integrated with online travel agency OTA, such as booking.com, and Expedia. And also, we are connected directly local transportation company like taxi and limousine and buses. Tim: So fundamentally, this is the airport transfer when you get off a plane and you need to get into a cab. Sota: Yes. So we focus on the airport transfer. So from airport to hotel, or hotel to airport. Tim: I agree, like, airport transfers, the ground transport, it's a messy process right now. But is your main competition rideshare companies like Uber and Grab? Sota: Similar business model. Transfers are a very fragment of business. And also, our company, all professional drivers, and also various model is business-to-business. So very different from ride-sharing companies. Tim: So what's the biggest difference there? Because I think a lot of people, when they hear this business model, they might think, yeah, getting off an airplane in a new city is just a pain. You don't know who to trust, you don't know the local vendors. It's all a bunch of, I don't know, SEO competition. And a lot of people say, oh, well, like Uber's a strong brand or grabs a strong brand. So what's your real value proposition to the customer? Sota: Yeah. When someone book through the travel, so airline sched and accommodation and activity, so something like that, at that time, customer can book airport transfer service. Tim: Okay. So they can just get everything done beforehand, have everything arranged.  Sota: Correct. Tim: All right. And tell me about your customers. You mentioned it was mainly b2b, but who's using SmartRyde? Sota: Now it's mostly family, small groups, three or four, five people. First is leisure. So leisure travel is 90% user is leisure travel. And also, our service is used in resort areas like Bari and Phuket. Yeah. Tim: All right. COVID must have really changed everything, it must have been a very difficult two years. Sota: Yes. Very, very serious situation for us and our industry. Tim: So during the time, have you tried to pivot to a new direction, or has your strategy been more focused on the core value and get through this rough time? Sota: So before COVID-19 situation, so we focused on APAC areas, so Southeast Asia and Japan. But APAC area is biggest damage for travel industry. So in 2020 we decrease more than 90% revenue. Tim: Yeah. APAC countries, especially seem to have, on average, much stricter travel restrictions than European or American countries. Sota: Yes, yes, that's great. So after that, we move the focus areas from APAC to Caribbean and Latin America from 2021.  Tim: Okay. I want to dive really deep into the business model, and I think there's some interesting questions I want to get into there. But before that, I want to back up a little bit and talk about you. So you started SmartRyde in 2017 after being inspired in a very interesting way. Sota: Yes, yes. So when I was travel abroad, I often travel with transportation from airport to hotel. At that time, I realized this point is a very big pain for everyone. So I established SmartRyde on March 2017 when I was college student, Tim: Before you're talking about you were ripped off by a cab driver from was a Bangkok airport? Sota: That's correct. Bangkok and Taiwan. Tim: We've all been there. I've been ripped off by taxi drivers at Bangkok airport myself a couple of times. Sota: So almost people, yes. There is one time for less travel and land transportation abroad. Tim: Yeah. I definitely think there's a need, no doubt about that. And you are still a university student when you were starting this. So at Ritsumeikan University, did you get much support in starting your startup from the school? Sota: No. So sort of very unique story, I studied Business Administration in the Ritsumeikan University. And after, I lived in entrepreneurs sharehouse for a year in total. Tim: An entrepreneurship sharehouse.  Sota: Yeah, correct.  Tim: Oh, cool. What is that? How did that work? Sota: Almost people is entrepreneur or freelance, so maybe 25 people stay in sharehouse together. Tim: So how many people from the sharehouse, from your cohort, from your team went on to start companies? Sota: Each other is different business established in the sharehouse. Every night, pitch each other in same room, so very good experience for me. Tim: Excellent. I'll have to look into that. That sounds like a super interesting project. Sota: Yes. I recommend all students.  Tim: It's really interesting. So the difference in experience for college founders between the really big universities and the smaller universities is so different. So when I talk to founders from Todai or Keio, they're saying, oh, yeah, we had these VCs came in, and we had these mentors come in, and they had this great support from the universities. When I talked to a lot of student founders from other schools, it was like, well, I went onto the internet and figured this out and talked to customers.  Sota: Yes. I really recommend you, all students stay in entrepreneurs sharehouse. Tim: That sounds interesting. We'll put some links to that on the website. I want to know more about that. But that's going to be a topic for a different podcast. Let's talk a little more about the business model here. So, it's interesting that I think everyone can look at this and agree like okay, airport transfers, this is user unfriendly, highly fragmented, lots of low quality companies in the business, lot of scammers. But once you've identified that market, how do you compete? How do you make SmartRyde different from the hundreds of other companies that claim to be trustworthy and reliable? Sota: Yes. I think it is the most important part for our company to build. Service control and service quality is very important for us, so we manage directory, local suppliers. And then we built our operation each airport. For example, in Bangkok before COVID situation, we have more than 2000 trip commerce. In Bangkok, arrival hall is many passengers, so sometime traveler cannot find the driver. So we put our assistant in airports so passenger can find assistant, after that connect to our driver.  Tim: That's an important commitment to quality. And I can see how that would be a much better experience for the user. But building the business, there's two sides to it, you have to build the quality product, which sounds like you've done, and then you have to tell the world that you've built this high quality product. And you have to convince your customers that no, no, no, you're different. So how have you reached your customers?

NFTs are easy to understand if you examine their core utility.  Unfortunately, there are thousands of NFT promoters spending millions of dollars to make sure you never look at that. This episode is a departure from our standard format, but it's an important topic. I want to explain what NFTs actually are and how you can best make money with them -- if you really want to. Our Japanese founders will be back next episode. So let’s get right to it. Transcript This is it, gentlemen. This Queen of Hearts is the winning card. Watch it closely. Follow her with your eye as she moves. Here she is, and now here, now here, and now—where? The Queen of Hearts. My hand is quicker than your eye. If you find the lady, you win, and I pay; if not, I win and take your money. Who will go me twenty dollars? Yes, this is in fact, Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs, but today we are going to be talking about Three-Card Monte, or more specifically what Three-Card Monte teaches us about NFTs, or non-fungible tokens.  You all know three-card-monte. Even if you don’t know it by that name. The dealer places three cards on the table, flips over one to reveal the queen. He flips the queen back over and begins shuffling the three cards around the table. He does this quickly, but not too quickly. You can just follow his movements. You confidently point to your card, and the dealer flips over a seven.   You lose your money!  Of course, you never really had a chance. The dealer slipped the queen up his sleeve when he started the shuffle. All that patter and shuffling is just there to distract you. The three cards you see on the table are all decoys. The important card had already been taken off the table. And you see, just like in three-card-monte, the key to understanding NFTs is looking at what’s missing. In this podcast we are going to grab the dealer by the wrist, dispose of the distracting patter and decoy cards, and take a hard look at exactly what’s been taken off the table.  And to be clear, I have absolutely no opinion as to whether you should invest in NFTs or if you personally will make money from them. Today we’ll just be talking about what they are; their reason for existence. In startup terms, we’ll be defining NFT’s true value proposition.  However, by the end of this episode it will make perfect sense to you why a jpg of a robot with a green mustache is worth $2 million, while the same robot with a red mustache is only worth $50. In fact, you’ll understand why NFTs could not possibly work any other way.   And before we dive in, I want to let you know that although I spent a lot of time checking my facts and making sure what I am about to explain to you is accurate. I am most emphatically not a lawyer or a financial advisor. I am a founder, podcaster, author, hacker, picker, grinner, lover, sinner, and if you are even thinking of taking legal or financial advice from me, you are being an idiot. Stop it!  OK, with that out of the way, let’s flip over these decoy cards.    Misdirection & the NFT Decoy Cards  Card #1: NFTs Prove Ownership NFTs are usually described as something like “digital certificate of ownership” or “a digital receipt” or  “virtual goods with the blockchain providing proof of provenance and authenticity.” NFT promoters love to claim that they are a “permanent, distributed, publicly-auditable, tamper-proof record” of ownership.   But no. They are not any of that. That’s misdirection, that’s one of the decoy cards.  NFTs absolutely provide a “permanent, distributed, publicly-auditable, tamper-proof record” that you gave your money to a crypto promoter, but purchasing an NFT gives you absolutely no copyrights, usage rights, or ownership rights to the artwork. It’s not a receipt because you haven't actually bought anything but the receipt itself. The terms of service a some NFT marketplaces hint at such rights, and some NFTs are sold with legal-sounding jargon that promises them. However, the whole idea that copyrights and usage rights can be transferred anonymously between wallets not tied to any specific legal entities is ...  well, let’s just say it’s untested legal ground.  Particularly when there is no way to know if an anonymous NFT creator owned the artwork in question and when there is no recourse if they are lying.  You’ll find that most promoters quickly toss aside the ownership card when you challenge them. They then fall back to the second decoy card.   Card #2: NFTs Provide Bragging Rights  “Well, they say, NFT buyers are not really interested in the legal minutiae of copyright law. To buyers NFTs are more about bragging rights. NFTs provide a “permanent, distributed, publicly-auditable, tamper-proof record” that they have bragging rights to a specific piece of art.”  OK, let’s flip over this decoy card as well.  Unlike copyrights, bragging rights don't seem to have any basis in law, so I can’t address that specifically. However, it’s important to realize that the artwork in question is not on the blockchain. It’s just a URL. So, once again, you find yourself with a "permanent, distributed, publicly-auditable, tamper-proof record" that you gave a crypto promoter your money, but you only get a URL in return.  Presumably, that URL resolved to something like a nice picture of a cat wearing sunglasses when you sent them your money, but after they have your money, there are no guarantees.  Domain names can be sold or go dark. Someone could take your image down or replace it with another one. You have no control over any of that. You just have to take them at their word that they will maintain this site for you forever, and for free.  But hey, I’m sure it will be fine! If you can’t trust the solemn promise of a crypto promoter, who can you trust?    Card #3: NFTs Help Artists  OK, let’s flip over the third and final card before we look up the dealer’s sleeve and see what’s there.  “NFTs are a way to ensure that artists and creators get paid for their hard work.”  No they are not. And as a former professional musician, this is the decoy card that annoys me the most.  This line of bull usually starts with the word “Imagine” as in “Imagine if artists could get paid every time their work is resold!” or “Image if you could take a unique digital item from game to game!” or “Imagine if musicians could be guaranteed to receive the royalties they are owed!”  Well, OK, I’m a fairly imaginative person, and I can imagine all kinds of wonderful things. But in reality NFTs are not enabling any of this. There are plenty of existing platforms and systems that do all that right now, and NFTs don’t seem to be improving or replacing any of them.  Honestly, even a casual glance at the NFT market will show you that most NFT art is algorithmically generated nonsense. But as we’ll see when we look up the dealer's sleeve, algorithmically generated nonsense is much, much  better suited to NFTs’ true value proposition than actual art would be.  By the way, I have no intention of getting into a “But, what is art?” debate. If you find NFT art appealing, that’s cool and totally valid. My point is that the vast majority of NFT art is generated by programmers and crypto promoters for the purpose of creating NFTs. Very, very little is generated by struggling artists trying to reach a wider audience. And that kind of gives the lie to how NFTs are really about helping artists.    Up the Dealer's Sleeve: Why Fungibility Matters OK, so what do we have left?  We’ve flipped over all three cards, and now there seems to be nothing left on the table.  Remember, the secret to understanding NFTs, just like the secret to understanding three-card monte, is figuring out what’s been taken off the table. So let’s have a look up the dealer’s sleeve and see what’s missing.  Let’s start with the name. We are talking about "non-fungible tokens", so obviously fungibility has been removed, but what does that mean exactly, and why is that important?  From a marketing perspective, “non-fungible tokens” is a really odd naming choice. They could have gone with “art tokens” or “creator tokens” or “collectors tokens”, but the creators and promoters went with an obscure (and difficult to pronounce) bit of financial jargon. “Non-fungible tokens.” But this makes perfect sense because, as you’ll see, NFTs have nothing to do with art and everything to do with fungibility.     NFT promoters usually explain that “non-fungible” means unique, but like everything else you hear about NFTs, that's not quite true. Not exactly.  Uniqueness and non-fungibility are related, but differ in one important way, and that difference is the reason NFTs exist.  If something is fungible it means that it is not legally distinct from any other instance of that thing. For example, commodities are not unique and they are fungible. If you buy or sell an ounce of gold or a barrel of WTI crude, the particular ounce of gold or barrel of oil doesn’t matter; only the quantity matters. So commodities are both fungible and non-unique. Things like banknotes and stock certificates are unique, but they are also fungible. Banknotes and stock certificates have serial numbers that uniquely identify them, but that uniqueness is legally irrelevant.  It’s easy to tell two different $20 bills apart. They have different serial numbers, they might be worn differently. One might have marks on it. But legally none of that matters. Every $20 bill is legally identical to every other $20 bill. The same is true for every share of Apple common stock. You can’t legally demand that a bank return a specific $20 bill or that your broker provide you with a specific share of Apple stock. Financial securities are both unique and fungible.  The same holds true for cryptocurrencies. Tokens are both unique and fungible.