Startup culture has crazy and contradictory views about failure. As founders we are told to fail fast, but also to never give up. We are told to follow our vision, but be ready to pivot.

Somehow this macho-bullshit culture of “I never really fail and ‘m not afraid of failure.” has become dominant amount founders. But it’s the result of denial. Trivializing failure is a way of not thinking about it’s effects.

The truth is that failure sucks. Failure is painful. Failure ends friendships and marriages. I suspect that most who trivialize it are eager deeply afraid of failure or have never really failed at anything important.

Today Hiroshi Nagashima tells a story of a startup gone very wrong. You’ll hear the red-flags start to appear as the story unfolds. There are important lessons to be learned here, but not just strategic ones.

Hiro’s honest story about what it really feels like to have the company you love fall apart and what t’s like to try to put your life back together in failure-phobic Japan is something all startup founders need to understand.

It’s a great story with no cliches, no feel-good rationalizations and no bullshit.

I think you’ll get a lot out of this one.

Show Notes for Startups

  • Early days and optimistic growth
  • First signs of danger come from the VCs
  • Pivots and strategic changes
  • Hiding the dangers from the employees
  • What it really means to go all-in
  • The real fear about failure
  • The reaction of Japanese companies to failure
  • Lessons learned and a new start

Links from the Founder

There is not much left in terms of the companies and products we discussed, but you can still friend Hiro on Facebook

 Leave a comment

Transcript from Japan

Welcome to disrupting Japan straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

I’ve got another great Disrupting Japan Selects show this week.

In creating Disrupting Japan, I’m always surprised at how hard it is to predict which shows will do well. When I am talking with my guests, I’m in the moment and just having a conversation, so sometimes when I sit down and edit, the conversation is really different from how I remembered it. And even after editing. there seems to be very little relationship between how good I think an episode is and how many times it will be downloaded.

But rather than trying to reverse engineer what makes one show more popular than another, I find it better to just interview people that I find interesting, to make the best show I possibly can, release it, and hope you like it.

But every once in a while there is a show that I think really deserved more attention than it received, and this is one of those shows.

I sat down with Hiro Nagashima back in 2015 and he told the story of how his startup failed. Not in the macho-bullshit “fail-fast fail-forward” kind of way, but simply and honestly. And he also shared how Japanese society reacts to failure.

It’s a great conversation and at the end of the show, I’ll give you an update both on Hiro himself and how Japan’s attitude towards failure has changed over the past few years.

—-

This is an experimental show, but an important one. You’re going to hear a story today that does not have a happy ending. Well, actually it kind of does, but not in the way you’d expect. Startup culture has a very confused view of failure. We founders are simultaneously told to fail fast but to never give up. People glibly spout that we should fail fast and fail forward; but actual failure, well it’s not that simple. It’s not something that can just be shrugged away.

Now I’ve been to two well-known conferences that claim to promote acceptance of failure and at these conferences, a procession of people took the stage and told the audience about their failures, but not really. You see, they told stories of how they bravely turned around a bad situation or how they rebounded even stronger from a temporary setback. One of them even ended his story with him selling his company for $200,000,000. I only wish I could fail like that.

But the stories were good. The audience enjoyed them. The event was a success. So who am I to criticize? But still, it made me wonder. Maybe people don’t really want to hear about actual failure. Maybe we only really want to hear about successful failures. Everyone loves a happy ending. But that’s not what failure is like.

I’ve had successful exits, but I’ve also bankrupted companies; and you know something? Failure hurts. Failure is lonely. Some people who you thought were close friends stop returning your calls.  Failure is where you see both the absolute worst and sometimes the absolute best in both yourself and the people around you.

Now failure is not to be celebrated.  Failure is to be accepted; to be studied but not celebrated. And today I’m honored to sit down with Hiroshi Nagashima and hear a story about a startup gone wrong. Now as the story unfolds, more experienced listeners will see the yellow flags and then the red flags start to appear.

But what I’m most grateful to Hiro for is sharing not simply the strategic and situational reasons that his business went bad, but what it really feels like to have your company fall apart around you. It’s a great story with no clichés, no feel good rationalizations and absolutely no bullshit. It’s a story not of happy endings, but perhaps one of redemption. So let’s get right to the interview.

Interview

Tim: All right I’m sitting here with Hiro Nagashima of Sharebu Kids. Thanks for sitting down with us.

Hiro: Thanks for having me Tim.

Tim: I’m delighted. Now, Sharebu Kids is or was an online retailer of high end fashion for babies and kids and it seemed to be mostly overseas brands.

Hiro: Yes that’s right.

Tim: You can probably explain it much better than I can, so what was Sharebu Kids?

Hiro: Yes, well Sharebu Kids started out in 2012. Actually the initial concept came out of one of the investor, Casey Wahl. He wanted to do something with baby and children’s clothes and I got together with him to try to think of an actual plan, how to create this company, and how the business model would be. He pointed out a very, very interesting aspect of the fashion business. There were really no flash sales in Japan.

Tim: Right.

Hiro: At the time I mean there were flash sells for adult clothes such as the Gilt Group or Brand for Friends.

Tim: So this is a company that very much you were building a company around a good business opportunity.

Hiro: Business idea really. It was just an idea at first and I really tried to develop this idea.

Tim: In a sense that makes sense because you yourself are coming from a really strong background in finance. So you’ve got an MBA from Wharton, you’ve worked at Mitsubishi and Bloomberg. So I can see why that financial angle would be appealing to you. But what made you want to leave a solid career in finance and go start a company?

Hiro: Actually before starting Sharebu Kids I actually worked at another start up and that’s a company called Locondo.

Tim: Was that a Rocket Internet company?

Hiro: That’s exactly right.

Tim: I know those guys.

Hiro: So the reason why I got started with that is because of my background in finance, because they had contacted my school and through the school they contacted me about starting. And so they wanted to create a team and it was very interesting to me. It was a great experience. The company didn’t go as we planned.

Tim: Now there was a lot of turnover there as I recall.

Hiro: Yes there was and I was one of the ones who turned over really, but it was a great experience.  I mean I was one of the founding members, one of the six starting members of the company and I built the operations for that company. I learned a lot of new things in e-commerce and after I stepped out of Locondo, I really wanted to continue on that path of building companies.  Starting Sharebu Kids was my company.

Tim Were your friends and family supportive of this move to entrepreneurship?

Hiro: They were and in some ways they are still. They know what I wanted to do. They kind of understand that I’m sort of an ambitious guy within the family. I’m Japanese and my parents of course are from the Japanese background, but I would say maybe they’re not the typical conservative-like Japanese family. I mean they were very supportive of me since I was a little.

Tim Oh that’s great. So many of the founders I talked to, when they first go out on their own there’s tremendous pressure from inside the family to not do that.

Hiro: Yeah to conform to maybe societal norms.

Tim: Especially if they’re leaving a really good job. So Sharebu Kids you had would seem like a solid business plan, an attractive market opportunity?

Hiro: Yes.

Tim: Tell me about the launch and early attraction.

Hiro: We tried to focus on the children and kids clothing marketing flash sales. We approached many of the Japanese domestic baby clothes manufacturers, the brands, and it turned out that they were very conservative; that they didn’t want to just give the products to us to sell on consignment.  Especially, because we were very startup-y, like we weren’t very well funded. That didn’t attract a lot of the Japanese brands.  So what happened was after exhausting all our contacts with the Japanese brands, we decided to make a pivot, of trying to get foreign brands to sell in Japan, but they were not on consignment. They were actually purchased.

Tim: Oh okay, so you were you were having an inventory. You had to maintain inventory.

Hiro: Exactly. But the model there is that we wouldn’t sell the extremely famous brands in Japan. We would sell some of the companies that were kind of moderately well known, but they didn’t have distributors in Japan.

Tim:  You were selling foreign brands that didn’t have a presence here in Japan yet right?

Hiro:  They were little known so they were kind of up and coming brands and this is what we tried to focus on.

Tim: Okay. So brands that might be getting a little bit attraction but are desperate enough for new revenues to take a chance on a startup.

Hiro: Exactly.

Tim:  Sounds like a solid approach.

Hiro: Yes. Ultimately for any retailer, if you have a customer base, that’s always attractive to manufacturers or brands. So this was really an entry.

Tim:  So you started building up a customer base for the foreign brands.

Hiro: Yes.

Tim: After you had this customer base, were the domestic manufacturers more willing to work with you?

Hiro: Yes. When we first initially approached them, we didn’t even have a website. But after we launched it with the foreign brands, they actually liked the site it was very upscale.  It was very different from what the Japanese brands were used to. So we went back to some of these brands and they were interested. I would say they definitely had more interest in giving us the clothes except they said, “Okay we will provide these clothes to you but you will have to buy this at this price.” But it was very low.  I mean, it was a good deal. But even at that point we just didn’t have enough funding to put all our money into that one brand.

Tim: Into inventory. Yeah.

Hiro: Yes.

Tim: But it sounds like things, other than the inventory risk, are going along well.  Your sales were increasing at this point.

Hiro: Yes.

Tim: You were hiring staff.

Hiro: Yes.

Tim: So when did things start to…

Hiro:  Unravel basically.

Tim: Well even before that when did you start to get the feeling that things weren’t going well?

Hiro:  When I tried to go get additional funding to grow the business, I attracted some VCs. What I realized later on was they showed a lot of interest, they showed a lot of interest in my background, and what the company could be, but retailing is such a risk for VCs especially when you’re doing it not on consignment, but when you’re buying risk. I mean, when you’re buying inventory. So, that’s very risky to them and I think I got the feeling that with the VCs that I approached they would rather invest when the company was much bigger. So it almost felt like there wasn’t funding for that series that I was very interested in.

Tim:  Were the VCs upfront with you? Did they tell you that? Or did they just say let’s keep talking?

Hiro:  One VC specifically said that they would rather invest in a later round. One VC wasn’t so straightforward. They just said they would have to see much higher projections. I think that’s one of the mistakes that I made as well was that when I actually approached them maybe I wasn’t as optimistic about the figures and they were really looking for that kind of mega-hits investment.

Tim: So you think you’re just too conservative.

Hiro:  Yes, that’s definitely one of my mistakes.

Tim: It’s probably your finance background working against you.

Hiro:  Maybe so.  Maybe so, but I think that one of the lessons that kind of came out was maybe I had made too conservative projection and that didn’t really in turn convince the VCs that this was…

Tim: That this was a serious possibility.

Hiro: Yeah.

Tim: Okay. Yeah, that could make sense just because they’re so used to hearing founders give ridiculous projections…

Hiro:  Exactly.

Tim:  They’ll cut anything you say in half before thinking.

Hiro:  Yeah exactly.

Tim:  All right. Well, so after you got this feedback from the VCs, you realized that the round was not going to close as you expected, when you expected.  How did you change your business? How did you take this new information and use it?

Hiro:  To grow the business exponentially I needed a lot of money. But at that point, the sales were still going up, my idea was that we would do kind of a slow ramp up of the business. Just kind of hiring people as the sales went up incrementally.

Tim:  Your burn rate must have been very low at this point.

Hiro:  Very low, very low.

Tim:  So you were almost at cash flow positive, growing the company…

Hiro:  Exactly.

Tim:  By normal measures you are doing everything right.

Hiro:  Basically I wasn’t really paying myself and I would set one full time staff and the rest of the part timers, I mean, this would be marketing, part time buying, photography of the products, photoshopping. These people were all part timers and many of them are people I actually got to know or worked for me at Loconda, the previous company.

Tim:  From my own experience with part timers I found they are often let’s say not as committed to the success of the company, but it sounds like you didn’t experience that at all.

Hiro:  Actually with some people I did, but most of the part timers that I brought in were people I already knew and I had worked with or had worked for me.

Tim: So it was a personal commitment?

Hiro:  It was a personal commitment.

Tim:  All right. So you decided to kind of stay in the course, grow organically, and cover your costs…

Hiro:  Yes.

Tim:  It sounds like you’re certainly on a reasonable path now.

Hiro: Yes.

Tim: So how did this play out?

Hiro:  When we initially started Sharebu Kids, we started importing clothes from overseas and at that time the yen was relatively strong.  It was probably ¥80 to the dollar and it started going bad when the yen rate became about ¥115 or ¥120 to the dollar.

Tim: It’s about ¥120 now.

Hiro:  That became very serious for the company because it just cuts into the margins and we realized that, of course we tried raising the price, I would say most items just didn’t stick for the consumers. So it was just really decreasing gross margins and that didn’t allow us to really cover the cost that we were able to before and it was becoming bad. And so early 2014 I had to let go of my only full time staff. And I kind of really stepped into that role so I was the only full time person just doing the marketing, the buying, and the fulfillment.

Tim:  Employees know when things are going wrong. I mean, for me anyway that was harder to deal with than the financial aspects of it. So what was the team like at this point? Were they still putting in the hours? What was going on?

Hiro:  The part timers, they mostly work from home, so they didn’t really know about the situation.

Tim:  So at this point you’re still keeping on and you’re still focused.

Hiro: Yes.

Tim: Your family and friends who were supportive early on, did they know what was going on or was it pretty much you kept it to yourself?

Hiro: The part timers didn’t know, a lot of my friends I didn’t tell, I mean my parents sort of knew, my girlfriend knew, but of course the investors knew but it was pretty much limited to that. I mean, I didn’t try to put on. I was always serious but I didn’t try to…

Tim:  So you were trying to keep a public persona that everything is fine and business as usual.

Hiro: Yeah, and up until the very last minute I believed that it was going to succeed. So I kept on.

Tim:  What happened at this point? You’re filling the role of two startup employees which is like four normal employees. That had to be taking its toll on you.

Hiro: The one thing that was good for me was that in terms of cost, like office space, I was able to use my investors’ office space and I wasn’t charged for that. Also what happened was I kind of doubled that office space as my apartment really.

Tim: Oh no. So you’re sleeping at the office.

Hiro: Yeah, I would wake up early and work until very late trying to get everything done. So it was tough.

Tim: So revenues at this point are shrinking or still going up?

Hiro:  They’re just very flat.

Tim: Flat.

Hiro: Very flat but the gross margins are getting worse.

Tim: Okay.

Hiro:  So at this point, 2014, I scraped together whatever money I could get. Some of the money I actually liquidated from my… I had worked in the United States so I had a 401k savings and I had to cash out on that to fund the business.

Tim: So you’re really putting everything you had in it?

Hiro: Yes.

Tim: In every sense of the word.

Hiro:  Yes.

Tim: Wow. I guess at this point, you’re sleeping in the office. You’ve put everything you have financially into the company again. You’re probably destroying your health at this point.

Hiro:  From eating unhealthy; breads and noodles.

Tim:  And you’re playing a game of mostly cost control at this point I would guess right?

Hiro: Yes.

Tim:  For me looking at this from the outside, it’s easy to say okay this is an unsustainable situation. Obviously, you didn’t think so or you wouldn’t have kept going. So what was that trigger that made you say okay I’m done with this?

Hiro:  The time I really knew that the business can’t go forward was basically the money just ran out. It wasn’t a self-sustaining business. I needed more cash to just even keep the sales going flat. I wasn’t paying myself so that kind of personal debt also piles on and it was just kind of spiraling out of control and that’s just when I knew. I mean, at this point unless I got funding and I don’t mean a little money, big money, it just wasn’t going to go on.

Tim:  So it wasn’t so much a rational decision as reality is just kind of hitting you in the face and saying you’re done you’re out of money.

Hiro: Yeah, it was just basically that. It was just almost filing for personal bankruptcy. It was just that kind of moment. Personality wise I’m not the one to quit on anything so I just found that once I got going, I just find it hard to stop and…

Tim:  You’re just focused on that goal.

Hiro:  Yeah and at this point, I remember there was a time when my father said maybe this is time to stop but it’s just like not something I was willing to accept. I just felt like I had to go on, basically. Maybe I couldn’t take the fact that everything, all the cost or all the money that I put in will be a sunk cost. But maybe I just couldn’t face up to that. So maybe there was…

Tim:  You think maybe you just didn’t want to admit it to yourself?

Hiro:  At that point maybe there was a little bit of that.  Maybe I was a bit delusional. Maybe not wanting to accept the fact that it would go under because what else would I do really? I mean I’ve been at it for so long and how would I go about folding a company?

Tim:  At this point what did you think shutting down the company was going to be like?   I mean you had to have an image in your head of what you thought it was going to be like and…

Hiro:  I think that the thing that I imagine the most is what kind of conversation would I have with the people who have supported me all this time. Which is not just family members, or my girlfriend or friends, but really also all the stakeholders which is the investors as well and also all the part timers.   At the end of the day it’s my responsibility. So I just found trying to have that conversation very tough to imagine.

Tim: You were feeling like you’d be letting a lot of people down?

Hiro:   Exactly I think that was what worried me the most.

Tim: What was it really like that day or that week when you finally had to pull the plug and shut it down for real?

Hiro:  I remember talking to my family wasn’t so tough because maybe they thought maybe I should walk away from it. But I remember talking to my investor and that was a very tough day because when you have an equity investor you know if a company goes under he just loses whatever stake he had in that company. And I know it’s my responsibility and that was…

Tim:  Shutting it down was mostly meeting with the stakeholders at that point? Talking to the part timers?

Hiro:  Yeah and they know what was going to happen going forward and how that process would be taking over.

Tim:  Well, how did it go over? I mean you were you were worried about talking to the stakeholders and your family kind of has to accept you no matter what. But how did these conversations go?

Hiro:  Not very good as one would imagine. Following that initial conversation, we had some difficult conversations about how we would exit and how I would get rid of some of the remaining inventory and so on and so forth.

Tim: I know investors come in all shapes, sizes, and levels of experience, but startup investors are supposed to be grownup enough to know that they’re probably going to lose any particular investment they make. So was the stress that your investors actually felt disappointed that you didn’t yet generate a return?

Hiro: I felt my investor was very understanding and I knew it wouldn’t be a terrible conversation because I had worked with him for a few years in the same office. But it’s just that feeling that I knew that I would be letting him down was kind of a burden on me.

Tim: Okay, so it wasn’t that your investors or stakeholders were acting unusual.  It was more of still your feeling of letting people down.

Hiro:  Yeah, I think that was bigger. Of course, with the investors that we had some difficult conversations, but it was within what I had expected. It wasn’t anything crazy.

Tim: What about from your wider circle of friends and things because I understand like…

Hiro:  They didn’t really give me feedback and I just really told them I was no longer working on it.  I had shut the site down and maybe they felt like, “Oh I told you so or I knew it wouldn’t work out”, but I didn’t really get any feedback.

Tim:  They kind of kept it to themselves.

Hiro:  Yeah, because I think they knew that it was difficult for me. So I think they just didn’t really comment on it.

Tim:  Huh. What sounds like, even in Japan where failure still does have this stigma, I mean from what I’m hearing anyway, it sounds like you were harder on yourself than anybody else was.

Hiro: Maybe.

Tim:  I mean it sounds to me like your investors and your friends and your family were more than willing to accept this failure and have you move on and be supportive; but you were the one beating up yourself.

Hiro:  Yeah because I think this is just how I was maybe trained or brought up because startups fail every day probably all over the world. But I think, my belief is that, as the owner, as the main person, you have to make sure that you put in everything you have into it or else it’s just not going to succeed. So really I wanted to do my part to make sure that I overcome these obstacles if I can and then maybe the company would go well. But I thought that if I didn’t put in that effort, of course it’s not going to go well.

Tim:  Right. So what’s next?

Hiro:  What I’ve decided to do after Sharebu Kids was… Reality really set in after that.  I just needed to find a job and in terms of personal standpoint I needed to just earn money even if it’s month to month.

Tim:  Now this is a really important point in Japan right now. So during the job interview process and particularly if you’re dealing with established companies, did you feel there was any kind of a stigma?

Hiro: I did. I did. It was so interesting, this whole process, because I started looking for opportunities at that time. And I would think even now there are a lot of opportunities in e-commerce.  I mean it’s in Japan and there’s so many jobs and I’m grateful from the experience that I’ve had and some of my educational background that I was able to get a lot of interviews with a lot of companies. But what happened during the interviews is a different story. I would tell them about my experiment, my experience in e-commerce and basically I have not had experience where I took a company and made it into a gazillion dollar company. And this is what everybody was expecting. I think in America they see failure in a startup as something that would be beneficial to a company, your next company.

Tim:  Sure. It’s not as good as success but it’s real experience.

Hiro:  It’s a real experience and you learn what not to do maybe, but a lot of the people I spoke to when I was interviewing here in Japan, most people didn’t see it that way.  It was like, “Well if you have not succeeded, then what can you do here?” And that was kind of the problem that I had.

Tim:  So were these companies, you don’t have to name names, but were they large traditional companies, were they newer startups?  What types of firms were you interviewing with?

Hiro: I was interviewing with large multinational companies. I mean some were domestic companies but fairly well known and some US companies, like Fortune Five Hundred companies that were looking to put a lot of effort into their e-commerce. But it was just really odd that I would go into a lot of these interviews and I had gotten many but it just didn’t have that good result.

Tim:  It wasn’t the lack of e-commerce knowledge. It was the fact that you failed. They brought this up in the interviews and really…

Hiro:  Yeah and I don’t know…

Tim:  I’m sorry to hear.  I mean just that’s one of the things that needs to change here in Japan.

Hiro:  And it was interesting because some of the multinational companies, you would think they’re much more willing to accept those kind of people, but in reality if you talk to maybe some of the hiring officers or the HR people…

Tim:  Cause they’re all Japanese.

Hiro:  Exactly and that’s the kind of mentality they have as well. It’s like, if you have failed what can you do for us and that’s the kind of hurdle I couldn’t overcome. In essential I felt I almost had to not lie but just kind of embellish a lot of things.

Tim: All right.

Hiro: But that still didn’t really work too much.

Tim: So you think that they would prefer a less skilled, less knowledgeable person who’s had less responsibility and therefore hasn’t failed?

Hiro: Yeah, maybe somebody who took less risk, but maybe somebody who had a lot of potential to succeed. I think those are maybe the kind of people they were looking for.

Tim:  I was really hoping you weren’t going to say that.

Hiro:  Oh really?

Tim:  No. No. I mean it’s the truth that’s what I want I just meant for like the future of Japan. I was hoping that, that wasn’t still the case. Everyone in Japan these days is saying that they’re more accepting of failure and that it’s embracing but having lived through it, it sounds like that’s not really the case yet.

Hiro:  Yes but I wouldn’t say that all is lost because I actually found an opportunity with a Japanese company who sell British luxury goods. I met with the CEO of that company and that person really found my experience interesting. And I remember during the interview he asked me, “If you have to do it all over again would you do it?” And I think that was the key question and I said, “Yes, you know absolutely I would do it again.” Consequently he hired me and I’m managing the e-commerce for that company.

Tim:  That’s fantastic.

Hiro: Yeah, so I’m extremely grateful to that person.

Tim: Was he the founder of that company?

Hiro: He’s the founder of the company.

Tim: See this is what I’ve found, everyone says that entrepreneurs can’t work for other people. I don’t believe this. Entrepreneurs can work for other entrepreneurs. That usually works out really well.

Hiro: I think so and maybe you know that’s probably true for a lot of people who do startups and end up like me.  Maybe temporarily they need to go back into a corporate job but I think if you spend the time, you can find opportunities.  It’s just that there’s just at this point in Japan not many.

Tim: You have to work for them

Hiro: You have to really work for them and find them.

Tim:  Well, the CEO already asked you the question I was going to, whether you would do it again. Let me ask if you, “If you could go back in time and do it again, what would you do differently this time?”

Hiro: I think before spending the money, before pivoting I would have made sure that the business model… Because initially we started to do flash sales and I would have made sure that I would have been able to follow through with the business with that model because we pivoted way too early.

Tim:  So do you mean you should’ve stuck with it longer or you should have tested it on a smaller scale?  What would you have done?

Hiro:  I would have gone to all the manufacturers and made sure what they wanted to do the flash sales; and I would have adjusted my spending or talking with the VCs accordingly because I started out with the company and we made a small pivot and we tried to do it like, “Oh maybe if we spend a little money we’ll see how it goes.” And it was kind of an incremental increase in sales of the business. Instead of doing that if I had known I would have done that business model. I would have made sure that I had thought of that business model well before starting and made all the projections and would have approached the VCs with a lot more funding. Getting funding is great but spending that money little by little doesn’t always…

Tim:  So you would’ve done fewer tiny experiments and spent more time on like customer validation and…

Hiro:  Exactly. Upfront and then I would have made my projections much higher and then I would have been able to approach the VCs with those kind of projections as opposed to doing this kind of slow, kind of incremental rise in sales.

Tim: Where all the VCs want to see that exponential growth…

Hiro:  Yes. So in a sense it’s like I would have spent my money much faster. Really.

Tim: But hopefully gotten more of it.

Hiro:  Yeah exactly. When we made that pivot, you’re a little scared that maybe that business model isn’t going to pan out so that’s why you spend in little bits and pieces of it; but that doesn’t work. That didn’t work out for me. And I see for a lot of my fellow entrepreneurs that a lot of people who have succeeded and gotten funding, they spend their money very quickly. And I think that was one of the mistakes that I made so I would do that differently.

Tim:  So get certain on your strategy first and then just put the money behind it.

Hiro:  And just do it. And then early on, then you would know if you had a good business model or not; whereas I kind of tinkered around with it for two or three years.

Tim:  We’ve talked a lot about the difficulties.  We’ve talked a lot about the hard times you went through in this, but looking back on it now, what do you look back on most fondly?

Hiro: Most fondly?

Tim:  Yeah.

Hiro:  I don’t know if I would say looking back on it fondly, the number one thing that I got most out of it, was it kind of built me up as a person. You face so much in a startup, I mean, so many things don’t go well, but you just need to have the focus, you need to have that kind of resolve. That’s what I gained most out of it because when I used to work for a company, you freak out at the smallest things like, “Oh this thing go, this thing go well.” But now it’s like those things don’t bother me because the things that I worried about with the startup was like, “Oh my God, what if I can’t pay my employees?” I mean, pay day is coming up and I know I don’t have the cash.

Tim:  It does give you a sense of priorities doesn’t it?

Hiro:  Yes it does.

Tim:  It gives you a real sense of perspective.

Hiro:  And after experiencing that a lot of the things that I used to fuss about aren’t such a big deal anymore. And so it’s given me so much of that resolve as a person. So I look, I don’t know if fondly, but appreciative on that.

Tim:  Excellent. You think you’ll do it again?

Hiro:  Oh definitely. I think I would at some point. I don’t know if I would just cleanly quit my company and work on a new startup but…

Tim:  It sounds like you need a little time to decompress

Hiro:  Exactly and to get my finances in order as well.

Tim:  The salary can be really helpful there.

Hiro:  Yes, but I have these thoughts because maybe deep down, maybe I am an entrepreneur.

Tim:  I want to really thank you for coming and sharing your story. But before we wrap up, what advice do you have for all the young Japanese who want to start companies?

Hiro: My number one advice is I think there’s only so much that you can think through the business model you’re thinking about, your own startup. But once you’ve done that to a certain extent, just go into it because there’s so many things that come up that you can’t predict and you have to solve on your own, so just go into it. Because if you don’t go into it you know it’s never going to start because I know so many people who say, “Oh I want to do my own business, I want to start this. I want to start that.” But for most people it just never happens because I think a lot of it is just that courage part. And I know of this very well because by doing this startup you know I just kind of put myself there and I just exposed myself.  And a lot of crappy things happened to me but I’m still here and I survived. And at the end of the day, “Hey you know I’m not dead you know.” My family is still intact you know.  My loved ones are still there for me and that’s all you can really expect in life.

Tim:  Excellent.  Well listen man, thanks so much for coming. I mean everyone, everyone talks about failure in the abstract or loves talking about other people’s failures but I think it takes real guts to talk about your own.

Hiro:  Thank you for having me. I really enjoyed talking about my experience.

Tim: Thanks for coming in.

Hiro:  It’s been a great time. Thank you.

Outtro

And we’re back.

I’ve got to say I was disappointed at how hard it was for Hiro to find a new job after his company went bankrupt. That’s one of the most important things we need to get fixed in Japan before startups will really begin to flourish. Now startup culture teaches us to treat failure so lightly that it almost trivializes it; but I disagree.

Now some of my friends in San Francisco feel I put too much concern on failure and perhaps they’re right but I don’t think so.  You can’t put your heart, your time, your life, and your relationships into something and then just shrug it off if it blows up around you. You get over it. You learn from it. You move on. Someday you might actually laugh at it. But I think if failure doesn’t hurt, your heart wasn’t in it. You weren’t really trying.

Being an entrepreneur is not so much about not being afraid of failure, but being afraid and doing it anyway.

Update

Now for the important updates.

First, Hiro is doing great. He had a hard time landing his first job after the failure of Sharebu Kids, but once he got it, he excelled and is now head of e-commerce at a major, international fashion brand.

Japan as a whole, however, has not made quite so much progress. But credit where credit is due. I called up and tracked down my friends and acquaintances who had started companies that went out of business, to check in on them and see how they were doing.

Everyone seems to have landed on their feet and picked up the pieces within about four months. That’s good news. However, two important trends emerged from this highly unscientific survey of mine.

First, just like Hiro, a lot of these founders were hired by other startup founders. That’s good. It’s a natural fit. Founders often are a better cultural fit at startups than they are at larger organizations. And better still, there are a lot more startups in Japan now than when Hiro and I first talked in 2015. Any founder who fails honestly has options.

Second, the more technology-driven large companies have really started to change on this point. There is more and more mobility of staff in their 20s and early 30s between startups and some of the newer, large Japanese companies like Rakuten, Marcari, DeNA, etc.

Now these companies make up a small percentage of Japan’s GNP, but they are the companies that are growing and hiring aggressively, so for a job-seeker, they are the important ones.

Japan still has a way to go, not to embracing failure or nonsense like that, but to understanding that failure as an entrepreneur is not the same thing as failure on a university entrance exam.

When you start a startup, nobody knows what the right answers are. Hell, usually you don’t even know what the right questions are. A startup failure is more like a defeat in baseball. It hurts. You’ll probably learn from it.

But you are still unquestionably more successful than all of the critics sitting in the stands.

If you’ve got an honest failure story you want to share, we’d love to hear from you. So come by Disrupting japan.com and let’s talk. If you get the chance, check us out on LinkedIn or Facebook, but even better. If you like the show, tell people about it. Disrupting Japan has grown not by social media marketing or advertising, but because listeners like you enjoy it and tell their friends about it.

But most of all, thanks for listening, and thank you for letting people interested in Japanese startups an innovation know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.