The single most common question I get asked are variations of “How do you start a business as a foreigner in Japan?”  or “What’s it like to start a startup as a foreigner in Japan?”

It’s always been a hard question to answer simply because it is such a big one, that it can be hard to know where to start. Well, today we are going to start to answer that question, and over the next month or two, we are really going to dig into it.

Jordan Fisher is CEO and co-founder of Zehitomo, which is an online marketplace for off-line services.

This is not an easy space. There are many such sites in Japan, but Jordan explains why the fact that he and his co-founder are both foreigners has given them a competitive advantage not just in the marketplace, but in recruiting and marketing as well.

Unsurprisingly, there are a few things that are much harder for foreign startup founders than for Japanese founders, and we talk about those as well.

It’s a great conversation, and I think you’ll enjoy it.

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Show Notes

  • Why charging commission is a losing strategy
  • One surprisingly popular kind of offline services
  • Why its hard to start a startup as a foreigner in Japan
  • What it’s like raising money as a foreigner in Japan
  • Ho to use your gaijin-ness to your business advantage
  • Why some Japanese have a hard time in foreign startups
  • How to differentiate your startup in Japan
  • Why the fear of failure is still holding Japan back

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Transcript

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

I’m Tim Romero and thanks for joining me.

How do you start a business as a foreigner in Japan? What’s it like to grow a business as a foreigner in Japan?

These are the two questions I get asked the most, not only by our non-Japanese listeners who make up 80% of the Disrupting Japan’s audience but also by our Japanese fans as well. And you know, I’ve always found it hard to answer that question because it’s just such a big question that it’s hard to get your head around it. It’s hard to know how to even start to answer it.

Well, today, we’ll be talking a lot about exactly that. We’ll be sitting down with Jordan Fisher, the CEO and cofounder of Zehitomo.

Now, Zehitomo is an online marketplace for off-line services and we will dive deeper into their business model during the show, but really, we talk a lot about how Westerners or at least Jordan, this one particular Westerner approaches of doing business in Japan. Both as an individual and a company, there are certain things that you can get away with and some things that you just can’t. There are certain advantages you’ll have over your Japanese competition and there’s certain disadvantages that you might not be able to overcome.

But you know, Jordan tells that story much better than I can, so let’s get right to the interview.

 

 

Tim: So, I’m sitting here with Jordan Fisher, the founder and CEO of Zehitomo which is a marketplace for matching professionals with those who want to hire them, so thanks for sitting down with me.

Jordan: Yeah, great to be here, Tim, thank you.

Tim: So, I mean, I gave a really brief description of what Zehitomo is, so maybe you can explain it a little better than I did.

Jordan: Sure, sure. In a nutshell, it’s what you said, we’re a marketplace for local services. I think a lot of people don’t really immediately click when you say ‘local services,’ what that actually means, and I generally summarize it by saying that it’s the jobs that happens off-line, not the ones that happen online, so think about your photographer, your plumber, your personal trainer, all these scenarios where you’re connecting directly with a vendor, usually a small business or a freelancer off-line, and as opposed to maybe a programming job or a design task, or a legal paperwork that could be done through some sort of online crowd works or something like that.

Tim: So, are most of the services offered on Zehitomo being offered by professionals or is it more like TaskRabbit where there are people who are just coming in and helping you assemble, like, yeah, furniture?

Jordan: Yeah, yeah, great question. So, that is one way that we differentiate ourselves, so we are a platform for professionals. The average job size is closer to around $500 or ５万円, and when you look at that, we look at the LTV of the job, so a lesson might be a recurring service and kind of looking at the average, getting hired several times, etc., but these are professionals that do this job for their living. Some of them, it is fukugyo or there’s kind of second work when it comes to some of the lesson related categories, but the vast majority are actually small businesses, and then followed by many freelancers in the case of photographers or personal trainers, and stuff like that.

Tim: So, I mean, that simplifies thing because you can expect a bit of professionalism from that side of your marketplace.

Jordan: Exactly, and I think people talk about the gig economy and how AI is going to automate everything, but I think when it comes the local services and really, the high-end – not the higher-end jobs but the jobs that you really need a professional or a specialist to take care of, those are the things that I don’t see, or I don’t think anybody sees us automating away anytime in the near future.

Tim: Well, yeah, there’s just something that can’t be done online. If you need someone to photograph your wedding or paint your apartment.

Jordan: Exactly, yeah, and I think one of the really frustrating things about local services is that it’s just a really, really inefficient and nontransparent market, so if you wanted to hire somebody to take photographs of your wedding or to hire somebody to renovate your kitchen, you have no idea how much that’s going to cost or who to actually ask, right? And generally, what happens in Japan is you go through a series of different agencies that all take cuts in between, and you’ll finally arrive at some sort of packaged solution which may or may not have been what you’re originally looking for, right? Wedding venues will usually charge you around $2,000 for a wedding photographer where they’ll get paid around $300 in the end, right? Like, 85% cut, it’s ridiculous.

Agencies – my personal experience that I’ve given before is when I bought a place in Japan and ordered – this was a few years ago and our place is near the train tracks, and so we wanted to soundproof the windows just to make it extra sound tight for myself, I just had a newborn daughter, and we spent – this was a business major real estate developer in Japan, they have their own kind of concierge desk and everything to kind of suit the place up as you need, and it took us a month to get a quote for soundproofing the windows, right? And we’re based in Tokyo, they’re based in Tokyo, their people come down from Osaka to measure the place, right? You’re going through the layers and layers. It was just so inefficient, and yeah, it took a month, and the price that came back was close to $40,000.

Tim: Well, you know, Japan is famous for these kind of inefficiencies. Hasn’t the Internet done a lot to change that? I mean, aren’t there specialty, like wedding photography sites and specialty kitchen renovation sites that are supposed to have cut through that nonsense?

Jordan: You would’ve thought so. So, I think in Japan, everybody loves what’s called tesuryou, right? Margin, and that’s why they’re recruiting businesses is still very much a margin business here, anybody that can continue to take that will generally try to continue to take that. The bottom line is, this doesn’t actually add any value to either side, right? If the problem you’re trying to solve is how do I make a payment? And then you take a margin off the top of that, that makes sense, right? You’re facilitating a need, but in the case of local services, you don’t actually add any value to the requester or to the professional by taking a cut in between.

Tim: So, all of these niche vertical marketplaces online, is it a case that these marketplaces are also playing the same game and trying to get a high margin, a high commission, or just people aren’t taking to those sites?

Jordan: I think there’s no good solution out there right now, and what you have, if you look at the evolution of local services, you could say, in Japan, it’s called Town Page which is very similar to the Yellow Pages overseas, and then you would have maybe the Town Page online, right? And that’s where we are right now, and there’s some sites that will do maybe a bit more matching for C2C jobs or have a list of trainers, but at the end of the day, you still have a list, you’re still going through the list, you’re filtering the list, you are calling off the list for number one, you’re trying to become an expert in whatever it is that you need. In my case, I had to become an expert in trying to understand how soundproofing glass. So, it got more convenient in that I don’t have to look through a book, I can look online, but one of the real challenges is that you have very custom requirements, but when it comes to ordering a service, you need a custom set of requirements and you don’t know what those are unless you’re actually a subject matter expert, and so when I hire a photographer for an event, I might not know that I would need to tell them if it’s indoor or outdoor because the lighting will change based on that. What we try to do is to try to make it as simple as possible to actually answer those questions and so that vendors have all the information they need.

Tim: Well, tell me about your customers. So, on the client side, are the mostly consumers? Are they businesses? Who’s using it on that side?

Jordan: Yeah, it’s mostly consumers. We do have a number of business that we haven’t even really started targeting yet – I think in the future there will be more of that, but right now, it’s really people that are searching for what they need, and usually, that’s consumers but businesses search for when they need something done as well from time to time.

Tim: We’re talking a lot about photography as an example. Is that the most popular? What are the most popular services on Zehitomo?

Jordan: Sure, sure, so I’d say photography is one of them but actually, one of the most popular areas is lessons. So, personal trainers, piano teachers, yoga instructors, things like these are surprisingly popular, and I’d say the largest growing segment is jobs around the home. So, thinking of… I need to replace my tatami flooring, I need to replace my blind screen, I need to repair my air-conditioner, things like this.

Tim: Okay, so skilled jobs around the home?

Jordan: Yes, yes, yes, skilled jobs around the home, and the other one that’s pretty popular is pet sitting and things like that, so it is pretty diverse, actually. We don’t have like, the top three is 50% or anything like that. We have 500 categories that we’ve launched, and say, when you look at it in segments, you can say, okay, there are some that stand out, like the pet sitters, the photographers, but lessons over all is very popular, particularly personal training.

Tim: Well, actually, before we dive into the details of the business model, I want to back up a bit and talk about how you and your partner launched this back in 2016, right?

Jordan: I think we only launched the service in 2016 but we formed the company and we had been talking about it and trying to work on it in stealth mode since 2015.

Tim: Okay. That’s a wow. Now, you and your cofounder James are both Americans. One of the things my listeners ask me about the most is, what’s it like starting a startup in Japan as a foreigner, which is such a ridiculously broad question that it’s kind of hard to get your head around it, but being a foreigner starting a startup, what things did that make harder and what things did that maybe make easier?

Jordan: Yeah, so I would start by saying that it’s not easy for anybody to start a company in Japan or arguably anywhere in the world, even if it’s listed number one on easiest. Maybe the processing is easy and whatnot, but it takes a lot of commitment.

Tim: It’s a lot of work.

Jordan: A lot of work, and starting a company versus running it and growing it, and scaling, and actually doing something meaningful, they all mean very different things in different stages, but yeah, I think being a foreigner doesn’t change the levels of commitment that are needed or anything else. There are some unique problems, maybe making sure that you have the right visa, around to making sure that for example, investors will treat you seriously and not as a flight risk from your country.

Tim: Yeah, let’s talk about that. So, in raising money, what kind of questions or pushback did you get from VCs?

Jordan: So, I’d say it wasn’t very vocal, like, “Oh, you’re not Japanese enough.” Myself and James, we had both lived and worked in Japan for 25 years between the two of us, right? So, we had a track record of being and working, and delivering results in Japan in the domestic market. So, I think that alleviated some of the concerns, but to run a company in Japan, we realized, this is – well, starting a company was one of our biggest weaknesses. We didn’t have another Japanese member on our kind of senior leadership.

Tim: So, did you get – I mean, when I started my companies in the past, investors frequently asked me if I had or was planning to have a Japanese cofounder. Did you ever get those kind of questions?

Jordan: Sure, I think at that time, we had already – we bootstrapped for a while at the beginning, and so I think the question was not, “Are you going to have a Japanese cofounder?” but “How are you going to make sure it doesn’t turn into a gaijin product?” Actually, 500 Startups who was our first VC that invested in us, they as well had that same concern but the wonderful thing about them is they actually introduced Satoshi who joined us as our CSO and helped alleviate that concern for them to later on invest. Yeah, I mean, it is something that – I think being a foreigner running a startup has its advantages as well: you can use your gaijin power when needed, you can…

Tim: What does that mean, ‘use your gaijin power when needed?’

Jordan: I think there’s a lot of times when it might not be socially correct or maybe a little bit frowned upon if you take certain approaches that are cutting the corners, or…

Tim: Well, can you give me a specific example, something that you or your partner did that maybe a Japanese couldn’t get away with or would have had to do a different way?

Jordan: I’d say even just approaching a few of our first clients, I’d say the way that we did it and just the type of sales that we could do was – I’d say the type of sales that you do as a foreigner is very different from that as you do as a Japanese, and I think you get interpreted differently by…

Tim: How so?

Jordan: I’d say the expectations are different depending on who you’re talking to and that could be a plus or a minus, but it allows us to get right to the chase much more quickly whereas if somebody Japanese would do that, and I don’t mean to kind of stereotype or generalize –

Tim: Oh, no, no, we’re talking in real broad terms here.

Jordan: Yeah, but it might be considered rude or this isn’t the kind of jump right to the heart of the matter so quickly as opposed to maybe developing a bit more of a relationship. It might be uncomfortable for a Japanese person to do that, it might be uncomfortable for the other company to see, are these guys alright? But as a foreigner, you can kind of ignore all the social constructs to an extent and you can go after what you think is appropriate as long as it’s logical and you can really connect with the other person.

Tim: So, like, getting straight to the point, does this mean just being able to be more directed in sales meetings or being able to be more direct in more of a social situation where a Japanese would expect to do more kind of small talk?

Jordan: I’d say anywhere where there is a clear goal, and so if that’s sales and we’re talking with the company and saying, “Hey, partner with us to do with this,” if we’re talking to an investor saying, “Hey, let’s make this happen,” and being persistent, and I think those – and it just comes a lot more – actually, I think we can get a pass on a lot of things that we wouldn’t otherwise…

Tim: I’ve seen that too, over the years. I mean, I think that on one hand, the Japanese language and Japanese social protocol is ridiculously complex, but on the other hand, I find Japanese businessmen, Japanese people in general are incredibly forgiving and tolerant as long as you’re making a sincere effort to do it right.

Jordan: Yes, yes, yes, yes, yes, yes, and I think that’s very important as well, and I think we get an extra pass just being a foreigner and making that effort, but the effort does need to be sincere, right? And so, there’s not as much hustling, like in Japan, whereas if you go to China or the States or other places, you kind of feel a lot more that business hustle.

Tim: I think that’s definitely true and there needs to be a lot more of it here, but again, I think that is something that foreigners can get away with socially easier than Japanese can, that hustle always being on and always kind of being in sales mode. If you’re not overtly rude about it, it’s just, well, he’s very passionate about his company, whereas a Japanese CEO, it might be, well, he should’ve really known better than to…

Jordan: Yeah, and so it’s tricky nuances, right? How you balance those, but it definitely makes sense for any company. And Satoshi being there’s been a huge asset for us to really take that balanced approach, right? When things seemed like it’s going to much in one direction, kind of make sure that okay, no, we are a stable company. I know there’s some investors that told us it was just comforting having Satoshi at the table.

Tim: Well, I mean it does make sense that if you’re addressing a Japanese market, you want to have Japanese people on the team, so what about in terms of running and growing the company? Do you think being foreign-founded has helped or hurt you in recruiting staff or getting customers, either the professionals or the clients on the platform?

Jordan: I think it’s helped. We definitely had our share of learnings. I’d say there is more struggles as first-time founders and learning a lot of things the hard way as opposed to being foreigners trying to run a company. I would say that I think being foreigners running the company has allowed us to move quite fast, has allowed us to really apply a lot of the best practices and principles from Silicon Valley or other different kind of startup cultures.

Tim: Like, what kind of things?

Jordan: So, I’d say it’s very easy for people to talk about being data-driven, to talk about fail-fast, to talk about really discussing and kind of arguing with one another, but if you don’t have a culture that supports that from the top and actually does that, it’s very different, I think, when you have Japanese leadership that’s not used to that for their entire career versus people that come from – and maybe not even being foreigners but has come from a bit more of an international or foreign background.

Tim: Almost all the Japanese startups are saying the same thing. “Fail fast, fail forward” is a phrase I detest with a burning passion, but we will get into that in some other time, but do you feel that being a foreign-led start up gives you more credibility to make those claims that the staff, that potential employees will see this as like, these guys are much more likely to walk the talk?

Jordan: I would say spend some time with our team, spend time with some of the random Japanese companies that say something similar, and you’ll probably feel a lot of differences, right? I mean, it’s possible there are some Japanese companies that execute this very well but for many of the companies that I’ve seen and that I’ve talked to, and people that we, as we are recruiting and hiring, and talked to many people as well, I think there is often a big gap between the values that a company puts out and what they actually follow internally, and that’s not specific to Japan. I think we – I’m not really maybe getting the heart of your question, but I think maybe being foreigners, it gives us a little bit more credibility from the beginning that we actually mean what we’re saying as we talk about these principles that are much more commonly used overseas, frankly, and –

Tim: How has that been reflected in your staffing? So, what percentage of your company is foreign versus what percentage Japanese?

Jordan: So, right now, we are growing our sales team quite aggressively, and the sales team is by and far, Japanese. There’s a lot of people that talk about wanting to work in a more international environment, but actually coming to work in an international environment, they’re not actually really ready for that.

Tim: I can see that happening, but what are their misconceptions? What surprises them?

Jordan: So, I think the – it’s not so much as what they are surprised about, it’s just being stricken by the reality of it. So, say you work in a very domestic company and you’re like, “I want to work in an international company because it’s going to be great, I can be free, I can do all these things. I’m not going to have a ceiling over my head,” and then you go actually work in one and you are thrown into the middle of the ocean, and you’re like, you are free to swim. All of maybe the juniors that you would have had, all of the –

Tim: So, can you give me an example of someone who came in with those expectations and what was the reality, and why did they leave, and how did they leave?

Jordan: So, we’ve had people, for example – so, at Zehitomo, what we do is we have everybody do a trial for at least one month first before converting somebody to full-time, then when we go full-time, we’re very western about it: we give them equity, we want everybody to feel like owners of the company, but because it’s not always a perfect fit for everybody in terms of culture – people can talk about it but the best was actually try working together. Many people will realize that, okay, so, I have this hard objective, right? I need to do something that is different from how I have done things to date, or one common mistake I would say I’ve seen is just people trying to work very hard to achieve it but not working very smart. Make it very clear it’s not about the hours but even still, people can say, “Oh, I’ll just fall back to just working very hard and I’ll be giving good performance as a result of that.” To achieve something that’d – to 10X whatever you’re trying to do, it’s relatively easy to maybe 2 or 3X something, right? You can just improve the processes, you can work a little harder, whatever it may be, it’s very hard to 5X something and I’d say it’s incredibly hard to 10X something. That’s exactly why you really need to think outside of the normal constraints, what you do and reinvent what you’re achieving, and I mean, the 10X methodology is not something that we’ve made up or is it unique, right?

Tim: You mentioned before, you always bring on people and you have a one-month trial period before you bring them on full-time, that makes sense when you’re recruiting from a pool of freelancers, or someone that can work part time in the evenings but doesn’t that limit your ability to recruit from someone who’s got a full-time sales job, for example?

Jordan: I’d say as a startup, one thing that is great is that we can be very, very flexible, right? So, we’ve had people maybe just take a couple weeks holiday and try working those couple weeks, and saying, it seems like it will work out, right? We’ve had people that will – on the development, maybe start with some projects in the nights and weekends, and make sure that we can work well together and stuff. Obviously, if it’s sales, it needs to be during the day.

Tim: Okay. One of the things I found interesting about Zehitomo, something you do very differently from all the other similar marketplaces, that you guys don’t handle the payments at all. It’s an unusual choice, so why did you decide to do it that way?

Jordan: Yeah. It wasn’t intuitive to us either at first, but the more we were doing it, the more we realized that this was the right way, and handling the payment is a great way to stay in between the transaction. So, for something that happens online, like take upwork.com, for example, which is a platform where you can hire developers or designers, or people remotely, they will stay in between and they will charge a percentage, but they’re actually adding value through the lifetime of your relationship, right? They will take screenshots every 10 minutes of the developer, they will handle the NDA documents, right? They will handle the payments and the processing, and automatically calculate the hours, right? So, I’m happy to paying extra X percentage to them for managing all that, and that’s valuable for me. In the case of local services, you’re meeting the professional off-line. If you’re going to have a personal trainer once a week, okay, you met. The next week, what’s your incentive to go through somebody else that’s going to take a 20% or 30% margin?

Tim: So, the fundamental business model is you are selling leads?

Jordan: Yes, correct. Staying in between and just providing an agency solution in trying to get people to match, and then try to stay in between. Where we are not actually adding value is just for our benefit, whereas structuring as a lead generation platform means that when vendors bid on jobs, it’s a natural quality filter at the same time.

Tim: It’s a very clean model.

Jordan: Yes, very clean. We don’t have to worry about all the operations that the professionals are much better at than we are.

Tim: And on the platform, is it a one-to-one match or if the client wants to get three different quotations from three different photographers, you will sell that lead three times?

Jordan: Up to five professionals can bid on one job. Ideally, we would actually have three replies for every single job. I think when you have one or two, it just becomes binary. You don’t know if this person is good or this person is bad. If you have three, you can get a real sense of the market and what’s fair. We are not quite there to be honest. I think some categories and areas are much more popular and we do have three, four, five replies per job but there’s other areas where if you look for that belly dance instructor, in Nagano-ken –

Tim: You are lucky to find that one.

Jordan: Yeah, exactly, yeah. So, our real challenge right now is building out the liquidity to handle these other cases and areas, but yeah, we think once it goes beyond five, you’re not getting that much more value. From what we can tell and from the information that we have, three is the biggest jump and after that, there’s not that much more value by having more choices, and in fact, I mean, too many choices can just lead to…

Tim: Confusion.

Jordan: Yeah, confusion, that much of a harder time.

Tim: Yeah, I can see that that business model as a whole, it makes it much cleaner, but how do you handle pricing? How do you determine what to charge with the commissions? Because as you mentioned before, for one wedding photographer might be charging $100 and another one might be charging $1000.

Jordan: So, I think there’s two parts of it: one is that we really try to get the right information to tell the pros. So, in the case of a wedding photographer, we don’t ask this for the majority of categories but because the range can change so much, we ask them what their budget is, right? What type of quality of pro that they’re looking for? And as such, there is some professionals that are only interested in certain types of jobs, and if it’s a more expensive budget, it’s a more expensive lead. We basically calculate the LTV or the Lifetime Value that we assume would work out for the pro if they were hired. So, in case of a recurring job, we can say, okay, on average, you’re going to get hired for a personal trainer job five times.

Tim: So, you have to reverse engineer their businesses to figure out where you can charge them? Sure.

Jordan: Exactly, and so maybe sometimes, you’ll just get hired once, maybe sometimes, you’ll get hired for years, but we can make assumptions on that and say, okay, if this job is worth $500 to you, and maybe you have to bid 10 times to get hired once on average, then okay, it should cost ¥500 or $5 to apply.

Tim: Okay, I can see where that’s a really unique value proposition on the supply side. Shifting to the demand side, so there are a lot of freelancing sites and crowdsourcing sites, and niche sites for photography and what have you in Japan, so what did you do to stand out from the crowd?

Jordan: So, I guess one of the biggest differentiators again is that we’re looking out for local services, and so yeah, so there’s many vertical players, right? Somebody who specializes in photography, there’s people that specialize in other things, and I think for us, looking at the market in how we can add the most value, the demand from everybody is getting new clients, and that’s the number one kind of concern. I think this solves it much better for them because they’re earning their own business, they can keep their own repeat, etc. –

Tim: I understand the advantage once you get them on your site as a process, but when you were starting from nothing, with zero traffic, or maybe just your first job for yourself, wedding photography, these other service, English language instruction, these are expensive keywords to be bidding on. These are competitive spaces, so how did you attract consumer interest? How did you let people know that you existed?

Jordan: So, at the beginning, yes, it was very hard, and I think – we went to our friends or friends of friends, we invited everyone to our Facebook page, we say, “Hey, we’re doing this. We have this great way, if you want to hire your photographer, etc.,” and one of the things that we realized with local services is that it’s not like this sticky experience where it’s like, “Oh, today, I’m going to hire a photographer. Tomorrow, I’m going to hire a personal trainer. On Thursday, I’m going to hire my soundproofing specialist,” right? You have these needs when they arise. The best is really coming from search, and we found that when people search for something and they need it, that’s why our strategy, I think is this is why we’ve been really building out our SEO. I think it’s much easier for when you look at repeat and something like that to say, “Hey, we can be the everything store,” instead of one category or a couple categories.

Tim: I find this really interesting: the debate about whether to go narrow and deep or broad and shallow. I don’t know if there is a right answer, but the case for narrow and deep seems to make more intuitive sense, right? You can put all your money into targeting a niche, buying specific keywords, building up a niche brand. It seems like an easier strategy to execute. So, what made you decide to go broad instead?

Jordan: So, I think when you look at marketplaces, exactly as you say, there’s two different approaches: you can go horizontal or you can go vertical, and I think actually, if you look at how things are in, say 10 years from now, I think it will be both, and I think it’s just so mind-boggling complicated that it doesn’t exist right now, and every category is different and everything is different, but local services, again, one of the most inefficient markets out there, is an industry that is as big as food but the online penetration seems to be around 2.5%.

Tim: Before, we were talking about that whole fail fast, fail forward nonsense, I think it’s a bunch of macho bullsh**, but some other discussion, but I noticed that you hired Koki from Letibee. So, he was on the show a couple of years ago, his startup, while incredibly progressive and well-intentioned, didn’t work out. You hired him, and I’m curious: do you think that Japanese startup founders have embraced the concept of learning through failure as much as the foreign founders, or at least you and your cofounder?

Jordan: So, Koki is amazing, right? I think he’s been through it, he’s experienced that.

Tim: Yeah, a really smart guy.

Jordan: Yeah, and I think he’s definitely the exception, not the norm in Japan, still. So, you learn as much as the energy you put into something, right? And so, I think when you start the company, you’re really putting in all energy, generally.

Tim: Oh, yeah, I mean, there is no doubt that even running an unsuccessful startup is an intense education. You come out of that with skills, but do you feel that the Japanese startup founders that you speak to a lot are – that they recognize that, that’s the appreciate the skills of even another startup founder who has failed?

Jordan: Anybody who makes it to that status of startup founder I think realizes and appreciates, and recognizes that.

Tim: Okay, Jordan, listen, before we wrap up, I want to ask you what I call my ‘magic wand’ question. If I gave a magic wand and I told you that you could change one thing about Japan, anything at all: any aspect of the society, the legal system them, the way people think in their heart of hearts, anything at all, what would you change?

Jordan: If I could do anything in Japan, I would want everybody in Japan to feel like they have that magic wand and they can actually inflict some sort of change. It’s one of the more fundamental kind of issues still deeply-rooted in society, is being afraid to take some of the risks, afraid to jump off and be that financer of starting your own business or whatever it may be. Some things we can wait for other people to influence change in the government. Sometimes, we can wait for other companies to solve our needs, but for everybody to feel like they have the power to influence change.

Tim: That’s an interesting way of putting it. So, I’ve had a lot of people talk about fear of failure, of risk aversion, but not quite the way you did. So, do you feel like there’s sort of a fatalism where people just feel like, “Oh, I shouldn’t try because my efforts won’t matter?”

Jordan: So, I’d say in Japan or at least compared to the States, I’d say people are less optimistic on many things, and in the States, regardless of what’s happening in the news and politics, and everything else, you still have kids that say, “I want to grow up and be president,” or, “I want to grow up and be number one in this team,” and our sports teams’ expectations are, of course, that were number one in everything.

Tim: We are ridiculously optimistic people.

Jordan: Yes. Whereas in Japan, people are like, “Oh, yeah, we got third,” right? Like, this is a big celebration, right? And yes, if you look at the track record, maybe that’s saying big but I think people do – some realize that expectations are different from how they are overseas, but a lot of places, people have – I don’t want to say given up but it kind of seems that way, right? Like, who was the last kid that you have spoken to that says, “I want to grow up and be Prime Minister”? “I want to grow up and change Japan,” right?

Tim: I think you’re right, yeah. I think a lot of Japanese are far too reasonable and pragmatic for their own good.

Jordan: Yes, so I think it comes down to being hungry or having that hustle of really thinking that you can invoke that change, but I think when you ask this magic wand question to myself or other entrepreneurs, we can think about that because we think that we can influence change and we think that we have an idea of what we do want to change, and I think just everybody having a bit more of that mindset will be really, really healthy.

Tim: Do you think it’s changing? I mean, we certainly see a lot more startups but what you’re talking about is much broader than that.

Jordan: I think there is a correlation between the mindset and the rise of startup, but yeah, when I talk to college students now versus 10 years ago, it’s very different in terms of their mindsets, in terms of where they want to go to work, what they want to do with their lives. Sooner or later, I think we’re going to get there more and more, freelancing is going to become more and more prevalent, people are going to have more and more options in their careers, people are going to have more and more options of what they want to do, and I hope for Japan’s sake as well, I mean, there is so many incredibly talented people did here and not everybody is it really living out their full potential.

Tim: Well, I think you’re right. There is something kind of in the air. A year and a half ago, I turned down a job in San Francisco because I think the next 10 years are going to be far more interesting in Japan than they are in San Francisco. Now, the last 10 years were far more interesting in San Francisco without a doubt.

Jordan: But it’s very great time, and because it is still hard and there are still these challenges, that’s why you’re starting to see some of the people – more and more people get involved but yeah, I mean, that takes time and by the time, it’s very easy and it’s obvious, everybody’s already doing it.

Tim: Well, excellent, and listen, Jordan, thanks for sitting down with me, I really appreciate it.

Jordan: Yeah, likewise, thank you very much Tim.

 

 

And we’re back.

If you ask three different Western startup founders what it’s like to run a startup in Japan, you’ll get three very different answers. I’ve been seeing the gap between Western and Japanese startup founders rapidly closing over the past few years, but Jordan who is on the ground rapidly growing his startup sees it as very much alive, sees this gap is very much a real thing, and that one of the Zehitomo’s primary advantages in the Japanese market is the ability to understand and execute Western startup strategies better than their Japanese competition.

Many foreign companies enter the Japanese market with proprietary technology or a strong brand, but in a sense, this is using business process as an advantage.

Zehitomo’s approach to selling leads rather than taking commission is a very interesting one, and it’s one that is quite uncommon in online marketplaces, but it makes a lot of sense when the marketplace is not selling a product that will be used again and again.

Rather than spending resources building out the perfect workflow for kitchen remodeling or wedding photography, Zehitomo can focus on building a brand and attracting more customers. That said, their choice to grow broad and sell everything rather than to go narrow and focus on one market is a risky one.

Building a brand around something like plumbing or home renovation will always be easier than building a brand around something as abstract as local services, but Zehitomo is clearly doing something right as their increasing volumes and revenue show.

One thing I do want to clarify, however, is that the online marketplace business is a lot richer than what was implied during our interview. Japan has moved past the era of Town Pages and Yellow Pages, directories a long time ago, and there are online marketplaces in almost every conceivable vertical and a lot of horizontal marketplaces as well. Of course, cost and quality vary, and there is always room for a new startup to come along and do things better.

Oh, and by the way, if you’re interested in how to do business in Japan as a foreigner, I’ve got some great news for you. Disrupting Japan’s big Fourth Anniversary Party and Live Podcast will be happening on September 13th at SuperDeluxe in Roppongi. We will have Paul Chapman, the CEO of MoneyTree, Jason Winder, the CEO of MakeLeaps, and Casey Wahl, CEO of Wahl & Case talking about how to start and grow a business as a foreigner in Japan. These are three successful foreign entrepreneurs who took three very different paths to growing their company here.

So, I guarantee you, it’s going to be a great discussion, and of course, a great deal of wine, beer, and conversation will flow after that discussion. You really want to be there. So, check out disruptingjapan.com or our LinkedIn and Facebook groups for more information. I hope to see you there.

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

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