Some industries need to be dragged kicking and screaming to innovation.

When margins are tight and profits are small, CEOs often don’t want to spend a dime on the promise of increased efficiencies or long-term savings, and so external leverage is needed.

Today we talk with Shinya Shimizu, founder and CEO of Elephantech, who explains how he found that leverage in his mission to make the global technology supply chain more environmentally friendly.

We explore how Elephantech and other startups are helping the world meet net-zero targets, strategies for scaling  manufacturing startups, and how you can make money while doing good in the world.

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

Show Notes

  • The surprising impact of circuit boards on global CO2 emissions
  • Growing from a kickstarter camping into a multi-million dollar startup
  • How to raise debt financing rather than equity financing
  • How Elephantech is selling eco-friendly solutions in a low-margin commodity industry
  • How they built their first factory, and Shinya never wants to build another one
  • How to scale a manufacturing startup
  • Advice on successfully selling to and collaborating with Japanese enterprise
  • How to take a deep tech startup global without massive amounts of capital
  • Advice for sustainability startups on how to survive and thrive in cost-conscious industries
  • When government regulation is good for startups and when it’s damaging
  • The danger of the wrong kinds of founder role models in Japan.

Links from the Founder


Welcome to Disrupting Japan. Straight Talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

Circuit boards are one of those things that are everywhere, but that we really don’t think about very much. Personally my only direct experience with circuit boards was years ago and involved a fair amount of cursing and a lot of solder burns.

But printed circuit boards or PCBs, or a $90 billion global industry that is highly standardized, tightly controlled, and surprisingly damaging to the environment.

Well, Shinya Shimizu and the team at Elephantech are changing that, they’ve not only developed the technology to re-engineer PCB manufacturer to be more environmentally friendly and less expensive, but they’ve also built their first factory and are now selling to some of the world’s largest manufacturers.

Elephantech is a great example of how startups can succeed while making a positive contribution in this world. And Shinya also gives some great practical advice about how to sell to large enterprises as a new startup. How to raise money for capital intensive growth, and how to introduce new innovation into a low margin cutthroat industry. It’s really quite an amazing story of their journey from a small Kickstarter project 10 years ago to make a pen that lets you draw working electrical circuits to selling PCB technology to some of the world’s largest manufacturers today, to just maybe fundamentally changing the way circuit boards get made tomorrow.

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


Tim: So, we’re sitting here with Shinya Shimizu, the CEO and founder of Elephantech. The first company in the world to mass produce printed circuit boards using an inkjet printing, echo friendly, sustainable manufacturing process.

Shinya: Yeah. Sure.

Tim: That’s longer to say than I thought. But thanks for sitting down with us.

Shinya: You’re welcome. So, I’m really happy to be here.

Tim: Well, I try to explain what you do in that big mouthful of an introduction, but I think you can probably explain it better than me. So, what does Elephantech do?

Shinya: So, Elephantech is going to completely change the way of manufacturing electronic circuits, completely changed with drastically, environmentally better, of course, and cost effective way. And our goal here is like probably in 10 years, or at least 15 years from now, the most of the circuit boards in the world, I mean, including iPhone and laptop, any kind of electronic circuits are made by our technology.

Tim: Well, and I think kind of the core of your innovation is most circuit boards today are produced using a subtractive process…

Shinya: Yeah. Subtractive method.

Tim: And you use an additive method.

Shinya: Right. I said completely different way of manufacturing. Electronic circuit means existing way uses subtractive method and ours additive, purely additive manufacturing. That’s the biggest difference. So, the conventional way is subtractive, which means, so, circuit boards are copper wires are placed on plastic boards, that circuit boards. And to make the circuit boards existing way, like laminate the copper foil to the plastic board and then remove unnecessary part from the copper file so that you use the remaining part as wires. But during the process, 80 or 70% of copper is dispersed and not used. So, which is material efficiency is very bad, and cost-wise, it’s bad. So, that’s the existing way. Our way is completely different. So, we first print the copper with inked printing technology and then increase the thickness of copper by plating technology. Plating makes the copper crystal grow. So, it’s purely additive. So with that technology, it’s inherently good.

Tim: Right, right. Well, less waste all around. So, like you’re claiming a 70% reduction of copper use and 95% reduction of water use. And 75% reduction in CO2 emissions. And I was amazed at how much circuit board production contributes to CO2 emissions.

Shinya: Absolutely. Yeah. That’s probably bigger than anyone think. Apple, I would say, for example, Apple is one of the biggest carbon producer in the world because they are making a lot of things. But 10% of their total carbon footprint, including their travel, including manufacturing and any kind of carbon footprint, 10% of them are from circuit board manufacturing.

Tim: So, that’s not just their supply chain, that’s their total carbon footprint.

Shinya: Total Carbon footprint.

Tim: Holy Cow. That is really a big contribution. That’s big.

Shinya: That is big. And Apple is, of course aiming at net zero by 2030. So, that 10% is significant.

Tim: Yeah. Well, tell me about your customers. So, who’s using Elephantech technology and what’s their motivation for doing it?

Shinya: Yeah, the motivation is mainly decarbonization. Exactly, decarbonization. So, last year — I cannot really talk about a lot about like undisclosed client of course, but in an already disclosed clients like Litton for example. Litton is not the most famous company in the world, but it’s a big company. So, one fourth of global laptop keyboards are manufactured by Litton. So, last year we had a joint press release of MOU sign kind of ceremony with Litton and Litton motivation to use our board exactly decarbonization. The point is like Litton customers are normally Western countries. I would say it’s not their customer. It’s not normally Taiwanese companies. So, they’re European companies or North American companies. And they really choose supplier by environmental aspect.

Tim: I really want to dig in on how those consumer pressures are changing supply chain in general. But before we do that, I want to talk a little about you. So, I mean, you founded Elephantech back in 2014.

Shinya: Yeah, it’s long ago.

Tim: But it was AgIC, right? As a Kickstarter campaign.

Shinya: Sure. Oh, you know that.

Tim: Oh, I’ve been fans of you guys for a long time.

Shinya: Thank you. Yeah, thank you.

Tim: Yeah. You had that cool little marker where you could…

Shinya: Yep, yep. Yeah, it’s cool. Little marker.

Tim: Tell us about that.

Shinya: Yeah. Before starting that company. So, I was working for McKinsey as a management consultant. And while working for McKinsey, I was looking for interesting scientific things especially from the universities. And because I believed, and I now still believe that university technologies are normally underused. So, there are a lot of technology that can potentially change the world, especially in Japanese universities, I would say. So, I was looking for innovations and I found this technology that is invented by a professor Kawahara, who is now the professor at the University of Tokyo. But the circuit markers, I’d say it is definitely not directly connected to our final goal.

Tim: Yeah. Why the kickstart? So, I mean, when I first thought saw that, I was like, oh, well that’s kind of cool. But what are these guys going to do with it? So, did you know your direction from the beginning?

Shinya: No. So, this is my first company and when I founded this company I was 25 years old. And honestly, so I got lost, I would say. So, I mean, the technology itself was really, I would say immature. It’s not as sophisticated as what it is right now. So, that professor’s technology cannot directly print metal on plastic substrate. And all of the circuit boards are basically plastic substrate. And they started from printing copper on paper. It’s interesting and it’s can be a good seed, but copper printed paper cannot be used for industrial use.

Tim: Okay. So, just from the outside, I was watching you guys go from like the handheld markers for drawing circuits to a kind of an inkjet on printer and now on the circuit board. But these were different technologies.

Shinya: Honestly. Yes. Honestly, yeah. I mean, so we say like to investors normally, so it’s all connected, but scientifically, so these technologies are not directly connected, I would say.

Tim: Well, I guess there’s a lot of kind of know-how and experimentation that connect them.

Shinya: Sure. So, the first period is like not directly connected to what we are doing currently, but during the process, I found that many people, at least more than I expected, are interested in new technology of manufacturing circuit boards and real printed circuit boards can have a significant market. Honestly, before finding this company, I knew nothing about PCB industry, so during the first period that research do those things and…

Tim: Well, so, this is really interesting. So, I mean, you were coming as an industry outsider and you’re not coming with a deep technical knowledge of the technology. So, how did you develop the new technologies for each generation of progress?

Shinya: Well, honestly, I am the first author of the patent we are using currently and I’m kind of weird guy. I designed our first CPU when I was 17 years old.

Tim: Oh, wow.

Shinya: Drawing star diagram and designed our original CPU and build a formula car when I was at university. So, I can do research and those business opportunity investigation.

Tim: So, you had to spend a lot of time going mentally back and forth between the business needs and the…

Shinya: Yeah, sure. But even now, honestly.

Tim: Still?

Shinya: Still.

Tim: But it’s fun. Right?

Shinya: It is. I mean, honestly, I’m tech guy. I love technology. I love science. If I cannot do any kind of developmental research at this company, so probably I will lose 70% of my fund.

Tim: Oh, I know exactly what you mean. On your journey, you rebranded to Elephantech in 2017. So, why the rebranding and why elephants?

Shinya: The first only answer here is I had a slight trademark issue. And second is like, anyway, I want to rebrand our company because we are completely moving from those circuit marker to industrial circuit boards, which are so different. Then why Elephantech. So, it’s a globally recognizable original name. Elephantech and this logo is great. When I work in China, Thailand, India, and those Asian countries, I mean normally Japanese company name is kind of hard to remember.

Tim: Yeah. They’re not very unique.

Shinya: Yeah. And Elephant is really unique, right? So even in any of those Asian countries, they love Elephants, no one hates Elephant.

Tim: True. Only positive associations.

Shinya: Yeah. And from the beginning, our market is not in Japan. Most of that market in global, and I would say Asian countries. So, I mean, I wanted to come up with an idea, the company name that is either to be remembered by Asian country peoples.

Tim: Okay, that makes sense. So, Elephantech has raised around well over about $80 million so far, right?

Shinya: $80 million. Yes.

Tim: And you’ve raised a lot of it in debt financing.

Shinya: Yes. Debt financing.

Tim: So, this is something that I think a lot of — we’re seeing more and more of it in Japan, but I think a lot of western founders would love to raise debt rather than equity. So, how did that come about? How did you get banks to loan money to a startup?

Shinya: So, honestly, the biggest follow wind is the government policy. Most of the debt we use is kind of government supported debt. So, government is not directly debting the startups, but giving debt to startups. But I mean, they have some, I don’t know the word…

Tim: Loan guarantees.

Shinya: Yeah. Loan guarantee, for example, 50% loan guarantee to the bank or those startup acceleration policy is one follow wind, but it’s not a decisive factor. Another important factor is we use the money to specific use, especially capital expenditures. So, the biggest difference between the debt and equity is that is more strict for the use of the money. So, but for most startups, especially in software based startups, the use of money, it can vary and it’s hard to have a forecast. How do you use your money over like next three years? But in our case, we build a factory, so we need capital expenditures. So, that’s a clear use of the money. So, that’s one factor.

Tim: So, it’s moving more towards project finance, hard assets, land, things that banks are more comfortable dealing with. That makes total sense.

Shinya: Being comfortable is really important. And no one…

Tim: For banks especially.

Shinya: Yeah. Yeah. No one put money into the uncomfortable areas.

Tim: Let’s get back into the overall marketing and the overall market for this because I mean, I’m also deeply invested and deeply committed to like green transformation and decarbonization. It’s a big part of what I do at JERA Ventures. But it’s challenging. Most founders really struggle with bringing their products to market in this.

Shinya: We do.

Tim: Yeah. We’ve been doing it successfully, but in a market that I would not have predicted would be a ripe one for decarbonization because it’s big, printed circuit boards it’s a $90 billion global market. But it’s one that tends to be driven by very low margins and very tight operating constraints. As you mentioned before, there’s this pressure from the consumer facing companies like Apple to become carbon neutral, to be more eco-friendly. Is that the main driver or are there other factors that are driving your sales into this traditionally very low margin business?

Shinya: That’s great question. And there are few, let’s say discrepancies in this market, as you mentioned, circuit board manufacturing is normally very low margin, which means, so they don’t have a motivation or capability to transform their manufacturing technologies or they don’t do green transformation honestly. But circuit board manufacturer are the full manufacturer circuit boards so they need to do something. On the other hand, Apple, HP, Logitech or those global brand owners have a quite high motivation to decarbonization of circuit because circuit board is a high carbon, low price product.

Tim: Oh, I see. So, from their point of view, even if the price of the circuit board increases by 10%, it could significantly impact their carbon footprint without impacting their price much.

Shinya: Sure. As I mentioned, so 10% of Apple’s carbon footprint is circuit boards, but the cost wise, it’s like probably less than 1%. So, circuit board manufacturer is a low margin, but in cost efficiency, carbon per cost of circuit boards is very high. So set makers, brand owners have high motivation.

Tim: That makes a lot of sense. But the other thing is the subtractive process is an incredibly complex process. There are multiple steps. The additive process is really quite simple.

Shinya: Very simple.

Tim: Theoretically it should be cost competitive as it gets refined. Is that something you see on the horizon or is there something that intrinsically makes it more expensive than the subtractive process?

Shinya: Well, there’s nothing which is intrinsically more expensive than subtractive method. There’s simply two things. There’s one’s volume. So, one is accumulation of small improvement. Subtractive process has probably almost like a hundred years of history. So, all the small improvements are done, which is incredibly optimized. And the volume of the material used for subtractive method is incredibly cheap. One quick example here is like currently the subtract method uses copper laminated plastic film, but copper laminated plastic film and plastic film itself, the price of them are almost equivalent. Almost same. That’s insane, right?

Tim: Why?

Shinya: Because plastic film manufacturers do a kind of integrative line from plastic material, copper material to copper laminated plastic film. So, it’s a kind of integrated line. So, they make it for million, tons of tons of amount. So, the price is incredibly cheap as cheap as plastic film itself. That’s insane.

Tim: I’m surprised because copper is not cheap.

Shinya: Not cheap, not cheap. Especially recently.

Tim: So, you set up your own plant, your first plant Nagoya, couple of years ago, 2020, right? Is the plant set up as, I mean your mass producing things, but is it set up as kind of a first of its kind? Will you be building more in Japan? Will you be building more in like Taiwan and other manufacturing centers? What’s your plan for building out production?

Shinya: Great question too, our next business model, we don’t really want to be the world’s biggest PCB manufacturer. We don’t, we rather want to be a technology provider. We sell that printers and ink so that other PCB manufacturer can manufacture PCB with our technology. So, our Nagoya factory is a first and hopefully the last factory owned by us. Next factory it’s going to be probably in Taiwan or Vietnam I guess. And we are already talking with several PCB manufacturers and we are going to sell those printers in ink or we are going to do, make a kind of joint factory with existing manufacturers.

Tim: So, is this technology something that an existing factory and existing line can be retrofitted or is it something you pretty much have to build from scratch as Elephantech technology?

Shinya: So, you can retrofit it.

Tim: And the joint projects you’re discussing, are they retrofits?

Shinya: Yeah, mainly in retrofitting. Another reason why starting from manufacturing PCB by ourselves is that industrial structure I mentioned before. PCB manufacturing itself is fairly low margin. It’s not profitable business, honestly, and it’s so tough. It’s solved my…

Tim: Sure. And you’re in supply chain of some of the toughest, tightest managed supply chains on the planet. Constant pressure to decrease price.

Shinya: Sure. It’s incredibly hard. But the reason why not starting from selling printers to PCB manufacturers, but starting from building PCB ourselves, it’s like we first need to talk with those brand owners, Apple, HP and those kind of people. Because if we start from selling printers to PCB manufacturers, as I mentioned. PCB manufacturers are really low margin and lower motivation, they have a lot of facilities that is already invested. So, here we come and the existing technologies are bad, so let’s change it to a new technology. No, right.

Tim: Well, I find this is true in a lot of hard industry. When you’re looking at how change happens in shipping, logistics in general, anything that is not directly consumer facing or not — a lot of manufacturing tech tends to face the same challenge. And in all cases, yeah, the answer seems to be you have to do enough of it. You have to get the original clients on board yourself, get it past proof of concept phase. And then you can move into scaling and licensing.

Shinya: This industry is in that sense, great for startups. Because once for example, Apple or those large manufacturers decides to use our technology, all the PCB manufacturer need for.

Tim: Right.  Well, let’s talk a bit about this because I think that foreign startups, well Japanese startups too, have this image of Japanese enterprise as being difficult to work with and slow to work with. And yeah, they can be.

Shinya: They can be.

Tim: They can be.

Tim: But Elephantech, you guys have had a really successful series of partnerships. I mean, you’ve worked with like Mitsui and Mitsubishi, you had Project Sumitomo. How did you kick off those collaborations? How did you manage to get those companies willing to work with you at sometimes a pretty early stage in your development?

Shinya: Yeah. So simply, this business is not understandable for general public, honestly, but its long awaited solution in specific industry. For the companies or people who worked in this industry they understand the value of this innovation very quickly. So, this is like nuclear fusion, like innovation in circuit board manufacturing. Everyone knows this idea. So, this idea is definitely not new. So, this idea has been existing for like 50 years, I’d say more than 50 years. So, people are saying like additive is better, additive is better, but no one could mass produce it. So finally, so this is the ultimate solution in this PCB manufacturing that you are going to commercialize it or buy it.

Tim: Okay. So, not that this was technology they were familiar with, but this was an idea and an approach they were familiar with and they believed in the approach from the beginning. Do you have any advice for other founders who want to approach large enterprise for partnerships?

Shinya: So, one advice that I give all the time is never give up. I mean, so for example, with an enterprise, we tried like five, six times with different windows and with a different counterpart. And most of the time they know we don’t need, we don’t need it, we don’t need it, we don’t need it. Then finally we one counterpart oh, this is the idea what you were looking for.

Tim: So, did that tend to be like a particular department in the organization or did it just depend on finding that right person?

Shinya: Person, yeah.

Tim: And they might’ve had a different function in every company, really. So, just keep plugging at it. But I guess also make sure that you have a solution they really need that they understand.

Shinya: Absolutely. Absolutely. So, this is my opinion here is like startups don’t necessarily build a solution that is agreed by a hundred percent of people. So, probably 90% or 80% of people cannot understand or can refuse. But you know, 10% or 20% of people enthusiastically support.

Tim: Well, I think that’s a good point. I mean, despite all of the enthusiasm that people have about startups and the interest people have about startups, yeah, 90% of the people will never understand the potential of any given opportunity. No, that’s important to keep in mind. Let’s talk a bit more about your international expansion. So, you’ve just closed very recently, a 3 billion yen or a $20 million funding round.  And that was just like last week, right?

Shinya: Ah, last week.

Tim: Congratulations.

Shinya: Thank you.

Tim: That’s amazing. And part of that is to drive this international expansion. So, do you see the bulk of that international effort being placed in the supply side helping PC board manufacturers get up to speed on the technology retrofitting factories or on the demand side educating the Apples and Samsung’s and HPs of the world? How are you going to be executing this international expansion?

Shinya: Well, our current bottleneck is actually our production capability, honestly. So, we have significant amount of international client already and are talking with almost all the major electronics manufacturers. So, we still have a lot of room for improvement in our supply side because current yield or yield productivity or printer stability, and we still have those issues. So, we need to improve it.

Tim: So, a lot of it’s going into expanding and further refining the production in your current Nagoya factory?

Shinya: Yes.

Tim: Because you mentioned that’s the last factory you hope to build.

Shinya: Hopefully. Yeah.

Tim: How much capacity can you handle at that factory before you’ll need to bring in the traditional manufacturers from Taiwan and from other overseas locations?

Shinya: Actually we have significant amount of production capability. For example, we can supply to tens of millions of keyboards, circuit boards annually. So I mean, it’s significant but of course, very small compared with the total market of PCB. But it’s okay for supplying to those laptop and those products, but not actually for smartphone. Smartphone has a digit bigger, normally PC is like several million to 10 million, 20 million pieces per year. But Apple manufacturers, I guess, a few hundreds of millions of smartphones per year. So, it’s advantage bigger. So, we cannot supply to iPhone unfortunately from Nagoya factory, but for other applications, including vehicle, pc peripherals and those kind of, and the cameras, it’s okay, we can supply that.

Tim: So, what do you see as the main bottleneck to hitting a truly global scale where you can get into smartphones and is it the technology refining the processes? Is it getting the production partnerships? Is it getting Apple to put even more pressure on their suppliers? What’s the big key to that scaling?

Shinya: Yeah, great question. So, technology is definitely one of the biggest bottleneck, honestly, technology wise, there are two things we need to improve. So, one is productivity for mass production, and it’s not performance, it’s variety of types of PCBs. So, there are a lot of type of PCBs. So, we are manufacturing the simplest one. We manufacture single sided flexible circuit, but there two layers. So, double layer circuit boards or multi-layered circuit boards. And while we are printing a flexible substrate currently, so they are rigid and there are multiple types of PCPs technically speaking so our technology can be applicable for any kind of circuit boards, but we are starting from the simplest one. So, we need to increase our lineup of the technology.

Tim: So, it’s always a risk to enter a market with a more expensive product, especially in a supply chain. So, how much of your expansion plans depends on increasing government and consumer pressure for these companies to hit their net zero targets versus your ability to drop your own prices as your production gets more efficient?

Shinya: The former. The former is a lot more important. So as I mentioned, so PCB is high carbon, low price product, so it can be counterintuitive. But PCB market is really a cost competitive market, but cost is not normally a decisive factor, a key buying factor, especially from startup, honestly, decarbonization it’s unique value added point is really, really important. And at the moment, not only PB manufacturer, but also those brand owners are not really serious. So, not really eager to decarbonize the product really seriously.

Tim: Right. They’re sort of doing it because they’re being forced to and public opinion can change on those type of things.

Shinya: My point here is like a common footprint reduction is just one of the value added point of the advantage. So, what we want in supply is not the product that is green but expensive. What we want to produce is like, this is better for environment than simultaneously cost effective. So, that’s our goal. But even though if we could reduce the cost by like 20, 30% compared with the existing one, without those environmental value addition, large companies probably don’t buy our product.

Tim: See, I think this is the core challenge I think that a lot of green transformation startups, environmentally friendly startups are facing. Do you have any advice you want to give to founders of startups that are trying to solve environmental problems to avoid some of the problems that cause so many of these startups to fail?

Shinya: Actually, yes. So, great question. And simultaneously, that’s a question I am asking to myself every day, honestly. But the first point here is like environmental motivation is not consistent. I mean, it’s not true that European companies are serious on decarbonization, that is, in my opinion, not true. So, it really depends on the company, right? So, it’s not region wise or not industry wise. So, you need to find a partner that focusing on decarbonization. So, it can be like a new CEOs initiative or new supply chain managers initiative, or we need to find opportunity.

Tim: Well, I think that goes back to what you were saying about the enterprise startup collaborations.

Shinya: Yeah. They never give up.

Tim: What role do you think governments have to play in this? So, everything from like the EU new carbon import tax or California now is requiring large companies to disclose their supply chain. their scope three emissions. What role do you think government has to play in aiding this transformation?

Shinya: Great question. And I am proposing all the time to the government, Japanese government, I’m kind of closely working with Japanese government. And what enterprise can do best for decarbonization is actually creating demand. So, buying from startup, even if they don’t actually buy from startups, so at least they need to show demand. So, we need a solution that reduces carbon footprint of this part of our business or those kind of demand declaration is really necessary. And that plays an incredibly important role. What I’m suggesting to Japanese government or several institutions is like, it’s hard. It’s so here is like democratic nation. So, government cannot force enterprises to buy specific thing. So, what I always propose is disclosure. So, at least enterprises so needs to disclose their motivation or their needs for decarbonization. They don’t necessarily need to buy exact product, but they at least need to disclose what is necessary, what they need for their net zero target.

Tim: That’s a good step. It makes the consumer pressure easier. It makes it harder to…

Shinya: That makes VC invest in those startups better easier.

Tim: And do you think that is enough, or do you think that needs to be followed up with legislation, which is more common in Europe, I think.

Shinya: Yeah, yeah. Need to be followed by legislation. But in case of Japanese market, Japanese companies, Japanese companies are like, I don’t know, I’m not really sure this is cultural thing, but disclosure has normally significant impact on Japanese country. It’s like culture of shame or…

Tim: Yeah. Yeah. It really has a powerful impact here, right?

Shinya: That’s true. That is true.

Tim: Well, I think it is just Japan does have this pattern where they’ll spend a couple of years where they’ll get every company and every CEO talking about their commitment and like, okay, now we have to disclose and yeah, it is this kind of shaming culture. It’s like, well, you said you were going to be doing this.

Shinya: Yeah. Disclose the exact plan, exact needs. That makes sense, right?

Tim: Yeah, it does. It really does. And it works here it across the board, a lot of industries.

Shinya: Yeah, definitely. Yeah.

Tim: Listen, Shinya, before I let you go, I want to ask you what I call my magic wand question. And that is, if I gave you a magic wand and I told you that you could change one thing about Japan, anything at all, the education system, the way people think about risk, the willingness of enterprise companies to try new technologies, anything at all to make it better for startups and innovation in Japan, what would you change?

Shinya: I think I would make Elon Musk reborn in Japan. The reason why here is like the biggest thing that is necessary, but not existing in Japan, a Japanese startup ecosystem is a huge successful case.

Tim: I mean, we do have very successful entrepreneurs in Japan from Mikitani to Son-san or in kind of Elon Muskie type maybe Hori-mon.

Shinya: Yeah. Hori-mon was successful?

Tim: Well, he was, yeah.

Shinya: But when I talk with college students at the University of Tokyo, so they cannot imagine their successful role. For them Son-san is too far or it’s hard to imagine that.

Tim: So, like role models.

Shinya: Role models they are changing the world, but they are not really changing the world as Elon Musk. Or as Moderna. So, it can be moderna. So, moderna is innovation that could have happened in Japan.

Tim: Yeah.  It didn’t, but could have, but didn’t. But say, so it can be a magic wand can be reborn, make the Moderna reborn in Japan.

Shinya: But even in a single successful case that really changes the world that is competitive in the world. I mean, not in domestic market. So, Mikitani is okay. I really respect Mikitani but Makitani is more focusing on domestic market.

Tim: Yeah, right. Well, I think we have to go back to like Morita son and like Sony for a real world changing Japanese entrepreneur.

Shinya: Yeah. But it’s history, right?

Tim: That’s 80 years ago. We need someone newer. So, you need to refresh that a bit.

Shinya: Yeah, yeah. Students, Morita san is this, but Morita san, right?  Sony or Toyota, it’s old company, right?

Tim: It’s a hundred years ago. We need to refresh that. Why isn’t that happening? Why aren’t we seeing more of these successes? Because, I mean, you can’t say its culture because in history there are very successful world changing Japanese entrepreneurs. So, why do you think we’re not seeing it right now?

Shinya: Well, one opinion that is commonly used is like Japan, good or bad has a big market. When Sony happened, the Toyota had it. Japan is definitely not as big as now currently. It’s completely efficient and effective to focus on domestic market. Then Japanese market is actually fascinating, right? So, it’s protected by language barrier and it has significant market.

Tim: Yeah. You can make a lot of money just focusing in Japan. That’s true. Do you see that attitude changing maybe among the younger, the college age students?

Shinya: Well, it changed like this three, four years ago, college students at the University of Tokyo are really looking for opportunities to be Elon Musk or world changing entrepreneurs. But recently Japanese economy is going well, right? They’re going, okay. So, they started to lean towards those domestic market business.

Tim: Tough times, make great companies.

Shinya: Yeah, absolutely. And another example, role model matters is like at the moment, the University of Tokyo has a lot of small successful role models. The entrepreneurs that started a small company and had a kind of small exit and get some millions of US dollars, which is significant, of course significant to anyone, right?

Tim: That’s real money.

Shinya: That’s a lot of money, right? So, from five, six years ago, people started to think like to be entrepreneurs, but those small exit happens a lot earlier than changing the world. So, those small exit role models exist more.

Tim: Okay. So yeah, I see what you mean. So, they’ve got role models for being entrepreneurs in general, but they need role models to dream big.

Shinya: Yes, yes. That’s why I started this business. I wanted to be the one.

Tim: Well, you seem to be well on your way to doing it.

Shinya: Yes. So, this technology is really, really only fascinating. So, that’s why I was doing this for 10 years, so, so this is a technology that could potentially change the world.

Tim: Awesome. Shinya, thank you so much for sitting down.

Shinya: Thank You. Thank you so much.


And we’re back.

One of the things I love the most about the Elephantech startup story is that it is one that involves old fashioned engineering pivots.

You see, when founders today don’t find product market fit, they’re encouraged to pivot, to find a new problem that their product might be able to solve. And that’s usually good advice. Elephantech, however, went old school, they kept their focus on the problem they wanted to solve and then continued to change and reinvent the technology needed to solve it.

It’s risky for a startup, which is why you don’t see it that often, and it’s kind of refreshing.

Also, Elephantech use of debt financing is interesting, not only in how this particular startup took advantage of it, but in what it tells us about the future of the Japanese startup ecosystem as a whole.

Now, most sensible founders would prefer to issue debt rather than equity. But most sensible creditors won’t make such risky loans. In Japan, however, some of the bank led CVCs have begun offering combined equity debt financing deals. It’s less diluted for the founders and it gets some new loans onto the bank’s balance sheet.

But even with government subsidies, they need to be good loans, secured loans. And that means these CVCs are looking to invest in startups with hard assets. So, while the US venture industry is strongly biased against asset heavy capital intensive startups, Japan might just be tailoring the ecosystem to support them while the US clearly dominates in software startups.

This funding pressure might result in strong tailwinds that allow innovative hardware and engineering focused startups to flourish in Japan in ways they cannot in the rest of the world.

And finally, my conversation with Shinya made me rethink my own position on the importance of role models. I’ve always said that the most useful and inspirational role models for students are founders that are just a little bit ahead of where the students are now. These are people that the students can better identify with, people more like they are.

But as Shinya you pointed out, while that is true, it’s simply not enough. Japan also needs some wildly successful and globally successful founders to show the next generation what’s really possible, how to dream big, shoot for the stars, and just maybe change the world for the better.



If you want to talk more about making money while doing good, Shinya and I would love to hear from you. So come by and let’s talk about it. And hey, if you enjoy disrupting Japan, share a link online or just tell people about it. Disrupting Japan is free forever and letting people know about it is the absolute best way you can support the podcast.

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.