A lot of great ideas seem crazy when you first hear about them.

Today Ryotaro Ako, founder of Atopiyo, explains not only why this is a great idea that is deeply valued by his users, but he also frankly talked about the difficulties in bringing it to market.

We talk about the challenges of forming a long-term, core team and of developing a steady cash flow while trying to focus on a social good, and the risks involved in monetizing a community.

Ryotaro also explains why extensive press coverage and shelves of startup awards don’t make developing a sustainable business model any easier.

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

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Show Notes

  • Why share photos of skin conditions?
  • How to find a technical co-founder, and what to do if you can’t
  • The two challenges all MedTech startups face
  • The danger of long-term plans without short-term action
  • How to monetize a community, and why it’s risky
  • Possible competitors
  • The myth of Japanese conservatism

Links from the Founder

Transcript

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

I’m Tim Romero and thanks for joining me.

Today’s conversation with Ryotaro Ako, founder of Atopiyo, is going to be a little bit different than usual. 

I first met Ryotaro several years ago at a Disrupting Japan live event, when he had just launched Atopiyo, an online community in which people with atopy and related skin conditions can support each other and exchange information about treatments and progress. Since its launch, Atopiyo has gone on to build an engaged and growing user base, attract extensive and positive press attention, and win a lot of startup awards from press, government, and industry. 

This is the kind of startup I really want to succeed; the kind of startup I think everyone really wants to succeed, actually. They’re using startup techniques and technology to solve problems and actually make the world a little bit better. 

At least in theory. 

You see, Ryotaro and Atopiyo have a bit of a problem, and it’s a problem that almost all social entrepreneurs run into, but very few managed to solve. If in this interview, I sound like I’m beating up on my guest a bit (by polite Japanese standards anyway) it’s coming from a place of desperately wanting to see him succeed. 

Everyone who has an idea for a social startup and a passion to change the world can learn a lot from Atopiyo’s story and this discussion.

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

Interview

Tim: So I’m sitting here with Ryotaro Ako of Atopiyo, which helps people with atopy understand the disease and connect with each other, so thanks for sitting down with me.

Ryotaro: Thank you very much, Tim. I’m very glad to talk with you.

Tim: And we’re glad to have you. I gave a really brief description of Atopiyo but I think you can explain it much better than I can. So what exactly does Atopiyo do? How does it work?

Ryotaro: Atopiyo is Japan’s first visual SNS for atopic dermatitis. It’s like Instagram specializing in atopic dermatitis.

Tim: Okay, I mean, at first reaction, sharing pictures of atopy and skin conditions does not sound that appealing.

Ryotaro: Yeah, yeah, yeah.

Tim: So I mean, tell me about your users. Who uses this? Why do they find it valuable?

Ryotaro: Yes, yes, our images can be this. So I think it is not so photogenic or happy images but patients want to know the other patients, their skin disease, how are getting better or how getting worse because of these drugs or other drugs, and they want to know their process of the skin disease. So it’s useful for the patients, and what’s more, they want to choose their images into their private mode. So if you set it to the private mode, this image is only for users.

Tim: Okay, so the main benefit the users get is they can compare their treatment and their progress with other people that are having similar treatments and things like that. I can certainly see why that would be valuable, and I guess we got to point out emphatically this is not for medical diagnostics or treatment, right? It’s just a social community.

Ryotaro: Yes, it’s not a medical treatment or a diagnosis, yes.

Tim: And we’ll dive into that a bit later when we talk about the business model.

Ryotaro: Okay, yeah.

Tim: But before that, let’s talk a bit about you.

Ryotaro: Okay, yes.

Tim: Yeah, before you started this, I mean, you had atopy yourself and you’d volunteered at a number of patient support groups, right?

Ryotaro: Yes. I’m a recovered patient of atopic dermatitis. I recovered, but there are other patients are suffering every day, so I interviewed and I researched their troubles and I decided to develop this app.

Tim: When you decided to do this, you didn’t have a technical co-founder?

Ryotaro: Yeah, yeah. At first, I tried to find programmers for three months, yes, but I gave up because —

Tim: It’s really hard. 

Ryotaro: Yeah, I gave up four or five years ago. 

Tim: I understand. I get contacted by probably, I don’t know, four or five people every month, who have this great ideas and say, “Well, I’m looking for a technical co-founder.” It’s like, man, that’s hard. 

Ryotaro: Yeah, very hard for me. And so, yes, so I participated in a lot of events such as Disrupting Japan Site Anniversary or —

Tim: Thank you.

Ryotaro: Yeah, yeah, yeah, a lot of events I participated, but it’s difficult.

Tim: So you finally took matters into your own hands?

Ryotaro: Yes, I entered the programming school, an online programming school in Japan. It’s called Tech Academy. I studied there for five months.

Tim: And that was enough to launch back in 2018, right?

Ryotaro: Yes, 2018 is the first launch.

Tim: I think this is a story a lot of founders are trying to figure out, you know, they’re one person with an idea of how to make something that’s worthwhile, but you managed to learn enough to launch the app in five months.

Ryotaro: Actually, programming school is five months and after that, I developed myself two months, maybe seven months and more.

Tim: But that’s great. I mean, I think a lot of people are interested in just how do you go from one person with an idea on how to help people build the app, and how do you turn that into a business. 

Ryotaro: Yes, yes, yes. 

Tim: Which is what we want to talk about next. And actually, you’ve just established a godo gaisha recently, right?

Ryotaro: Yeah, last week I founded Atopiyo LLC. 

Tim: And I’m curious, why a GK instead of a KK? 

Ryotaro: Because GK is very easy to found and really easy to manage so I chose it.

Tim: And I mean, a GK is very easy to convert into a KK later on if you decide to. Okay, so let’s talk about the business model. So what’s the plan? How is Atopiyo going to make money?

Ryotaro: Atopiyo is largest database for atopic dermatitis patients. So now, many pharmaceutical company develop new medicine. Atopiyo provides information about their patients to the pharmaceutical company without their personal information.

Tim: At the moment it’s just photographs, are you planning on collecting more deeper and detailed information about the users?

Ryotaro: Yes, yes. Now, we had profiles like sex or age or atopic period. In the future, we would like to have more deeper information. 

Tim: Looking back over the past couple of years, you guys won actually a lot of awards from both universities, government programs, incubators, pitch contests, the string of awards for an interesting idea. And I’m curious did those awards help you land the business connections? Did those awards help you get the business or was that almost a separate —

Ryotaro: These awards helped me to spread this Atopiyo app, because Atopiyo app is just a volunteer for me so we don’t have any budget. So I would like to spread it to atopic patients in Japan so this will help me to efficient spreading in Japan. It’s been shown in more than 100 media. 

Tim: So the pitch contest was mostly about more of a marketing strategy than a business model development. 

Ryotaro: Yes.

Tim: But I mean, you mentioned you have been working with pharma companies and medical institutions for some time now. So getting them data on atopy patients, it’s one of those things that sounds worthwhile as a first step, but let’s dig into that a little more. So, you know, the pharmaceutical companies, they already have lots and lots of pictures of atopy and different types of skin diseases. So what are they getting here that’s really unique? What is the value they find in this community?

Ryotaro: A pharmaceutical company have a data from doctors or a hospital but they don’t have the data from patients. Direct patients’ data, that’s kind of the data called the “real world data”. They are thinking — they are about data and they want to know their suffering, and they want to use it for the new medicine. Yes, that is a new trend for the company.

Tim: So for example, the pharmaceutical companies could follow the progress of individuals that are going through a certain kind of treatment or that are taking a certain medication?

Ryotaro: A pharmaceutical company, they want to find female situation or a male situation, and children situation or some situation.

Tim: One of the challenges in med tech across the board, it kicks in from small one person startups to, you know, very well-funded. Medical technology and medical information is really highly regulated, which is good for the most part. Do you run into any problems with Japan’s law on personal privacy and on storing medical information with this app?

Ryotaro: Yes, right now, we don’t encourage such medical information or medical treatment but in the future, we want to collaborate with hospital or pharmaceutical company. So now, we think about such a legal device and treatment. Yes, we are thinking now.

Tim: It seems to me that every medical startup runs into one of two hurdles or often both. One is either in the handling of patient data, which is, you know, there’s a lot of laws and protections around, and the other is getting certified as a medical device. If you’re doing things that are related to diagnostics or to treatment, there’s a whole lot of complex rules you need to follow. These are big, big steps so how are you getting ready to tackle those?

Ryotaro: I don’t have any medical background so I’d like to collaborate with doctors, and pharmacists, and other AI engineer or — yes, yes, we need help.

Tim: It sounds to me like you’re sort of in the same situation you were four years ago but at a little bit of a higher level, right? 

Ryotaro: Yeah.

Tim: You’re still in the situation where you need outside experts for programming and medical advice.

Ryotaro: Yes, it’s very hard. 

Tim: Have you been involved with Japan’s regulatory sandbox at all?

Ryotaro: Not yet.

Tim: That seems like a very good program that allows, you know, certain regulations to be relaxed for experimental reasons.

Ryotaro: Yeah, yeah, yeah, maybe.

Tim: Well, let me ask you, I mean, building this company out, looking forward, knowing that you might need to bring people on to meet the requirements for data privacy protection or to develop something that’s certifiable as a medical device of some level. So these are skills that unlike before, when you were going back and learning programming on your own, this is probably something you can’t learn to do by yourself.

Ryotaro: I think it’s very hard to —

Tim: It’s a different level, right? 

Ryotaro: Yeah, I think it’s a different level so I have experts.

Tim: So how do you move to that level? Is there enough revenue in providing non-patient, you know, this anonymized information to pharmaceutical companies and to medical institutions? Is that enough revenue to get you to the next stage?

Ryotaro: No, it is only anonymous data. It’s not included personal information, but if we connect with personal information, it’s very valuable more than now. So we need some lawyers and we need pharmacist, yes.

Tim: So that’s the big question. So where is that funding coming from? Is it coming from outside investors? Is it coming from revenues from contracts with the pharma companies?

Ryotaro: See, I just think revenue from pharmaceutical company and I find other members from other healthcare or medical community. It’s my job, find our other members.

Tim: So these experts you need, are they going to be full-time staff? Are they going to be volunteers?

Ryotaro: First, part-time staff, because expert is very expensive so part-time staff is better.

Tim: What is the timing of that? When are you starting on this next step?

Ryotaro: Yes, yes, okay. Maybe next year or two years. So this year, I want to focus on the other PR, because I want to update a lot of functions.

Tim: So I’ve been working with so many social entrepreneurs in Japan, and there’s so many amazing ideas that can really make the world better and hopefully generate revenues. But I think what you’re talking about is like one of the biggest challenges. Volunteers are great, they’re awesome people but, you know, they’re not enough, right? We can’t count on it. They’ve got their own lives and their own problems and their commitments. So the challenge of all these social startups and the same one you seem to be staring at right now is how to make that transition, how to generate the revenue so that you can start paying people.

Ryotaro: I think most important thing is users and the second one is collaborate with a pharmaceutical company. And now, Atopiyo is one of their biggest app for patients. So this community is one of the biggest, so, yeah.

Tim: I get it. It’s a really unique and special community. There’s nothing quite like it. It clearly provides a lot of value and support to the people who are part of it. The question is how to transition that into a business in such a way that it still provides all of that but somehow generates revenue, because cash flow is like blood, right? You don’t need a lot of it but it has to circulate. You are an accountant. You know this stuff. 

Ryotaro: Yeah, yeah, yeah. I know, I know. Yeah, yes, yes. So yeah, I’m thinking about collaborating with pharmaceutical companies. Actually, there are two or three steps. First one is the introduction, investigators like a clinical trial. And the second one is providing our patient data without personal information. So now we are thinking about the third option.

Tim: What’s the target for that? Is that going to happen later this year? 

Ryotaro: This year, this year. 

Tim: Yeah, you know, that is good. One thing I’ve noticed that is different between startup culture in Japan and the US, Japanese large enterprises and institutions seem to be willing to make more long-term partnerships with startups, where in the US things tend to be more transactional.

Ryotaro: Yeah, yeah, yeah.

Tim: Do you plan on monetizing in the other direction? Because usually, one of the main strategies of monetizing a community of any kind is advertising.

Ryotaro: Yeah, I know, I know.

Tim: Is that something you’re exploring?

Ryotaro: No, because there are a lot of claim or there are a lot of medicine, and maybe some claim is effective, maybe the other one is not effective. So there are a lot of medicine so a lot of patients are suffering because these advertisement. 

Tim: Actually, I think that’s really smart. I mean, you have to choose one strategy or the other, either go with the hospitals and the doctors or you go with the advertisers.

Ryotaro: Yeah, yeah, yeah. So I choose only pharmaceutical company and doctors. 

Tim: Yeah, I think that’s smart long term. Because advertisers, you’d suddenly attract a lot of, I don’t know, supplements and kind of semi scammies, you know. 

Ryotaro: Yeah, yes, I don’t like it.

Tim: So advertising is like the easiest way to monetize a community, and I’ve seen that happen a lot, it’ll often destroy the community that they’re advertising to. So I’m glad to hear you’re doing it the hard way.

Ryotaro: Yes, yes, I choose hard way.

Tim: I think that will do the most good in the long run, even if it’s hard.

Ryotaro: Oh, yeah, yeah, long term, yes. 

Tim: So, well, let’s talk about the future here. So I noticed you were selected for JETRO Silicon Valley Program?

Ryotaro: Yeah. 

Tim: Tell me a bit about that. What do you guys expect to get out of that program?

Ryotaro: In the US, 27 million people are suffering of this disease, so I want to spread this Atopiyo app to the US patients. That is my, yes, objective. 

Tim: Actually, let me let me push back on that. I think there’s two risks here. Right now, you definitely have the best community of atopy sufferers. They’re supportive, it’s the largest. But if someone decided to do the other business model, say, we’re going to be completely advertising-supported, I mean, as a business, that might be difficult to compete with, even if you’re doing the right thing long term.

Ryotaro: I think advertising business price is cheap, I think. And the pharmaceutical company have a lot of money so they have a lot of budget, yeah.

Tim: They have a lot of money but that does not mean they’re going to give it to you.

Ryotaro: Yeah, yeah, maybe, maybe.

Tim: So what does Atopiyo look like in 10 years? What is this going to evolve into?

Ryotaro: I want this Atopiyo app spread out all over the world. That is my final objective, yes. I have to focus on this SNS social networking, so we collaborate with other hospital or pharmaceutical company. We just focus on the SNS.

Tim: And do you think that model will work? So for example, in Japan, I think Japanese startups, one thing that they’re very lucky about is they do have institutions and enterprises that are willing to work and develop long term relationships, that doesn’t really exist in the US or in most of Europe. So this model might work in Japan. Do you think it will work in the US and outside of Japan as well, this long term, hard way of doing things?

Ryotaro: Actually, I don’t know, because I just — I say, I don’t know.

Tim: Well, listen, Ryotaro, before we wrap up, 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, how people think about risk, how the medical industry is regulated, anything at all, to make it better for startups and innovation in Japan, what would you change?

Ryotaro: People’s mind.

Tim: About what?

Ryotaro: Japanese people are conservative. They want to stay. They want to progress step-by-step, very conservative. They don’t challenge another thing or new things.

Tim: One of the biggest differences, so when I very first came to Japan, it was in the late ’80s. It was still bubbly.

Ryotaro: Yeah, yeah, bubbly. It’s a nice time.

Tim: Yeah, it was a fun time to be in Japan, it really was. 

Ryotaro: Yeah, it’s a nice era. Yeah, very good <overlap>. 

Tim: But at that time, people were also very conservative in that, you know, “this is the way we do things, it’s the right way, we don’t want to change”, but people aren’t conservative in that way anymore. I think people understand that we need to change. These are things we need to improve on. So why do you think it’s difficult if everyone sort of agrees that we need to improve and we need to change? Why is it? What makes it hard to change?

Ryotaro: Yeah, Japanese people imitate other people. Japanese people don’t go out by themselves or invent new things by themselves. They imitate the other ones, yes. 

Tim: Yeah, I think there’s definitely some truth to that. But I think one of the interesting things we’ve seen in how startups have developed in Japan, it is related to that imitation in that 15 years ago or even 10 years ago, I think Japan was very much looking at Silicon Valley and the rest of the world saying, “What are they doing? Let’s do that.” like you were saying, “imitate that”. But I think now it seems to be a bit different. I think there’s a lot of Japanese companies coming up with their own unique ideas and a lot more desire to change things in Japan. 

Ryotaro: Yeah, yeah, yeah, I also think so. It’s a transition time for us, yes, including me. We are changing now.

Tim: But just too slowly.

Ryotaro: Yeah, just too slowly. 

Tim: Okay. Well, you know, at least we’re going in the right direction.

Ryotaro: Yeah, right direction, maybe.

Tim: Well, listen, Ryotaro, thank you so much for sitting down with me. I really appreciate it.

Ryotaro: I’m very happy talking with you.

Outtro

And we’re back. 

Regardless of the eventual outcome, I really respect Ryotaro’s choice not to monetize via advertising but it’s a risky choice, at least until he gets a solid revenue model in place. 

It’s often said that all online platforms eventually become ad platforms, and most of them certainly do. This is true not only for community spaces but for businesses like Amazon, which is expected to sell over $25 billion in ads this year, and where ad sales are one of their fastest-growing lines of business. 

While running ads is by far the easiest way to monetize a community, what founders need to realize, both social startups and regular startups, is that advertising risks fundamentally changing the nature of a community. 

You see, the fundamental transaction when selling ads is that you’re exchanging the trust that your users have in you for your advertiser’s money. You’re selling trust. And that’s not always bad but you need to make those choices carefully. 

I mean, when I was doing Disrupting Japan full-time, I had a group of amazing sponsors who genuinely supported the show. I only had one who ever even suggested influencing the content, and he backed down after some polite pushback but the pressure was still there. These people were my customers. I’d made promises, they had believed in me and I wanted to do right by them. 

It’s always a hard balance to strike, and most founders will not be lucky enough to have such understanding sponsors. So I think it’s awesome that Ryotaro recognizes that and wants to do things the hard way. 

I’m rooting for Ryotaro and for Atopiyo. I think a lot of people are. And with Japanese enterprises less transactional and more willing to enter into long-term relationships with startups, Atopiyo might just nail down a reliable business model. But the clock is ticking. Hopefully, we’ll be hearing big things about Atopiyo very soon. 

If you want to talk more about community building or monetization, Ryotaro and I would love to hear from you, so come by DisruptingJapan.com/show178, and let’s talk about it. If you leave a comment, I guarantee Ryotaro or I or maybe both will respond. And hey, 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 is my labor of love and it’s free forever. People hear about the podcast because listeners like you enjoy it and they tell their friends about it. 

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

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