How Japanese Startups are Breaking into Silicon Valley – Ramen Hero

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Transcript from Japan

Disrupting Japan, episode 69.

Welcome to Disrupting Japan, straight talk from the Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me.

More and more, Japanese startup founders are looking at, or even moving to Silicon Valley. It’s easy to see the appeal. San Francisco is home to the largest and most competitive startup ecosystem in the world. In fact, there’s a small Japanese startup community in San Francisco, with Japanese startups, mentors, and investors all supporting each other and trying to make it work.

Of course, the founders that come from Japan—well, it’s a mixed group. Some successful companies view San Francisco as their logical first step towards global expansion; some are new founders that have an idea they feel is more suited to the American market than the Japanese market; and some, well, some are kind of startup tourists, visiting the offices of famous startups and going through the motions, as if they were in some sort of startup role playing game.

On my last trip to San Francisco, I had a chance to sit down and talk with Keisuke Kajitani, co-founder of Ramen Hero. He and his co-founder moved to San Francisco from Japan because they thought the US would be a better market for their product, oddly, because ramen is already too popular in Japan. Now, Ramen Hero sells home delivery ramen meal kits and it’s a business that makes much more sense to launch in the US than it does in Japan. But, you know, Keisuke explains all that much better than I can.

So let’s hear from our sponsor and get right to the interview.

Tim: I’m sitting here with Keisuke Kajitani of Ramen Hero and we’re sitting here in beautiful San Francisco. So thanks for sitting down with us.

Keisuke: Thanks for having me.

Tim: I’ve got to say, San Francisco is not so beautiful today.

Keisuke: Yeah, it’s raining hard.

Tim: I don’t think I’ve ever seen this much rain in San Francisco.

Keisuke: Yeah, it’s unfortunate.

Tim: But we’re inside and dry, so that’s good. Listen, to get things started, why don’t you tell me a bit about Ramen Hero?

Keisuke: Sure. So Ramen Hero is a meal kit service specifically focused on delivering authentic ramen to your house. So what we deliver inside of the meal kit is fresh noodles, and soup, and toppings, and of course the recipe cards. So you can become a ramen chef at your house.

Tim: Okay. The food industry in general is hard. It’s incredibly competitive, it’s hard to build up a loyal user base because trends come and go so fast. Why did you choose this particular startup?

Keisuke: I’ve seen a lot of Japanese entrepreneurs trying to figure out how to make a big company in Silicon Valley, but I often find that the Japanese entrepreneurs are not having strengths in their expertise. There is tons of good engineers, there is tons of good entrepreneurs, but ramen is something Japanese can be expertise about, so that’s why we chose ramen as the first entrance for food business.

Tim: Okay, so it was something that would make you unique and play on your Japanese-ness here in Silicon Valley. How did you pull it together? Tell me a bit about your partners and co-founders. Tell me about the team.

Keisuke: Sure. So I’m the COO of Ramen Hero and I have a co-founder whose name is Hiro, who is the CEO/the chef of this company. Hiro graduated Tokyo University but while he was in university, he decided to open his own ramen restaurant by himself with his friend. But he totally screwed up. He had the wrong recipe, he tried to have the squid intestine in the soup to have uniqueness, but it smelled horrible. He was unique for sure but he wasn’t a good chef. So after that, he founded online farmers market service, which restaurants in Tokyo can purchase fruits and vegetables directly from the farms. He was doing that business but he couldn’t actually erase the passion of the ramen by himself, so he decided to come to Silicon Valley and start a ramen business. But he cannot turn himself into a ramen chef instantly, so what he did was he entered a ramen university.

Tim: There’s an actual ramen school to learn how to—

Keisuke: Yes, for sure.

Tim: This is Japan. This should not surprise me.

Keisuke: Exactly. So he went through like a couple weeks of training, it was a couple thousand dollars; it was expensive, but it surely was very fruitful. So he got the basic understanding of ramen there and then he was serving ramen in the United States for maybe 40 to 50 times, getting the local taste, sometimes serving like 100 ramen in 2 hours.

Tim: And how did you two end up getting together?

Keisuke: We met through the mutual mentor, his name is Kiyo Kobayashi. Very famous guy in Japanese startup industry. We had the same mentor and I always wanted to start a business in Silicon Valley, that was like the holy place for entrepreneurs, but I didn’t have a chance to do it by myself. I was seeking for an opportunity and that’s how Kiyo introduced me to Hiro.

Tim: All right. It makes sense as an objective but usually people who are passionate about food—whether it’s ramen or any other particular type of food—their goal is to open a restaurant. You guys have taken the home delivery approach, so it’s similar to like Blue Apron but for ramen. How big do you think this market is? How many customers could potentially be realistically interested in home-delivered ramen?

Keisuke: The market research is estimated as 1.5 billion US dollars for the meal kit market right now, but it’s not as big as you think. It’s going to be growing to around maybe 4 to 5 billion US dollars in maybe the next 10 years—that’s what the research is saying. But what’s more interesting is I think the meal kit business, or the restaurant without the physical restaurant model, is much more scalable than the other restaurant business types because you can basically own a restaurant without paying lots of rent. So we think, starting from San Francisco, where the rent is most expensive, we believe the business model of the meal kits is more fitable than actually opening a ramen restaurant.

Tim: But of the currently 1.4 billion—it could be up to 4 billion in a few years—meal kit market, what percentage of that do you think could be filled by ramen? Or do you plan to expand beyond ramen?

Keisuke: I think you multiply that 1.4 or 5 meal kit business times the ramen ratio is going to be very small, but you can also look at the number of the servings of the instant noodle, which is I think over billions—only in the United States. So the ramen is the foundation of the people’s way of eating, and we definitely want to improve rather than just eating the Top Ramen. So you can look at the market in two different—maybe three different—perspectives. One is the meal kit service that I mentioned. Two is the instant noodles I just mentioned. And the third one is a ramen shop. It is estimated that we have 12,000 ramen shops in the United States and it’s growing by 17.5% every year. If we grow at the same growth rate, the number of ramen shops will double in 5 years. So in the food industry, doubling the number of restaurants is a huge change. So we think that’s the trend that we are chasing for.

Tim: So are you always going to be marketing these meal kits to consumers or are you also going to be marketing to restaurants and pop up restaurants as well? What’s the plan?

Keisuke: Very good point. Actually, when we started this company in the beginning, we were aiming for the B2B market, serving the ramen soup to the restaurants, like Chinese restaurants or ramen shops. There is one Japanese company called Ariake Japan, IPO’d company who sells the manufactured ramen soup to the restaurants. Very profitable and very good business, so we decided to do something similar to that, but the feedback we got from the chefs all around the bay area was like, “You need proof. I know this soup tastes good, but you need proof that this soup sells—not just tastes good.” So just because we can make a good ramen doesn’t mean it sells right. It has to have a brand or it has to have a proof from the customers, good feedbacks. So what we decided to do is—

Tim: Let’s dig down on this because I find that surprising. Because when you go to a restaurant and they serve you ramen or any kind of food, the chefs aren’t telling you who their suppliers are. In fact, they’re going to great lengths to pretend that there is no supplier. They have a bunch of fresh vegetables, they’re doing everything right behind you in the kitchen. That’s the big illusion. So I find it very surprising that the chefs would think that something tasted good but they would have trouble selling it.

Keisuke: Most of the ramen shops you find in Japan, they’re using the industrial soup—they’re not making it. Many of them, when they make soup, you have to boil the soup for over 8 hours to 12 hours. That’s a long time, right? So you want to cut the labor by introducing soup from outside, but where is not many variety of soup which is manufactured outside yet in San Francisco. Maybe only 15 kinds.

Tim: So your goal is to introduce a very premium quality of broth in these commercial markets. So the chefs you spoke to said that they liked the flavor but they weren’t sure it would sell, so your next step was to sell directly to consumers?

Keisuke: Yeah. I mean, what we were trying to do is, exactly, sell directly to the consumers and when we do that, we understand what ingredients are included in each soup. So according to the customer’s satisfaction or the feedback, we can examine which ingredients fits the best for American people’s taste. That will actually accelerate the development of the best American ramen soup.

Tim: It’s kind of a ramen meets big data.

Keisuke: That’s kind of an exaggeration but we’re doing something like that.

Tim: What kind of feedback did you get from your customers? What kind of changes did you have to make?

Keisuke: So the population of San Francisco is very diverse, as you know. Some people, whose nationality is from like Asia, or especially in China, feels that the Japanese ramen soup tastes a little bit saltier than what they expected. We call this soy sauce a kareshi or tare. That is not usually included in the Chinese soups, so because we add extra soy sauce into the ramen soup or maybe extra miso into the ramen soup, they feel a little bit saltier. So that kind of difference, or maybe for American people, Japanese tend to feel the umami, but American people tend to feel the spiciness as a good taste, so they always ask for like, “Do you have spicy toppings or spicy sauces, like maybe Sriracha?”

Tim: Oh no. That’s so wrong.

Keisuke: Yeah, but that’s the right answer for the United States actually. We don’t want to push the Japanese culture of ramen to here. We want to re-invent the American ramen culture here in the United States.

Tim: So you’re developing several different flavors for different markets?

Keisuke: Yes, exactly.

Tim: So the American ramen is going to be more spicy, less salty?

Keisuke: For some people. I think everybody has a different taste.

Tim: Any kind of general trends that are going to be different in the US?

Keisuke: Right now, it’s just the beginning of ramen in the United States, so—

Tim: We’ll have to wait and see.

Keisuke: Yeah. The first company who entered and had a successful track record might be Momofuku, which was founded by David Chang, the celebrity chef, and also Ippudo in New York City. We can say we’re successful; tonkotsu ramen is like the foundation of the ramen culture here in the United States. I think there is more flavor coming.

Tim: So when you did that initial pivot to sell directly consumers, tell me about your customers. Who are your customers? Who is buying your ramen kits?

Keisuke: It’s very surprising, but for our customers, ramen is like a party food. So it’s like a pizza. When people say, “I’m going to make ramen tonight. Would you like to come?” almost 100% of your friends want to come to your place. It’s like hip food culture, so we usually sell our product to like maybe 20s to 30s—we call it millennials—who has like a community around them, maybe friends who go to Burning Man together. So those segments love exploring a new food culture and those segments are the ones who are actually buying the meal kits. They are no longer going to restaurants and eating very fatty, unhealthy foods. They want to control and learn what they’re putting in their mouths.

Tim: Are these people who are also interested in Ramen Hero because they’re already part of a group of people who are already using home delivery meals? Or are they more interested in it from the ramen angle?

Keisuke: I think the latter. They are always seeking for a new thing, but you cannot open the instant noodle and serve it at the party, right? But I think to have authentic ramen, you have to go to ramen shops right now and some of the ramen shops are very expensive—like 20 bucks per bowl of ramen, including chips.

Tim: $20 for a bowl of ramen? Ramen is expensive in San Francisco.

Keisuke: It’s like a luxury French food. And you have to sometimes wait hours or two hours before you get into the shops. I guess it’s more accessible for them and making ramen by yourself, doing kind of motion, draining the water from the noodle, that’s more interesting for the people here. They want to experience that.

Tim: Okay. So in a big way, you’re selling the novelty of it.

Keisuke: Sure, “the experience,” we call it.

Tim: So how did you go about marketing, building the community? Were there trade shows? How did you get the word out about Ramen Hero?

Keisuke: So we have two strong channels for marketing. One is called Kitchen Town, located in San Mateo. It’s a shared kitchen, which is shared among maybe 20 to 30 food startups, and besides that commercial kitchen, there is a café restaurant located, and we can use the space to actually conduct events or popup events to serve ramen. And in that community, there are tons of foodie people subscribing, there are e-mail list looking for a new food culture, and when we conduct events, people exploring a new food culture always come. So that would be the core of people, who are viral about ramen, who talk about our product and brands. And second channel we’re using recently is some, something called Feastly and EatWith—that’s a website actually and what’s interesting about them is in short, it’s Airbnb for restaurants. Chefs can actually conduct a restaurant without actually having a physical restaurant or licenses. They can conduct a restaurant at home. So you will post your own menu, like, “This is the ramen we’re going to be serving, this is how much it costs,” and the platform will gather the customers for you and you will basically conduct a ramen shop at your house. So these channels are really good for us to gather the customers without having any marketing cost.

Tim: Now are these channels something that are unique to San Francisco, or will this approach scale to the rest of America and the rest of the world?

Keisuke: I think it’s only limited to maybe coast side. Maybe New York has one too. EatWith is very big in New York as well, and also there is like a food accelerator in New York called FoodX, which we are applying. They do have lots of community of foodie people as well and they can conduct events for us as well. So maybe on the coast side, we do have the potential to do similar marketing.

Tim: And the next step after that, do you have plans to go back to Japan with this, to enter the Japanese market with the American home delivery ramen?

Keisuke: Probably not Japan, but the rest of the world, yes. Japan is just like Uber—I think your article was mentioning Uber in Japan, Japanese market. The taxis are everywhere and Japan is too convenient.

Tim: Yeah, there’s lots of good ramen in Japan.

Keisuke: Exactly. So competition is much higher. You can just walk to the shop.

Tim: Also, if your main marketing strategy is the novelty of putting together ramen and making ramen, it’s not novel in Japan. It’s really everyday food. Okay. That makes a lot of sense. Actually, let’s back up a little bit and talk about you. Before you started Ramen Hero, you’ve had a number of experiences in startups and Japan market entry, and you were running the Japan office for a Korean startup, VCNC, right?

Keisuke: My first career was actually joining a venture capital called JAFCO. Just fresh after college, I joined that company and I spent only a half-year in the VC and jumped into the startup world, which was VCNC, the Korean startup.

Tim: What made you jump? JAFCO is very traditional Japanese VC.

Keisuke: Maybe I should have stayed much longer to experience the beauty of the VC, because I didn’t make any investment there. I just sourced the deals. I always envied entrepreneurs. I really love how they put their passion and work in something they love. I was doing in internship in Silicon Valley before I joined JAFCO, but I saw entrepreneurs sleeping on the floor, missing the culture, and working hard until the late night. And I really like how people spend their life. So Kiyo, he comes again. He told me, “Would you like to be entrepreneurial VC? Because the muscle you’re using in entrepreneur and the muscle you’re using in VC is totally different.” So if you want to become an entrepreneur, you have to train yourself by becoming an entrepreneur. So that made me actually decide.

Tim: So VCNC was still a small company when you joined?

Keisuke: I think so, yeah. They only had 10 people and they were all Korean and I was the only Japanese person in residency. They make a smartphone app called Between, and it’s an app for couples, and I think they have more than 15 million users worldwide. It’s not a dating app. After you date with someone, you want to have an intimate space for the two of you, like not sharing photos or not sharing messages with others.

Tim: So it’s an online kind of personal history and personal chat? Yeah, I think I’ve run across them before.

Keisuke: So I was just the 10^th member and the product was already there. My role is to localize the Korean product in the Japanese market. That leads me to where I am. If I want to challenge more, I would to go the US. If I don’t want to have more stress or suffer, then probably I will just stay in Japan and do something more profitable.

Tim: So was that your big motivation in coming to San Francisco?

Keisuke: I think so, yes. I’m 27 right now, almost 30. My mentality will definitely change when I have family, or kids, or whatever. So I think taking risk whenever I can is the fastest way to grow myself. So I think I’m taking this decision because of this.

Tim: So why move to San Francisco rather than start a new company in Tokyo?

Keisuke: I actually did start my own company in Tokyo last year. It was really fun with a great co-founder. We built maybe 5 products and we failed every one.

Tim: That happens.

Keisuke: Yes. But I was actually doing half of my product and half of market entry consultant, and I had this idea in my mind that if I keep doing the consultant for market entry, then I won’t experience that skillset that entrepreneurs really need.

Tim: When you moved to San Francisco, you didn’t have the idea for the company yet, right? You just knew you wanted to start something.

Keisuke: I just knew that I will be doing something related to ramen, that’s all.

Tim: You decided on ramen before San Francisco?

Keisuke: Yeah, before San Francisco, I was talking with Hiro, so, yeah.

Tim: So the two of you came together? Okay, excellent. Let’s talk a little bit about the Japanese startup here in San Francisco. There are a lot of Japanese—both successful Japanese startups like SmartNews and Markari are here. And there’s also a lot of individuals, entrepreneurs like yourself who have moved to San Francisco. So what is the Japanese startup community like here in San Francisco.

Keisuke: I think I’m being very fortunate to be surrounded by very passionate people. For example, this office, we are sharing with 3 Japanese startups, just like us. It’s becoming one of the Japanese ecosystems to share our failure and also the success case. And also, there are very successful local Japanese entrepreneurs, like , so it’s very fortune for us to actually talk with them and learn how they success. So I think it’s a great ecosystem.

Tim: So recently in Japan, it’s a bit of a trend for Japanese to do like you’ve done and move to San Francisco to start a company. Far more Japanese stay in Japan and start a company there. What’s your advice in terms of when should a Japanese founder think about moving to San Francisco or London, or some overseas market, and when is it best to focus on the Japanese market?

Keisuke: I don’t think there will be a best timing because in any timing, you will suffer anyways. So even me, I came to US, and Hiro told me that we would do B2B ramen business, but the day I came to US, he said, “I’m going to pivot. I’m going to change the business model to B2C,” so I think we weren’t ready when I came to the US but we survived through this and we are still trying to grow our business, so it wouldn’t be good advice, but my opinion is just come to US whenever you want to and you will suffer anyways, so I think what’s more important is the commitment. You have to be here and you have to put 100% of your time in order to make your company successful. I don’t think you can do it remotely.

Tim: So, of course, Silicon Valley, San Francisco, it has an image of this startup capital of the world—which it is, looking at the numbers—but on a personal level, from your own experiences of running a startup in Japan and now running one in San Francisco, what is the biggest difference that you see in your own life?

Keisuke: Like, personal level right? Personal burn rate is much higher than in Japan because the rent is more expensive—

Tim: Engineers cost a lot more. Well so far, you’re giving me good reasons not to come to San Francisco. So far, it seems like a great idea to stay in Japan as a startup. So again, personally, what’s the good part about being in San Francisco?

Keisuke: I don’t think you will meet the top tier VCs and top tier startup people here in Japan. There are a bunch of Japanese startups there, but I think the people we meet are—for example, we have conducted a ramen private party with certain VC. VC is really interested in the food industry and they wanted to have this Tampopo, which is like video old time ramen movie. They’re showing the Tampopo in front of the VCs and the celebrity chefs, and we were serving ramen there. That kind of event won’t be happening and we won’t be able to reach those segments if we are in Japan.

Tim: So you think the market is more open and easier to reach from San Francisco?

Keisuke: The community is much easier. I think it’s harder to get into the VC community because they always require us to have the introduction from promising startup or promising investors, but because we have ramen as a weapon, we can get into the community much more smoothly than maybe other business models. Ramen is like a connection between us and the people here.

Tim: It’s interesting because it is—I don’t know if this is a big enough advantage to move to anywhere but it’s, the companies I’ve founded in Japan, the fact that I was a foreign founder was always really interesting and unique, and I could get introductions that Japanese who are running companies, little companies my size could. And it sounds like you’re experiencing the same thing here in the United States, where being American company, but headed up by Japanese, and very part of Japanese culture, makes you unique and that uniqueness is opening doors.

Keisuke: I think so. I came to Silicon Valley several times but I couldn’t get into the investor community so easily if I’m not running a ramen company, for example. It’s very interesting because you start a ramen shop in Japan, from scratch, without any brand, you won’t be having 100 customers in 2 hours and selling out. But here, because your ramen is very rare and special, everybody comes to eat your ramen and you can sell out of ramen very fast.

Tim: In your opinion, it would be much more difficult if a team of Japanese with a virtual reality company decided to move to San Francisco, it would be much tougher on them?

Keisuke: I think there is plenty of people who is working in that certain domain, so what’s the specialty about that business model, the most important thing, we have been compared with Blue Apron or Ippudo or Top Ramen, but we can differentiate ourselves by saying that we want to turn everybody into a ramen chef and this is not something that Top Ramen. This is a totally different experience from going to ramen shops.

Tim: So before you moved to San Francisco, you were clear that your business was going to focus around ramen? You were still working out the details, but you had that unique idea before you came?

Keisuke: I like ramen. To be honest, I really liked ramen, but I didn’t expect myself to become a ramen chef or ramen person before I joined this company. Hiro is totally different from my characteristic. Whatever the job, I can handle it. I’m really good at finishing the tasks and making it efficiently. Hiro is more about passion and dreams, so he sometimes misses some tasks, but I can pick it up for him.

Tim: Do you have any advice for young Japanese entrepreneurs who are dreaming about coming to San Francisco to start a startup?

Keisuke: If you come to San Francisco, come with a business, not just, “I’m trying to look around and see the Facebook office and go to Twitter’s office.” Don’t do that.

Tim: Like startup tourists.

Keisuke: Yeah, that’s not very—your time is more precious than that I believe and if you have a business, I think people will attract to that. Just because we have ramen, people gather around us and make a community around us. So bring something to Silicon Valley, bring something you love or you’re passionate about and people will gather and make some good movement.

Tim: Excellent. Well, listen, 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 you could change one thing about Japan—the Japanese education system, the legal system, the way people think about risk—anything at all, to make it better for startups, what would you change?

Keisuke: I wish Japan has a better method of finding a good mentor I think because if I didn’t have my mentor or people around me, I wouldn’t be able to take the risk. I’m a very coward person. I don’t have so much confidence in myself but because Kiyo or maybe Kinoshita-san from Skyland Adventures, he gave me tons of pressure to take a risk, and be more entrepreneurialship and that’s why I could make a decision to go to VCNV or go to JAFCO or go to this company. So I wish Japanese people are more familiar with finding a mentor who can push your back.

Tim: So more mentors, more role models, and more mentoring?

Keisuke: I think so, yeah. Right now it’s like a village and people are very nice to each other and not saying so much harsh stuff to each other, but I think there should be one person who can push you to a very uncomfortable zone. I call this suffering.

Tim: That’s an interesting point because a lot of times mentoring and the community is there to try to be supportive and helpful. And what you’re saying is sometimes the most helpful thing they can do is to not support but to push a little harder.

Keisuke: I think mentors are calling it stretch. Or when I get come back comment from people I trust, I get very upset and I couldn’t sleep, and I get up very early in the morning, and I go to the office very early. So those little things. But it’s hard because I think humans are generally very weak and I’m weak too. And if people can push you to the next phase, I think people are generally willing to walk toward it. But if there is no mentor then I just stop trying you.

Tim: So mentors in a community—the goal shouldn’t be to make people feel comfortable, it’s to make them feel a little uncomfortable so they act?

Keisuke: Yeah, I think so. If someone you don’t trust says something bad about you, then you won’t listen to it, but if you really trust that person because that person is a mentor, then even the harsh comments you can listen to and actually move forward. So that relationship is very like a treasure. So I hope everybody in Japan has that too.

Tim: Okay. Fantastic. Thank you so much for sitting down with me. Great.

Keisuke: Thank you so much.

And we’re back.

What strikes me most about Ramen Hero is that its greatest current strength and its greatest long term weakness both stem from the same thing: its novelty. In the short run, Ramen Hero’s novelty has attracted the attention of investors and foodies who are relatively unfamiliar with ramen and want to try something new. In a city awash in gaming, sass, and AI startups, leveraging their Japanese ties to offer something novel has helped them stand out in San Francisco.

But moving forward, well, how much national or global interest will there be in the home delivery ramen? Will Ramen Hero ever be able to grow beyond its initial group of novelty-seeking customers?

Well, it’s impossible to know at this point, of course, but Keisuke outlined two avenues of possible success. First, home delivery meal kits are becoming increasingly popular throughout the United States, and the ramen market will be some small part of that. Second, and perhaps more scalable, is taking the lessons learned from the direct to consumer space and returning to the B2B restaurant market.

But Keisuke’s main point about being unique is undoubtedly true. Whether you are a startup trying to attract the attention of a VC, or a multi-national trying to attract a new customer, you had better be doing something substantially different than all the people around you.

If you have a story about Japanese and San Francisco startups, Kei and I would love to hear from you. So come by DisruptingJapan.com/show069 and let’s talk about it. And when you drop by, you’ll find all the links and sites that Keisuke and I talked about and much, much more in the resources section of the post. And, you know, we’re starting listener mail here at Disrupting Japan, so if you’ve got a question, e-mail me at [email protected], or better yet, send them via Twitter or on our Facebook page and I’ll read them on the show. It should be fun.

And most of all, thanks for listening, and thank you for letting people interested in Japanese start-ups know about the show.

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