Disrupting Japan is three years old, so we decided to invite a few hundred movers and shakers from Tokyo’s startup community over to have few drinks and to hear three of Japan’s most successful startup CEOs talk about what it takes for Japanese startups to succeed globally.

Our panel included the CEOs of some of the most innovative startups in Japan.

We talk about strategies for global growth, how to best manage multi-cultural teams, and the likely future of hardware and IoT startups in Japan.

In fact, we talk a lot about the challenges hardware startups are facing in Japan today. Japanese hardware startups are at a crossroads. The old model of hardware innovation is failing, but there is a new model, unique to Japan, that might just take its place. But, as our guests explain, things are far from certain.

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

On a personal note, thank you for reading and listening and for being a part of Disrupting Japan. When I started this project three years ago, I never imagined how big it would become, or how large, passionate, and global the interest in Japanese truly is.

I want to offer a sincere thank you to everyone who has pitched in to help make Disrupting Japan a success. There is no way I could have built this by myself. I have access to a bottomless well of innovative and genuinely interesting Japanese startup founders, and I look forward to continuing to introduce them to you and to bring you their stories.

Thanks for listening!

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Transcript

Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. You guys are joining mw. You guys are awesome.

Audience: [Cheering]

Tim: I’ve got to admit, that is the exact response I hear in my head every time I say that phrase.

Audience: [Laughing]

Tim: Before we get to the kampai and to the panel discussion proper, there’s a few people I really want to thank, who without them I couldn’t have put this show together. The first of which is Creww. What Creww does is they run about 80% of the corporate accelerators in Japan. So if your startup wants to hook up with a large corporation or you’ve got a big company who want to hook up a startup, you need to talk to Creww and Segawa-san is hanging around somewhere. Where is Segawa-san? Waive. I can’t see you from up here, so. There he is in the back. Talk to Segawa-san and also, Creww is opening a new co-working collaboration space to help startups connect with enterprises. It’s just up the street.

Second, I want to give a big shout out to the Carter Group. Dominic Carter is here somewhere, himself. There is Dominic over there. And so, for those of you who have done business in Japan, which is pretty much everyone here, the things never quite work out as you expect them to. The Carter Group provides market intelligence and market research that help companies grow their business here or come here in the first place. Their processes and the prices are extremely startup-friendly. So if you want to grow your business here, talk to Dominic.

And last but certainly not least, I want to give a big shout out to Digital Hub. Now, you’ll see these guys running around with cameras and microphones, documenting this for all of posterity. Don’t talk to the guys with the cameras. But they also do some great corporate video work. So if you’re looking for video — and who isn’t these days — talk to Steve, who is over there.

Audience: [Applause]

Tim: So, I’d like everyone to raise their glasses and thank you guys so much for being with me for three years and over 100 episodes. And I hope you come along with me for the next 100 episodes in the next three years. Thank you so much. Kampai!

Audience: Kampai!

Tim: Cheers! All right.

Audience: [Applause]

Tim: Now, we get to the meat of the show. Now, I want to introduce the panel myself because I know these guys. If I just let you talk about your companies, you’re going to use up all the time. So, on my far left is Shin Sakane of Seven Dreamers. They have been one of the most innovative in aggressively exporting hardware companies in Japan. You’ve done everything from carbon fiber golf shafts to a medical device that fits in the nose for some reason. But you’re most known for the Laundroid, laundry-folding robot, which you’re releasing overseas and Japan at about the same time.

Shin: Right.

Tim: In the center is Ken Tamagawa of Soracom, who makes extremely affordable and flexible connectivity for internet of things and connected devices, and who is in the process of selling his company to KDDI. Nothing’s been officially launched but it’s been leaked all over creation. And on my immediate left is Takuma Iwasa of Cerevo, who is one of the most innovative device makers in Japan and one of the leaders in the maker space here. I will say you’ve got one of the most interesting models for global expansion that I’ve ever heard of. So, let’s hear it for the panel.

Audience: [Applause and cheering]

Tim: So first and foremost, I want to talk about going global. In all of your cases, the global market has been extremely important to you. How soon in your company history did you decide to go global and why did you do it at that time? Shin, let’s start with you.

Shin: We have three products and two of them are already launched. Our strategy is initially start marketing in Japan. Japanese market is one of the, I shouldn’t say easiest, but really kind of the warmest, is the nicest marketplace I ever think. So, if we cannot be successful in Japan, forget about global expansion. Just like we test market in Japan, and once we found it successful and immediately go global. That’s our strategy.

Tim: So basically as soon as you find that that product market fit, you’ll take it global?

Shin: Right, right.

Tim: Okay.

Shin: It’s about like one year or a little bit less than one year after we launched in Japan that we just go global.

Tim: And do you think the Japanese market is easy because you’re Japanese or is there something unique about the market that makes it easy?

Shin: So good thing about Japanese market is, I think — maybe I skip this.

Tim: We’re going to come back to that question.

Audience: [Laughter]

Tim: Ken, How about you? You took a different route but the international markets are really important.

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Ken: Yeah. Actually, let me talk about my background. So, I used to work for Amazon Web Services (AWS). I really like the business model, kind of, global platform business. So when we started Soracom, we want it to make naturally global platform. So when we started the company, actually, I registered entity in the data ware first then we tried to fundraise money but we couldn’t. So we switch to Japanese company. What I actually understand is what our team has unfair advantage is in Japanese market. Because I knew a lot of people, VCs and also the many, many CIO, CTO of the companies, so we changed our strategy. First, we start Japanese company. Then after we demonstrated our product strength, immediately, we started expanding our business to the global. So we started our business is 2015 September then last year 2016 December, we started business in the US, then EU.

Tim: It sounds like it’s pretty much the same strategy. As soon as you validated the product, you went overseas.

Ken: Exactly.

Tim: Why? Why was that important? Because so many Japanese companies are Japan-focused. It’s much easier and it is a very big market.

Ken: Because if we demonstrated our product is very good, somebody might copy our business. But before other doing that, we want to go global. And also, if you look at the technology like AWS and other smartphone and platforms, it’s not that difficult to go global in terms of technology.

Tim: True. For the technology going global and the company going global are really different. Actually, let’s talk about that in a minute because before then, Takuma, why don’t you explain your global strategy? Because I think it’s a very interesting one.

Takuma: Yeah. I just understood why I invite here, because of my companies. I have to explain about my company’s very curious strategy because every startup company is focusing in the mass market or future mass market. Laundroid is like this. I think the second is on product. It’s future, the washing machine or future something but my company doesn’t focus to any mass market. Our product is a really niche product. I worked I Panasonic for years, and Panasonic is really focusing on the consumer market. That was very tough for me and very tough for the Japanese startup companies. That’s why the Japanese startup company doesn’t have huge money compared to Silicon Valley. Then I changed my company strategy to the global niche. That means we are slicing very, very small the users in India, in US, in UK, in Japan like this.

Tim: You’ve developed a lot of very, like you say, global niche. Things like smart snowboard bindings and streaming video that clips on to video cameras. So for WiFi and strange anime connected gun looking things. I don’t know what it’s called.

Takuma: The name is dominator.

Tim: Dominator. That was it.

Takuma: Raise your hands. Anyone knows dominator? Oh, very small quantity. So let’s see the anime. The name is Psychopath.

Tim: But this is interesting. So Shin and Ken were saying that they find product market fit in Japan first and then go global. But it sounds like what you are saying is that you didn’t get that much interest in Japan, and you got greater interest overseas.

Takuma: Yeah. That’s why today, the news media is very, very important for the startup company. And our product is a hardware with service or with applications. Just the unveil of the hardware, the news will be automatically learning all over the world just on the 24 hours or 48 hours. That’s why we unveiled our product in Las Vegas or in some European countries. Then the day, only one X day. Then the news value is raising down every day, that’s why we launch product to global same day.

Tim: So do you think that the global media is more interested in novel unusual products than the Japanese media is?

Takuma: Same but from my vision, US-based and China-based media is much more aggressive to picking up the curious product or a whole new product. And also, here in Tokyo, Japan — anyone comes from Tokyo media company? No? That’s great. I can’t find him, okay? The Japanese media guys is very carefully checking global media. One is picking up in TechCrunch, Venture Beat articles, quickly writing to translate to the Japanese media. That’s why we launch product in global.

Tim: So when you get the US media, the Japanese media kind of comes along for free. Excellent. Good to know.

Takuma: Sorry. 20% joking, right?

Tim: I don’t know. I mean it’s working for you pretty well. But getting media attention and getting the technical product market fit is very different from running a market entry to actually making sales overseas. Ken, you were mentioning particularly, your software runs on AWS. You can deploy it into any market in the world in an hour, maybe less. But how did you go about building up the business? What advice do you have for Japanese companies who need to go overseas and need to build those international teams?

Ken: That’s actually what we are working on right now. In Japan, we had unfair advantage. Our team is popular in the cloud market and we have many evangelist in our team.

Tim: Right. You have all the connections.

Ken: Right, right. But in the US and in the EU, we are nothing. Nobody knows Soracom. Right now, we are working bottom-up marketing. We have free workshop and many, many developers joining our workshop. And then actually, we try to have them touch our technology. Then if they like it, they’re going to write about it in the blogs. That’s a grassroots marketing type.

Tim: But even to do grassroots is a lot of work. Have you been focusing on, say, customer outreach from a team in Japan? Did you hire local teams in each market? How did you go about it?

Ken: We do that. We say our technology is super global in terms of running on the AWS and software technology. But sales and marketing need to be super local. So we hire the people in US. We hire people in EU and Denmark, Estonia, France, all over the world.

Tim: So US team, it’s all US team?

Ken: Exactly.

Tim: Okay. So it is super local. Shin, what are you guys doing?

Shin: In order to expand the market globally, simply, we just repeat the same thing as what we’ve done in Japan. For example, when we expand the business in Europe, all you need to need to is a simple, like establish a company in EU, one of the countries. We choose France just because of the food and wine. I didn’t want to go to the place where the food is not good. But anyways, we chose –

Tim: Well, Britain has already Brexited, so.

Shin: Yeah. So we chose Paris and then we just established a company there and then we just hire the corporate president, the company president, area leader, and then just expand the same thing. And we just register the company in Silicon Valley, in Shanghai. We do what we’ve done in Japan.

Tim: How much freedom and independence do the different units have versus how much do they work together? I mean, all the technology is here in Japan but it’s a lot of making strategic alliances. It’s a lot of sales work. Do you customize for every market you go into or do you have a coordinated strategy that’s global?

Shin: Good point. Technology development-wise, we are not big enough to really customize the product in each country. So all the product development are done in Japan but we try to make it global standard product. What we focus in each region is marketing and PR and sales. We hire someone like a leader who is very knowledgeable about PR, marketing, and sales in each country, and then let him hire whoever he wants to hire and then create a team.

Tim: Okay. So your efforts are really customized and independent in each market.

Shin: Right, right, right.

Tim: Okay. And Takuma, I know you do something that’s very different.

Takuma: Yeah.

Tim: You don’t have any overseas staff, do you?

Takuma: No. We have two paper companies. One is in Hong Kong and another one is in Seattle, Washington.

Tim: Two paper companies?

Takuma: Yeah, two paper, just for processing the tax and managing the USD and some other currencies.

Tim: I know this is going to be really attracted to a lot of companies in Japan who want to go global. How do you handle things like support and customers that are coming in from America and Europe? How do you handle that from Japan?

Takuma: Every sales and customer support is controlled from Japan. That’s only providing the email-based user support, customer support. But almost all the customer says okay because the product is really niche. So please imagine, if you’re going to buy some special ski equipment or –

Tim: I’m sorry. Shin and Ken are laughing at that. I think they would love to get away with that.

Takuma: That’s okay. Let’s think about everyone’s minds. If you’re going to buy some niche product, they’re buying directly from the US directory, buying from China, maybe user support is only Chinese or English only but almost all guys says okay. Right?

Tim: Let me ask you. Do you think that will scale? I think that what you’re doing, this idea of having buyers who are just so fascinated with the product and who think that you have something that’s cool and unique, they’ll put up with a lot. It’s like running a kickstarter campaign.

Takuma: Yes.

Tim: But do you think that that can scale from, say, the thousands of units into tens of thousands or hundred thousands of units? Do you think that approach can scale up?

Takuma: Our average can be scalable because each product quantity is just only 20 KPC, 30 KPCs but we have already 26 different products. Every product, if we can sell 10K or 20K pieces, that’s huge amount of the revenue and profit. Right?

Tim: Absolutely. But what happens when there’s global demand for a million units? Do you sell the business division?

Takuma: Maybe some of the product raising up around millions of units, maybe we’re going to sell the business unit to Tamakawa-san’s boss company or some other big company like Sony Panasonic.

Tim: Okay.

Takuma: So my company is like a special ops.

Tim: It’s almost like a hardware accelerator with a company wrapped around it.

Takuma: That’s correct.

Tim: Awesome. I think that’s an awesome model, and it lets you do global sales and support using email and kickstarter. How awesome is that?

Takuma: Can I add one additional thing?

Tim: Absolutely.

Takuma: We’re trying a very curious niche product. Once we are going to launch curious and very niche world first product, the media guides, include you, is picking up our product. I can easily find the distributors global. Once open a global door, we can find so many curious distributors. They are handling really curious things and real curious things.

Tim: I think so. Shin, I know you and I talked about you had so much interest from distributors around the world but you decided it was best to handle it all yourself and set up offices. Why did you decide to do that instead of going through distributors?

Shin: Not that we don’t deal with distributors. We do deal with distributors. Actually, we do have good partnerships with many distributors in Japan. What I mean is we need to have a hub in each region. This is what we’ve done in Japan. We have a hub in Tokyo and then we have a certain team here, then we keep increasing the number of partners, distributors, in Japan even. In order to repeat the same thing in each region globally, what I mean is we need at least one hub office or team. One place in Europe, one in North America.

Tim: So you can control the message.

Shin: Right. And based on this hub, then we try to establish many, many partnerships around the team.

Tim: One thing that, Shin and Ken, you both mentioned earlier, you talked about the Japanese market as being friendly and warm. I think a lot of startups here might disagree with that but it’s hard. I’ve noticed that foreign companies and foreign startups are coming into Japan earlier and earlier. 10, 20 years ago, people talked about Japan as being this Galapagos, where it was this technological island where companies could get away with doing things different here. But with foreign companies coming in earlier and earlier, do you think the Japanese markets getting more competitive, and is that Galapagos effect disappearing here? Ken, what do you think?

Ken: I think in terms of foreign companies getting into the Japanese market know the Galapagos disappearance. Because already many, many companies are using the technology platform, like a common platform, like iPhone, Android, AWS, Google, and already, many people know that. But I think most important part is how they can hire the best people in Japan. I’m not saying I’m the best people.

Tim: We’re all trying to hire the best people.

Ken: No, no. I used to work on the MBA in the US, then I learned English and also American culture. Then naturally, I worked for Amazon, introduced the best technology into Japanese market because I know Japanese market, right.

Tim: Yeah.

Ken: I think that’s the most important part.

Tim: So I guess what you’re saying is that the infrastructure layer, whereas 30, 40 years ago, the infrastructure layer was unique to Japan, whether it was in networks —

Ken: I mean, iMode, different.

Tim: Yeah, exactly. And now that the infrastructure has gone global, all these smaller service offerings and SaaS companies, it’s much easier to bring into Japan.

Ken: Yeah. Like Netflix, Hulu.

Tim: So you think the Japanese market is going to get less warm and friendly?

Ken: Well, language barrier is still high. So how they can handle that.

Tim: Shin, what do you think? So you think the Galapagos is going away or do you think that Japan will remain the —

Shin: It should. I think it should. Of course, a lot of global, like overseas companies are really coming to this one of the biggest market in the world. But what I mean by this country market being so friendly is if you do something unique like all of us here, we cannot shine easier. For example, I don’t think our company could stand out as much in Silicon Valley because there are so many great, fancy ideas. Startups, so many of them are there.

Tim: That’s true. So many startups with huge marketing and media budgets.

Shin: Right. Like crazy ideas. But in Japan, if we try to do something unique, everybody likes it. Initially, it’s kind of tough. Everybody thought I’m stupid and crazy when I try to do laundry folding robot. But eventually, later, soon after they found okay, this guy is unique.

Tim: Because you’ve been working on this laundroid for like 12 years.

Shin: Yeah, 12 years. Stupid. Wasting so much money.

Tim: Well, no, no. I mean, you’re finally launching.

Audience: [Applause]

Tim: So you think the Japanese press is maybe more skeptical of crazy claims?

Shin: Yeah. Well, but this is a good thing. Right? Always, if you want to improve products, we always want to have monster customers and monster market.

Tim: But I notice like in Silicon Valley, if you read any of the big tech sites, a lot of it is these startups you look at and go, “That’s utter nonsense. This is not going to work.” During those, say, eight years where it wasn’t working and it was just a crazy idea you were working on, was the Japanese, press, did they think it was interesting and want to write about you or did they think like, “This guy is crazy. Come back to us when you’ve got something the works”?

Shin: Well, that was our case at the beginning. But the good thing is, of course, we have to have certain level of success to start with. It’s the same anywhere in the world. But once we reach certain point, Japanese media, Japanese investors are more friendly than the US ones, I think.

Tim: Okay. So once you’ve proved yourself, all the doors open very quickly in Japan?

Shin: Yeah. I think so. And then once it really get moving in Japan and once we found okay, this is the way to go, we can do it, then immediately we should go global.

Tim: It seems like the whole idea, the push to going global, it’s almost defensive now. If that whole Galapagos is going away and if it’s becoming easier for foreign companies to enter the market, it’s a question of do you go after them before they come after you?

Shin: Well, that, I don’t know.

Tim: A little too aggressive?

Shin: But one thing I can tell you is it’s very simple math. The global market is 60 times bigger than Japanese market in theory. When you write a business plan to show to your investors, of course it’s better to have bigger numbers. You get more investment. But if you have more money, then you simply can just do it.

Tim: Takuma, you are almost immune to Galapagos because you’re creating such crazy products on your own. But is your feeling also that the unique nature of the Japanese market, the Galapagos effect is going away or do you think there’s going to be unique aspects?

Takuma: Some part is remaining but some part is already gone. We are a hardware company and some kitchen-based, kitchen cooking product is still Galapagos. Not only Japan, every country’s cooking situation is completely different, Chinese food and Japanese food and US-based food. But something like a digital gadget like a smartphone, a smartwatch, or some music player, these type of digital gadget, Galapagos is already gone. That’s why it depends, the Japanese distributer and resellers.

Tim: I think, Ken, you really hit on it. Anything where there is a shared infrastructure, anything where there is a shared base between Japanese companies and foreign companies, it’s very, very easy to come into Japan.

Ken: I think so. I mean, especially technology-wise, cloud resources, the marketing resources, social network resources, most are free. Right?

Tim: Yeah.

Ken: Globally fair. But we are doing a telecom business. So if we look at the telecom business, regulation is different. When we go into the US market, we need to take care of the American law. And also, when we go into the EU market, we thought EU is united but there are very different regulation, law in each country.

Tim: It works in theory.

Ken: Yeah. But I mean, technology-wise, as you said, we can copy our software stack on the AWS within one hour from Tokyo region to Frankfurt region or Oregon region, everywhere.

Tim: Okay. Let me turn that question around. I mean it’s a great opportunity. I’ve got the CEOs of three of the most innovative hardware startups in Japan on stage here. In the ‘80s and ‘90s, Japan was unquestionably the dominant player worldwide in hardware. Whether you were talking about consumer electronics, the home appliances, video gaming, Japan dominated all of it. And then in the later half of the ‘90s, 2000s, Japan lost its edge and really fell behind. I mean, rather than analyzing all the things that went wrong or could have gone wrong, obviously, your companies accepted, but do you think that Japan can turn it around and become a hardware leader again? What’s holding it back now? Shin, you want to jump in on that?

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Shin: Yeah. I agree that when I was in high school, Sony’s Walkman was the best in the world. I was so excited Japanese companies going so global. I was always talking about Japanese success stories. But nowadays, it’s kind of not like that. But I think we can do it again. I think.

Tim: What has to happen? For example, in 1999 in America, Sony was the number 1 brand in America. It was better than Apple. It was better than the GM. It was better than Microsoft. Sony was just dominant. What has to happen before Japanese companies can start regaining that hardware leadership?

Shin: Ken and Iwasa-san should answer that. The thing is, I think someone like us has to really challenge hard and then hopefully younger entrepreneurs will follow.

Tim: So you think it’s just a matter of a lot of individuals deciding to do it?

Shin: Kind of like that just because for example, like now, laundroid’s development team is consisted of 60 engineers. The 40 out of 60 are the guys that used to work for Sony, Panasonic, Sharp, Toshiba, Hitachi, and JBC.

Tim: Japan has always had fantastic engineers and they still do. The problem is turning that engineering know-how into product.

Shin: Yeah. Actually, they’re all like over 50 years old. You cannot imagine Seven Dreamers is one fascinating young engineer’s paradise, right, but it’s not like that. It’s like really old men, unbelievable startup company.

Tim: It’s an old engineer’s paradise.

Shin: Yeah, old engineer’s paradise. And I was so worried. I look at their VCs and they’re so smart, unbelievable careers but they’re old. We are really busy startups. Can they handle it? But they can. They are very healthy and they work so hard. They have speed and they have experiences. Unbelievably smart. All they needed to have was the theme, innovative theme. New thing.

Tim: The vision. They’re missing the vision.

Shin: Right. That’s what it is.

Tim: All right. Takuma, you guys have a lot, even putting out a steady stream of innovations. Do you really think it’s just a matter of innovative engineers with a vision stepping up and creating stuff? Is that all that’s required? So do you think for Japan to become a global leader, do you think that there needs to be some top-down change or changes in the government or do you think like Shin was saying that all we have to do is individuals create companies, create products? What will be the trigger?

Takuma: It’s not a dreamy answer. The very realistic answer is that’s money.

Tim: Money?

Takuma: Because the Silicon Valley and China has a huge amount of money to spend in the startup scene. Huawei has a huge amount of money, same as DJI –

Tim: But it can’t just be money because Sony and Sharp have huge amounts of money but they couldn’t put out creative products.

Takuma: Okay. Money and entrepreneurship and age.

Tim: Age? Older, younger?

Takuma: Younger is better.

Tim: Okay.

Takuma: Same as Sakane-san’s opinion. I completely agree with him. Youngers has a passion and youngers know IoT and they have the ideas and they know the global and they can speak English as well but they don’t have money. Because I have been in a great relationship with a Chinese factory and entrepreneurs, and they have a passion in young age and huge money. Don’t laugh at it. Serious.

Tim: We need money. We need money.

Takuma: Yes. And also, once you go into Google, Japanese startup scene’s investing money, it’s so small compared to China and the US. That’s very important. If we can get huge amount of money from the market or from the Japanese investors, I believe we can compete to the global guys.

Tim: Ken, you and I, we’ve talked about this.

Shin: Yeah, I have heard about this before.

Ken: I have different view on this. I think in short, software is eating the world. You guys now DJI, their own company in China. They have a really strong technology in hardware though but also, their core competency is software. So synthesize all of the hardware by software technology. So that’s their competency. Software business can scale compared with hardware business. Even if Amazon, Facebook, GoPro they are all software companies. We need to make next generation software company in Japan, otherwise –

Tim: I think it’s true. I think that – and this is true in the case of all of your companies – hardware companies now are much more software-intensive than they were in the ‘80s or ‘90s.

Ken: Exactly.

Takuma: Tamagawa-san is best friend for me but this is a panel discussion. I have to discuss.

Ken: I’m saying, if we want to make a really huge company from Japan like Amazon, we need to focus on software. That’s what I’m saying. I mean, global niche is good –

Takuma: DJI is a software company. I agree but how about GoPro? GoPro is already alive $10 billion how much, again calculation?

Tim: It’s way up there.

Ken: But they are struggling, right, right now?

Takuma: Yeah. I know but –

Tim: I don’t think you can say that GoPro is a bad example.

Takuma: But how many 10 billion company in Japan? Just one time multimillion, that’s huge, great success global. Also, Fitbit as well. They already $40 billion or $50 billion business. That’s also huge.

Tim: But actually just to benchmark it because I know that Shin and Ken, both of your companies are extremely software-intensive. Iwasa-san, are most of your creations or divisions, are they 80% hardware innovation and 20% hardware or 50-50? How much software is on your hardware?

Takuma: 80.

Tim: 80% software?

Takuma: It’s joking. But I think 50 or 60. Because our product in everyone’s current digital gadgets, 60% is software-based driven.

Tim: Okay.

Ken: My point is contribution portion of value-added addition is shifting to software. Even if we have a lot of good companies who has really good technology and hardware. You can name, Shimano, Fanc. Those companies are right now great. But their core competency, if they focus on the hardware, losing, right? Losing. So they need to shift to the software. That’s my concern.

Takuma: Software and software-based experience as well. So GoPro is 90% hardware company but GoPro’s experience came from software. Once you’re going to take a GoPro movie and upload to YouTube, and people post famous GoPro’s experience via YouTube. YouTube is a software platform.

Tim: So what we really need is a little more vision, a lot more money, and more of a software engineering focus in Japan. Listen, before we open this up to Q&A and by the way, the mic is there. We’ll start Q&A in just a minute. So if you got some question for these guys, please step over there. But before we wrap up, I just want to ask a really quick question. What is the best short advice you could give to Japanese startup founders or foreign startup founders in Japan, who want to sell globally? What’s the best advice you could give them?

Takuma: Just entry to the innovation award and CES.

Tim: So focus on the publicity?

Takuma: Yes. Global publicity today is limited to enter the CES Innovation Award.

Tim: Excellent. Ken, what would you say?

Ken: I would say hiring the best people.

Tim: Okay. That’s a good advice but everyone’s trying to do that. How do you know you’ve got the right people when you’re hiring halfway around the world and you’re competing with everyone else who wants to hire the best people?

Ken: I mean, we are working on that, right? I would say don’t lower the bar of the hiring. We should raise the bar of the hiring.

Tim: Would you delay a product launch into a new market until you found the right country-head?

Ken: Kind of like a startup, we are making innovation with very few people. If you hire a very junior person in the team, that damages the team power. I would say hold the milestone and wait for the best people.

Tim: Okay. So put people over schedule.

Ken: Yeah, I would say that.

Tim: Shin, how about you?

Shin: Well, simply dream big. So basically, you have to have a vision to go global from the beginning. And once you have that, you draw a business plan counting on the global cells. Once you promise that, then investors invest in us. Once that happens, we have to do it no matter what, then we just re-do it.

Tim: Okay. So the same idea of plan to be global, find that product market fit in Japan and then push it out as quickly and aggressively as you can.

Shin: Yes, that’s it.

Tim: Excellent. Let’s give our panel a huge hand.

Audience: [Applause]

Tim: And open it up for Q&A. Please, step up to the mic.

Nofel: Hello, everybody. First, thank you to the panel, all four of you for this show. It was very entertaining and also very informative. So for me, I’m Nofel. I’m from France and I’m currently in international marketing at Mitsubishi Fuso. You talked about the fact that Japan needs to build the next generation software companies. I feel like some of those companies already exist but they are struggling to scale. I think the best example is the Rakuten, which is this equivalent to Amazon. We’ve seen recently they have aggressively undertaken marketing actions like sponsoring, especially with Barcelona and Golden State Warriors. What do you think Rakuten lacks to actually go global and actually compete with Amazon on global markets?

Tim: Rakuten specifically or just large Japanese companies in general?

Nofel: Rakuten specifically and also like both, I think, but Rakuten is a good example.

Tim: Okay. Do you have any thoughts? You don’t have to dig into Rakuten specifically if you don’t want to. This is Japan. Harmony must be maintained. I’ll dig into them later but I want to hear –

Ken: Our headquarter is based in Futako-Tamagawa. Rakuten is like a friend, so I cannot say anything about that.

Tim: Let’s keep it general. So large Japanese corporations, what can they do better to build that software architecture?

Takuma: I think purely software-based company, B2C software-based companies are very difficult to go into the global market from Japan. Because B2C, the software is just a software, not IOT devices. It’s easy to make it compared to the hardware. That’s why we are trying the hardware, the software, the mixed. And hardware is really bit difficult compared to the consumer-based software. So my answer is it’s seriously difficult if they are trying to make just software or software-based platform. But once they are going to combine some little bit complex hardware and some special equipment with the software, that’s really easy to go to the global market.

Tim: So basically, it’s tough but good luck.

Takuma: That’s typical example with Fitbit.

Tim: Okay. Shin, d you want to weigh in on it?

Shin: Well, I don’t know too much about Rakuten but I think just they missed the timing in a good timing. Like Amazon and Rakuten in Japan, they expanded in the right timing but it’s kind of too late for them to go global, I think. That’s what I think.

Tim: I’m American. I don’t pull punches. I think if you look at why Rakuten hasn’t really built up a globally competitive development infrastructure — they’ve got plenty of good engineers there but what Rakuten is as a company, they found a niche in Japan but they never found a similar product market fit outside Japan. So their software engineers are focused on filling that need and patching holes. They don’t have a unique value proposition that says this is a software we’re selling. This is your problem and this is how it solves it. They’re very strong in Japan because they’ve got that product market fit but they’ve struggled to find it overseas. So I think it’s more of a lack of direction. It’s certainly not a lack of talent. Come on up, next question.

Audience Member: I have sort of a philosophical question.

Tim: I love those.

Audience Member: So Silicon Valley is the big believer in fail fast-fail often. Does that apply in Japan, in the startup scene? Should it apply? I always felt that the Japanese market was risk averse.

Tim: What’s your reaction? You guys, have you seen people who failed with startups? Have they had a hard time finding new jobs? What is the reaction of the Japanese society and business community towards people who have failed?

Shin: It’s getting closer but definitely, obviously, historically, in Japan, failure is a big thing. But recently, I think, we learn from overseas that the people who failed has a lot of value. I think it’s changing a little bit.

Tim: Is it just a big company problem? Would all of you, would you think twice about hiring the CEO of a startup that had failed in Japan? If his skills are good, would it be like come on board or would it be wait a minute?

Ken: I think so. We hire the guy. But I would say those startups are still few. We intentionally took the style of Silicon Valley. We wanted to make the company like startup technology company in Japan. So we took that style. Actually, I call my team member by first name. Everybody call me Ken not Tamagawa-san. That’s the way we took it intentionally but I want many startups to do that.

Tim: Okay. I think it’s definitely getting better in Japan. But even in San Francisco, the fail fast-fail forward mantra is really kind of macho bullshit. Everybody says it but they don’t do it. Like VCs are like, “I want to invest in a founder that has failed but not his last venture, like the one before that.” People talk about failure as like, “Yes, I failed but then I sold my company for $100 million.” That’s not failure, man. I wish I could fail like that. I think that the fail fast-fail forward thing, as a philosophy, it’s a good thing to keep in your heart but it’s way overhyped. Failure sucks and it’s difficult and it’s hard to bounce back from. But Ken, it’s good to know because I might be looking for a job someday.

Ken: Yeah, yeah. You do?

Tim: Come on up, next question.

Audience Member. Yeah. So something you’ve already talked about, finding and hiring the best people. I just want to ask more about the challenges and the talent market for startups in Japan and what were the challenges and maybe describe what kind of employees we’re looking for and how did you find them and what were the difficulties or challenges you experienced.

Tim: That’s kind of broad so let me try to focus that down. Can you guys name one thing you do to help attract the best talent in Japan? A good piece of advice or a strategy for hiring engineers in Japan. Shin, you’ve been at this the longest.

Shin: Yeah. The strategy, like the point of hiring from outside or –

Tim: How do you attract really good people when there’s so much competition from other startups and from big companies who are paying a lot more money than you are?

Shin: Well, from our side, in order to attract people, best way is media attention.

Tim: So people want to join a cool company that’s doing cool things.

Shin: Yeah. Like basically, the more we get famous, more we attract people. It’s a simple calculation.

Tim: So get the word out, word of mouth.

Takuma: So Tim, it’s completely same answer as Sakane-san. Once the consumer recognize business people want to change a job to the startup company, just Google it. Maybe they can find only two company, Seven Dreamers and Cerevo. That’s very, very important.

Tim: So people want to work for a cool company that’s building cool meaningful things.

Ken: Actually, we are little bit different. Actually, we don’t publish the job description. We focus on the position we want to hire then I’m going to ask all of the friends. That’s kind of a difference.

Tim: Word of mouth recruiting.

Ken: Yes, yes, yes.

Tim: All right.

Ken: So far, we have only 45 people. So it’s working out right now but later maybe we need to change it, our strategy.

Tim: As you get bigger, then it’s more and more people to recruit for you, right?

Ken: But I would say, early stage of startups, you should hire only the guy who your network knows very well.

Tim: Okay. So someone you know and that your connections know?

Ken: Yeah.

Tim: Excellent. We’ve got time for one more question before we wrap up. So come on up to the mic.

Audience Member: I’m the lucky winner. Oh, my gosh.

Tim: You’re the lucky winner.

Audience Member: I hope it’s the same question we all had. You talked about you have a lot of local hubs. You hire locally and you let them hire their teams. So the question that forms in my head was like, what are your communication challenges that you have with these groups?

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Tim: Good question.

Audience Member: And also, what does the global community need to understand about Japan to communicate things like vision, decision-making, and all the things that those entail?

Tim: Shin, you’ve got a pretty big global operation. How do you ensure communications stay aligned?

Shin: Basically, same as organizing the team in Japan. So what’s important is make responsibility clear, what they can make decision 100% and what they cannot. What we want to tell them to do and what we don’t want to tell them to do. Make these things –

Tim: Make it really clear what authority they have, what resources they have from the beginning.

Shin: Right. The second most important thing is to invite the leader of the region to Japan and give him the best sushi.

Tim: This works.

Shin: This definitely works. Yes.

Tim: Ken.

Ken: We try to use latest technology. Actually, we prohibit email internally. We stick to slack communication. All of the information inside is exposed in this slack. And also, we have a practice we call daily sync. Everyday 11 a.m., everybody joining into the conference call. And then our robot in slack is asking question like, what did you do yesterday, what will you do today? What you need help from team. We are writing. You can read all of things within 10 minutes.

Tim: Your project manager is a slack bot?

Ken: Yes.

Tim: That’s kind of cool. I have to admit.

Ken: We try to re-innovate those communication style.

Tim: Excellent. Takuma, I know I think your advice might be not to have any foreign staff.

Takuma: And also foreign staff can speak Japanese currently, so I can understand his question. But in the future, I have to think about this.

Tim: Okay. Excellent. Well, listen, please let’s give our panel a big hand.

Audience: [Applause]

Tim: So I just want to say thank you for coming out. Thank you for listening, and I hope to see you all here again next year at our fourth anniversary. Thank you so much.

Audience: [Applause and cheering]