Pivot Till It Hurts: Making Mobile Video Profitable – Pocket Supernova

Pocket Supernova has pivoted through three countries and three completely different products before they hit their stride with their current video editing platform for mobile, and they now seem ready to move a generation of video content creators out from behind their desktops and onto their mobile phones.

We talk about the market forces that lead to the past pivots and why the team is confident they they have a winner on their hands this time. Oscar also outlines what he sees as the critical business model flaw that will cause 99% of all social startups, even the very cleaver ones, to fail.

The local behind their move to Japan is fascinating as well, and Oscar views the use of Japanese developers, rather than San Francisco-based programmers as a key strategic advantage.

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

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Show Notes for Startups

• The risks of selecting a market top-down
• Why network effects are a two-edged sword
• What social startups need to know about novelty-seeking
• How to piggyback on someone else’s network
• The democratization of video
• Bringing new users to video editing
• Why it’s better to hire developers in Tokyo rather than San Francisco
• Why Japanese companies have trouble going global

Transcript from Japan

Disrupting Japan. Episode 47.

Welcome to Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for listening.

Oscar Noriega knows a thing or two about video editing. He started out stealing computer time from his high school computer lab and is now trying to move a new generation of video content creators off of their desktops and onto their mobile phones.

The journey has not been a straightforward one. Oscar and the team at Pocket Supernova trace their journey through three countries and three very different mobile video offerings and it seems they finally found the magic combination with their Japanese office and their latest iOS and android video editing software.

We talk a lot about the market forces and strategic thinking that led to each pivot and we also discuss the key aspect of Japanese programmers that led Oscar to conclude that setting up operations in Japan would give Pocket Supernova a huge competitive advantage over the global competition.

But I don’t want to give too much away, so let’s get right to the interview.

Tim: So I’m sitting here with Oscar Noriega, CEO and founder of Pocket Supernova, thanks for sitting down with me.

Oscar: Thank you. Thank you, for having us.

Tim: Now Pocket Supernova the company, you’ve released several products. You’re heavily focused on mobile video editing and creation.

Oscar: Right.

Tim: But that’s a really broad statement. Can you drill down a bit and tell me about your company and what the products you make do?

Oscar: When we started the company, we realized that video was going to be one of the next big trends on the mobile market three years ago. I actually studied in Mountain View in Silicon Valley.

Tim: Okay.

Oscar: So we got our first investor over there from 500 Start Ups because we wanted to do a mobile focused company, but the same time we really want to take a look at all the markets, what could be one interesting market that we love.

Tim:    The decision to launch these particular products or particular industry, is really kind of a top-down market based research.

Oscar: Yes,

Tim:    Interesting.

Oscar: And also sort of a personal experience I would say, because, to dig a little bit deeper into why we started the company, but one of my personal interests has been video for a very long time. So I learned how edit video when I was really young, Mac OS7 or something like that and Premiere2.

Tim: It has gotten easier since then.

Oscar: Yeah, way easier. I’m talking about ‘94 or something like that. So actually in my high school we had a laboratory where we had a bunch of Macs, and we got Premiere there. I was not supposed to be there because I was a high school student, and it was only for university students. But still I pitched an idea, they said, “Yeah, yeah, whatever. Just use it, nobody’s really using it.” Back in those days you had to spend a lot of time editing on Premier.

Tim: Right.

Oscar: Render it at night and then you just leave it all night long. Come back in the morning and hope you didn’t make any mistakes. Hope it was good enough to not render it again, right? So it was actually terrible, because you had to wait for about 12 hours and then just to get to see the 20 second render. Since then I’ve been very passionate about cameras and the process of filmmaking, video making and so on.

Tim: Okay. So when you saw the opportunity in the mobile space, it wasn’t completely top down. This was something you’ve been interested in a long, long time.

Oscar: Exactly, exactly, but when I said top down, the fact is it’s because we really took a look at the market as well, trying to find a problem that we thought that was going to be surfacing over the next years.

Tim: Let’s talk about that. What are your products and what are the problems they’re really solving.

Oscar: Well first of all, we started with a messaging product.

Tim: Right.

Oscar: So actually we pivoted twice. We started with video messaging product and this was way before everyone was doing video messaging, way before messenger, way before Skype doing video messaging and stuff like that.

Tim: Right.

Oscar: We wanted to use videos as a short way of communicating with your friends and family and just sending a synchronized short videos back and forth, especially with groups.

Tim: The space is good, the idea is good.

Oscar: Right.

Tim: Why did you end up pivoting?

Oscar: Well we didn’t really find a lot of traction. I think it was maybe, a little bit hard for us to sell the concept to investors first of all. But then second I think we had a very hard wake-up call in a way to see that most of the big companies started to jump into the space very quickly. Just very few acquisitions happened, actually we were approached by Skype and they said, “Hey you guys are doing a really cool product.” We just launched the product on demo day and they actually met us on demo day.  So we had like, I don’t know 5,000 users.

Tim: Right.

Oscar: But they loved the product, because the UI was so nice and the experience was so nice. And they said, “This is really interesting, would you guys be interested in talking to us and maybe you guys can join the company.” I think basically there were sort of trying to do an aqui-hire and bring us in. We said no, it was too early for us. We said, “Well you know what, we just prefer to raise some money and keep going.”

Tim: Of course, of course.

Oscar: As everybody else, in the end what happened was that Skype ended up buying actually a company doing video messaging.

Tim: Well I think with anything, whether it is video messaging or SMS, anything with a strong network effect, There are only can be a few winners and it is whoever gets that critical mass first.

Oscar: Exactly.

Tim: …takes it.

Oscar: Yeah, it’s true. I think that there are only one or two horses that are going to win.

Tim: Right. Right.

Oscar: And then everybody else is sort of struggling to shine and then, I don’t think it’s possible to stick around for that long, if you really want that massive traction.

Tim: And credit to you for realizing that was happening.

Oscar: Yeah.

Tim: You realized the market was running away from you. It was time to make a change.

Oscar: Exactly.

Tim: So what did you did you pivot to?

Oscar: So we pivoted to a selfie camera app. That was a little bit different, but it was in the same space, because it was video. It was a selfie app and actually we named the product Video Selfie. So we thought that on those social sharing space a lot of movement was happening, Instagram at the time was considering announcing video. So we realized that many companies were trying to be the Instagram of video at the time.

Tim: Right

Oscar: And one of our investors and one of our advisors actually told us, “Hey, you know what? So many people are trying to be the Instagram of video so don’t make the same mistake. Because the only Instagram of video will be Instagram. And he thought that way, way before Instagram announced that they were going to introduce video.

Tim: Well it’s the same dynamic that you are were talking about before, that there can only be a handful of winners.

Oscar: Exactly. So what we thought is, “Alright. So how about if we just focus on the creation side?” And that’s sort of where the idea of the company started to be more concrete. Where we realized, “Okay you know what? The creation space seems to be hungry for new ideas.” And there is an empty space where we realized there are so many things you can do with video that are not happening right now. We thought about the decoration stuff very early on like, how about we put some you know, text or GIFS or things moving around you or tracking your face.

Tim: Right. So it’s video, so instead of just the little marks and text, they’d be moving.

Oscar: Right. We were so inspired be all these decoration apps in Japan.

Tim: Yeah,

Oscar: The photo decoration apps. That was huge thing already of the time and, but mainly also we saw that because of all these creation tools happening around the photo creation space. We thought, this is going to happen as well on the video space eventually and you will need all these sort of creation tools for sure. But the challenge is video is motion and video is dynamic, not static. So if you just…

Tim: It’s a lot harder than just dropping a line of text on GIF.

Oscar: On a photo right? Yes. So it’s a lot harder from the technology point of view or the engineering perspective we thought, “Well this is going to be harder, but at the same time we know that this is going to be a good space to be in.” Trying to bring some of those things from the decoration space, from the photo space into the video market, then the challenge is hard enough and then we believe that we can contribute with something there. So that’s how Video Selfie started

Tim: Right, and you have a really unique product. It’s hard that’s why no one else is doing it.

Oscar: Exactly. If you take a look at video selfies actually, I think nowadays it’s way easier to explain it, because the space already blew up. Snapchat acquired a company called Look Straight, which is a company that powers the 3D filters inside the app. And also now Facebook acquired Masquerade as well and we were in a very similar space. Because actually we were also doing face tracking and face recognition and then all the motion happening inside the app was actually using face tracking, face recognition. So you move the camera around and then all the objects were just floating around. We sort of come up with this idea of putting you cat ears.

Tim: Right. Right.

Oscar: And that blew up on Instagram for a while, but, that helped us get a lot of users into the app and so many people just wanted to join and do the cat ears. That’s where we started to see that we wanted to be a company that is creating tools for video creation on mobile devices.

Tim: So after the acquisition by like Snapshot, were you feeling like you sort of missed that wave again?

Oscar: That happened way later. I mean that actually happened last year.

Tim: Okay.

Oscar: So we had a long run with that product, maybe about a year and a half. It got a lot of traction, we did like 2.5 million downloads. It grew very quickly, it grew very fast and got decent traction. But once we took off, we were just monitoring what was going on on Instagram and other networks. So you were able to shoot these video selfies, decorate it, put the cat ears and some filters.

Tim: So what is the monetization of that? Is it a freemium model? Is it in-app purchases?

Oscar: Yeah the idea was to do it like a freemium models. Basically, we wanted to provide some premium content, traction went really well. But then we started to monitor all these apps in the video space. One thing that really caught our eye, was that we went up very quickly and then we went down very quickly, and it was really steep, very rapidly.

Tim: I guess that makes senses, if a lot of what you’re doing is the idea of the cat ears really catch on. So you’ll get a whole lot of new users and then somewhere else, very clever engineers are coming up with another great idea which is next month’s clever…

Oscar: to be honest with you, it was not really that people cloned us or copy us quickly. It was more about the fact that what was happening was that there were a bunch of new apps for creation, for count and creation either video, photo, GIFs. So many different things happening in the space, but we realize that the users didn’t really stick to any product for that long. So the retention was a huge problem, even though we had provided new content or we came up with new ideas and so on. We realized that if we didn’t build this inside somewhere, we’d never have very strong network effect.

Tim: Right.

Oscar: Where you have already so many reasons to go back for the product every single day and these just became some kind of accessory.

Tim: Yeah. So I guess that makes sense. I mean especially in this space which is novelty focued.

Oscar: Yeah.

Tim: By definition your customers are novelty-seeking.

Oscar: Yes.

Tim: So they are going to get bored and move on much faster than customers in others segments.

Oscar: Totally. They move on very quickly. So we realize, “Okay they got it. They installed it, they did the cat ears, they did another one and another one.” Then what happened was friends on Instagram get bored very quickly. And I’m not talking about the creator. I’m talking about your followers. What happens, the people that are following your feed, they are looking at your content and once you do one thing. It’s like, “Oh that’s really cool, I want to do it.”

Tim: Yeah, but after two o three cat ears videos. They’re like, “Alright enough with the cat ears.”

Oscar: Enough with the cat ears, right. So that actually was a huge problem. People just get saturated very quickly and they just want to move on to the next new thing you, because it’s new again. So it’s hard to keep up, even if you provide a lot of content.

Tim: Yeah.

Oscar: It’s hard to stick and it was really hard to stick. And we saw every single app in the category suffering from the same behavior and that’s when we realized it. If this is something that it lives inside a super huge network. Where you have so many reasons to keep coming back to the product and once in a while you use it. We thought, “Then it’s going to work.”

Tim: Right.

Oscar: But for us, I mean to build a very strong network and stay on top. It was going to be so hard, so challenging and for us again. When we saw an app that got 50 million downloads and they had exactly the same pattern going down super steep, right? Really, really fast…

Tim: You realized was the structure of the industry, it’s not anything you’re doing wrong.

Oscar: Exactly. So we realized the users’ behavior is the same for every single app no matter the scale.

Tim: That brought you to pivot number two.

Oscar: Exactly. That was a huge yellow signal for us, but in a way. Once we set this goal for the company where we said we wanted to create tools for video creation. And we actually started talking to our users a lot. We just asked them, why are you using these apps for? And we started noticing a lot of kids recording the selfie and then they asked us to make it available to save it to your camera roll. In the very beginning we just had the sharing directly to the network.

Tim: Okay.

Oscar. And then we said, “Why? I mean you can share it anywhere you want.” No, no, no, I want to keep it my camera roll because I want to use it in my YouTube blog. “Oh, interesting.” The biggest shift that was happening on Youtube at that moment was that Youtube kept growing like crazy as a platform, but they totally stopped doing tools and video creation tools. Why did this happen? The opportunity to build some product that is really aimed at allowing any user on Youtube to become a creator, its huge

Tim: Sure.

Oscar: We started toying around with the idea and we actually built a small prototype.

Tim: So the current product it’s not decorations. It’s a full blown editor that runs on the mobile phone.

Oscar: Exactly and it’s kind of like an iMovie.

Tim: Alright.

Oscar: So basically our main competitor right now is iMovie from Apple on the iPhone. That the fact of video editing app for everyone on the iPhone is iMovie, because it’s free.

Tim: Sure.

Oscar: But we realized that it was very limited and also we realized something very clear and very simple, which was, you know. This is not Apple’s main business either, I mean.

Tim: Yeah, it will always be sort of a neglected child.

Oscar: Right. I guess.

Tim: So what does a platform most people are using to edit video for YouTube channels for Vine? What are they using now? Apple?

Oscar: No, I guess that actually you know this is very interesting, but most of the content on YouTube and Vine is coming from PCs and Macs. So they’re using either FinalCut or they’re using either Premier.

Tim: Traditional desktop.

Oscar: Well established professional video software editing. Applications of they’ve been there for forever.

Tim: Sure.

Oscar: It’s sort of a natural thing to happen that you know, the most professional tools you know. Dominating everything every single creation aspect on the desktop, but on mobile something interesting is happening. No app was actually building something towards these creators.

Tim: So are you starting to see content creators that are exclusively producing on mobile now?

Oscar: Yes.

Tim: On YouTube?

Oscar: For short.

Tim: Excellent.

Oscar: But I think the logic there and really where we saw the biggest opportunity that you know, top creators. They already have a workflow.

Tim: Sure.

Oscar: It’s really hard to change the behavior of those users, because they’ve invested a lot, right? They’ve invested a lot of time; they’ve invested a lot on gear, cameras, microphones.

Tim: They got a system that’s obviously working for them so…

Oscar: So especially if you have an audience already. You’ve invested on something to create that. But what we saw as a huge opportunity, was actually the creators that live inside the long tail.

Tim: So smaller creators or new creators if you’re just coming on this.

Oscar: Exactly. Which is huge, you know. There’s so many people that have been watching content for a very long time and now they’re sort of feeling, “Okay I want to be a creator as well. I want to start. I want to start my own channel.”

Tim: Well this is something I think a previous guest on the podcast also talked about. They’re seeing the evolution of any new medium, inevitable shrinking of the gap between the producers and the consumers.

Oscar: Right.

Tim: If you look at book publishing. There is a huge gap between the producer and the consumer, by the time you step it through blogs and Facebook and you get down to a tweet. There is no difference.

Oscar: Right.

Tim: It’s a fundamentally equal platform and it seems like video is starting down that path now.

Oscar: Yeah totally and it’s because of the mobile market.

Tim: So do you think that editing and posting video will be as intuitive and as quick as a writing tweet?

Oscar: I guess eventually it will be. I mean the challenge with video though, is that you know. A tweet I guess is a really good example of how can you simplify something.

Tim: Yeah.

Oscar: To the… In the case of a tweet, to the minimum expression, right?

Tim: But it’s also a matter of sort of like the way the user interacts with.

Oscar: Yeah, for sure.

Tim: So if I’m sending out a tweet. I’ll send it out. I don’t think about it, it takes all of 10 seconds and then I’ve kind of forgot about it, it’s done.

Oscar: Alright.

Tim: Video even on mobile is much more of a investment and effort in thinking and planning. Or you see it eventually being just like, “Oh great, let me get this, it’s out.”

Oscar: It depends on the use case and I believe that even though in the video space you so many different categories. In our industry what we’re seeing is that yes of course there’s a huge opportunity for a very simple video creation. Something that is almost as seamless as doing a tweet is possible to do. There is hundreds of apps that you just launch the camera, record the video and put the filter.

Tim: Right.

Oscar: So it’s sort of like the Instagram fact, right?

Tim: That’s a different thing. It’s almost close to the decorations we were talking about earlier.

Oscar: Right. But that’s an interesting category and that’s a very active category, because you have a lot of people that just want to use it in a very casual way. But the area we’re focusing on is a very particular one and it’s storytelling by the video. So video has many different uses, right? I mean now with live stream can be broadcasting what’s going on in the moment. And with these small videos, it’s just maybe just sharing the moment. It’s like a photo in motion, but the storytelling is very particular. Because the storytelling actually requires people, one to think about an idea.

Tim: Yeah.

Oscar: And you actually have to go through that process. What am I going to say in front of the camera? So it’s not scripted, but you actually…

Tim: So how do you think this is going to evolve? So for example, we were talking about Youtube which well there’s a whole range.

Oscar: Right.

Tim: There’s people who simply turn on the camera, but there’s also…

Oscar: YouGo live right?

Tim: Yeah there is also very well produced content up there.

Oscar: Right.

Tim: What do you see as the most useful feature? How will people’s behaviors change? How will they use video in a different way?

Oscar: Well the reason why we believe that PocketVideo in this case, Which is a sort of a pre-end post production solution for mobile content creation. We take the analogy from TV. So when you turn the TV on, you have mainly two kinds of content. Content that is live and content that is pre-produced and post-produced. And the quality and the dynamics it’s completely different and actually they tell you a story in a very different way, whoever is creating that content put in a lot of effort into those ideas and they crafted something. And the result is completely different from doing a live show.

Tim: Sure.

Oscar: When you see a video that is well edited. When you see that and you think about it and you’re like, “Well maybe when life.”

Time: But if were talking about that there’s a big difference between making the tools for this kind of storytelling available on mobile and having people use those tools to create engaging stories.

Oscar: Right.

Tim: Where we are like on YouTube there are plenty of people just turn the camera on and just talk.

Oscar: Right.

Tim: Do you think that once the tools are available and easy to use. People will just invest more time to create compelling stories?

Oscar: Not everyone. I think there is going to be two choices always. And there’s going to be people who prefer to just switch on the camera and talk in front of the camera. Maybe some people will be very good at that and of course maybe tools are going to get better to the live shows for sure.

Tim: Right.

Oscar: But at the same I believe that there is still a very interesting opportunity for people who want to craft something that is more unique and something that tells a story in a very different pace. You can tell the difference.

Tim: Excellent.

Oscar: And you can actually see the result of putting that effort into crafting something. And we see that eventually happen on mobile for sure.

Tim: Okay, excellent. Are you still pursuing a freemium model?

Oscar: Sort of the same path. First we launch the product, introducing all the creation tools, all the basic creation tools, back in September. Just two weeks ago we just introduced a new version. So we’ve include some sort of production tools as well for your videos. Way improved and a little bit more sophisticated. So it’s getting more sophisticated and because of the technology and you know. Phones are getting faster, we’re getting more memory and so on. So now it’s you know, technically it’s possible to replicate some of those things that it’s almost the same experience in the core essence of what you can do. But it’s faster and it’s easier…

Tim: Yes, it’s pretty amazing.

Oscar: And then use your fingers on the screen and you realize that I’m manipulating everything just pinching in, pinching out. Then you know, your touching the video in a way. So it’s very different from just having the mouse and the keyboard.

Tim: Yeah.

Oscar: So it’s a very different paradigm as well. The users who were born with a phone, millennials and kids and young kids and teenagers, they love the creation on mobile devices. And they’re not really…

Tim: creatively. When you’re sitting down on a tablet to do editing versus sitting on a desktop.

Oscar: Yeah.

Tim: It would seem to be that your thought processes are different. I mean didn’t…

Oscar: It is.

Tim: Are we starting to see videos that are produced on mobile, have a particular look or style to them.

Oscar: Not really I guess of the style, maybe it’s more about the platform itself.

Tim: Okay.

Oscar: And then kids follow what they’re seeing, right? And they’re trying to come up with new ideas and everything, but even the format. A lot of the videos that we are seeing being created on PocketVideo, really follows the same rules. Not rules, but the visual guidelines of the visual style of Youtube.

Tim: Well that’s as far as every new technology starts out by imitating.

Oscar: Right.

Tim: What it will eventually replace.

Oscar: Right. And I believe that really the key here is that is just making it accessible for more people. If they just got their phones, that’s enough.

Tim: It’s got everything they need in there.

Oscar: You don’t need anything else. You actually, you can just start with that. There are so many talented kids that are just waiting for that chance to just know be on the spotlight as well.

Tim: Okay.

Oscar: And that’s sort of a very interesting take as well for us.

Tim: Okay.

Oscar: We believe that we can be the seating area for these platforms. Where so many new creators that could be really, really big eventually, can actually born and can actually start from here.

Tim: That makes sense. Let’s shift gears a bit. You started and run startups in Mexico, in the US and in Japan. I’ve got to ask you just some compare and contrast questions so…

Oscar: Between the three countries?

Tim: Between three, well the US. San Francisco I think is the outlier.

Oscar: Yeah.

Tim: That’s the one that’s unique in the world.

Oscar: Yeah.

Tim: But, what are some of the starkest differences you see between the ecosystems here in Japan and even like Mexico and San Francisco?

Oscar: When you’re an interpreter for all your life. when you go to Silicon Valley you realize, “Yeah. This place is just crazy.” I mean.

Tim: Yeah.

Oscar: Everything just moves so fast and the entire ecosystem is just basically built around that idea and that concept of everything’s possible, right? So we can just build everything no matter how crazy the idea is, anybody can build everything. So I think that’s the most shocking part for me, every time I go there. I mean stark differences, I mean for sure when you start a company in Mexico or in Japan. It’s a painful process in a way, it’s kind of slow.

Tim: So you think people are just more, they’re more doubting whether the idea is possible? where in San Francisco they’ll be more likely to say, “Yeah that is possible.”

Oscar: I guess people who go to Silicon Valley have that kind of mindset for sure. I mean they believe that something can be better or that they can create something completely new or they can really alter the course of any industry or any sort of idea basically.

Tim: Was that the mindset that drew you there the first time?

Oscar: Yeah, for sure. I think that when we went there and we raised actually our around there. In our particular case, we found it very hard to hire engineers in the video space. Especially in Silicon Valley, we thought it was going to be way easier. Competition is really stiff in Silicon Valley.

Tim: Absolutely.

Oscar: You’re competing not with Google and Apple or a handful of companies. You’re competing with everything single startup,

Tim: Very well funded startups.

Oscar: Very well funded startups.

Tim: Was that one of reasons that drew you to Japan?

Oscar: Yes. We interviewed a lot of engineers that were really skilled, really good. But then we realized just talking with them about the video space, that they had no experience whatsoever.

Tim: You’re talking about image processing and you’re talking about…

Oscar: Well it’s a very, very specific and deep field.

Tim: Exactly.

Oscar: There’s a lot of memory optimization, resources optimization.

Tim: Was it that there was a lot of engineers those talents in Japan or just much less competition and few engineers?

Oscar: Sure, no there’s actually a great, great insight about that and why we thought it was really great to be Japan.

Tim: Why is that?

Oscar: Well the video game industry.

Tim: Of course.

Oscar: Game developers, you know game developers especially back in the day. And I’m talking you know before game engines and before the unities and so on.

Tim: So talking about console gaming gear?

Oscar: Exactly. Console gaming but back in the days, the biggest challenge that you had as an engineer was that since there was no middlewhere whatsoever or no engines whatsoever. You actually had to do everything almost by a family language for that specific processor or those GPU or those specific chipsets, even some custom chips that the consoles had back in the day. So the best engineers were actually coming out from Japan.

Tim: Alright.

Oscar: Because they really had a lot of access to talking with the Sony engineers and really understanding how the platform work and so on. Then we realize these guy they have a lot of experience actually using OpenGL, because they build engines for those chipsets. And they really understood the essence of doing a graphics processing and image processing.

Tim: Now recently there have been a lot of Japanese companies who have moved to San Francisco. Not as a market entry, but just to move there to start a company. And someone who’s started companies in three different countries. When do you think it’s a good idea for Japanese company to move to Silicon Valley to raise funds? When do you think is best for them to stay in their home market?

Oscar: I think that the problem with Japanese companies in a way that the market still very strong in Japan. And in a way even though it’s declining and maybe some people can argue about the aging population and so on. Still domestic market and domestic consumption is still high. It needs a full mobile hundred percent penetration mobile market with crazy good networks. So all the infrastructure is ready and all the market is ready. So you can try and you can succeed.

Tim: So you think it’s just there, nothing’s forcing them to go overseas.

Oscar: Yeah, totally I mean at least in the very beginning. There is no motivation to really think about a global company in Japan. So that’s why you see a lot of companies starting here just saying, “Now we’re going to go after the Japanese Market, we’re making a lot of money. So who cares about the US?”

Tim: Well I think that attitude is changing now.

Oscar: I think so too.

Tim: You know there’s been a couple of rather high profile companies that made that mistake and paid for it. I think even like startups now, tend to think a little more globally than even big companies did 20 years ago.

Oscar: I believe so, but I still see the pattern in a way of so many startups focusing on the Japanese market first. They’re not really thinking about building a product that is going to be for the entire planet. They’re thinking about making a successful product in Japan. And then eventually maybe think about bringing it outside.

Tim: So you’d saying it’d be worthwhile to move to San Francisco early?

Oscar: If you have a product that has that global potential and you believe that you’re really building something that can succeed around the world and can be easily imported into different areas of the world. Then I think that’s the right time to go to Silicon Valley and then try raise money there. But if you don’t have that ambition or you don’t have that kind of product, where it can be universal enough. I don’t think there’s a reason to go to SiliconValley.

Tim: Okay, excellent.

Oscar: And there’s a few industries. There is very strong engineering for those areas. For instance robotics, I mean robotics is one of the areas that so many people keep talking about and people say, “Well nothing’s happening in Japan.” They’re wrong; I mean there are so many great startups.

Tim: It’s actually yeah. It’s astounding the depth of R&D that’s being done in robotics.

Oscar: Exactly. It’s crazy.

Tim: For both startups and big companies as well.

Oscar: But even people who used to work at big companies now, sort of considering moving on to build their own company. Robotics and also mobility in a way or any related to the car industry. You know this great company, called Wheel, the wheelchair.

Tim: Yeah.

Oscar: I mean, they were actually our batch mates in 500 Startups in Mountain View.

Tim: Oh Yeah.

Oscar: So we know them very well. All these guys come from the auto industries. All these ex-engineers with such great skill you know for building a product like that. They decided to, you know use those skills to build a mobility product. In some industries, there might be a really great connection with your brand.

Tim: Alright.

Oscar: And especially because of the talent.

Tim: That makes sense. What do you think is the biggest problem facing Japanese startups today?

Oscar: Well maybe the lack of startup and entrepreneurial culture in a way nowadays. Which is ironic right? I mean all these great companies back in the post-war era.

Tim: Well I think…

Oscar: They were great entrepreneurs, right?

Tim: Yeah.

Oscar: I mean in the end.

Tim: I think that’s exactly it, in the sixties and seventies. Companies had to go global, domestic market wasn’t big enough.

Oscar: But the lesson is there and I think it’s very visible for Japan. The problem is maybe they forgot about that or maybe as a foreigner, it’s easier for us to see it. But come on I mean, the Sony’s and the Toyota’s and the Honda’s, and all these guys. They built empires from scratch and from a totally destroyed country.

Tim: Yeah.

Oscar: With a country that was actually starving after the war and the only way to try, was to try to be global, and to try to go outside.

Tim: So the DNA is definitely in there.

Oscar: I think they have it wired somehow, you know in their DNA. And nowadays it’s kind of like comfortable enough. So nothings pushing them to do it, right.

Tim: Well actually that, that probably leads well into what I call my magic wand question? If I gave you a magic wand and I said, “You could change one thing about Japan, education, attitude towards risk, anything at all to make it better for startups here, what would you change?”

Oscar: Maybe changing the perception of someone deciding not to go through the path and just say, “Dad I’m not going to join Sony, I’m not going to join Toshiba or Toyota

Tim: So to make people more accepting of people making different career choices.

Oscar: Yes.

Tim: Life style choices.

Oscar: And one choice could be I want to build my own company. It doesn’t matter if it’s a you know, super scalable business or like IT company. It could be even, I want to open restaurants or whatever. Just this sort of entrepreneurial spirit.

Tim: Yeah that’s very much at the heart of innovation in general I think. To be open-minded, accepting of people who want to do something different and off the beaten path as well, that would be a huge event.

Oscar: So that thing alone, I think it would help a lot.

Tim: Excellent, yeah. Alright well listen, thanks for sitting down with me.

Oscar: Yeah thank you so much, thanks for the time.

 And we’re back.

The Pocket Supernova team has had an interesting journey so far. In their most recent pivot into a pure video editing platform for mobile, seems to have put them on the track for success. You know, I wonder to what extent the novelty seeking behavior that Oscar and I talked about skews the growth numbers for all mobile apps. Those in gaming in the social space are most extreme of course, but it seems that mobile apps these days are a lot like pop stars. They have huge initial growth numbers with legions of fans and tons of press. And a year later, the world has forgotten all about them and are now transfixed by the new greatest thing since the last greatest thing.

But it seems that Pocket Supernova has now identified and solved the real and persistent problem for its users. One with less novelty, but far more staying power and earning power than cute cat ears.

I also thought it was interesting that Oscar considers having development being done in Japan as a key strategic advantage. With the increased centralization of and competition for talent in San Francisco and with venture capital becoming more and more global, I think we’re going to be seeing a lot more of that in the future.

If you’ve got an idea about where mobile video is heading, then Oscar and I would love to hear about it. So come by disruptingjapan.com/show/047 and let us know what you think, and when you drop by, you’ll find all the links and sites that Oscar and I talked about and much, much more in the resources section of the post.

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

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