Long before the maker movement existed, Akihabara was world famous as a destination for hardware geeks, robotics nerds, and audiophiles and tinkerers of all kinds. Hundreds of tiny specialty shops lined the areas back streets and did a surprising brisk business in items you could not find anywhere else.

The internet changed all that. The specialty electronics and computer goods could be found far more easily and for far less money. Even the maker communities began to migrate online. Over the next decade Akihabara changed from the heart of the maker community into the center of otaku culture with mama shops and maid cafes lining the streets.

Mitsuo Hashiba, the General Manager of DMM.make Akiba plans to take Akihabara back to it’s maker roots. DMM.make Akiba is the most ambitious IoT – focused maker space in Japan, and they are already attracting international attention and the community has produced some pretty innovative hardware startups.

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

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Show Notes for Startups

  • What makes the greatest maker-space in Japan
  • Success stories of bionic arms and in-show lighting
  • Why international partnerships are essential on IoT
  • How DMM rebranded from porn to hardware prototyping
  • How a subsidiary can maintain an independent culture
  • The biggest problem startups still face in Japan
  • Japan’s biggest strength in IoT startups

Links from the Founder

Transcript from Japan

Disrupting Japan episode 52.

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

For the past few episodes, I’ve been telling you about some big changes that are coming to Disrupting Japan and that series of changes has begun. We have a new website and starting this episode, we have proper sponsorship. Our advertisers are companies that I know well and I think you probably should too. Most of all, this gives us the resources to make two more big changes which will be coming soon. I can only tease you about it right now, but I think you’ll like it when you hear it. But for now, let’s get back to today’s story.

Long before the maker movement existed, Akihabara was a world famous destination for well, makers, really. Twenty years ago, wandering the streets of Akihabara on any given weekend, you would find masses of tinkerers and hardware geeks and robotics nerds and audiophiles. All shopping at small specialty electronics and computer shops. And I do mean small. Many of these shops were the size of food stalls. The internet changed all that. Around the year 2000, all of the parts and advice and communities started to become available online. There was no need to go all the way to Akihabara and the small specialty electronics and computer shops began closing their doors.

Over the next 15 years, Akihabara transformed itself into the center of Japan’s Otaku culture with manga stores and maid cafes becoming the dominant form of commerce. That’s all fine, I suppose. But DMM.make is trying to take Akihabara back to its roots. They’ve opened one of the most amazing maker spaces in the world and they’re gathering a community of makers in the middle of the Otaku stronghold. Although, I admit, there is a lot of overlap between those two groups.

 

Now, DMM seems an unlikely company to affect this change. They’re Japan’s largest online porn retailer. But they’ve been diversifying into several industries very successfully over the past decade. Mitsuo Hashiba, the General Manager of DMM.make AKIBA explains how DMM.make AKIBA’s changing the nature of IoT in Japan and how DMM managed to pivot from porn to rapid hardware prototyping. So let’s get right to the interview.

 

Tim:    Cheers.

Mitsuo:   Cheers.

Tim:    So I’m sitting here with Mitsuo Hashiba, the General Manager of DMM.make AKIBA. Thanks for sitting down with us.

Mitsuo:            Thank you very much.

Tim:    DMM.make is perhaps the most amazing maker space and Internet of Things creative lab that exists in Japan. But why don’t you tell us a bit about what DMM.make is.

Mitsuo:            DMM.make AKIBA is located in Akihabara in Tokyo. DMM built this facility in Akiba because Akihabara is very famous for electronics parts shops.

Tim:    It’s interesting because Akihabara used to be very famous electronics and parts and makers. And then recently it’s become more famous for Otaku culture. So in a sense, DMM.make is kind of going back to the roots of Akihabara.

Mitsuo:            Yeah, yeah. In Akihabara, still many electric parts shop exist. There’s many people who like build something and DMM.make AKIBA’s main target is IoT hardware startups. Startups, people can go Akihabara City to buy electrical parts.

Tim:    Ah, I see. So it’s just very convenient for the Internet of Things-based startups. That makes sense.

Mitsuo: DMM.make AKIBA, we have two floors. One is base floor. Base floor is a share office, people can use space freely. And base floor also by individual room for three people and six people.

Tim:    And the other floor with the workshop is what I think most people are excited about.

Mitsuo:            Ah, yes, yes. Other floor it’s called the studio. This floor is kind of a share factory. Then our main tenant is IoT hardware startup. And studio’s concept is rapid prototyping.

Tim:    Just looking at it, it seems that DMM.make has gone almost crazy with the amount of equipment so there’s lots of maker spaces in there but you’ve got a lot of top of the line 3D printers, CAD/CAM software, you’ve got testing devices to help people get certified; it’s really an amazing facility. What is the model? Because I noticed that you have different levels of membership. Is the basic model a specialized office rental? Or is it an investment model? What is DMM.make’s basic business model?

Mitsuo:            At first, it was pay fee for every month. We have three plans. Studio only plan and base only plan and the plan, which can use both floor.

Tim:    So it’s a specialized shared office space.

Mitsuo:            Yes, shared office. We also have our corporate plan.

Tim:    I noticed Intel has an office here.

Mitsuo:            Yeah, yeah, yeah. We have some collaboration with Intel on other accelerators. Corporate plan uses companies like Intel or Sharp and many makers. And they want to try their products here.

Tim:    Try their products, do you mean they want to use the testing equipment or they want to test market and get feedback on their products from startups and the community.

Mitsuo:            Both. For example Intel has a device called Edison. The longest to try Edison’s possibility so they had the acceleration program last year. It was very good trial for the big company, I think.

Tim:    So was it run like a hackathon or was it a longer term program?

Mitsuo:            Longer term program. Six months program.

Tim:    Well, let’s talk about some of the successes we’ve seen come out of DMM.make AKIBA. What are some of the most interesting Internet of Things projects you’ve seen come out of this community?

Mitsuo:            There’s many, it’s difficult to select one.

Tim:    If you had to pick one or two.

Mitsuo:            A startup called Exii, they have a very interesting designs on bionic arms.

Tim:    Right. They’re making artificial arms.

Mitsuo:            Yeah, bionic arm. Then why, what they do is interesting for me because most of parts can be made by 3D printer and it’s really data and it’s open-sourced. And their product make bionic arms as a fashion.

Tim:    So it’s stylish designs.

Mitsuo:            Yeah, cool designs. Very nice.

Tim:    Okay. Since they’ve open-sourced these designs, is there a lot of collaboration around the world on this?

Mitsuo:            They have a community worldwide and so many people making their own bionic arms.

Tim:    That’s fantastic.

Mitsuo:            Yeah, really great.

Tim:    This project was open source and with both startups and venture capital all having a global mindset, do you think you’re going to see a lot more international collaboration like that?

Mitsuo:            Yeah. Last month, another startup called NNF, No New Folks Studio, they released their new product called Orphe. Orphe is a luminous shoes which is related with a smartphone application.

Tim:    I saw that. So when dancers can sort of program their shoes to blink and react and change colors as they move.

Mitsuo:            Yes, yes. This is a kind of IoT, they will start local collaboration with dancers  or musicians inside and outside Japan. Because this service doesn’t need language so much.

Tim:    Right. Dance by definition is universal.

Mitsuo:            The application has a very good function. If a very famous dancer put on Orphe and dance application record how colors change or how it moved. So if dancer’s fan can also trace this famous dancer’s action.

Tim:    So the dancer’s fans can actually see not only like the dance moves and the steps this person made, but the light show that was programmed with it. That’s cool. So DMM.make has been focused on, as you mentioned, the creation of these new clever internet of things, devices. But you’ve opened up offices around the world. I noticed that there are make offices in the U.S., India, several countries, so are these your own efforts or collaboration with local accelerators?

Mitsuo:            Ah, yeah, we want to have a connection with accelerators all over the world. Our facilities main target is startups or makers company so need more connection and partnership with accelerators not only in Japan but also outside Japan.

Tim:    Okay. Mitsuo, let’s step back a bit and talk about your history and about DMM and how DMM.make came to exist.

Mitsuo:            Okay.

Tim:    For our listeners overseas, DMM.com became very famous in Japan for selling porn videos, for online games. But in the last ten years, DMM has done an amazing rebranding. So they’re now diversified not only into DMM.make but DMM Securities is one of the biggest FX trading platforms so it’s a leader also obviously in IoT innovation, robotics, cloud sourcing, solar panels. And what’s astounding to me is they’re not just throwing money around, these projects are effective and so I want to know how did that happen internally? How was a company that was so successful on one thing able to change its culture and enter a completely different market successfully?

Mitsuo:            Yeah. But the key is DMM’s Chairman, Mr. Kameyama who’s also my boss. I asked the same question to him, he said, no policy is DMM’s policy he said.

Tim:    DMM’s policy is no policy.

Mitsuo:            No policy, yup exactly. He said if you find good market, just search and try. Chairman Kameyama, he loves business. So he’s looking for many kind of business models.

Tim:    So anyone that brought him a good business model, he would allow them to execute.

Mitsuo:            Yeah, yeah.

Tim:    But within a company as big and DMM was a very big company at that point. How do you get staff to execute, how do you get resources to execute because inside any company, it’s a fight to get any resources at all.

Mitsuo:            All internal program. I know. We also have a system called kamechaku. Kamechaku is not employed by DMM, employed by Mr. Kameyama.

Tim:    So he hires them directly.

Mitsuo:            Directly. He always take in a new source people into DMM.

Tim:    So when you were setting up DMM.make, was the staff primarily DMM staff or did you go out and recruit staff from outside the company?

Mitsuo:            Both. Members are working from inside and outside DMM. 80% hired from outside, outside DMM.

Tim:    Okay. So only 20% of it was company staff.

Mitsuo:            Yeah.

Tim:    That’s very unusual for a Japanese spinout.

Mitsuo:            Yeah, I think so.

Tim:    It usually works kind of the other way where 80% are the parent company staff and 20% are specialists.

Mitsuo:            Because DMM is a company of internet service. But this Akiba isn’t hardware, that’s where you find it. So Mr. Wasawa he’s the founder and producer of DMM.make AKIBA. He’s a bit higher, many engineers from everywhere in Japan. I think, culture is different from DMM.com. DMM.com is internet service so one third is completely different.

Tim:    Well, that makes sense if 80% are new hires and you’re on a very different location. It makes sense you’d naturally develop your own corporate culture. Has DMM.com ever had a spinout that didn’t work and they had to close down?

Mitsuo:            Yeah. We’ve launched a lot of services, not only successful service.

Tim:    But some services are not good and the decision was made to shut those down pretty quickly?

Mitsuo:            Quickly.

Tim:    That’s – I’ve got to say this is unusual for a Japanese company. They fail fast, fail forward. I worked with a number of large Japanese companies who are trying to do open innovation and are trying to do spinouts. And most of them aren’t doing it very well. So what advice do you have for big companies who want to spinout innovative subsidiaries?

Mitsuo:            I think I have no authority to say that. But DMM is a 100% owned company and we also have a strong digital services so we can try new enterprise service quickly. And Mr. Kameyama mind makes it quickly.

Tim:    So he makes his mind up quickly.

Mitsuo:            Yeah.

Tim:    So you think the secret really is just that it’s still a private company that’s controlled by one person who can make a decision quickly.

Mitsuo:            Yeah.

Tim:    Okay. That’s good for DMM. That’s hard to transfer to other companies who are trying to do it. But that does makes sense.

Mitsuo:            I talk with other facilities managers. Japan is a difficult country to startup, I think.

Tim:    Getting better.

Mitsuo:            Yeah, getting better but not enough, I think. The problem is the number of VCs especially on the hardware. Softwares, hardwares have many VCs in Japan. But if Japanese government will support to big companies, entrepreneurs it makes our culture better, I think.

Tim:    That’s interesting cos I think one of the best things that Japanese government did for startups was just talking about them. To have Prime Minister Abe say startups are important for the future of Japan. Suddenly, everyone’s working with them. So what do you think government could do to help these entrepreneurs or help open innovation in Japanese companies? What should they do?

Mitsuo:            Very simple. May I suggest? Money.

Tim:    Just funding?

Mitsuo:            Funding, yeah. Otherwise, Japanese government should support buyer or companies who will introduce or buy IoT startups products.

Tim:    Okay, so you think they could do a lot to do it from the demand side?

Mitsuo:            Yeah. Because if government helps startups, some of them helps startups but it may confused about price in the market.

Tim:    Yeah, yeah. When there’s a lot of money flowing in, the prices go up. So valuations get high.

Mitsuo:            I thought entrepreneur system in the big companies and governmental support to middle or small makers company to introduce priority.

Tim:    So looking in to the future, with all the changes of the Internet of Things and all the crazy changes going on in DMM.make, what is DMM.make going to look like in the next 10 years?

Mitsuo:            The basic style will not change in the future.

Tim:    What do you mean?

Mitsuo:            Our value isn’t new startup comes up and they’re released and gets out in to the wild. DMM.make AKIBA wants this cycle increasing.

Tim:    So you’re going to keep the same model?

Mitsuo:            Yeah, same model. Just we are platform for people who wants to make something or mission vision more strong platform.

Tim:    So in 10 years from now will be the same business model just bigger and more companies.

Mitsuo:            Yeah, so…

Tim:    So, I mentioned before that the Internet of Things today is a lot like programming-wise in the early 80s. Where a lot of people are kind of playing with things, coming up with cool ideas but finding it really hard to make money on it. In Japan, what you do think needs to change for IoT companies to really take off and be successful?

Mitsuo:            Just my mind will be changed, I think.

Tim:    How so? Like whose mind? What kind of thinking will change?

Mitsuo:           IoT is just one solution that now that I went to many contests or hackathons, some products are very good, very nice, innovative. But others are just technical-started service. And sometimes I ask to their builders why don’t you use a smartphone. Many people couldn’t answer so technical is very important. But from the fast and industrial version program, it’s fast and some…

Tim:    You think the makers need to focus more on real world problems, maybe think about business a little more?

Mitsuo:            Yeah, I think so.

Tim:    That makes sense.

Mitsuo:            Especially in like city area like Tokyo or Osaka or urban area. Very convenient to live. But I think there’s more many problems outside the city.

Tim:    I think so too. That happens a lot, I think, for all kinds of startups. Founders like to solve the problem that’s in front of them. They want to solve the problem they see. And since we’re in Tokyo and so many founders are in Tokyo, everyone’s trying to solve Tokyo’s problems.

Mitsuo:            I think many very small problems there are in Tokyo , so we are talking with governors from everywhere in Japan and outside Japan. Then I ask somebody do you have a problem, your prefecture or your area, so they have a lot of problems.

Tim:    But it is interesting because the founders themselves and the money and everything really is in, well not just in Tokyo, but in the big cities. Yeah, it will be good if there’s some way to communicate that information or have the creative founders understand the problems facing rural areas.

Mitsuo:            Yes, so we want to correct the problems everywhere inside and outside Japan. Then we would see if this problem can be solved by Iot or not.

Tim:    Now, with the offices you have all over the world, have you noticed a difference between Japanese hardware startups and hardware startups outside Japan?

Mitsuo:            I think there is no big difference between inside Japan and outside Japan.

Tim:    I’m finding that too. Just in the last 5 years, the gap between Japanese startup founders and foreign startup founders has become very, very small. The gap between Japanese VCs and foreign VCs is still pretty big. Okay, so if the makers and founders in Japan are pretty much the same as the makers and founders everywhere, but certainly the products they’re making are different. And last year, you took a delegation of 10 Japanese makers to South by Southwest. And what was the reaction there to the Japanese Internet of Things things?

Mitsuo:            They promoted successfully. Connect with many people from all over the world.

Tim:    So are there any industries or any sectors or any applications where you think that the Japanese IoT companies are particularly strong?

Mitsuo: Security and agriculture.

Tim:    Agriculture?

Mitsuo:            And Med Tech.

Tim:    Med Tech? Okay. Why agriculture in particular?

Mitsuo:            Cos Japan has four seasons per year and we also have many agricultural area is Japan. Of course I know foreign country has a lot too. Japan is not big land and environment is very important, I think. Here we have some startups who are making agricultural device and I talk with them a lot.

Tim:    One other thing that Japan has a lot of specialty agriculture where they’re producing very expensive specialty fruits or vegetables. The farmers might be much more willing to experiment with new innovations on the high-end, the more expensive end. Okay. And for med tech, what do you see as Japan’s big advantage there?

Mitsuo:            Japan has the knowledge but also there’s many regulation for medical approach in Japan. Strong knowledge and experience, but also those rules, big and small.

Tim:    Okay. So the rules make it difficult to introduce new products. But that sounds like it would be a disadvantage. So you think that’ll change? Do you think the government will change the regulations to make it easier for startups?

Mitsuo:            Yeah, if government try to change the system.

Tim:    Well, I mean, the government has been very supportive of startups here so hopefully they will makes some changes.

Mitsuo:            Yeah, but economic ministry look their eyes on IoTs but medical scene, it’s…

Tim:    That’s true. It’s a different ministry. Right. Maybe they’ll change their mind eventually. Before we wrap up, let me ask you what I call my magic wand question. So if I gave you a magic wand and I said that you could change one thing about Japan, anything at all, you could change education or the markets or the governments to make things better for startups, what would you change?

Mitsuo:            Government.

Tim:    The government? What would you change?

Mitsuo:            I know the staff are very busy but I want them to discuss with more many people.

Tim:    So they’d take more outside advice?

Mitsuo:            Yeah, they have a very wide category areas. Just the collecting of data, and data is not reality, I think.

Tim:    Yeah, that makes sense. They’ll do market surveys, they’ll collect information but that doesn’t necessarily give them the accurate picture of what’s really happening. You would say it would be very worthwhile if the government will interact directly, more directly with small companies and individuals. That would be a big change and a good one. Well, listen, before we finish, is there anything else that you want to talk about?

Mitsuo:       I think Akiba is also a kind of startup.

Tim:    Yeah.

Mitsuo:            Very nice platform to not only startups but also some makers and foreigners. Our strong point is rapid prototyping, please come and look. We have also guided tour.

Tim:    Yeah, the guided tour is impressive.

Mitsuo:            Please visit us.

Tim:    Excellent. Hey listen, thank you so much for sitting down for today.

Mitsuo: Thank you so much.

And we’re back.

If you’re a maker and you find yourself in Akihabara, I do recommend you drop in and take their free tour. It’s a very impressive facility.

DMM might be the only porn company who’s managed to successfully diversify into other business areas. Clearly, the secret to how they have managed and continue to manage this is not only that DMM is a private and closely held company but it’s led by an open-minded CEO willing to listen to new business plans and provide new projects with both the backing and the independence they need to grow. Unfortunately, t’s a recipe that most large companies will not be able to follow.

Mitsuo and I are both bullish on Internet of Things startups in Japan and for much of the same reasons. There are many areas where Japanese IoT startups have a unique approach and a unique advantage. And I think we’re going to see even more interesting hardware startups coming out of DMM.make and out of Japan in general.

If you’ve ever had problems prototyping or even using an IoT device, Mitsuo and I would love to hear it from you. So come by disruptingjapan.com/show052 and let’s talk about it. When you drop by, you’ll see all the links and sites that Mitsuo and I talked about and much, much more in the Resources section of the post.

And I also want to let you know that our 2nd anniversary live show is coming up on September 13th at Super Deluxe in Roppongi. If you’re on the mailing list, you’ll be getting updates and information. If you’re not on the mailing list, wait, why aren’t you on the mailing list? You can sign up on the site or you can just get the event info there or on our Facebook page. Please let people know and help us get the word out. If you like what we’re doing, share it with your friends. If you hate what we’re doing, then share it with your enemies.

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.