New technology is always introduced with the promise of the good it can do for humanity. Most of the time the promised good never come to be.

This is largely a structural problem ib how startups are funded, and some founders are creating a better way.

Today we talk with Yosuke Kaneko, founder of  Sora Technology, who is using drones to fight malaria in Africa. The technology is a perfect fit, but it was hard to address this problem as a startup.

We talk about the challenges of using technology to solve important, but only marginally profitable problems, and why the unique nature of Japan’s startup ecosystem might provide the solution.

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

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Show Notes

  • How drones can find mosquitos that humans can’t
  • Why real done innovation continues to come from the global South
  • Why it’s getting harder to build a drone startups in Japan
  • Moving from a good idea to getting the first contract
  • The difficult business model of doing good
  • How to continue growing long-term
  • The impact of regulations on drone innovation
  • The truth about the startup scene in Nagoya and Aichi
  • The current state of drone startups in Japan
  • How to get Japanese companies exporting again

Links from the Founder

Transcript

Welcome to Disrupting Japan, Straight Talk from Japan’s most innovative founders and VCs.

I’m Tim Romero, and thanks for joining me.

Fortunately, most of us never have to think much about malaria, but it’s one of the most deadly diseases in human history. Malaria was responsible for up to 5% of all the deaths of the 20th century, and it killed tens of billions of people before that. Even now, the disease continues to kill around 600,000 people every year.

Well today, we sit down with Yosuke Kaneko, founder of Sora Technology, and we talk about a new approach to startup business models that can actually help save lives.

Sora uses drones in Africa to identify water bodies with the highest chance of being mosquito breeding grounds, and then they work with government agencies to ensure that those water bodies get sprayed with insecticide.

Yosuke and I talk about the challenges and the opportunities in working with global and national health organizations, when to pivot from solving the problem you want to solve onto solving a problem that actually needs to be solved, and the challenges involved in making a profitable business that is actually focused on doing good in the world.

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

Interview

Tim: We’re sitting here with Yosuke Kaneko of Sora Technologies, who’s using drones to combat malaria in Africa. So, thanks for sitting down with me.

Yosuke: Thank you, Tim.

Tim: Now, I explained very briefly what you guys are doing, but you can explain it much better than me. What is Sora Technology doing?

Yosuke: Okay, so it’s using drone, satellite, and AI, then analyzing environment data, such as the water and also the surface data. Then one of our flagship projects is, you mentioned, the malaria.

Tim: So, how are you using drones to combat malaria?

Yosuke: So ,do you know where is habitats of mosquitos?

Tim: Well, I know when they’re little, when they’re larvae, they grow up in these shallow ponds and shallow pools.

Yosuke: Yeah, you are right. You are right. Exactly. So we are searching the water bodies where mosquitos larvae is habitat. So, we are firstly searching from the sky, so satellite and drone. Then after that, we will find out high risk breeding site of mosquitos. So, the highest breeding site is only 30% of all water bodies. After that, we will spray insect site by drone and also by human.

Tim: So, why is it important to do this by drone? Are the water bodies changing every year? Are they coming and going and evaporating? Are they hard to find?

Yosuke: So, existing way is that they have to treat mosquito larvae, but they don’t know where is the water bodies. So, that’s why they open the maps. Then from their experience, okay, maybe this point, there are the water bodies. So, only their experience, they imagine where is the water bodies. And also they are spraying the 100% of the water bodies. So, that’s why 70% of the insect site is just a waste of money. It’s not good for environment.

Tim: Do these water bodies form in different places every year?

Yosuke: Almost decided place, but the detail is different by season and also the rainy volume, also the climate.

Tim: Your drones are trying to identify the highest risk pools, what are the factors you’re looking for?

Yosuke: We are taking the water body sites and also depths and temperature and also the water bush information based on that we are put to our AI, then classify the highest breeding site.

Tim: Now, you originally didn’t start out doing anti-malarial activities, right? You started out with last mile drug delivery.

Yosuke: Exactly. So, we slightly pivoted from original.

Tim: Well, actually, then let’s back up a bit and talk about that pivot and also talk about you. So, you started out interested in economics rather than communicable diseases or technology. So, how did you end up involved with drones and malaria?

Yosuke: Before I established Sora technology, I worked at JAXA, Japanese NASA. I was the senior researcher of drone, flying car, and also low altitude control. Then actually in Japan, research and development, R&D is enough, but drone, the real data on ground and on site is the most important. That’s why I believe the new tech, especially drone, will be started not from Japan, but global South, especially Africa.

Tim: Yeah, I mean, it makes sense. Any new technology, you want to be deploying it where you’re solving a real problem. But with your work at JAXA, was that also involving using drones for maybe agriculture or surveys, or was it a similar application space?

Yosuke: Yes, similar. I was belong to disaster management team. So, before disaster, we took GIS data from satellites, Eros, which is a satellite named by JAXA. Then after the disaster, we will send the drone, then getting more detailed data, then overlay on the GIS.

Tim: That sounds like a really worthwhile area of research.

Yosuke: Yes, but this is for only disaster case. So, special case, not commercial case. So in regards of the commercial side, for example, drone delivery, we tested one time each quarter by NATO or something. It’s not enough. R&D level is enough, but the commercial level not enough. So, I said our benchmark is Zipline, the San Francisco venture. They started medical drone delivery from Rwanda. Their valuation is around 7 billion US dollars. So global level, using Japan technology, then starting the global south, it’s very general strategy.

Tim: That makes sense. So, yeah, I can understand, well, not so much frustration, because as you meant, if your goal is research, having one test flight a quarter might be perfectly sufficient, but completely impractical for commercial development. So, once you got the idea of what you wanted to do, how did you move from that idea to your first contract to actually deliver these medicines?

Yosuke: The first project is work with UNICEF, United Nations UNICEF, in Sierra Leone, Western African country. Project name, it’s Medical Drone Delivery Project. We went to Sierra Leone based on this contract. Then we discussed, okay, that we have drone, then where’s the medicine? Then they said, we don’t have medicine.

Tim: So, the problem is further upstream, yes.

Yosuke: Yeah, because we don’t have money. Then our counter partner is Science Technologies Ministries, so not Ministry of Health, so they don’t have the real needs. That’s why we discussed with Ministry of Health to know the real needs. Then Ministry of Health person said that we don’t have enough items. So, if we can use technology for reducing the item, then I asked what is the current biggest issue? Then they said the malaria. We don’t have enough items, so enough spray and insecticide. So, that’s why if we can find out only high-breeding site, then reducing the insecticide, it’s good for environment, good for health, and it’s good for money. So, they said yes.

Tim: So, they were willing to fund that pilot, or was that pilot also funded through UNICEF, philanthropic?

Yosuke: Unfortunately, we could not with UNICEF, but Japanese METI supported our project. Then the same year, 2023, June, we started the pilot project.

Tim: And what have been the results of the pilot?

Yosuke: Actually, I was pretty surprised that we took the data from the drone, then we created POC level of the AI. Accuracy is over 80%. It was very good.

Tim: So, did it allow them to spray more ponds? Did it decrease the cases of malaria in the coming year?

Yosuke: So, in that time, we could not prove that level. We could prove only AI accuracy. But this year, we published work with Ghana University, and Noguchi Memorial Institute, which is very famous for infection disease, and Harvard Infection Disease Team. Then we already proved reducing the volume of the insect sites. And also the mosquito count is also reducing, and the suffering person is also reducing.

Tim: I mean, that’s fantastic. Is the government of Sierra Leone going to continue this program and expand it?

Yosuke: Yes, we also testing in Ghana, more big sites, POC with JICA. JICA is a Japanese International Cooperation Agency. Now we are trying to update WHO manual. WHO agreed our strategy. Now we’re working with them, more data we’re getting in Mozambique. Also, last month, Ghana Ministry of Health explained to over 10 country Ministry of Health person this solution. It’s very good. So, you must use that.

Tim: Oh, fantastic. That is just really great to hear. I mean, malaria kills so many people.

Yosuke: So, this is an incredibly important thing to be doing, but how is it profitable? I mean, it kind of sounds like a shitty thing to ask. It kind of came out wrong, but you know what I mean, right? You recently raised money from like the Drone Fund, and Nissay, and SMBC, and these are companies that are going to want to return on their investment. So, what’s the business model behind this?

Yosuke: So, we separate the two parts. The one is public sectors. The second one is private sectors. Public sector is mainly from the Ministry of Health of each country, and also WHO, and also Global Fund, which is focusing on infection disease, HIV, malaria, TB. So, they are spending around 5 or 6 billion US dollars each year. Second one, the private sector, we are focusing on two parts. So, one is the mining sectors. So for example, we have client which is the biggest gold mining company in Ghana, Anglo Gold Ashanti, because the mining company is investing the big money for employee health. So, that’s why they’re investing for malaria intervention. Also, the second one is the agriculture sector, because one of the big high breeding sites is paddy fields, rice fields. So, the mosquitos of insecticides, and also agricultural fertilizer, the chemical level is very similar. So, we have to control the insecticide and the fertilizer, and also both the same situation, the same place. So, that’s why very close to our solution. And also our technology is not find out mosquitos, find out waters. We have the patent to calculate the water level from the sky. So we are supporting agriculture, the water condition, and also brain, the others.

Tim: And so as the business expands into other countries, what’s your growth plan? Are you planning on actually hiring people to run these services in each country? Are you going to be licensing the software to other companies to run the service? How are you going to grow?

Yosuke: Step by step, we are now starting as operators, service providers. Next step, we are creating a platform intelligence room. So, the malaria is the mosquito intelligence room we are providing to each country. Then the operator is not our service. So, we will provide SAS platform and also AI platform.

Tim: So the platform focuses on the diagnostics, identifying pools that are highest risk for malaria.

Yosuke: Exactly, yes. And also we can provide hardware. So, we have spray drone. We can identify where we have to spray by AI and also GIS information. Then after that, we will send that information to a spray drone.

Tim: Right. I was like, it’s your website. I was very curious about that because after you’ve identified the ponds, there are people who drive out there and spray them. And so I was curious why you weren’t using drones. If it’s just the distance or the…

Yosuke: Yeah, exactly. Yeah. So yeah, you will know about the drone industry. So yeah, so the limitation of the drone capabilities, the spray drone, it can be fly less than 20 or 30 minutes. So, that’s why so far over 90% of the spray place is sprayed by human. But 10%, for example, around the bush or difficult to go to by human, now we are using a spray drone. It depends on drone capability increasing. We can increase the percentage of the drone spraying.

Tim: Do you think there are other applications for this technology, maybe in agriculture or back in disaster relief again?

Yosuke: Yes. So, now we are expanding to agriculture and also mining sector. For example, sometimes including the illegal, because the small illegal small mining site, we can identify by the water pond results. It’s a very sensitive topic. So just we are sending the information, but we are supporting that. And also acid mine drainage. So for example, I went to Zambia last month. There are many copper mining sites, but one big issue. There are a few big ponds for mining sites. Then after the disaster, the ponds crash. Then they’re around party fairs, acid mine drainage.

Tim: Right. They contaminate the other water around them.

Yosuke: The environment issue. So, that kind of situation we can prevent.

Tim: That is interesting. So, it does seem like it has a lot of applicability. You know, one thing you mentioned earlier, I want to get back to about your experience back at JAXA and having the one test flight per quarter. Do you think the stricter regulations around drones in Japan and in other developed countries as well, do you think that makes it harder to innovate in this area?

Yosuke: So, Japanese law is of course strict, but the biggest difference is a mindset and a culture. In Japan, it’s very difficult to fly a drone with a disaster case. But in Africa and also global South, there are more needs than risk.

Tim: Right. Well, you always want to be close to customers who have the biggest need for your product. I mean, that makes sense. The regulations are tailored to the needs as well.

Yosuke: Yes. So more flexible. Flexible based on needs.

Tim: So your team is a really distributed team, right? So where are you located?

Yosuke: Our R&D is in Japan. In Japan, we have around 15 or 20 members. Then we have the staff in Africa, 18 countries, and also France and also US. And also I lived in UK.

Tim: So where’s the head office?

Yosuke: We have head office in Nagoya, so middle of Japan.

Tim: And that’s where like the R&D team is?

Yosuke: The main R&D is Shibuya. So when I worked at JAXA, more office of JAXA is in Nagoya. I’m very close to them. So, that’s why I established headquarter in Nagoya.

Tim: Okay. That makes sense. Actually, we see a lot of these really innovative, important solutions kind of going to Africa, going to the global South, which is great. But I’m always curious, why don’t we see more of this innovation coming out of the global South? Is there something that makes it hard for local innovation and for kind of local entrepreneurs to get things started there?

Yosuke: Yeah. Early social implementation is a very good place, but research and development. So, for example, we were working with Tokyo University. So, university and the academia level is very important for research and development.

Tim: So, it’s the lack of that R&D capability.

Yosuke: Yes, so far. But now they’re growing up. So repeatedly, we’re working with, for example, Ghana University. So, we established a new class for drone and AI. Now we are hiring, starting from the internship, then the full-time employee.

Tim: Oh, great. Oh, excellent. Actually, let’s get back to Nagoya for a minute. Are you from Nagoya?

Yosuke: No, actually, I was born in Ibaraki. So, why I established Nagoya because I was very close to Nagoya startup personality. But a second reason is Aichi Prefecture is selected focus area for aviation technology. Aichi Prefecture is a headquarter of Toyota. But they have to change industry. The one of the target is the flying car and also drone. So, very good place to work with manufacturing company. And also hiring engineer is a very good place.

Tim: The startup ecosystem in Nagoya, is it very strongly focused around this kind of manufacturing, the automobiles and drones, or is it a broader base?

Yosuke: So, Aichi and central Japan, including Aichi and Gifu Prefecture, it’s a very strong area for manufacturing the car and also the aviation. And also for startup supporting, very kind. Because they have the budget, because they have Toyota and big manufacturing company in the prefectures. But as you mentioned, almost startup is in Tokyo. So, Tokyo has a big budget and also the high competition. But in Nagoya, it’s a big budget, but low competition.

Tim: Well, is that a good thing? I mean, that seems like a good thing in the short term. But I mean, eventually you have to compete with everyone else, right?

Yosuke: Also, that’s why they are investing not only the budget, but also they created the Station AI. They’re very similar with the Station F. So, they are trying different approach with Tokyo. Tokyo is so many competitive place, but they have the strategy to connect other country, for example, Paris and also the US, how to connect incubation ecosystem with Nagoya.

Tim: When Nagoya startups get successful, do they tend to stay in Nagoya or do they move to Tokyo? It depends on each company, but we will never transfer to Tokyo because I already promised to them.

Tim: So, headquarters is staying in Nagoya. All right, excellent. What’s the current state of drone startups in Japan? Because this was like super active, maybe, I don’t know, five or six years ago. There was a lot of investment, a lot of activity. But things seem to have cooled down a little bit since then.

Yosuke: Yeah, exactly. So almost the drone startup is a slightly difficult situation. The expected market is bigger than real.

Tim: Yeah, people are expecting a much bigger market.

Yosuke: But actually, it’s more. So, that’s why almost the drone company is a slightly difficult situation, especially established before 2020.

Tim: So, is the smaller market, is that because of competition from China? Is it because of stricter regulations? Or is it just because people were dreaming a little too big and the applications aren’t there?

Yosuke: The manufacturer side is, as you mentioned, Chinese company is very strong and also service company. A construction survey created market, but the biggest market they expected is delivery. And it doesn’t. So, that’s why the trend is now changing. Security, defense, and also commercial, the market is very big.

Tim: Well, listen, Yosuke, before I let you go, I want to ask you what I call my magic wand question. And that is, if I gave you a magic wand and I said that you could change one thing about Japan, anything at all, the education system, the way people think about risk, the amount of regulations, anything at all to make it better for startups and innovation in Japan, what would you change?

Yosuke: Only one?

Tim: Start with one.

Yosuke: First one is everyone can talk the English, same as Japanese level. For example, dissertation, we have the more effort than the native person of English.

Tim: Yeah, a lot of people talk about the importance of English language in Japan, but why is it important? What does it get? Is it for research? For sales?

Yosuke: For everything. So, over half of year, I’m staying abroad. So, then I felt the Japanese technology is very good, but for example, in UK now, so many macha.

Tim: Yeah, there’s a bit of a macha craze right now.

Yosuke: But the most biggest macha exporter is in China. So, creating is a very good thing, but expanding the business global is a very weakness of Japanese. So, that’s why the first three languages, second one is connecting the global, and then third one is, I think, the history. So, one of the Japanese quality is accumulate. Accumulate technology, accumulate history. So, we have around 2,000 years of history. This is a very special case, but Japanese doesn’t know that it’s special. I would like to tell Japanese to learn English, understand the history.

Tim: So, not just the language, but understand better other countries’ history, and culture, and markets.

Yosuke: Yes.

Tim: Well, do you see that improving? Do you see among new startup founders, people thinking more globally?

Yosuke: Yes, I think so. Yes.

Tim: Okay, well, that’s encouraging. Well, listen, Yosuke, thanks so much for sitting down with me. I really appreciate it.

Yosuke: Thank you so much. Arigato gozaimasu..

Outtro

And we’re back.

Yosuke’s experience with Sora illustrates one of the most frustrating, or at least disappointing, aspects of startup innovation. And it’s the one that comes up most often when I’m working with aspiring college-age startup founders.

The problem is that it’s usually very hard to make money solving our most important problems. Even when technology can be used to help solve serious problems, the structure of venture capital and startups forces the technology to be used to address the most profitable problems, rather than the most important.

As Yosuke explained, many drone startups have rushed to solve the Global South’s scalable problem of last-mile remote drug delivery. But the real problem, the lack of drugs to deliver, well, that remains unsolved.

The sad fact is that it is extremely hard to construct a highly scalable, profitable business model around saving lives, or at least around saving poor people’s lives.

Sora Technologies is not what most investors would consider to be massively scalable, and that’s fine. That’s good, actually. It’s exactly that lack of massive scalability that gives them a real chance to help solve the important problem they’re trying to solve.

You know, Japan is often criticized, and correctly so, for having too many low-growth, low-valuation IPOs. There absolutely does need to be more focus on bigger bets and bigger-impact startups. But still, I think there needs to be a place for lower-valuation, non-hyperscaling IPOs in order to allow for some capital to flow to startups that are solving important but less profitable problems.

Sora’s investors include some of the best-known VCs in Japan, so I don’t think I’m alone in this way of thinking.

And there is no contradiction here. Both hypergrowth and slower-growth strategies can happily coexist in the market as long as we’re not fixated on optimizing everything to maximize rapid growth.

Now, Japan has always had far more patient capital than America and much more long-term corporate discipline. So perhaps this model for helping startups help solve our most important problems will evolve into one of Japan’s most successful exports.

 

 

If you want to talk more about doing meaningful good with startups, Yosuke and I would love to talk with you, so come by disruptingjapan.com/show249 and let’s talk about it. And if you enjoy Disrupting Japan, please share a link online or just tell people about it. Disrupting Japan is free forever, and letting people know about it is the absolute best way you can support the podcast.

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

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