We’ve said this many times on Innovators in Japan, but Japan is a great market for international expansion.

In fact, Japan is the largest SaaS and Cloud market in Asia. It ranks 3rd in domestic IT market size, consumer market size, portion of Fortune 500 enterprises headquartered, and overall size of the economy. There have been numerous success stories of startups opening up their Tokyo office, but it’s easy to skip Japan just because you’ve heard of the challenges moving into Japan. While these anecdotes, from the language and cultural barriers, to lack of on-the-ground support, contain nuggets of truth, most of them are overblown realities (“business cards are sacred”) to outright myths (“I can only sell through partners in Japan”).

“And if we couldn’t find this information, we knew it’d be close to impossible for others to come across it, and thus both nations would be missing out on the best parts of American innovation and mature Japanese business.”

Having written about the Japanese market for a while, we stumbled on two key insights. First, that there was a huge gap between the perception and reality surrounding the Japanese market. The second was that while those in the know knew at a gut-level what made startups think twice about Japan market entry, we couldn’t find any actual documentation on why startups actually hesitated starting up their Japan entry. And if we couldn’t find this information, we knew it’d be close to impossible for others to come across it, and thus both nations would be missing out on the best parts of American innovation and mature Japanese business.

We at Innovators in Japan decided to fill in this gap by going out an asking US startup executives about what they think of Japan as it relates to their business. We started sending the survey in early January, we’re excited to announce that we’ve now closed survey responses, and have begun analyzing the results.

What the Survey is About

The survey is broken into three parts:

1. Basic information: Industry, size, and other current-state information.
2. A series of questions measuring how respondents felt about certain statements. Examples include “Japan will be too expensive,” and “We don’t know how to hire in japan.”
3. A multiple choice question to select the top 3 areas of support that would move the needle on Japan entry

The idea here is to understand how they felt about Japan based on how much respondents agreed or disagreed with each statement in section 2, along with what kinds of support would help respondents feel confident in their hypothetical Japan entry initiative across different verticals and sizes.

“While these anecdotes, from the language and cultural barriers, to lack of on-the-ground support, contain nuggets of truth, most of them are overblown realities (‘business cards are sacred’) to outright myths (‘I can only sell through partners in Japan’).”

The Plan — Where We’re Going from Here

We broke down the entire project into four phases:

Phase 1: Survey development and initial outreach to Japan experts for input
Phase 2: Startup executive outreach with a request to fill out the survey
Phase 3: Analysis and report draft
Phase 4: Finalize and publish the report

Phase 1 began last November with several Japan experts providing their time and insights to making the survey better.

Phase 2 began in early January with us reaching out to startup executives with a request to fill out the survey. We’re now in phase 3, having closed responses and beginning to take a closer look at the results. We’re already seeing some general trends

We expect to wrap up phase 3 in mid- to late-May, with the final report published in June (with what we hope to be a pang of excitement Japan had for its 2020 Olympics before they decided to postpone the games).

Back to Our Roots

I started Innovators in Japan a few years back when I was preparing to open up a Tokyo office (and first APAC office) for the startup I work for. As a Japanese person who grew up in Japan, I knew that, while I would be fine living in Tokyo, I had no idea how to sell, recruit, explain our technology model, or pitch in Japanese (I moved to California when I was 18 — been here ever since).

In the age of the Internet, searching for these kinds of information would be easy — at least that’s what I told myself.

But the reality was that there were only two main kinds of information on business in Japan — the superficial kind (how to bow politely), and the outdated kind (a la the decades-old Toyota manufacturing method). If I, a bilingual and bicultural Japanese American couldn’t find information on how to conduct business in Japan, then who could? And this, my writing as part of documenting my learning about the Japanese market and business tips, is how Innovators in Japan came to be.

“If I, a bilingual and bicultural Japanese American couldn’t find information on how to conduct business in Japan, then who could?”

We’re now excited to be working on a larger project to understand how others view the Japanese market in order to shine some light on what’s stopping companies from entering Japan. We’ve received enough responses to move forward to the next phase; we can’t wait to get the report out there in the world.

Announcing the Perception of Japan Survey Project was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

From the lives of the hundreds and thousands infected, to municipalities and nations taking drastic measures to contain the issue, there’s no question COVID19 has affected the global economy in ways the layperson did not see coming. Japan, a very close neighbor of China, has seen restaurants, hotels, and other mom-and-pop shops shut down due to widespread cancellations — some establishments are now reportedly hanging “Japanese Only” signs in a desperate and misguided effort to keep their customers safe.

Though all nations across the globe are undoubtedly affected by the current crisis, Japan amongst them has found itself in a worse position than others, as they scramble to figure out what to do with the planned 2020 Tokyo Summer Olympics.

Hopes for an Economic Boost

The Tokyo Organising Committee of the Olympic and Paralympic Games (TOCOG) estimated in 2019 that planning and executing on the Olympics will cost Japan ¥1.35 trillion (~$12.3 billion), or about 0.25% of Japanese GDP, and 2.24% of Japan’s annual tax revenue (based on fiscal year 2018 data).

The good news is that the Olympics are supposed to result in an economic boost, at least temporarily, from visitors from around the world descending on Japan amidst the burning summer heat and humidity. The economic impact was expected to boost annual GDP levels by 10% for a few years after the event according to the Bank of Japan. Even beyond quantitative revenue metrics, Japan was supposed to be able to flex their soft power, showcasing their food, music, clean streets, a highly efficient metro system, and all things Japanese to a mostly unfamiliar crowd. Now those expectations seem more of a distant dream of a bygone time, before we all were aware of the effects of COVID19.

Mounting Costs and a Fading Plan

In December 2019, the Japanese Board of Audit reported ¥1.06 trillion (~$9.6 billion) in spending between fiscal year 2013 and 2018 for 340 projects related to the Olympics including building the stadium and developing the program. In other words, $9.6 billion could go to waste, even before we consider the hundreds of millions of dollars in corporate sponsorships.

Some used to say that the Olympics will be the last hurrah before the Japanese economy cools down, that the Olympics would have only been a short injection of revenue that was never to be sustained, and that interest in Japan from foreigners is short-lived. With recent events, the Japanese economy may not even have the chance of seeing even a temporary boost before business slows down (if it hasn’t already) and people bypass Japan entirely for a while to avoid contact with COVID19.

This is why the Japanese government is pushing hard to postpone the Olympics by a few years, with Tokyo Governor Yuriko Koike stating that cancelation is unthinkable. Cancellation is a rare but not unprecedented move by a host country, though cancellations have only happened due to the two World Wars, highlighting the dire position Japan has found itself.

Worthwhile Investment or Sunk Cost?

The Japanese government must weigh its options carefully, as any hole in their logic will be diligently scrutinized. The inconvenient truth is that the Abe administration can expect widespread criticism no matter what choice the nation makes, as the economics of hosting the Olympics has been hotly debated.

While some economic analyses have found positive net economic gains, understanding much less calculating revenue lift from hosting the event is a challenging tasks. Combined with the very clear costs associated with running the Olympics, it’s no wonder many cities are reluctant to pitch themselves as potential hosts. One very real and rational option for Japan is to view this as a lost cause, and cancel it to save itself from spending even more money for very little, if any, return.

A Test of Leadership

As Daniel Kahneman, Nouriel Roubini, Richard Thaler, and many other behavioral economists have proven time and time again, Homo Economicus, the model human being who considers all issues rationally with perfect information at all times, does not exist. All we have are risk-averse and cognitively biased people (myself included) who are not able to take the complexities and the scale of costs to run the Olympics, all disgruntled for having to cancel an international event Japan has put in too much effort to see it get ditched last-minute due to a viral outbreak.

Perhaps the safest option of Abe, as a politician and as a leader of a nation damaged and fearful in the throes of COVID19, is to postpone the Olympics, if only for the world to finally celebrate the resilience of the international community in the face of a global pandemic.

What COVID19 Means for the Tokyo Olympics, and the Japanese Economy was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

This week, our topic of discussion is a US-born 4th generation Japanese American who decided to move halfway across the globe to make a difference in Japan’s entrepreneurship culture, one student at a time. Meet Steve Sakanashi, founder of Sekai Creator.

About

Read more in the article here

Macro View:

Crowdport: Japanese social lending grows to ¥100bn (~$900m) in first half of 2018, at 2x annual growth. More here: https://bit.ly/2wpbEuy

New Rounds:

Activ8, operator of virtual character agency upd8, raises ¥600m (~$5.4m) from gumi and Makers Fund as they prepare for global business expansion. More here: https://bit.ly/2PcxvNo

Bespo!, a service for restaurant reservation with LINE, raised ~¥100m (~$900k) from Keisuke Honda and LINE Ventures | LINEチャットでレストラン予約の「ビスポ！」にLINE、本田圭佑氏らが出資 https://tcrn.ch/2BTzC74 #Japanese #startup

Leapfrog Ventures, a seed-stage VC firm Led by ex-Incubate Fund investor Takuma Terakubo, invested $50k in Kenyan social commerce management SaaS BisharaBot. More here: https://bit.ly/2wiMoHg

MerryBiz, an accounting virtual assistance service, raised ¥150m (~$1.35m) from Fuyo Sogo Lease and ,the Accretive Group to accelerate its business process outsourcing business. More here: https://bit.ly/2MW7t3u

Plant Form, a Niigata-based aquaponics startup, raised ¥20m (~$180k) for its monitoring and controls system development. More here: https://bit.ly/2olGlx7

Rakuten, a leading Japanese ecommerce company, entered the crypto exchange arena with move to acquire company Minna no Bitcoin aka “Everyone’s Bitcoin” (@minbtc) for ¥265m (~$2.3m). More here: https://tcrn.ch/2Po592T

requpo, on-demand hair stylist matching startup, raised ¥230m (~2m) from istyle, Energy & Environment Investment, Adways, iSGS, Monex Ventures, and SMBC Venture Capital. More here: https://bit.ly/2wrghnU

StarBurst, a seed stage accelerator operated by Protostar, completes ots 5th demo day; “asset management for apparel shop” SMASELL wins out of 8 contestants. More here: https://bit.ly/2Pbq1ue

Toyota, a Japanese auto maker, invested $500m in Uber as it aims to launch autonomous vehicle services by 2021.More here: https://tcrn.ch/2P8enA8

TRANBI, online M&A matching service, raised ~¥1.1bn (~$10m)from SBI Investment and Mitsubishi UFJ Capital, et al. to solve the lack of successors to SMB companies. More here: https://tcrn.ch/2MSQJKL

Quick Updates:

Alice.style, a personal item sharing platform, and IoT PO box startup SPACER announces partnership. More here: https://bit.ly/2LBV7sT

CLAS, an affordable furniture rental startup, released its service; widens tenants’ options to furnish their living quarters. More here: https://tcrn.ch/2wrYtd7

ERAS, a tech worker education and software dev outfit, and AI Academy operator CyberBrain announces partnership in EdTech. More here: https://bit.ly/2NBZ7vl

frame00, a Japanese UI/UX company, announced the development of a new crypto token to foster open source ecosystem growth. More here: https://bit.ly/2NlNmZz

GA Technologies, a pre-owned real estate market solution provider, launched the Blockchain Strategy Center to accelerate blockchain technology and business development. More here: https://bit.ly/2PNPbQE

GHELIA, a consumer AI technology R&D joint venture by Sony CSL, venture firm World Innovation Lab, and UEI, announced its plans to release new services within 2018; will allow anyone to leverage AI from a browser. More here: https://tcrn.ch/2wqURYP

LINE, Japanese telecommunications and search company, released its token economy concept along with plans to create a LINE ecosystem around own blockchain. More here: https://tcrn.ch/2NzSx8y

Metro Engines, short-term rental management Cloud provider, launched corporate apartment management Monthly Engines. More here: https://bit.ly/2PIQmkp

Prevent, a Nagoya-based medical data analytics startup, launched a lifestyle disease management app Mystar. More here: https://bit.ly/2MFid7m

Property Access Asset, a Singapore-based Japanese property management solution, adds blockchain development firm LayerX and real estate marketplace tsukuruba as partners for their new platform Cryptorealty. More here: https://tcrn.ch/2omDJz9

Quoine, a blockchain FinTech and crypto exchange operator, announced their migration to Liquid aiming to improve market liquidity, and plans to launch new platform on Sept 4th. More here: https://bit.ly/2NlNCYx

scouty, an AI-based recruiting SaaS company, launched its product along with a feature detecting signs of job switching.More here: https://tcrn.ch/2BMOFPS

Sony Music Entertainment, a global music conglomerate, launched its accelerator ENTX (ent-ex) to support businesses for social good. More here: https://bit.ly/2osSMHC

UUUM, a YouTube influencer marketing and talent management agency, released its new audition platform NOCHISTA, bringing gamification to the auditioning process. More here: https://tcrn.ch/2C0aLhY

Verses, an AR/VR blockchain foundation, opened its Tokyo office with Japanese tele-existence startup Telexistence. More here: https://tcrn.ch/2PUprlF

Innovators in Japan: Weekly Digest 9/3/2018 was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

PayPal, a now well-known electronic payment platform, is also known for having spawned several notable tech insiders, from serial entrepreneurs to successful venture capitalists — the roster includes YouTube, LinkedIn, Yammer, and SpaceX for new startups, and Founders Fund, 500 Startups, and Mithril for venture capital firms to name a few.

Also known as the PayPal Mafia, over twenty of these early employees at PayPal have contributed directly dozens of companies, not to mention hundreds of venture capital investments, and similar to groups of early employees at Google and Facebook, the great thing about wildly successful startups is that they become a new incubating ecosystem for future founders and visionaries.

Across the pond, in the largely enterprise-heavy land of Japan, there is one company that stands out as having graduated numerous alumni well known in the Japanese business world.

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The Basics: Recruit Holdings

Recruit Holdings has a long history starting in 1960, when it started out as an advertising agency for university newspapers (think classifieds and other job-related ads). In the 60 or so years in existence, it has grown to a corporate giant with more than $16 billion in annual revenue across 21 group companies, and approximately 45,000 employees across the globe. The company has acquired a number of non-Japanese companies in recent years, the most notable being Glassdoor and Indeed, both in the recruitment and corporate review space. It’s probably a safe bet that you didn’t think these two companies were now owned by one Japanese corporation.

Compared to its humble beginnings (and perhaps a lack of brand value in the US), the company is now a household name in Japan, operating several high-profile magazines and websites targeting audiences in specific life stages, from part-time and freelance classifieds TownWork, to Zexy for wedding and marriage-related tips, and SUUMO, Japan’s leading real estate search site.

Though it’s had an amazing six-decade run, the company hasn’t been immune to the kinds of corporate scandals many large companies face given enough time in the market. The company was once blasted in Japanese media in the 1980s when the then-chairman was caught leading an insider trading scheme that involved senior business leaders and political figures. The incident, known as the Recruit Scandal, is said to have swayed public opinion so much that the nation voted in a government led by the Democratic Party of Japan after a 39-year reign by the Liberal Democratic Party. That’s the kind of influence Recruit has built, one ad channel at a time.

Recruit has continued to grow throughout the decades, surviving both the asset price bubble bursting Japanese Lost Decade of the 90s and the financial crisis of 2008 (during which the Lost Decade was used as a case study in numerous articles), continuing into the 2010s with a number of global acquisitions. And over these decades, Recruit has built a reputation for their internal hiring, training, and operating practices that have resulted in numerous alumni founding successful startups, or being poached by other organizations as effective leaders.

The Recruit System

To understand why there have been so many startups founded by ex-Recruit employees, we’ve compiled a list of factors posited by many writers and ex-Recruit employees have already tried to answer the question (thank goodness for the popularity of this topic over in Japan). No matter what article, it seemed that these four factors created a solid foundation to nurture future leaders:

1. Extreme Accountability and Meritocracy
2. Attention to Processes (but for the results)
3. Internal Mingling and Angling
4. New Business Development Support

Extreme Accountability and Meritocracy

“…an article from 2018 reports 32% of Japanese male workers and 26% of Japanese female workers will only work for one company until retirement.”

Believe it or not, a large number of Japanese companies still operate on the assumption of lifetime employment, whereby a college graduate joins and stays at one company for their entire career. In fact, an article from 2018 reports 32% of Japanese male workers and 26% of Japanese female workers will only work for one company until retirement. The Japanese Institute for Labor Policy and Training found that close to a whopping 90% of respondents desired lifetime employment. This system has resulted in a seniority-based compensation system that rewards loyalty vis-a-vis each employee’s tenure and age rather than results, which inevitably results in mediocre or even poor performance being ignored, high performers disincentivized to continue producing high-quality work, and low tolerance for risk taking so as to not rock the boat, or worse, have a project you’re involve fail.

Recruit has taken an almost polar opposite approach of actually focusing on an individual’s performance by setting up concrete performance metrics to evaluate their contribution and progress — a perspective Japanese corporations are warming up to, yet still unable to switch gears after decades of lifetime employment firmly embedded as a key pillar of Japanese society. A Recruit employee is given individual accountability and can move up the ladder much quicker than in traditional enterprises, along with an increasing paycheck, which in turn incentivizes them to keep producing solid work (who would’ve thought?).

Accountability at Recruit comes in the form of autonomy and freedom in decision making, both in professional development and responsibilities over their domain. It’s the individual who comes up with their stretch KPIs and set annual professional goals to achieve their short- and longer-term career vision. Their pay grade and positions come with very clear expectations, which make mapping your own career plan as well as receiving constructive feedback a natural part of their work.

In addition, when things seem to be getting off track, whether it be a project or a sales cycle, it isn’t the individual’s manager’s role to step in to course correct — they start by simply asking what that individual wants to deal with that situation. This provides an opportunity for the employee to think through the issue without overly focusing on the consequences, getting him or her out of their comfort zone and allowing them to grow as professionals. It also instills in the employee a sense of ownership (something not all employees in the US get, either), an emotional aspect of motivation that’s proven to produce better results.

Attention to Processes (but for the results)

While many business teams set their quarterly revenue goals and work hard to achieve them, Recruit sales people have been known to break goals down into weekly subgoals and processes. For example, rather than working to achieve $40,000 a month, working on $10k a week and taking it week-by-week makes it easier to pace yourself and track progress. While developing processes and optimizing workflows is a large part of Japanese business, it usually comes at the expense of results—given enough time, following processes and orders for the sake of following them becomes the norm. To the contrary, processes at Recruit have been implemented to support the results-driven workforce, making goals more measurable and achievable and keeping each employee on track. In fact, non-sales teams (engineering, new business planning, etc.) also operate on this results-based mentality, laying out their own KPIs and tangible, actionable metrics to improve their own departments.

Their daily or weekly standup meetings, as well as awards given out frequently (weekly, monthly, quarterly, etc.), are other methods Recruit companies employ to keep everyone honest and moving in the same direction, not to mention motivated while stoking friendly competition.

Internal Mingling and Angling

As Recruit sales teams tend to work very closely with their clients, sometimes even embedded on-site, they often don’t consider themselves ad sales people, or external recruiters, but rather business consultants. Due to this mentality, there’s always something intriguing one of your colleagues is working on outside of your scope. In order to be in-the-known of what everyone else is working on, a lot of Recruit conversations end up resulting in people talking about their latest project to showcase their experience and network — and working hard to find interesting ways to communicate what you’re working on in order to show off the projects you’re working on. This has created a culture in which employees find stimulation in talking about their unique projects, find out the exciting, fast-paced industries in which some of their clients operate, and keep the competitive spirit alive within each business, along with planting seeds for future cross-business collaboration.

New Business Development Support

Quitting your job at Recruit is commonly known as graduating, and the ex-Recruit network reaches far and wide. While Japanese companies are known for their lifetime employment system, still very standard to this day, Recruit has made it very easy, and even beneficial, for employees to leave the company.

One example of that is their “graduation” severance package of one-year’s salary after 5~6.5 years of employment. This creates a sense of security for those leaving the company to pursue other, riskier opportunities, if not outright entrepreneurship, and provides a reason to move on rather than sit idly in a role that may have become just another job. Recruit as an organization understands, just like venture capitalists and tech insiders in Silicon Valley, that the endeavor of entrepreneurship is, in and of itself, a beneficial journey you can undertake; having your alumni start new businesses, even if they fail in the end, creates a better alumni network that’s better for the Recruit network.

In addition, Recruit has created their own internal business idea pipeline Ring. Initially set up in 1982, Ring has created business units such as Zexy, StudySapuri, and R25, all household names in Japan today. Ring is organized as a business idea contest with initial submissions, feedback, and a final presentation to the executive directors of the company including the president. Once an idea has been given approval to move forward as an actual project, the process starts over — the winning teams have to hit certain goals to receive further funding and support at the seed, MVP, alpha, and beta stages before it is turned into an actual business line (another nod to Recruit’s process- and results-oriented culture).

What We Can Learn from Recruit

If you’re somebody who works at an American startup or tech sales organization, what Recruit does well, from its meritocracy, to autonomy given to employees, and internal water cooler talk, may already be a given in your day-to-day life. Recruit’s practices may come across as obvious and even mundane to you. However, I took these four pillars of Recruit’s success as a kind of management mantra — key insights and actions to take and codify in order to create a successful business culture instead of waiting for these attributes to organically materialize on day.

Just like the Checklist Manifesto, How to Make Friends and Influence People, and other tried and tested management books, Recruit has found a way to successfully build a wide variety of business on these pillars. And if a Japanese conglomerate can generate successful leaders and entrepreneurs one after another using these methods, I have a feeling all other companies, especially those in the US, have a solid chance at improving their business outcomes.

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Thanks for reading this article! If you learned something new and want to let us know, leave us a few 👏s. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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The Recruit Mafia: The 60-Year Old Behemoth that Keeps Creating Japanese Business Leaders was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

Japan, believe it or not, is an amazing market for software companies. It’s the 3rd largest economy and 2nd largest IT market in the world; it’s also the largest SaaS / Cloud market in Asia. Despite whatever you may have heard about Japan’s closed Japanese business culture, it’s warming up quickly to non-Japanese companies for a variety of reasons. In other words, there’s never been a better time to be a software startup trying to move into Japan.

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Don’t forget to leave a few 👏s if you like what you see. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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We’ve written a lot about misconceptions surrounding Japanese business culture, from overblowing the importance of business cards, to the notion that a foreign company will be successful only if they go through a distributor already embedded in Japanese businesses. And just like any other culturally-enmeshed aspects of business in Japan, sales is also often mistaken for having an impenetrable cultural moat foreigners just won’t be able to break through.

While there are culture-specific nuances to selling and gaining traction in any culture, I believe these are just nuances, and sometimes obstacles, but never mysterious nor impossible to bridge. However, you do need to be aware of them, and actively work with how things work in Japan if you’re to succeed in expanding your operations to Japan.

Setting Expectations with HQ

If you’re reading this, I’m going to assume that you’re not going to be the person selling directly to Japanese corporations. You’ll most likely be hiring a team in Japan (or a handful of Japanese professionals where you are) down the line to handle day-to-day Japan operations.

So, no matter how much we talk about how to enter, and sell in, Japan, a lot of the tactics are moot if you personally won’t be able to execute on them.

What I’ve found is that many representative directors in Japan managing the office, and Japan teams in general tend to have a hard time convincing management back at HQ of the differences between the Japanese market and that in the US, especially for executives expanding operations to Japan for the first time.

Instead of talking about specific sales tactics, what I’d like to focus on here is the expectations you should have, and how to make sure you can reconcile what you expect from your US team v. your Japan team.

What Types of Companies Lend Itself Well to Japan Market Expansion?

While Japan is a great market for software companies, there are a few factors that can make it easier or harder to enter Japan. As you start thinking about moving to Japan, being able to take a pulse of the Japanese market without diving straight in is invaluable. But how do you do that? If your company has these following traits, you might be able to test the waters with a few early-stage customers in Japan.

Developer-centric v. Business User-Centric Software

I’m defining “developer-centric software” as those sold to IT and developers, and used primarily for building (or helping build) something technical. These include, but are not limited to DevOps tools (CI/CD, testing tools, etc.), developer tools (SDKs, identity management tools, etc.), business intelligence tools, databases, etc.

Business user-centric software, on the other hand, are those sold to non-technical users, for non-technical functions. This could be HR and payroll solutions, expense management tools, digital advertisement solutions, and content management tools.

Between these two, developer-centric tools may be easier to sell into Japan, at least initially, compared to business user-centric tools because developers are much more used to dealing with software with incomplete support. A lack of product localization, a small Japanese community, and very little Japanese documentation are par for the course when using non-Japanese software. Japanese developers have gone through this cycle time and time again as new tools and methods crop up outside of Japan, and they are relatively independent and unbiased in their evaluation of tools. These factors make it easy to measure Japan expansion viability through initial organic adoption without much upfront work (think GitHub and their organic growth in registered users in Japan), though organizations will have to have a Japan support strategy in the long-run (again, think of GitHub as they start selling enterprise licenses).

Individual licenses v. enterprise licenses

Simply put, it’s much easier to convince one person to sign up for a freemium service or purchase one software license compared to going through a POC cycle and having to convince a room full of decision makers. Of course, companies will still have to eventually figure out how to sell into larger accounts more efficiently, but getting 100 users who signed themselves up is much more cost effective than having to hire a sales team first.

Self-service v. professional services

This is no different than in the US, but software that is completely self-service, from signing up to implementing and operating the tool, can garner a significantly higher number of users (revenue notwithstanding) than those requiring professional services support.

Exceptions

These three factors are just a few ways to start asking about an organization’s Japan expansion viability. But by no means does this mean that a business user-centric tool on an enterprise sales cycle with heavy professional services for onboarding cannot expand into Japan. In fact, Salesforce and Oracle are two great examples of companies that have been extremely successful in Japan that exhibit exactly the traits that may have made initial expansion difficult.

For better or worse, understanding these factors can be a way to tally up the market opportunity and start with incremental steps to increasing market share in Japan, rather than jumping straight into opening up an office.

Moving In, and Moving Up

Once you’ve decided Japan possesses the qualities of an attractive overseas market, you will most likely kick off a project to incorporate in Japan, and find a representative director (also commonly known as country managers).

The good news is that these people know Japanese business like the back of their hands. The bad news is that it’s going to be difficult for you, a non-Japanese person, to fully appreciate what the team in Tokyo are working through because you don’t have experience in Japan. This means that you might set unreasonable standards without adequate HQ support, or conversely, not know exactly when to push back on your Japan team’s input.

In order to close the gap between your expectations and the unknown (to you) reality, we’re going to lay out what to expect during the sales process, along with a few dos and don’ts.

1. Qualify, always

This seems obvious, but your team in Japan may be reluctant to ask qualifying questions upfront, thinking that it’d be impolite to start asking questions about their business and pain points over email before meeting the prospect. Many of them will want to go onsite, exchange business cards, and go through a company overview deck before asking questions.

• Do push hard on your team to qualify, even if it’s a few high-level questions. Given most meetings take place in-person, going to a meeting without any upfront information means wasting almost 2 hours of each attendee’s time. Come up with a few qualification questions, and make them into a template they can easily paste into their email while scheduling the meeting.
• Don’t just agree to the pushback that asking these questions are impolite. You won’t lose any prospects just because you asked a few questions, and the worst they can respond with is a “let’s chat about it in person.” In fact, asking pointed questions upfront can signal a level of expertise to the prospect, and can lead to them trusting you more than just walking into a room to run through a dry presentation.

2. Always Assume In-Person Meetings for Introductions

American executives generally don’t realize how ingrained on-site introduction meetings are in Japan. Especially in Tokyo, where you can get anywhere within 30 mins via the well-oiled machine that is the Tokyo subway system, the expectation is that your team will visit each and every prospect for meetings.

• Do accept this as a fact and a cost of doing business in Japan. Yes, meetings will take twice as much time considering the amount of time it takes to get to the prospects’ offices, but you’re not going to go far if you try to overturn this long-standing piece of business culture.
• Do make sure your sales teams are qualifying these prospects before jumping head-first into an intro meeting (refer to the point above).
• Do try to find other meetings that could be done online, like POC check-in meetings, and second, or third meetings without executives involved. Your sales team can always say that they’re going to be traveling around that time, and can only chat over video conference. Of course, this isn’t going to work for negotiations and other important presentations.

3. Clarify POC Objectives or Get Into a 2-Year POC Time Sucker

As your sales team walks prospects through their products and services, the topic of running a free POC will inevitably come up. The only problem is that they’ll speak to a larger number of people than you’re used to back in the US, and none of them have decision-making authority. The Japanese sales person, thinking running a trial is the right way to get the attention of higher-ups, agrees to a free trial, but isn’t able to get information on their budget cycle, and who will be signing the dotted line (and it’ll most likely require multiple people approving the project). A few months of hands-on support from your organization, and the prospect comes back with new requirements, a request for a second round of evaluations, and a longer than expected timeline.

• Do make sure there’s a clear POC objective and a path to final approval. Japanese organizations are group consensus-oriented, which makes finding the one decision maker almost impossible (in fact, there are usually many people who have to sign off). Going into a trial with out either of these will guarantee a long-term cycle of multiple trials as new decision makers and goals crop up, along with egregious scope creep.
• Do make sure you know their fiscal calendar with budget cycles. Because Japanese organizations go through a round of reorganizations every year, the trial you’re currently working on may mean close to nothing once your champion leaves their post and is replaced by somebody completely unfamiliar with the project, along with new corporate goals that can easily shift the importance of your POC. Also, there’s very little point in running a trial right away if they have to wait 3 quarters to even submit new budget / project requests to consider purchasing your software (happens all too often).

4. Negotiation

Aside from asking for discounts, I’ve experienced very few instances of Japanese prospects negotiate hard on contracts. From what I know (and that’s just a drop in the bucket compared to all sales cycles in Japan), Japanese prospects are pretty straight forward and honest about their needs and requests. A lot of who I worked with collaborated on coming up with a fair price and licensing structure without playing hard-to-get or any of the games we’re used to seeing back in the US. That’s not to say you won’t get some prospects who aren’t as forthcoming, but on the hole, Japan is a very easy place to come to an agreement on pricing.

• Don’t start at an excessively high price point expecting your Japanese counterparts to negotiate downward. Japan is very rule and structure-oriented, which means they will expect you to propose a price that’s honest and real, not something to be toyed around with excessively. If you shock them with a number, they will likely not move forward with trial, or try to ask for a lower price (“We’ll get back to you” followed by silence).

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Thanks for reading this article! If you learned something new and want to let us know, leave us a few 👏s. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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Further References

I hope this clarifies some key points to keep in mind as you support your Japan sales team in their quest to expanding the company’s market share out East. With that said, this is just one perspective of many — there have been many others who’ve written about selling in Japan, and I’ve listed a few for your reference.

• How to sell to Japanese corporations - Venture Japan
• How to Sell Without Salesmen in Japan - Disrupting Japan
• B2B Sales in Japan and How It's Different
• Evernote Co-Founder Phil Libin on the Company's Success in Japan
• Starting a Japanese sales office - Venture Japan
• Doing Business In Japan
• Secrets of Japanese business culture - Venture Japan

Entering the Japanese Market: Stacking the Deck and Setting Expectations was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

From real estate market and agency service Zillow and Redfin, to online real estate mutual fund trading platforms CrowdStreet and Rich Uncles, and other cutting edge startups tokenizing property access and streamlining appraisals, the US Property Tech (i.e. PropTech) scene has been a part of the wider startup ecosystem for more than a decade (Zillow was founded in 2004). Japan, on the other hand still has very limited experience with PropTech, as you may have imagined.

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Don’t forget to leave a few 👏s if you like what you see. You can actually give it up to 50 👏 by holding down the button (which would mean so much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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With that kind of lag in experience, it’s easy to imagine Japan’s real estate-related tech startups to act as so-called time machine businesses by following the path of global PropTech startup front-runners, essentially recreating Japanese versions of Silicon Valley products and services. While this may be true in a very broad sense given Japan is a capitalist nation with people buying and selling homes, condos, and commercial properties, there are a few angles unique to Japan any curious investor would have to consider.

Real Estate isn’t Really an Asset

The one biggest and most talk about difference in real estate between Japan and the US is that Japanese real estate doesn’t appreciate. The whole idea of home ownership in the US is based not only on the qualitative joys of owning one’s own domicile, but also in the hopeful returns on investment captured through home value appreciation. The land on which the house is may retain value, but the building on top will depreciate over 22 years on average.

This, combined with the idea that a family should live in a house they built or purchased freshly built, has led to constant home building in the suburbs as former tenants leave and new, happily married couples arrive. On visiting a real estate listing site, you’ll be greeted by the option to search for new or pre-owned homes. Just like a car, a piece of property is recognized as pre-owned once the first tenants occupy it along with a decrease in value. The net-positive of this is that commercial real estate developers and their surrounding ecosystem of suppliers will have ample business opportunity to sell their services as new generations mature into home ownership.

Hard for Foreigners to Navigate

Yes, non-Japanese people can purchase real estate in Japan, and I’d bet the process is no more complex and painful than it is in any other country. Renting an apartment, on the other hand, is one of those experiences that often leaves the first very negative impression of Japan in a foreigner’s mind. Of course, discrimination based on race, family origin, etc. is very much illegal in Japan. Enforcing this during your first few apartment searches as a newcomer to Japan is a different beast.

A whopping 40% of foreigners surveyed by the Japanese Ministry of Justice said their applications were rejected due to their non-Japanese standing. Stories abound of exchange students and new employees assigned to Japan being denied apartment leases, both directly by landlords and by agents due to a variety of reasons ranging from owners / agents not speaking English and the potential lessee not speaking any Japanese, to ignorant assumptions of foreigners being loud, obnoxious, and taking poor care of the property.

Renting is hard enough for foreigners that you’ll often see real estate offices explicitly welcoming foreigners. These foreigners often will have to find connections through friends of friends (if they’re lucky), or go through an agency that focuses on placing non-Japanese tenants into Japanese apartments, taking a non-trivial cut in the process.

This is why services such as AtHearth, an next-gen apartment rental service targeting foreign residents of Japan, has found initial success by essentially focusing on a market that has been completely neglected by traditional players.

Aging Population and Akiya Problem

It’s no secret that Japan is rapidly decreasing in population, leaving the nation older on average every year. Japan is on course to lose a third of its population in the next 50 years, and one in five Japanese person is already over 70 years old. Rural areas are now full of abandoned houses that have effectively fully depreciated, but without any new takers to raze and build for many reasons including those already brought up in this article.

The Japanese Ministry of Land, Infrastructure, Transport and Tourism (MLIT) estimates that there are 8.2 million abandoned homes, a 24.4% increase from a decade ago; they also expect this number to rise to 20 million by 2033. Japanese municipalities and innovators have taken this issue to task by creating search portals for dirt-cheap abandoned houses and property flipping.

These cheap houses don’t really come cheap when you consider renovation and relocation costs, not to mention the burden of having to live in rural areas with few ways to make a living especially when you’re a foreigner with no ties to the local economy. Having said that, there’s enough room to grow new vacation rental services based on traditional homes, as well as services catering to digital nomads who are able to work remotely and wish to immerse themselves in local culture outside of Japanese metropolitan areas.

Japanese PropTech Trailblazers

Now that we’ve covered some nuances to the Japanese real estate market, I’ve listed a few PropTech startups changing the real estate market in Japan. These five startups are obviously only a very small sliver of the current ecosystem — if you’re looking for more information or a detailed list, please contact me at shohei@innovatorsinjapan.com.

Renoveru

With $4.4 million in funding, this 9 year old company provides home renovation and urban planning consulting services.

リノベーション（中古マンション）ならリノべる。

GA Technologies

This 5 year old startup operates an apartment renovation business; RENOSY, a real estate listing database and property search service; and a livability research and development arm. The company has grown to more than 300 employees and $10.5 million in funding.

株式会社GA technologies -ジーエーテクノロジーズ

Sumutasu

Sumutasu is an AI-based real estate marketplace that enables homeowners to sell their properties in as fast as two days, and aspiring homeowners to purchase renovated condos with zero agent commission. This 10-person company has been around for a little less than two years.

住まいに新しい価値を足す | 株式会社すむたす（sumutasu inc.）

Collabit

Collabit, an 8 year old AI-enabled home appraisal service, makes it easy and fast to predict the value of your own home, as well as properties across Japan.

collabit（コラビット）｜不動産テック(RealEstateTech)企業

Spacely

Spacely is an Augmented Reality startup that has developed a solution for virtual property tours via a VR headset. The company has been around for over 5 years, and has collected $2.4 million in funding. It also claims to have signed up 2000 customers within two years of rolling out the VR service.

Spacely, Inc. | 株式会社スペースリー

Akippa

Akippa is essentially an Airbnb for parking spots (or ParkMobile), with $18 million in funding over ten years they’ve been in operation.

akippa株式会社

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Thanks for reading this article! If you learned something new and want to let us know, leave us a few 👏s. You can actually give it up to 50 👏 by holding down the button (which would mean so much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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The Growing Property Tech Landscape in Japan was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Don’t forget to leave a few 👏s if you like what you see. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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In 2018, we expanded our focus to include macro trends in Japan, from the aging and declining population that’s expected to shave off a third of current population levels by the mid-2050s, to what the latest US-Japan trade deals means for global politics. In addition to articles, we added 5 more podcast episodes, thanks to all the amazing people who connected me with each guest, and took the time to sit down and discuss their trials and tribulations with the world.

And as we get closer to the very end of 2019 (and the 2010s!), I wanted to reflect on all the articles we published as a “Year in Review” article.

1. Fariza Abidova discussed her latest project, Trusted Corporation, a B2B matching site for Japanese corporations and foreign startups to find one another

Innovators in Japan Podcast: Interview with Fariza Abidova

2. We looked at the Japanese problem of aging and population decline as potential opportunities for startups to make a mark

The Aging and Declining Population of Japan: An Opportunity

3. We tried to help people looking for “software engineers” in Japan by making sure they know what’s in a Japanese software engineering title

Software Engineers in Japan: Not What You’d Expect

4. We explored one quick way Japanese companies can be more competitive with very little investment or effort

One Thing Japanese Enterprises Can Do Right Now to Become Much More Competitive

5. We dove deeper into the cultural aspects of Japanese work-style reform, noticing how ineffective government mandates were in affecting change

Japanese Work Style Reform and Its Bureaucratic Sins

6. We sat down with Kenji Negi, formerly of OpenX, currently at AppNexus, to discuss Japanese customer success and account management best practices

Innovators in Japan Podcast: Kenji Negi

7. We talked about Japan market entry and expansion with Riki Yoshinaga, a venture capitalist and Japanese business development expert

Innovators in Japan Podcast: Riki Yoshinaga

8. By popular demand, we republished our article on Tokyo startup hubs with some updates

Startup Hubs in Tokyo Revisited

9. We learned about how Robert Schuman, CTO of Zehitomo, created an environment where cross-cultural engineering teams can thrive in Japan, while learning a lot from Japanese business practices

Innovators in Japan Podcast: Robert Schuman

10. Brad Ellis, Director of Product at Japanese unicorn Mercari, shared what he’s learned by building products for Japanese and American audiences

Innovators in Japan Podcast: Brad Ellis

11. We looked into what the US-Japan digital trade deal actually meant for Japan and the APAC region as a whole

On The US-Japan Digital Trade Deal: It’s Really About China

12. We questioned the notion that Japan is “behind” other developed nations when it comes to venture capital funding and overall innovation

The Japanese Startup Landscape: A Glass Half Full

It seems like each year, time flies by much faster than it used to! Thanks for all your continuing support, and I hope you all have a nice holiday season.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Thanks for reading this article! If you learned something new and want to let us know, leave us a few 👏s. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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Innovators in Japan 2019: Year in Review was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Don’t forget to leave a few 👏s if you like what you see. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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Commentators often compare what’s happening in Japan to Silicon Valley to point out how small and almost negligible the Japanese startup scene is — and that’s no surprise, with US startups taking $84.2bn in venture capital funding, while Japanese startups funneled $2.5bn, or 2.9% that of the US.

But there’s a shift in mindset and culture in Japan that is pushing the Japanese tech world back onto the global playing field, and you would’ve easily missed it if you hadn’t been paying attention.

University-affiliated startups have been on the rise in recent years, churning out hard science startups based on basic and applied research as opposed to faddish mobile apps, and elite university grads have been entering startups in droves. Not to mention, Japan has more than doubled venture capital funding in just five years between 2013 and 2018. Again, these are numbers and trends that you simply would’ve not seen had you been comparing snapshots of Japan to Silicon Valley without focusing on trends within Japan.

Japan looks decent even looking at other parts of the world. In 2010 and 2015, Japanese startups collected $1.29bn and $1.11bn in venture capital funding, respectively, while those in the UK received $0.79bn and$0.69, respectively. In 2018, Japanese startups raised $3.5bn, while those in the UK raised $3.19bn. Israeli startups, known for highly technical teams creating enterprise-grade security and analytics software, raised $3.63bn. Do we view the UK to be significantly behind the US? Are Israeli startups technologically inferior to those in the US? Then why is it that we see Japan as a closed off nation with very little innovation in the making?

Japan is clearly in the running, and I suspect there is a combination of narrative fallacy (Japanese startups suffer because of long-standing bureaucracy), framing bias (Japanese startups got less than 3% of VC funding compared to the US), and a few other biases and fallacies, as well as some overblown realities that have contributed to Japan being known as a nation with a lack of entrepreneurial strength. In other words, we’re all viewing the same glass, and believe it to be half empty.

In the 1970s and 80s, the US felt a very real fear that Japanese corporations would take over the nation — from Japanese automakers dominating the market and even purchasing US parts to put into their cars, to Japanese banks buying up US companies and real estate, and even some movies referencing this new reality. (Also as a side note — ThunderCats and Transformers, both cornerstones of 1980s cartoon classics, were animated by Japanese studios.)

Then came the asset price bubble collapse of the 1990s that would lead to what will be known as the lost decade of Japan, cementing in everyone’s minds that Japan had forever lost its economic luster. It certainly has taken time, but things are changing rapidly, and almost under the radar — you’ll miss it if you aren’t looking for it until it catches you by surprise.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Thanks for reading this article! If you learned something new and want to let us know, leave us a few 👏s. You can actually give it up to 50 👏 by holding down the button (which would mean SO much to me!). Let us know what you think in the comments or via shohei@innovatorsinjapan.com!

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The Japanese Startup Landscape: A Glass Half Full was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

On Wednesday, September 25th, the US and Japan signed a digital trade deal that aims to promote the exchange of data and information through a high-level framework on intellectual property rights.

According to a fact sheet published by the Office of the United States Trade Representative, this agreement encompasses a “high-standard and comprehensive set of provisions addressing priority areas of digital trade” as listed below:

* Prohibitions on imposing customs duties on digital products transmitted electronically such as videos, music, e-books, software, and games.

* Ensuring non-discriminatory treatment of digital products, including coverage of tax measures.

* Ensuring barrier-free cross-border data transfers in all sectors.

* Prohibiting data localization requirements, including for financial service suppliers.

* Prohibiting arbitrary access to computer source code and algorithms.

* Ensuring firms’ flexibility to use innovative encryption technology in their products.

A cursory analysis of the fact sheet is that the agreement will result in the following:

1. Lower barriers to digital good import and export by effectively lowering the overall cost incurred by the importing party. This is a win for Japan as it aims to set itself up as a cultural hub after the 2020 Olympic games. This will allow Japanese media publishers to license their products at a cheaper price without hurting their own margins, while encouraging US media outlets above and beyond Viz Media and Crunchyroll to take Japanese companies up on their offer.
2. Remove most requirements to set up infrastructure in order to export digital goods to either country. This is most likely aimed at cloud service providers who provide goods and services that are accessible from outside the nation in which their infrastructure is set up, especially in FinTech given the wording, though I’m not entirely sure what exactly they had in mind (customer data collected through online banking, cross-border investing, income remittance, etc.?).
3. Agree on a baseline understanding that neither government will allow commercial spying and stealing of core IP, while encouraging better encryption. The Japanese fact sheet published by the Japanese Ministry of Economy, Trade and Industry (METI) provides more color in their statement which suggested these governments will not allow companies to steal IP, not that the governments themselves will not be able to use backdoors to peek into what’s happening behind the scenes.

This deal has been described as a “minideal” by some — and I have to agree. It seems like a collection of very standard, high-level ideas that don’t require government intervention for the most part (perhaps except for the tariff piece). But what if this deal isn’t really about the US and Japan after all? Once you take the perspective of a someone trying to pressure another nation whose economic growth and ideological leanings have been diametrically opposed to yours, the pieces fall into place.

The US has had a rough go with China on all fronts. From the age-old notion of China as a rampant IP thief, to the recent trade war initiated by the US, the two nations have not had great trade relations. To make things worse, the tech culture between the US and China are so different that some even say that there will be two Internets — one US-centric, Silicon Valley-driven ecosystem, and another Chinese conglomerate-driven ecosystem — fragmented by different government regulations and ideals.

The effects of this rift has been felt by many in the industry — from Google which pulled out of China after internal backlash for complying with Chinese censorship requests, to AWS which touts two Chinese regions in which they have set up data centers operated through a two local corporations, and malware and government spying concerns across hardware made in China. Yet talks have been hampered by China’s ambition to continue its past breakneck growth to return to the position of global leader in innovation at all costs, combined with the US’s strong need to maintain its position as the leader of the free world, causing both nations to often mix economic arguments with ideological proselytizing.

It seems Trump is working on smaller wins which individually don’t create much of an impact for the sake of deal-making and showing his political prowess, perhaps mostly for the next election cycle. But once enough of these minideals have been struck, he might have an opportunity to finally strike a deal with the Chinese with support from the powerful coalition of countries he’ll have created by then.

On The US-Japan Digital Trade Deal: It’s Really About China was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.

It might be easy to imagine that differences in a country’s culture can greatly influence the sales culture in that country. Sales is inherently a personal endeavor, and how people interact with one another and navigate relationships depend on how people interact with one another in general in each culture. How about other fields like engineering? Aren’t certain processes objectively better than others? In a field like engineering where hard, cold output matters more than fluffier concepts like relationships, can your work still be influenced by the greater culture around you?

Our guest Brad Ellis fortunately has some insight into this. Brad has worked for both Japanese and American companies (Google and Mercari), for both the Japan and US offices, giving him the ability to evaluate engineering cultures and how they are created and maintained regionally, and at the corporate level. Currently working as Director of Product Management for Mercari USA (but in Tokyo as an expat), he’s got a unique perspective on how to turn communication style differences between the US and Japan into a corporate strength, how different national UX sensibilities can end up splitting a product into two independent products, how to diversify your thought by living and breathing a different culture than the one you’re used to, and what Silicon Valley can learn from Japanese service standards.

I hope you enjoy the show!

Some highlights of the conversation include:

• How to think differently in order to make a well-known product in one country successful globally
• Differences in UX preferences between US and Japan-based users
• Cases when local customer feedback turned out to be wrong
• How writing down meeting progress improved everyone’s understanding and output for international team members and 1–1s
• How to successfully deal with the high expectations for customer service in Japan
• Hints from Japanese teams on how to improve Engineering and Product Management quality
• How understanding another culture’s perspectives helps improve decision making (and makes life richer in general)

Innovators in Japan Podcast: Brad Ellis was originally published in Innovators in Japan on Medium, where people are continuing the conversation by highlighting and responding to this story.