Three Tokyo start-ups
Japan is often said to lack a start-up culture, with the perceived risks of failure being too high, funding difficult to secure, and established large companies still getting their pick of the brightest and best employees. Being a foreign entrepreneur in such an environment can be both a bane and a blessing. EURObiZ Japan spoke to three start-ups to find out what the challenges are, and how they overcame them.
MyGengo – online translation service
Launched in 2008, although not officially founded until 2009, MyGengo delivers rapid access to 3,000 translators working in every time zone of the world. Customers can go online and order translation of something as short as an email or a tweet, and expect it back in a matter of hours. Longer texts take a day or so.
“Working in Japan in design, I was always requesting things to be translated and it was as complicated to get something simple done as it was to get a longer document done. So I made this service thinking that it was something that I needed,” says CEO Robert Laing, co-founder with Matthew Romaine.
Laing, who describes himself as “English via Australia and Belgium”, says that the initial administration required to start the company would have been “impossible without the help of my wife, who is Japanese”.
The next hurdle, as it is for almost every start-up, was raising funds. As foreigners, they found it hard to attract interest from venture capitalists or angel investors in Japan, so in 2009 they looked overseas to Silicon Valley.
“For some potential investors the Japan location was a turn-on, for others it was a complete turn-off,” says Laing, who explains that the company has since completed a second successful round of fund-raising.
MyGengo created a US entity to act as a parent company at the beginning of 2010, which was both “useful for investment purposes”, and to avoid the difficulties of sending thousands of translators around the world Japanese tax forms to fill out.
With two foreign founders in their twenties, the company needed “a respectable senior Japanese sales guy”, says Laing. Although they managed to attract a former VP of sales at Apple and Oracle, he adds, there is still a hiring issue regarding the credibility of less conventional employers.
“Our current intern is going to go and work at DeNA [the hugely successful company that runs cellphone gaming platform Mobage-town], and his parents are horrified.”
BRANDPOINT Advertising – specialist in unique ad placement
Headed by two Christophers, Delcourt and Schoenwald, the firm sells advertising in unique spots such as in parking stripes and on escalator handrails, as well as 3D screens that appear to follow viewers as they walk past them.
BRANDPOINT is actually the second company they have founded, having sold an education management consulting firm they started in their twenties after meeting at their first jobs in an English language school in Hiroshima.
Since starting up in April 2010, BRANDPOINT has partnered with Fujifilm for their parking-stripe operation – which places ads in the white lines at public parking spots – and is working with all the major Japanese ad agencies.
BRANDPOINT found that putting a Japanese face to the company was essential and hired a director who previously worked at Suntory and Disney. According to Delcourt, 30, having senior Japanese staff is essential, not just to represent the company, but also to constantly advise on the way they should approach local companies and the etiquette of doing business.
“Though we can still harness a bit of gaijin-power and get away with some things that a traditional Japanese company can’t, we still need to be respectful and show a strong sense of understanding Japanese business ways,” says Delcourt.
Having sold their previous business, BRANDPOINT’s founders had some capital behind them and were able to delay fund-raising, something the partners were happy about for several reasons.
“If you are able to be initially self-funded and grow organically, it enables you to truly understand how to grow within your means,” says Delcourt.
The company had discussions regarding an investment of $1 million from SBI Holdings but felt it “wasn’t the right time for an institutional investor”. They have since secured funding from an angel investor, which has the advantage of it being “not just about money, but that person’s passion as an innovator and a mentor,” says Delcourt.
BRANDPOINT founders’ future ambitions including expanding the company’s overseas operations and having it seen as “a media think-tank” as much as an advertising agency.
LM3Labs – augmented reality using 3D holography and motion sensors
LM3Labs was started by a team of French researchers and developers who came to Japan in 2003 to sell patents to domestic electronics manufacturers such as Epson and NEC. The team had developed algorithms for tracking the movement of hands, feet and faces for sensors, though the programmes were a little ahead of their time.
“This was before the era of the iPhone and all the companies told us that customers weren’t interested in interactive technology,” recalls CEO of Japanese operations Nicholas Loeillot. “We nearly packed up and went back to France. But there was a great guy from DoCoMo who told us that they didn’t want to acquire the patents, but if we made the product, they would buy it.”
Japan being “hardware-focused” was very helpful as the team went on to make products for other domestic companies, which led them to set up shop in Tokyo, where their main office remains, though they now have another in a technology park near Cannes.
Nevertheless, Loeillot describes the first three years as “terrible” as they went through teething troubles with their early products, serving customers who expected perfection.
When it comes to raising funds, Loeillot confesses he is no fan of venture capitalists. “You can waste years trying to explain the next revolution to them, and they don’t get it,” he says. “We tried to show them how motion sensors were going to be big, but they weren’t interested. Then Microsoft gets the Kinect technology [the motion sensor for the Xbox game machine] from a small Israeli start-up.”
LM3Labs is currently financed almost entirely by its customers, which now include global companies, events and museums, where a range of interactive displays and installations are deployed.
The firm has recently teamed up with Panasonic to create middleware – software that links systems – for the electronics giant’s sensors and 3DFeel, LM3Labs’s 3D full body tracking framework which will be showcased at the London Olympics next year.