Disrupting Japan

Startup M&A is changing in Japan. In August, Naoki Yamada sold his startup Conyac to Rozetta for $14 million.

It was an unusual journey of alternating cycles of rapid growth and near bankruptcy, and today Naoki explains how he managed to make the deal happen and also how M&A is changing in Japan, and it seems that change might come much sooner than anyone had been expecting.

Naoki talks very openly about some of the mistakes he made and give solid advice on how you can avoid making the same ones. And of course, he explains how he handled the negotiations for the acquisition, and why he decided the exit now rather than continue to grow the company.

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

Show Notes for Startups

How two quick pivots saved Naoki's company

The risks for startups hiring (and firing) too quickly

The temptation and danger of focusing on investors at the expense of the team

Why M&A made more sense than another round of fundraising

What Japanese acquiring companies are most worried and most excited about

The struggles of post-M&A integration

Advice for large companies who want to acquire startups

Links from the Founder

Learn more about Conyac at their home page

Rozetta's Home page

Read Naoki’s thoughts on Nakoki’s personal blog 

Follow him on Twitter @naokey

Friend him on Facebook

 Leave a comment

Transcript from Japan

 

Disrupting Japan, episode 65.

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

Today, Naoki Yamada, founder of Conyac, joins us for a second time. Long-term listeners may remember that he first came on the show a little over 2 years ago and he’s been very busy since then. In August, 2016, Naoki sold his company to Rozeta for about 12 million dollars. But that deal almost didn’t happen and today Naoki joins us again to tell us the story of massive growth, followed by near bankruptcy, followed by massive growth, followed by near bankruptcy, followed by recovery, followed by M&A. So you already know the ending but it’s the story that’s important. Naoki talks very openly about some of the mistakes he made and gives solid advice on how you can avoid making the same ones.

And of course, he explains how he handled the negotiations of the acquisition and why he decided to exit now, rather than continue to grow the company. But, you know, Naoki tells that story much better than I do, so let’s hear form our sponsor and then get right to the interview.

Tim: Cheers. It’s great to see you again. I’m sitting here with Naoki Yamada and we’re going to talk about Conyac. And it’s an exciting story of starting up and growing, and almost going bankrupt, and growing, and almost going bankrupt again, and having a happy ending. So thanks for sitting down with us.

Naoki: Thank you.

Tim: So let’s back up a bit—let’s back up a lot. Tell us about what Conyac is.

Naoki: When was the last time we talked?

Tim: A little over two years ago.

Naoki: Okay. It’s been a while and we’ve changed a lot. We started Conyac as a social translation and we slightly changed our service from customer service to business service in 2013.

Tim: So let’s start from the beginning. In 2009, you started it. What is consumer translation? Was it like peer-to-peer translation?

Naoki: It was more like a community-based translation service. At that time, there were only two options for the translations. One is traditional translation entities and the other one is Google. We wanted to make our service in between those two options, so we asked people who could do the translations outside of the community. We added many translators in our platform and we did translation through those people.

Tim: So was it just very small batch translations of 10 words, or a tweet, or that kind of thing?

Naoki: Most of the translations are for 3,000 small sentences,

Expedia had a hard road to travel when they decided to come into Japan. The Japanese market turned out to be nothing like they had ever experienced before. Not only were consumer attitudes and behaviors towards travel booking completely different than it was in their home market, but they were up against some very powerful and well entrenched companies, including both online giants Rakuten and Yahoo and traditional powerhouses like JTB.

Today Hidemaru Sato, or “Maru" as his friends call him, will explain to us how Expedia managed to overcome the odds on a ridiculously tight deadline and how a few tweaks to the core product turned out to be key to their success.

Maru also shares some great advice for both western companies looking to hire a Japan country manager and for people who are Japan country managers and want to do their jobs more effectively.

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

Expedia had a hard road to travel when they decided to come into Japan. The Japanese market turned out to be nothing like they had ever experienced before. Not only were consumer attitudes and behaviors towards travel booking completely different than it was in their home market, but they were up against some very powerful and well entrenched companies, including both online giants Rakuten and Yahoo and traditional powerhouses like JTB.

Today Hidemaru Sato, or “Maru" as his friends call him, will explain to us how Expedia managed to overcome the odds on a ridiculously tight deadline and how a few tweaks to the core product turned out to be key to their success.

Maru also shares some great advice for both western companies looking to hire a Japan country manager and for people who are Japan country managers and want to do their jobs more effectively.

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

 Leave a comment

Friend Maru on Facebook

Connect with him on LinkedIn

Maru's advice on successful market entry

Maru's advice on how to hire a country manager

Partial Transcript

Disrupting Japan, episode 64.

Welcome to Disrupting Japan, straight talk from the CEOs breaking into Japan. I'm Tim Romero and thanks for listening.

Travel giant Expedia has their work cut out for them coming into the Japanese market. Not only was the online travel game played very differently in Japan, but they were up against some very strong, very entrenched competition in Japan, both from the major online players like Rakuten Travel and Yahoo Travel, and from traditional players like JTB as well.

Today we sit with down with Hidemaru Sato, or Maru, as his friends call him, and he explains how he had to change both Expedia’s marketing message and he product itself to make it attractive to Japanese consumers. In both cases, you’ll see why less is actually sometimes more. Maru also provides framework for both western companies looking to higher a Japanese country manager and for people who are Japanese country managers and want to do their jobs more effectively. Once you get to know Maru, you won’t be surprised to see that he has a very personality-driven approach on both counts. But you know, Maru can explain that much better than I can, so let’s hear from our sponsor and then get right to our interview.

[Interview]

Tim: So, we’re sitting down with Maru Sato, and you’ve brought a number of companies into Japan, but today we’re going to talk about Expedia. It was a while ago but let’s go back to when Expedia was first thinking of coming into Japan. What did they see that was important about the Japanese market? Why did they want to be here?

Maru: Okay, I think back to maybe the early 2000s, and basically it’s kind of the boom. It’s a lot of successful U.S. companies who enter the Japan market because Japan was still strong.

Tim: Well, it still is. The Japan market is still pretty big.

Maru: Then also, the Japanese market is something like new IT technology or internet-related business just starting. The first company I just helped come into Japan market is America Online, AOL. This is 1999, so this is when AOL was the world’s biggest internet service at that time. So they expand to Europe first, U.K., Germany, France, and also the Asia Pacific.

Tim: In both AOL’s case and Expedia’s case, it was just part of the natural global expansion.

Maru: And then U.S. companies, or global companies, they expect the Japanese market is big. So now it’s the same thing. Basically the Japanese market is big but usually they do not understand the cultural difference, and also business difference, and also user difference. So a lot of our conflict—

Tim: I want to talk about that a lot. Before we get to that, though, how did Expedia pick you? How did you end up running this organization?

Maru: My experience, AOL launching experience here, and also more than 10 years experience in Japan...

Expedia had a hard road to travel when they decided to come into Japan. The Japanese market turned out to be nothing like they had ever experienced before. Not only were consumer attitudes and behaviors towards travel booking completely different than it was in their home market, but they were up against some very powerful and well entrenched companies, including both online giants Rakuten and Yahoo and traditional powerhouses like JTB.

Today Hidemaru Sato, or “Maru" as his friends call him, will explain to us how Expedia managed to overcome the odds on a ridiculously tight deadline and how a few tweaks to the core product turned out to be key to their success.

Maru also shares some great advice for both western companies looking to hire a Japan country manager and for people who are Japan country managers and want to do their jobs more effectively.

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

 Leave a comment

Friend Maru on Facebook

Connect with him on LinkedIn

Maru's advice on successful market entry

Maru's advice on how to hire a country manager

Partial Transcript

Disrupting Japan, episode 64.

Welcome to Disrupting Japan, straight talk from the CEOs breaking into Japan. I'm Tim Romero and thanks for listening.

Travel giant Expedia has their work cut out for them coming into the Japanese market. Not only was the online travel game played very differently in Japan, but they were up against some very strong, very entrenched competition in Japan, both from the major online players like Rakuten Travel and Yahoo Travel, and from traditional players like JTB as well.

Today we sit with down with Hidemaru Sato, or Maru, as his friends call him, and he explains how he had to change both Expedia’s marketing message and he product itself to make it attractive to Japanese consumers. In both cases, you’ll see why less is actually sometimes more. Maru also provides framework for both western companies looking to higher a Japanese country manager and for people who are Japanese country managers and want to do their jobs more effectively. Once you get to know Maru, you won’t be surprised to see that he has a very personality-driven approach on both counts. But you know, Maru can explain that much better than I can, so let’s hear from our sponsor and then get right to our interview.

[Interview]

Tim: So, we’re sitting down with Maru Sato, and you’ve brought a number of companies into Japan, but today we’re going to talk about Expedia. It was a while ago but let’s go back to when Expedia was first thinking of coming into Japan. What did they see that was important about the Japanese market? Why did they want to be here?

Maru: Okay, I think back to maybe the early 2000s, and basically it’s kind of the boom. It’s a lot of successful U.S. companies who enter the Japan market because Japan was still strong.

Tim: Well, it still is. The Japan market is still pretty big.

Maru: Then also, the Japanese market is something like new IT technology or internet-related business just starting. The first company I just helped come into Japan market is America Online, AOL. This is 1999, so this is when AOL was the world’s biggest internet service at that time. So they expand to Europe first, U.K., Germany, France, and also the Asia Pacific.

Tim: In both AOL’s case and Expedia’s case, it was just part of the natural global expansion.

Maru: And then U.S. companies, or global companies, they expect the Japanese market is big. So now it’s the same thing. Basically the Japanese market is big but usually they do not understand the cultural difference, and also business difference, and also user difference.

From the outside, it looks like Airbnb is crushing it in Japan. Listings and rentals are both increasing at an unbelievable rate, and Japan is loosening her room-sharing (or minpaku) laws. The future looks bright for Airbnb here, but behind the scenes a resistance is secretly growing.

You see, Airbnb has a real problem in Japan. At first glance, many of the issues look familiar. They seem to be the same kinds of challenges Airbnb is facing all over the world, but things are different in Japan, and today we're going to take a look at how important these differences can be. 

It's worth noting that so far, Airbnb has not taken steps to address their Japan problem, or even publicly acknowledged that it exists. But it's a situation they will be forced to deal with over the next 18 months, and it's something that we can learn a lot from.

This is a rather personal episode. We have no guests this time.

It’s just you and me.

From the outside, it looks like Airbnb is crushing it in Japan. Listings and rentals are both increasing at an unbelievable rate, and Japan is loosening her room-sharing (or minpaku) laws. The future looks bright for Airbnb here, but behind the scenes a resistance is secretly growing.

You see, Airbnb has a real problem in Japan. At first glance many of the issues look familiar. They seem to be the same kinds of challenges Airbnb is facing all over the world, but things are different in Japan, and today we're going to take a look at how important these differences can be. 

It's worth noting that so far, Airbnb has not taken steps to address their Japan problem, or even publicly acknowledged that it exists. But it's a situation they will be forced to deal with over the next 18 months, and it's something that we can learn a lot from.

 Leave a comment

Transcript from Japan

Disrupting Japan Episode 63

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

Once again, I’ve got a special show for you today. There will be no guests, no beer, no playful banter with someone speaking English as a second language. Today it’s just you and me. For the next 20 minutes I’ll be whispering in your ear about something I consider very important, but that not enough people are talking about.

Airbnb has a serious problem in Japan. They may or may not have recognized it yet, but there has been something massing behind the scenes, getting stronger and stronger. And it’s something that will become very visible over the next 18 months.

Now, to the casual observer, and lets face it, most journalists and bloggers are casual observers. To the causal observer, it seems ridiculous to even claim that Airbnb has a problem in Japan. In fact, if you rely on what’s written in the English-language press, any rational person would conclude that Airbnb is crushing it in Japan.

Let's look at the facts. Japan is Airbnb’s second largest and their fastest growing market. In fact, listings are up over 500% from last year. Furthermore, Airbnb are way out in front of their local competition. They have far more listings, and using publicly available data, it looks like Airbnb’s Japan site is getting more than 15x more traffic as the most popular local competitor. 

In fact, I’ve had several different investors speculate that the Japanese companies providing cleaning services to Airbnb hosts are probably making more money than the Japanese companies competing with Airbnb.

And yet, Airbnb is dancing through a minefield in Japan. Whether they are doing it blindfolded or with their eyes wide open, well that’s anyone’s guess. But if you read Japanese and you care about such things you can see that there are powerful forces lining up against Airbnb in Japan, and next year we are going to see the start of a real public backlash.

Now, I know what you are saying. This is nothing unique to Japan. Airbnb is fighting this backlash all over the world. I mean New York and Berlin just passed strong anti-Airbnb legislation, and Airbnb’s lawyers are suing and pushing back hard. San Francisco recently added new restrictions to Airbnb rentals and Airbnb is suing the city, of course.

Airbnb is used to handing that kind of backlash and legal challenges. They are good at it. It’s in their DNA. No, what is happening in Japan is different. It’s quieter. More secret, and in some ways far more dangerous than the challenges they’ve faced in other markets.

But i’m getting a bit ahead of my story. We will get to all of that. First let me set the stage and explain what is actually playing out on the ground here in Japan.

So lets walk though what is happening around Airbnb in Japan and the drama that will be unfolding —  whether they want it to or not — over the next 18 months.

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness and product evangelists throughout Japan. They did not so much push their way into the Japanese market, so much as they were pulled into it.

Even under the best conditions, however, Japan market entry is not easy and Derek Sorkin explains some of the challenges they faced with their distribution plans and the original go-to-market strategies. Managing to salvage a great ongoing relationship from what could have been a very ugly incident.

Derek also explains why even in this age of Skype and go-to-meeting it’s absolutely essential to spend the time and money on airfare in managing international offices and to maintain trust and credibility.

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

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness and product evangelists throughout Japan. They did not so much push their way into the Japanese market, so much as they were pulled into it.

Even under the best conditions, however, Japan market entry is not easy and Derek Sorkin explains some of the challenges they faced with their distribution plans and the original go-to-market strategies. Managing to salvage a great ongoing relationship from what could have been a very ugly incident.

Derek also explains why even in this age of Skype and go-to-meeting it’s absolutely essential to spend the time and money on airfare in managing international offices and to maintain trust and credibility.

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

 Leave a comment

Links & Resources

The GitHub homepage

Connect with Derek on GitHub @dsorkin

Follow him on twitter @thesorkin

Connect with him on LinkedIn

Partial Transcript

 

Disrupting Japan, episode 62.

Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening.

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness, and product evangelists throughout Japan. They did not so much push their way into the Japanese market so much as they were pulled into it. Even under the best conditions, however, Japan market entry is not easy, and Derek Sorkin explains some of the challenges they faced with their distribution plans and their original go-to-market strategies. And how they managed to salvage a great ongoing relationship from what could have been a very ugly incident.

Derek also explains, even in this age of Skype and GoToMeeting, it’s absolutely essential to spend the time and money in airfare in managing international offices and to maintain trust and credibility. But Derek explains all of that much better than I can, so let’s hear from our sponsor and then get right to the interview.

 

[Interview]

Tim: So I’m sitting here with Derek Sorkin, the Asia Pacific for GitHub, who spearheaded GitHub’s entry into Japan and that’s what we’re going to talk about today, so thanks for sitting down with me.

Derek: No problem, Tim. Good to talk to you again.

Tim: Excellent. So listen, you guys have been here a while and you’re doing really well. Let’s step it back a couple of years. What did GitHub see in Japan? What was the motivation for coming here?

Derek: We had quite an interesting background with Japan. Our co-founders had been coming here for some time for different conferences; working with companies like Digital Garage back in the day, talking to them; and open source has always had a strong foothold in Japan, things like many of the contributors to the Ruby Project, which GitHub is obviously built on to a certain extent. In Japan and Japanese.

Tim: Ruby is from Japan.

Derek: Right. So we always had a good core base of those Ruby developers that were interested in open source, that were using GitHub since very early days of GitHub, back in 2009 and 2010. So when we started in the B2B space and working with enterprises—and I think we’ll get into this a little more later, around how decisions are made in Japan—but that really helped us here. There were lots of the forward thinking internet companies. I say “internet companies” broadly, but internet gaming companies like that, that immediately took a hold with organizations on GitHub.com

Tim: Okay, so even before you guys were here, you had brand awareness and you had users here in Japan. That’s a huge leg up in the market.

Derek: Yeah. It makes it very interesting, especially at that time, a little more than three years or so, we didn’t have any staff in Japan. So all of our efforts in Japan to continue to raise that awarenes...

You don’t usually think of Japan’s geisha as being an industry, but it is. In fact, strictly speaking, it’s a cartel. A cartel that is now being disrupted by internet-based booking agencies and low-cost substitutes. It seems that even geisha are not immune to internet-based disintermediation.

In this special interview Sayuki, Japan’s only geisha that holds an MBA, explains the business model behind geisha. We talk about the way things used to be, the current threats that have many geisha concerned that the traditional art form and the lifestyle will not survive, and how some geisha houses are trying to adapt.

This is a rare, behind the scenes look at the business of being a geisha and a chance to see how Japan’s geisha might survive and even thrive in the coming digital age.

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

You don’t usually think of Japan’s geisha as being an industry, but it is. In fact, strictly speaking, it’s a cartel. A cartel that is now being disrupted by internet-based booking agencies and low-cost substitutes. It seems that even geisha are not immune to internet-based disintermediation.

In this special interview Sayuki, Japan’s only geisha that holds an MBA, explains the business model behind geisha. We talk about the way things used to be, the current threats that have many geisha concerned that the traditional art form and the lifestyle will not survive, and how some geisha houses are trying to adapt.

This is a rare, behind the scenes look at the business of being a geisha and a chance to see how Japan’s geisha might survive and even thrive in the coming digital age.

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

Show Notes for Startups

How Sayuki broke 100 years of tradition to become a geisha

How geisha are being challenged by both the entertainment and tourism industries

Changing geisha from a private art to a public one

Why geisha might not survive the modern era of tourism

The geisha cartel is being challenged, any why that's not good for anyone

The challenge modern geisha face on social media

The changes in training for the next generation of Japan's geisha

Links from the Founder

Sayuki's home page 

Follow her on twitter @sayukiofasakusa

Become her patron on Patreon

Follow her on Facebook

Book a geisha experience

Geisha Banquet in Tokyo

Private Custom Shopping Tour with a Geisha

Private Lunch with Sayuki

Kimono Shopping

Tokyo Tour

 Leave a comment

Transcript from Japan

Disrupting Japan, episode 61.

Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs.

I'm Tim Romero and thanks for listening.

Today I’ve got something really special for you. We are going to talk about the kind of business that you’ve probably never heard any details about. Today we’re going to sit down and interview Sayuki, a Geisha. And since this is Disrupting Japan, we’ll be talking about the business side of being a Geisha. We’ll look at the Geisha business model and examine how it’s being disrupted by modern technology. And believe me, it really is.

Now, listeners outside Japan might not understand how special this opportunity is. Traditionally, Geisha are not really supposed to talk about their business. Geisha create the illusion of comfort, beauty, and elegance, that is unsoiled by such base things as money. But make no mistake about it; it’s an illusion. Geisha is a very serious business and Sayuki, who also has an MBA from Oxford, has agreed to sit down and walk us through it.

In fact, from a business point of view, Geisha are an established cartel that are being disrupted by new technology, the internet, and tourism websites in particular, and by low-cost substitutes. And there’s a very good chance that Geisha will not survive in their traditional form. In fact, many Geisha houses are proactively trying to adapt to this new market environment. But Sayuki tells this story much better than I do, so let’s hear from our sponsor and then get right to the interview.

[Interview]

Tim: So today we’re sitting down with Sayuki, who is a bonafide Geisha here in Japan and we’re going to talk about the business of being a Geisha, so thanks so much for sitting down with me today.

Sayuki: Thank you.

Tim: First and foremost, a lot of our audience is either in Japan or knows a lot about Japan, but a lot of people don’t, so before I get started for the business can you clear up exactly what a Geisha is, what they do now, what they used to do?

Sayuki: A Geisha means arts person, literally. So Geisha are traditional dancers or musicians, and most of the entertainment that we do is private entertainment. So we go to dinners and parties, which are usually in private rooms,