Terrie's Take: Foreign Entrepreneurs in Japan, Moon Marketing, Publishing, Radiation, & Batteries!
Terrie’s Take is a selection of Japan-centric news collected and collated by long-time resident and media business professional Terrie Lloyd. AkihabaraNews is pleased to present Terrie’s learned perspective; we all could use another take on the news - here’s Terrie’s:
• • •
Terrie’s Take on May 17, 2014
- Japan Getting Easier for Foreign Entrepreneurs
- Iconic publishers to merge
- Very cool new garbage disposal unit
- Pocari Sweat drink powder to become lunar souvenir
- Highest radioactive readings in Fukushima sea water
- Exciting new lithium battery technology
Japan Getting Easier for Foreign Entrepreneurs
Over the last few days we have been attending the Silicon Valley TiECon 2014, the largest event of the largest entrepreneur network in the world. It was quite an experience to be among 3,600 entrepreneurs in the same place at the same time, and just goes to reinforce the fact that Silicon Valley is the center of entrepreneurship not only in America but the world. As can be expected, Venture Capitalists were out in force, as were Asian government business organizations looking to attract foreign entrepreneurs to their own shores. The Koreans (KOTRA) were there, folks from Invest Hong Kong and Singapore as well, even Bangladesh -- but nary a hint of the Japanese. Which was disappointing, because Japan is supposedly getting ready to ramp up the hosting of foreign entrepreneurs in its soon-to-be-established Special Economic Zones (SEZs).
At the TiECon sessions we learned that foreign entrepreneurs are attracted to Silicon Valley by five main things (yes, this is not an exhaustive list):
1. A liquid market that allows them to get an "earn out" from their ventures after an appropriate amount of effort and results.
2. Availability of capital to get started.
3. Availability of resources to apply the capital against.
4. Size and availability of market.
At the same time, they are hobbled, even in the USA, by the following:
1. Visa restrictions
2. Access to early stage capital
3. Language -- non-native English speakers find that they need to be eloquent to secure the best funding results.
You might think the early stage capital point is a non-issue, given how much venture capital is applied just in Silicon Valley alone (approx. $8.3bn in 2013), but the pressure of competition coupled with the fact that most venture capital goes into already established and "ramping" companies, means that it is just as tough for start-ups in the valley to get early-stage funding as it is in other countries.
Actually, the conclusion we drew at the end of the conference is that in the context of money, market, and visas, Japan actually compares quite favorably with the U.S.
OK, no one beats Silicon Valley for the shear amount of capital available at all stages of development. There are angels, incubators, and accelerators for the early-stage businesses, then early-stage VCs (Series A rounds) for those with a product and initial market traction, and mezzanine investors (Series B, C) for later-stage companies. Interesting to see a lot of Japanese corporate capital being applied alongside the mezzanine investors in the USA, largely because this gives them exposure to new technologies at low risk, and of course they are hoping that companies at this funding stage are expanding abroad, providing them with an opportunity to tie up for the Japanese market.
Japan's big negative is its lack of early-stage capital. While we are seeing a boom in incubators and accelerators, there are still very few angel investors. This means that because accelerators are short-term and very sparing in their investments, early-stage companies are constricted in the amount of capital they can raise during the product/service development phase and therefore the products/services they can produce are seldom very advanced compared with start-ups overseas.
We see this funding gap as an area the Japanese government can fill to great effect and we hope that they do so. You can see that there is already an awareness of the need for early-stage capital, from the formation of the US$600m Cool Japan fund. Unfortunately that particular fund has decided to position itself more at the advanced Series A level (minimum investment amount of JPY150MM), and so an earlier stage government fund is needed. We suppose that the ready availability of bank and government guaranteed debt does cover the gap partially, so it's not all bad news.
Indeed, on the positive side, once a start-up does start to earn revenues, the Japanese funding environment is quite rich, although slow to move. Unlike the USA, Japan has many corporations willing to make early-stage strategic capital investments as a means of building up the investee to collaborate with their own businesses. Such companies are generally very hands off, but do expect that their investment will translate into business, so the foreign investor needs to adjust his/her business plan to accommodate them and their needs.
With a market of 127m people and net household assets (excludes housing loans and consumer finance) of about JPY1,193trn, 55% of which is in cash, the Japanese consumer is still highly attractive. We hear a lot about the greying of society and how this is restricting the flow of consumer spending because the elderly are a lot more conservative. While this is true, at the same time the aging population is creating a whole new range of services and products that entrepreneurs can bring to the market quicker than the big boys do. Consider recent developments in the travel, food, supplements, home products, sectors.
The other attractive point about Japan is its proximity and involvement in the Asian region in general. Both from a physical travel point of view and from the ability to mesh with existing Japanese initiatives in the region, there is rich opportunity for the foreign entrepreneur. For example, although foreign owned, since the company would be Japanese in registration, it can apply to get involved in Japanese government funded Asia-based projects.
Of all the first world countries, we believe that Japan has one of the easiest immigration regimes for foreign entrepreneurs who want to be resident in the country. An Investor visa only requires a commitment of US$50,000, and doesn't require an investment in people (minimum of 2 nationals) or office until AFTER the 3-year visa is issued. In this regard, we see little or no impediment to a foreign investor thinking of setting up here. Curious, then, that the Japanese government has identified visas as an item to be further deregulated.
Reports coming from the various advisory panels include an "entrepreneur visa" which even further relaxes requirements for companies setting up the new Special Economic Zones (SEZ), slated for Tokyo, Osaka (medical focus), and Fukuoka. This could mean that even people with a basic high school education could conceivably be allowed entry into Japan, so long as they agree to set up a business. No word yet on just what the actual requirements will be, but they will surely be a lot easier than the minimum for equivalent U.S. EB-5 Immigrant visas, which require hiring 10 people and an investment of between US$500,000 and US$1,000,000.
Iconic publishers to merge
It's a sign of the times when a proud traditional publisher like Kadokawa takes a backseat in a merger with an Internet content provider (Dwango). But this is what happened this week. The two companies will merge on October 1, and Dwango Chairman Nobuo Kawakami will become chairman of the new company. The structure of the new business will be that of a holding company and two separate operates as subsidiaries -- presumably so that the two very different cultures can be gradually merged into one in bite-sized projects. Dwango is best known for its Youtube-like video sharing service, Niko Niko Douga. (Source: TT commentary from the-japan-news.com, May 14, 2014)
Very cool new garbage disposal unit
Kitchen in-sink garbage disposal units are rare in Japan because householders are worried about the slurry clogging sewer pipes. Now a Hamamatsu company has come up with an amazing new product that uses microbes to completely consume any biodegradable garbage, leaving only water to go down the pipes. The company is called Eiwa and the garbage disposal device is called the Zero. The microbes are kept in a resin ball inside the unit and can digest everything from oils and fats to bones and eggshells. Current microbe-based disposal units leave residue which has to be extracted. The Zero leaves nothing behind. (Source: TT commentary from asia.nikkei.com, May 15, 2014)
Pocari Sweat drink powder to become lunar souvenir
Non-news of the week. An innovative PR exercise by Otsuka, the maker of Pocari Sweat electrolyte drink, will see Japan's first lunar (unmanned) space expedition leave a can of Pocari Sweat powder behind on the moon, purportedly as a time capsule for future astronauts to recover and enjoy. The powder requires water to reconstitute it to drinkable form. The can will be delivered in October next year, on the Falcon 9 space craft. (Source: TT commentary from washingtontimes.com, May 16, 2014)
Highest radioactive readings in Fukushima sea water
Fukushima continues to be in the news, as power company TEPCO admitted that levels of tritium and stontium-90 were found at record levels in sea water in the port next to the plant. Tritium was recorded at 1,900 Becquerels/liter, up from 1,400 bq in April, and strontium-90 was recorded at 840 bq versus 540 as a previous high. The increasing leakage rates are likely to spur the government to act more quickly on put in the JPY31.9bn ice wall to lock in the radioactive ground water. Interesting to see that the ice wall will require 45.5 gigawatt/hours of electricity to maintain -- enough to power a large township. ***Ed: We heard the other day speculation that the radiation leakage could stimulate the Olympic committee to revoke the 2020 Olympics for Tokyo, on the basis of safety concerns. If so, Osaka?** (Source: TT commentary from japantimes.co.jp, May 17, 2014)
Exciting new lithium battery technology
Although we often hear about battery breakthroughs which promise to pack more energy into smaller profiles, we seldom see them come to market. However, a new technology from Power Japan Plus might be a real step forward. The new technology uses carbon for both the anode and cathode, not only reducing the cost of metals in the cell, but also significantly increasing charge/discharge time without thermal changes. This will be a huge advantage for high-power applications such as autos, where thermal runaway is a major problem and requires extensive electronics to control. The new batteries are called "Ryden" batteries and for a Nissan Leaf would charge in just 12 minutes, versus four hours for current Lithium technology. (Source: TT commentary from cnet.com, May 13, 2014)
• • •
That was Terrie's Take.
What's yours? Let us know down below.