20150407 current trends among startups and how they keep momentum in japan

Current trends among startups and

how they keep momentum in Japan

Yusuke AsakuraVisiting Scholar at Stanford UniversityFormer-CEO of mixi, Inc.

[email protected]

2015/4/7

Entrepreneurship in Asian High-Tech Industries

1

Self introduction

How startups keep momentum

Startup trends in Japan

2

Self introduction



3


after IPO in Japan

Overview of mixi Inc.

4

• Founded in1999 originally as

online recruitment information

media provider for Web

engineers.

• Social networking service

“mixi” launched in 2004.

• Main features were such as

diary, community and photo

sharing.

• Listed on the Tokyo Stock

Exchange in 2006

• Became dominant social

media platform in Japan

Market cap of mixi in the first 5 years after IPO

0

1,000

2,000

3,000

Q2Q1Q2 Q3 Q4Q1 Q4 Q2Q1Q3Q2Q4 Q1Q3Q4Q3Q2Q1Q4Q3

Market cap

(USD million; USD 1 = JPY 100)

FY2006 FY2007

IPO5

FY2008 FY2009 FY2010 FY2011

NT acquired

by mixi

Sales of mixi from FY 2011 to the time I became the CEO

Became CEO

Sales


24

1821

2731

3335

3834

3130

58

0

10

20

30

40

50

60

Q3 Q4Q4Q3Q2 Q2Q1Q4Q1 Q3Q2Q1

FY2011 FY2012 FY2013

Acquired by

mixi 6

Problems mixi faced with

•Competitor

•Customer

•Company

7

Finding out essential value of the company

8

General Value

• mixi as

Social Networking

Service

Essential Value

• Capability of service

development

• Cash : USD 120M

• “mixi” brand

Basic strategy

9

• Improving the bottom line of existing

business

• Diversification through

• New business development

• External business acquisition

• Recreation of corporate culture

Set of actions and the essential issue tackled with

10

■Developing new business

peti jete

“User first week”

Launch of innovation center

Alliance on game platform

i-mercury capital

Scrum Ventures

Deploy Gate

nohana

Monster Strike

muuk

■Cost reduction

Termination of part-time contract

Closure of call center

Closure of US office

Closure of Shangai office

Internal relocation

Assignment of business

■Governance

Redefinition of mission

Cross-division weekly check-in

Effect measurement of each

product

Regular internal survey

Split-up of mixi marketing

Management accounting

HR rotation program

Public offering : $63M

■Acquisition

mixi research

Kamado

YYC

Confianza

Mystery shopping business

Moving the company

beyond

original business

Triggers to regrowth

11

• Blockbuster app

• Buyout of profitable services

• Assignment of

underperforming business

Boosting top-line growth through business diversification

Became CEO

Sales


58

24

1821

2731

3335

3834

3130

0

10

20

30

40

50

60

Q3 Q4Q4Q3Q2 Q2Q1Q4Q1 Q3Q2Q1

FY2011 FY2012 FY2013

Acquired by

mixi 12

Fiscal soundness and mega-hit app triggered regrowth

0

1,000

2,000

3,000

4,000

5,000

Q4 Q1Q2 Q2Q3Q1 Q4 Q1 Q4 Q2Q3 Q2 Q3 Q1

Market cap


FY2011 FY2012 FY2013 FY2014

Became CEOAcquired by

mixi 13

14

• Obligation to grow

• Brave new frontier

• Forget about current sales and profit margin

• There is no synergy

• Accept cannibalism

• ‘Big Company Disease’ is preventable

Some lessons learned from the case

15

Self introduction



GDP of Japan in the last 20 years

16SOURCE: Cabinet office Government of Japan

Real GDP of Japan

(JPY Trillion; 1994-2014)

0

100

200

300

400

500

600

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

+1%

Japan’s GDP doesn’t show significant growth in the last 20 years

17SOURCE: SPEEDA, International Monetary Fund (IMF)『World Economic Outlook Database』

Real GDP

(USD Trillion; 1994-2014)

0

2

4

6

8

10

12

14

16

18

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

China

United States

Japan

5

16

0

CAGR

(%)

Internet and Mobile sectors are key drivers of Japan’s economic growth

18SOURCE: GLOBIS CAPITAL PARTNERS, Ministry of Internal Affairs and Communications

Real GDP Growth

(%; Compound Annual Growth Rate; 2005-2011)

-4.4-3.7

-1.6-1.2-0.4

0.40.60.9

7.6

13.5

-5

0

5

10

15

Retail

-1.0

Other

IT

Electric

machinery

Transport

machinery

Mobile

communication

SteelInternet

services

Average

Trans

portation

Whole

sale

Constr

uction

IPO activity surged in 2014

19

Number of IPOs on TSE Mothers1 Quick Facts

44

32

24

12

64

13

22

4037

2013 201420122008 2009 2010 2011200720062005

1 Market of the high-growth and emerging stocks

SOURCE: TSE, Nikkei, GLOBIS CAPITAL PARTNERS, NASDAQ, Bloomberg

• Median Market Cap

at IPO on TSE

Mothers is US 55

million in 2013

• 70% of newly public

companies are

internet-related

business in 2014

Aggressive economic growth policy triggered cash inflow to VC funds

20SOURCE: Incubate Fund

501

(19%)

1,158

(45%)

922

(36%) CVC

Independent

Financial

13

(35%)

6

(16%)

18

(49%)

Newly launched VC funds

(2013-2014/10)

Size of raised funds

(USD million)

Number of GPs

Financial support through

government-backed

investment funds

Organization for Small & Medium

Enterprises and Regional

Innovation;

• has invested 580 million USD

in more than 90 funds since

1999

• invest in private VCs upto the

half amount of fund size

The Innovation Network Corporation

of Japan(INCJ);

• Capitalized at 3billion USD

• Invest in both of startups and VCsUSD

2,581

million

Independent VCs are playing active roles in Japan’s startup ecosystem

21SOURCE: Incubate Fund

Venture capital business is becoming more profitable in terms of IPO

22

Average ratio of stock price at IPO to the value of stock at the last round

before IPO*

(Multiple)

* Please note the data may not be comprehensive

SOURCE: Japan Venture Research

4.584.77

2.30

1.55

2.04

6.26

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2.39

1.29

4.14

2.36

Volume of VC investment is surging

Volume of VC investment*


1,154

729

557

759747768

1,1821,221

1,452

0

250

500

750

1,000

1,250

1,500

2011201020092008 20142012 201320072006

23 * Please note the data may not be comprehensive


More cash flow to VC leads to more sizable private finances

24* Please note the data may not be compehensive


Sizable private finance cases in 2014*

(USD; 2014; USD 1 = JPY 100)

Game

83M

Commerce

16M

Commerce

12M

Commerce

25M

C2C market

38M

Utility

14M

Chemical

12M

News apps

24M

Bio tech

36M

Enterprise

14M

Wheel chair

12M

Cloudstorage

24M

Commerce

24M

News apps

35M

Game

14M

Commerce

11M

Commerce

18M

Bio tech

30M

Enterprise

13M

Bio tech

10M

Fin-tech

16M

Bio tech

13M

Automotive

10M

Bio tech

26M

Internet

service

More Japanese startups are going global

25

Mercari

Smart News

gumi

Metaps

Moi

Mobile C2C shopping

app.

Opened US office and

launched US version in

2014.

Android monetization

platform and credit

card processing

service.

Focusing on Asian

region.

News curation apps for

smartphones and tablets.

Opened US office and

launched US version in

2014.

Ranked #1 on App Store

Providing TwitCasting,

realtime video

broadcasting platform.

Opened US office in

2013.

Social games provider

for smartphone and

feature phone.

Subsidiary companies in

8 countries.

Listed on TSE 1st in

2014.

SOURCE: TECH IN ASIA

Given the current GDP, the volume of acquisition deal in Japan is lower

than expectation

26

Number of deals in 90s

Number of deals from

2000 to August of 2013 GDP

(USD billion; 2013)

12,411Germany

US

Japan

72,111

2,198

117,666

18,563

19,532 3,730

4,899

16,768

Japan X Japan X Japan X

32.8

5.6

1

6.3

1.1

1

3.4

0.8

1

SOURCE: Industrial Growth Platform, Inc.

Acquisition accelerating1

27

Announced Acquirer Target2 Service of target company

1 Picked up only notable cases. Not meant to be comprehensive

2 Target name is based on service name. Not corporate name except Aratana.

Aggregate

Value

(USD million)

10/2014MERY:Ladies fashion curation service

iemo:Home-design curation service50

9/2014Japan's largest lifehack media site

NA

10/2013Rewarding app for customers who visit

participating storesNA

9/2013C2C market place for coaches and people

who seeks lessons10

2/2015 18Fashion-oriented VIP flash sales site

3/2015 116Consumer-to-consumer ticket marketplace

3/2015 30Social app

E-Commerce solution

SOURCE: SPEEDA, Tech Crunch, TECH IN ASIA

• Strong demands for startup but not

enough supply

• Scarcity and immobility of talents

• More acquisitions needed

My observation about current startup environment in

Japan

29

Appendix

Population)

Japan has the 10th largest population in the world while aging society is

going on

30

29 30 28 25 25 27 28 26 22 20 18 18 17 16 16 15 13 12

50 55 60 67 7276 79 83 86 87 86 84 81 79 77 73 71 68

6358 54 50 47 44

7

911

12 15 18 22 26 29 32 3436

3737

3739

3938

3635

899101111

124

2015

127

2013

127

1960

93

2030

4

83

1950

5

89

117

2060

87

1955

5

97

2050

92

2055

112

2035

107

2040

102

20452025

121

20201995

125

1990

123

1985

121

1980

117

1975

112

1970

104

1965

98

6

2010

127

2005

127

2000

127Under 14

Over 65

15-64

SOURCE: The national census, National Institute of Population and Social Security Research

Actual Forecast

Population of Japan

(million)

Internet penetration)

More than 90% of people over 13-59 use internet

31

100.496.596.194.694.1

90.988.187.585.3

79.577.3

0

10

20

30

40

50

60

70

80

90

100

110

2003 20052006 2008200920102011201220132004 2007

Number of internet user in Japan

(million)

SOURCE: Ministry of Internal Affairs and Communications

22.3

48.9

68.9

76.6

91.496.697.498.597.9

73.3

0

20

40

60

80

100

30-

39

20-

29

40-

49

13-

19

50-

59

60-

64

70-

79

65-

69

80-

Average

82.8

6-12

Internet penetration rate by generation in Japan

(%; 2013)

Smartphone)

iPhone has become the most successful smartphone in Japan

32

Penetration rate of device in household

(%)

SOURCE: Ministry of Internal Affairs and Communications, IDC Japan, MMD

0

25

50

75

100

2008 2009 2010 2011 2012 2013

PC

Tablet

Smartphone

Mobile

Domestic shipments of smartphone by

vendor

(%; 100%=5.2 million; 2014/7-2014/9)

Samsung

11%

4%

Other

9%Sony

6%

Kyocera

64%Apple

6%

Sharp

Smartphone device survey

(%; N=18,182; 2014)

Xperia

iPhone

15%

13%

AQUOS

44%

12%DIGNO

ARROWS 7%

GALAXY 5% 2%

Other

2%

MEDIAS

Mobile contents)

Japan’s mobile contents market shows strong growth

33

0

5,000

10,000

15,000

20,000

25,000

2011

19,061

2010

16,550

2009

15,206

2008

13,524

2007

9,681

6,465

10,085

7,345

11,716

8,510

14,997

4,835

8,689

5,525

2012

5,641

3,150

4,074

7,329

3,666 4,272

23,507

11,601

2006

9,307

2005

7,224

+18%

Market size of mobile contents and commerce

(million USD; 1USD = JPY100)

1 Calculated based on global digital goods market size and U.S. market share among global mobile contents market

SOURCE: Ministry of Internal Affairs and Communications, GLOBIS CAPITAL PARTNERS, Mobile Contents Forum, Deutsche Bank, ResearchMoz,

ITU - ICT Statistics

Mobile Contents

Mobile Commerce

US mobile contents market is estimated to be 6.8 billion USD1

E-Commerce)

B2C E-Commerce shows steady growth led by key players and

smartphone penetration

34

111,660

95,130

84,59077,880

66,96060,890

0

20,000

40,000

60,000

80,000

100,000

120,000

2008

+13%

201220112010 20132009

Market size of B2C E-Commerce in Japan

(million USD; 1USD = JPY100)


1.79 2.08 2.46 2.83 3.67

Share of

E-Commerce

in Japan’s

consumer

Market (%)

3.11

Key E-Commerce companies

SNS 1/2)

Line is the most commonly used service in Japan. Japanese users prefer

to communicate anonymously

35

59.6

52.0

39.3

21.7

16.4

13.5

10.3

13.7

11.4

20.8

5.96.8

3.4

4.8

2.7

3.7

4.1

Facebook

Twitter

Line

4.4Twit Casting

Viber

5.2

5.0

Tumblr

Pinterest

Kakao talk

Instagram

5.3

mixi

5.2

Google+

Used previsouy

Using now

Survey on SNS/communication service

(2014; N=562)

Survey on anonymous use of Twitter by country

(2014)

75%

31%

19%

56%

60%

42%

55%

48%

36%

40%

32%

45%

13%

14%

539

France 278

UK 9%

US

13%

498

6%Japan

8%

402

Anonimity

Korea

100%

Real name

494Singapore

Both

569

SOURCE: MMD, Ministry of Internal Affairs and Communications

SNS 2/2)

People in their 20s is the most active users

36

Mobage

mixi

Twitter

Facebook

LINE

GREE

14.4

8.6

22.3

39.6

70.5

14.4

Survey on web service use by generation

(%; 2013)


16.6

57.0

80.3

34.1

22.9

47.1

65.4

19.2

16.4

16.4

42.0

13.3

11.8

13.9

9.8

12.5

20.3

42.6

2.7

3.9

7.0

3.5

15.2

22.3

1.0

0.7

1.7

3.0

5.0

4.3

10-19 20-29 30-39 40-49 50-59 60-

Example of Venture Capital Firms in Japan

Investment volume*

(USD million; 2014)

37 * Please note the data may not be comprehensive


8

8

8

9

9

10

11

11

13

14

14

15

19

22

24

32

40

56

69

113

JAFCO

WiL

Doll Capital Management

Atomico

Fidelity Growth Partners Japan

Nissay Capital

Nippon Venture Capital

SMBC Venture Capital

Globis Capital Partners

Global Brain

The University of Tokyo Edge Capital

Innovation Network Corporation of Japan

B Dash Ventures

Gree Ventures

Mitsubishi UFJ Capital

YJ Capital

Recruit Incubation Partners

Itochu Technology Ventures

Hiroshima Innovation Network

Mizuho Capital

Venture Capital Firms Type of VCFinanci

al

Indepe

ndent CVC Foreign

Governmental Organization

Governmental Organization

20150407 current trends among startups and how they keep momentum in japan

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