Quick overview of startup trends in

Japan

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

asakura@stanford.edu

1

Japan as market

Startup trend in Japan

Population)

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

going on

2

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)

GDP)

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

3SOURCE: GLOBIS CAPITAL PARTNERS, Ministry of Internal Affairs and Communications

Real GDP

(%; 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

Internet penetration)

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

4

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)

Mobile contents)

Japan’s mobile contents market shows strong growth

5

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

Smartphone)

Japan is the most successful market for Apple’s iPhone

6

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

E-Commerce)

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

smartphone penetration

7

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)

SOURCE: Ministry of Internal Affairs and Communications

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/sevices

SNS 1/2)

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

to communicate anonymously

8

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

Twit Casting 4.4

Google+

Twitter

Line

5.0

Tumblr 5.2

Facebook

Viber

Instagram 5.2

mixi

Pinterest 5.3

Kakao talk

Using now

Used previously

Survey on SNS/communication service

(%; 2014; N=562)

Survey on anonymous use of Twitter by country

(%; 2014)

75%

36%

31%

45%

32%

40%

19%

56%

60%

42%

55%

48% 13%

14%

Real name

Korea

Singapore

9%UK 539

France 13%

100%

6%

US 498

402Japan

8%

278

Anonimity

494

569

Both

SOURCE: MMD, Ministry of Internal Affairs and Communications

SNS 2/2)

People in their 20s is the most active users

9

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)

SOURCE: Ministry of Internal Affairs and Communications

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-

10

Japan as market

Startup trend in Japan

IPO in Japan activity surged in 2014

11

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 J startups

12SOURCE: Incubate Fund

922

(36%)

501

(19%)

1,158

(45%)

Financial

Independent

CVC

6

(16%)

18

(49%)

13

(35%)

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 VCs upto the

half amount of fund size

The Innovation Network

Corporation of Japan;

• Capitalized at 3billion

USD

Sizable private finance cases

(USD million; 2014)

Game

100M+

Commerce

42M

Commerce

33M

Game

25M+

C2C market

42M

News apps

41M

News apps

28M

Game

29M

USD

2,581 million

Utility

21M

More Japanese startups are going global

13

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 Mothers

in 2014.

SOURCE: TECH IN ASIA

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

than expectation

14

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.

But acquisition of startups are accelerating little by littele1

15

Announced Acquirer Target2 Business

10/2014

10/2014

9/2014

9/2014

10/2013

9/2013

7/2013

Peroli.

Ladies fashion curation service.

Home-design curation service.

Japan's largest lifehack media

site

Smartphone camera apps

Rewarding app for customers

who visit participating stores

C2C market place for coaches

and people who seeks lessons

Service allows anyone to quickly

get into the online selling

business1 Picked up only notable cases. Not meant to be comprehensive

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