1. Situation and recent trends of
web startups in Japan.
Shunichi Arai
CTO, Mogura Inc.

2. Shunichi Arai
• Entrepreneur
– Developing a business-card
management software as a
service.
• Blogger
–Asiajin.com (亜州人) –
the best English blog on
Japanese IT

4. 福岡 - Fukuoka

5. Today, I won’t talk
a funny story.

6. No joke in the talk.
Sorry about that.

7. I will talk
too many facts and examples
of Japanese Internet industry.

8. Please, don’t sleep.

9. No, it’s okay to sleep if you want.

10. Today’s agenda
• Brief Summary of Japanese IT industry
– Internet
– Mobile web
• Most powerful websites in Japan
• Startups in Japan
– Summary
– Regulations, rules and norms
– Examples of Japanese startups

11. SUMMARY OF JAPANESE IT

12. Facts of Japanese IT Industry
• No globally successful • Total market size:
software company. 205 billion USD.
– Same as most countries. • 857,877 people in IT
• 95% of Japanese companies workforce.
software companies are • 186 public companies.
in consultation business.
– Consultation and
development services.

13. Internet Penetration Rate
90.0
80.0
70.0
60.0
50.0 Japan
40.0 China
30.0 Korea
20.0
10.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
http://www.internetworldstats.com/

14. Japan Internet history
• 1984: JUNET
– Japan University Network
– UUCP connection (Mail / Netnews)
• 1988: WIDE project
– TCP/IP network
• 1992: IIJ
– Japan’s first Internet Connection Provider
• 1996: Yahoo! Japan
– Still, Japan’s number one website

15. Mobile Web
• 92% of cell phones are 3G in Japan.
– 3G was started in 2001.
• Now, Japanese mobile web are split into
iPhone and Japanese phones.
• Japanese phones have:
– HTML-based Web browsers (limited capability)
– Huge incompatibility between 3 carriers
• Completely incompatible with rest of world
– Lots of useful / useless features

16. Features of Japanese phone
• Payment • Internet email (push)
– Credit card • Java application
– Public Transportation • Mobile Web browsing
– Prepaid card – Web payment
– Discount Coupons
• Video phone
• Television
• Infrared communication
• Lots of emoticons – For exchange numbers.
• Decorated email • Of course, music player,
(kind of greeting card) camera, calculator, etc…

17. Examples of successful companies in Japanese Internet Industry
POWERFUL WEBSITES

18. Most Powerful Web companies
• Companies over $10bn. valuation
– Yahoo! Japan (Portal and many)
– Rakuten (B2C marketplace and many)
– DeNA (Mobage town, mobile social game)
– Gree (mobile social game)
– Kakaku.com (price comparison)
– Matsui Securities(online stock broker)
– Monex (online stock broker)
• Other important companies
– Mixi (SNS)
– Dwango (Mobile games and NicoNico Douga)

20. • Number one web site.
• 48 billion page views / month
– 7.8 billion from mobile
• Auction
– 22 million items (avg.)
• Revenue: 279 billion yen
• Net Income: 83 billion yen

21. Softbank
• Valuation: 26 billion USD
• 3rd largest mobile phone operator.
• Yahoo! Japan’s major shareholder.
• Alibaba’s shareholder.
• And many other businesses.

22. Softbank
• Founded by 孫正義 (Masayoshi Song)
• Richest person in Japan
• 1981: Founded
• 1996: Yahoo! Japan founded
• 2001: Yahoo! BB (ISP)
• 2005: Baseball team buyout
• 2006: Vodafone buyout  Softbank mobile
• Very aggressive sales & buyout

24. Rakuten Ichiba
• Japan’s biggest B2C market place.
– 106,448 shops.
– 61 million items.
• Revenue: 298 bn. yen
• Net Income: 52 bn. yen
• Many other powerful businesses
– Rakuten Travel (No.1 hotel reservation site)
– Rakuten Securities
– Linkshare

26. • Biggest SNS site in Japan
– 19 million users
– 33 bn. monthly page views
• 5x mobile accesses
• Founded in 2004
– Mini blog feature is a hit factor.
• Revenue: 13 bn. yen
• Net Income: 1.3 bn. yen
• Started “mixi app” in 2009

27. Mobage / Gree
• Mobile social game platform
• Mobage started in 2006.
– The company ‘DeNA’ started as an online auction
site, but that business was not successful.
• Gree had started as a SNS for PC in 2004.
– But as SNS, Gree was not successful.
– So, they changed their course to clone Mobage.

28. Successful Global Websites in Japan
• Google
• Amazon
• Wikipedia – 6th biggest Wikipedia in the world
• Twitter – estimated 5～10 million users
• Youtube
• Han game

29. Current situation and latest trends
ENTREPRENEURSHIP IN JAPAN

30. Entrepreneurship in Japan
• Brief summary and numbers
• Regulations, rules, and norms
• Latest trends
• Examples of latest startups

31. Facts of Japanese startups
• IPO market is in a serious downhill.
• Buyout market is very small.
• Therefore, VCs are almost dead.
– Literally, now in danger of bankruptcy.
• Still, many startups are emerging.
– With their own money, family’s money, or
government backed banks, small community
banks.
– And organic growth.

32. Venture Investment
• US
– $17.7 billion with 2795 deals in 2009
• Japan
– $0.2 billion in 2009
– Much smaller number than $0.8 billion in 2006

33. Regulations, rules, and norms
• Equity finance
– Very few people have a knowledge and experience
in startup financing.
– Much smaller number and size of VCs and angels.
• Debt finance
– 99% of loans for startups require personal
guarantee of CEO.
 if fails, CEO owes personal debt.

34. Number of IPOs
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

35. History of Japanese IPO market
• Japan has many stock markets.
– Tokyo Stock Exchange has 1st and 2nd section for
bigger companies.
• TSE ‘Mothers’ market for emerging companies
was opened in Jan 1999.
• ‘NASDAQ Japan’ started in May 2000.
• NASDAQ Japan is not successful, and changed
its name to ‘Hercules’ market, because
NASDAQ withdrew from the market.

36. Livedoor scandal
• 2006 Jan 16: Livedoor (high-growth IT
company) was searched for fraudulent
accounting.
• 2006 Jan 17-18: TOPIX (stock index) fell 5%.
– Jan 18: TSE halted all trades.
• 2006 Jan 23: Executives of Livedoor were
arrested.

37. Mother’s market index
Livedoor
Scandal

38. Livedoor is much better than
• FOI
– Nov 2009: listed on Mothers market.
– May 2010: searched for fraudulent accounting.
– May 2010: bankruptcy
• Liquid Audio Japan
– Dec 1999: listed on Mothers market as one of the first
company on the market.
– Oct 2000: CEO was arrested for violent crime
– Feb 2009: finally delisted from the market
• Internet Research Institute
– Dec 1999: listed on Mothers market as the first .
– Jun 2007: delisted from the market for fraudulent activity.

39. Fads, fashions, and buzzwords
LATEST TRENDS

40. Groupon race
• Many Groupon clones • Piku
appeared in 2010. • Pomparade
– Around 20 or more. • Kaupon
• Most sites are having • Qpon
difficulties to provide
• Q:Pod
attractive coupon deals.
• Minawari
• First Groupon clone
‘Piku’ has launched on • Nikopon
Apr 20, 2010. • Goti

41. Rise of social games
• Mixi started “mixi app” based on OpenSocial
API.
– “Sunshine farm” by Rekoo.
• Gree and Mobage are social gaming
companies.
– And they opened their platform to third parties.
• Han game (Korea) is the first social game
provider in Japan which started on 2000.

42. iPhone and Android
• iPhone is the best selling
phone in Japan.
– However, still small
percentage of the market.
• Revolutionary, because
iPhone brought globally
compatible mobile web
to Japan.

43. EXAMPLES OF JAPANESE STARTUPS

45. Ciftr – work shift management tool
• Easily create work shift based on employee’s
preferences.
• Employee uses their own cell phone to send
preferences.
• Employer uses PC to adjust and fix work shift,
and pushes it to employee’s cell phone.