Terrie's Take 587 -- Where Start-ups Get Money From, e-biz news from Japan

Mon Oct 25 00:29:14 JST 2010

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, October 24, 2010, Issue No. 587

+++ INDEX

- What's New
- Short Takes
- News
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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+++ WHAT'S NEW

It doesn't need to be said that Japan is a tough place to
start your own company. But whatever the reason,
whether it's the market competition, lack of sources for
funding, or a risk averse culture, the number of new
start-ups is falling steadily, meaning that the future
commercial base of the country is being eroded.
According to the Statistics Bureau there were somewhere
around 29,000 small and medium-sized companies
started up in 2006, down substantially from the 45,000
started in 1999.

The lack of start-ups in general, and particularly
"quality" start-ups (i.e., those with genuine technical
or some other inherent advantage), has to be concerning to
the powers that be, since it's well-known that not only do
small firms create innovative new technology and solutions,
but they also provide 70% of the nation's employment and
thereby fulfill one of Japan's most important business
concepts -- the social contract between companies and
society which ensures high employment.

So why is there a lack of new, innovative companies being
established in Japan? Our guess in order is: lack of a risk
taking culture and general apathy that goes with it,
followed by difficulty in raising initial capital to run
the business, then the sheer competitiveness of the
market.

Today, let's look at raising capital.

Traditionally Japanese start-ups go only to banks for
financing, rather than raising equity as is common
elsewhere. This is because the debt system here is
well established and accepted, and because the
banks are considered experienced enough to help
lenders navigate the new waters of business. However,
the problem with bank loans is that for a start-up you
need to have guarantors, and right from the start the
company directors are asked to put their personal
guarantees (and thus their assets) on the line for
such loans -- considerably disincentivizing directors
from joining start-ups....

[Continued below...]

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[...Article continues]

In other countries, Venture Capital (VC) firms play a
fairly major role in helping new companies get started.
Silicon Valley epitomizes this relationship, and on average
 VC investment in the USA is about 10 times greater than
here. One likely reason why Japan lags far behind other
markets could be because stock market listings (IPOs) are
way down and thus VCs have a very slim chance of getting a
profitable return. Then of course there is the boring old guy
entrepreneur factor referred to previously, as well.

2009 produced a record-low (in recent times) number of
IPOs: just 19, and this year will not be much better. In
stark contrast, perhaps surprisingly so, the South Korean
IPO market is booming and there were 66 IPOs in Seoul last
year, with an expected 70 lined up for FY2010.

As a result of the poor IPO market, and possibly the
resistance to the idea of VC-led non-IPO "trade sale" M&A
 by CEOs who look at their companies as their own family
jewels, fiscal 2009 venture capital investments fell 40%
over those made in 2008, for a total of JPY63.7bn by the
nation's top 20 VC companies. To put things into better
perspective, in a recent UK firm's survey of 100 global
institutional investors about the attractiveness to VCs in
Asia and Oceania, Japan ranked bottom of the list...

So if there is little venture capital, where do start-up
companies get their funds from? We can see from the
government's Stats Bureau that in 2006, there were 12,078
companies funded with capital of between JPY3m and JPY5m --
we speculate that these companies were probably self funded
by the founders and perhaps a few family members and
friends. After the initial round, the founders will most likely go
on to raise money from the various government institutions
available in the government's "debt conveyor belt" system --
such as the Japan Finance Corporation and the Tokyo Credit
Guarantee Corporation.

The next most common capital amount given in the Stats
Bureau numbers is 7,700 companies started with funds
ranging from JPY10m-JPY30m. This is surprising and shows
that a significant share (almost 25%) of start-ups are
getting larger amounts of cash not normally available to
salary men. Our guess is that much of this comes from larger
companies helping a division to spin-out, or making a
strategic investment in someone they know and trust. This
is a very common act in Japan and is generally a great way
to raise capital when needed.

Last but not least, and just to round out the picture on
small company start-ups stats, there were 3,637 businesses
funded with capital of JPY5m-JPY10m, which again, in our
opinion probably represents money put in by family and
friends.

Can foreigners tap into the Japanese debt stream for
start-up companies? Absolutely. So long as your firm is an
incorporated business, we would recommend looking into
the Japan Finance Corporation loans -- which typically
come with an interest rate of around 2.5% or so and which
do not require you to be profitable at the time of applying.

There are many other loans as well. The best place to find
out about these is through your local "gyousei shoshi"
(Administrative Scrivener) who specializes in loan
applications and who for a percentage of the fees will
make your loan application on a success-only basis.

...The information janitors/

***------------------------****-------------------------***

+++ SHORT TAKES

We recommend products and services that you might find
interesting or useful while living in Japan.

=> 1. Cheap but good Vitamin C

Several weeks ago, we mentioned Solgar's Quercetin complex
Vitamin C supplement. The only problem with this
excellent product is that it is quite expensive, and if you
want a large dose every day, then there are other choices
in buffered (easy on the stomach) Ester-C products, such as
American Health's Ester-C. There is no real agreement on
how much Vitamin C you should take daily, with WHO saying
that just 45mg is enough, and proponents of megadoses
saying 2gm to 4gms. We think that (and take this) 2gm is a
useful amount.

http://www.iherb.com/American-Health-Ester-C-1000-mg-with-Citrus-Bioflavonoids-180-Veggie-Tabs/15080?at=0
* iherb.com referral code -- LOY499
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=> 2. Coming week's MMC prize
Next week's prize in the Metropolis Members Club is a set
of Puff Nation casual clothes from Puff Nation. This
week's prize was a Dyson DC24 Upright Vacuum Cleaner,
courtesy of Dyson, won by Stephen Lebovitz.

http://blogs.metropolis.co.jp/club/
* 40 prizes scheduled in the next 40 weeks.
* No charge to enter.
* Simply receive the MMC newsletter to stay in the draw.

***------------------------****-------------------------***

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an office in Japan. We take care of all aspects of the
employment, contracting, and dispatch -- including
management of the employee.

For more information on this and other SI and IT services,
in English or Japanese:

Phone: 03-5773-3090, Email: solutions at biosjp.com
Web: www.biosjp.com
-----------------------------------------------------------

+++ NEWS

- Record number of companies in business in China
- Skype-KDDI service coming
- Leading investment fund bullish on Japanese Real Estate
- Embassy wine cellars overflow
- Tsukiji fish market to move

-> Record number of companies in business in China

Corporate data research firm Teikoku Databank reckons that
a record 10,778 Japanese companies are now present and
commercially active in China. Of these, about 42% are
manufacturers and 35% are wholesalers. 67% of firms had
more than 50 employees. Not many of those companies are
doing so well, however, with just 20% saying that revenues
increased in FY3009. (Source: TT commentary from
nikkei.com, Oct 22, 2010)

http://e.nikkei.com/e/ac/tnks/Nni20101022D22SS606.htm

-> Skype-KDDI service coming

KDDI has obviously realized that it has missed the boat on
smart phones, and not only is it moving quickly to roll out
Android OS handsets, but it is also rolling out some
groundbreaking services. One of these is Skype on its Au
mobile service, allowing Au callers to, presumably, connect
to Skype users globally from the cell phone, regardless of
whether it has access to a broadband connection or just
through its Au 3G connection. (Source: TT commentary from
google.com, Oct 19, 2010)

http://tinyurl.com/25po42r

-> Leading investment fund bullish on Japanese Real Estate

Fortress Investment Group said at a Tokyo investment
conference this last week, that it thinks Japan's
distressed real estate sector is about to enter into a boom
period (or bust period if you're the seller). Fortress expects
about US$50bn in distressed loans to come on the market
over the next 3-5 years, requiring banks to take foreclosure
measures. Currently the total commercial mortgage debt
market in Japan is worth around JPY1.12trn. ***Ed: So what
they're saying is that Japan is about to enter into another
real estate slump, where land holders won't be able to get
mortgage renewal fundings. If they are right, and distressed
assets do make their way on to the market, there will be a
feeding frenzy by funds - who'd love to be in on a Japan
play for super-cheap assets.** (Source: TT commentary
from bloomberg.net, Oct 20, 2010)

http://tinyurl.com/2dwdkub

-> Embassy wine cellars overflow

As the government continues to look for waste and
misallocation of tax money in the nation's various organs
of power, someone decided to do an audit of the 211
diplomatic missions overseas. What they found was an
amazing stockpile of 8,000 bottles of high quality wine at
a number of embassies around the world, including the OECD
mission, which has 7,896 bottles of wine in stock! ***Ed: As
these are embassies and are unlikely to serve cheap wine,
conservative estimates are that the wines are worth
somewhere around JPY400m.** (Source: TT
commentary from vancouversun.com, Oct 19, 2010)

http://tinyurl.com/24tkdh4

-> Tsukiji fish market to move

Not one to back down in the face of a fight, rambunctious
Tokyo governor Shintaro Ishihara has said that he approved
the budget needed to move Tsukiji fish market to a new
location in nearby Toyosu. This, despite the fact that the
new location has been found to contain contaminated soil,
and that both the DPJ ruling party AND Tsukiji employees
are against such a move. The relocation is expected to cost
around JPY128bn. ***Ed: Can someone PLEASE put Ishihara out
to pasture so we can have a financially responsible
governor in charge for a change?** (Source: TT commentary
from nikkei.com, Oct 22, 2010)

http://e.nikkei.com/e/ac/tnks/Nni20101022D22JF660.htm

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

***------------------------****-------------------------***

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION(S)

BiOS is currently looking for skilled deskside support
staff to work onsite in operations of a Tokyo based office
equipment company. We require both level 1 and level 2
engineers and support staff, so if you are looking to use
your knowledge to get further experience in complex user
and operations support, or looking to upgrade your
helpdesk career with the next step up, this is the role
for you. Depending on the job category, duties range from
standard helpdesk receipt of calls and incident logging, to
resolution of issues and ad-hoc desk side support, and at
the high end to project, network and server work.

As this is a predominantly customer facing role you will
need to have excellent communication skills,
never-failing enthusiasm, and go-getting can-do attitude.
You will be helping people out with each and every request
you receive so as well as your excellent attitude, a few
years experience in a similar operation would be required,
and if you can show certification such as CCNA, CompTia or
MCP, or something similar it will be a great help to your
application.

Remuneration is JPY4m – JPY6m depending on your experience
and technical level.

** POSITIONS VACANT

- Network QA Analyst, Global Telecoms, JPY6m – JPY8m
- Data Center Network Support, JPY3.5m – JPY5m
- Web Apps Support, LCD Manf JPY3.5m – JPY4m
- IT Support Engineer, Euro Pharma client, JPY4m – JPY5m
- Okinawa IT Manager, Investment bankJPY5m – JPY6m

Interested individuals may e-mail resumes to:
stuart.gibson at biosjp.com

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its
job seeking candidates, called BiOS Job Mail. Every edition
carries a list of BiOS's current and most up-to-date
vacancies, with each entry featuring a short job
description and a direct link to the main entry on the BiOS
home page. Regardless of whether you are unemployed and
searching, thinking about a career change, or just curious
to know if there is something out there that might suit you
better, the BiOS Job Mail newsletter is an easy and
convenient way for you to stay informed. If you would like
to register for the BiOS Job Mail, or to find out more,
please email stuart.gibson at biosjp.com.

Interested individuals may e-mail resumes to:
stuart.gibson at biosjp.com

-----------------------------------------------------------

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-----------------------------------------------------------

***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------------- CCH HR Seminar ------------------------

CCH Japan presents 'HR Seminar 2010'

Redundancy under The Current Economic Crisis
-Redundancy of Expatriate and Early retirement program-

Speaker: Hideki Kano: Partner of Anderson Mori & Tomotsune

Date:Friday, 19th November 1:30pm-5:00pm
Venue: Happo-en 5F Room 'Linden'
Number of Seats: 50seats
Language:English
Fees: JPY21,000 (Tax included)-->JPY18,900 (Tax included)
We offer a special 10% Discount for readers!!

Register at: https://www.cch-japan.jp/contents/register/form
For more details, please contact us at: support at cch.co.jp,
or 03-6234-3980.

www.cch-japan.jp
-----------------------------------------------------------

---------------- iWine Event at Roti ----------------------

http://en.iwine.jp presents an evening wine dinner event at
Roti Roppongi, with a great line up of the Francis Ford
Coppola Winery.

Heather de Savoye, Francis Ford Coppola Winery’s Director
of International Wine & Food will be on hand to chat about
the wines.

It should be a beautiful fall evening out under the stars
right in the heart of Roppongi, where Chef Ian Tozer & his
kitchen crew will be putting out an exciting array of
dishes for the dinner buffet paired with the evening's
amazing wines.

Details:
-Tuesday, October 26, 2010
-7:00pm - 10:00pm
-Roti Roppongi
-5,000 Yen including tax and service
-14 great Francis Ford Coppola wines to enjoy
-Exciting, tasty dinner buffet by Chef Ian Tozer
-Door Prizes & Giveaways

-For tickets: http://www.iwine.jp/roti/
-----------------------------------------------------------

---------------- ICA Event - November 18 ------------------

Speaker: Garr Reynolds, Associate Professor of Business and
Communication, Kansai Gaidai University, Osaka

Title: 'Presenting Naked with Visuals: Thinking Like a
Designer'

Details: Complete event details at http://www.icajapan.jp/
(RSVP Required)

Date: Thursday, November 18, 2010
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members)
Open to all, at The Foreign Correspondents' Club of Japan

http://www.fccj.or.jp/aboutus/map
-----------------------------------------------------------

----------- Metropolis Halloween Glitterball 2010 ---------

'Double Trouble'

Oct 28th, 7pm-midnight at Vanity Lounge and f-Bar
Double chance to win our famous costume contest!

All-night access to both venues 2,000yen w/1d (presale),
2,500yen w/1d (door).

http://metropolis.co.jp/glitterball/
-----------------------------------------------------------

--------------- APABIS Economic Conference ----------------

2010 APABIS Annual Conference 'Decision-Making in a Time of
Crisis: Private and Public Perspectives'

The conference - a platform for cross learning and
understanding across public and private sectors and an
opportunity for finding answers to global crises.

Join over 150 delegates and speakers as this important
international conference explores the twin challenges of an
economic system in urgent need of reinvention and the climate
change imperative.
The conference will examine how decisions are made in the
public and private sectors. In a globalised world economy
where solutions require business, government and civil
society to work in harmony, this conference brings together
speakers, ideas and initiatives to explore new ways of
tackling global issues.

Date: November 4th, 5th 2010
Place: United Nations University, Tokyo, Japan
Price: NZ$350
Registration: http://www.apabis.org/events/
-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors at terrie.com.

*** No comments or feedback this week.

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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