Terrie's Take 695 -- Where to Find Venture Funding in 2013, ebiz news from Japan

Terrie's Take terrie at mailman.japaninc.com
Mon Jan 28 01:03:15 JST 2013

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, Jan 27, 2013, Issue No. 695


- What's New -- Where to Find Venture Funding in 2013
- News -- Hay fever epidemic expected in March
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Skiing in Zao, Hitch-hiking in Kyushu
- Japan Business Q&A -- Consumption Tax and small co's
- News Credits

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Things have changed a lot since the heady days of 1998-1999, when it was
possible to raise a hundred million yen on a mere business plan. At that
time, the 4-year US dotcom bubble had just hit Japan's shores, and brought
with it foreign investors and new ways of thinking about how to leverage
companies with capital. For 18 short months, the environment for starting a
company was the most fertile it had been since the end of WWII. Although
some firms may have started a bit earlier, most of the famous players today
saw their critical growth happening from strategic investments made during
this funding window. Companies such as Rakuten, Gree, DeNA, Globis,
Kakaku.com, Netprice, GMO, and others.

At the height in early 2000, www.japaninc.com estimated that there were
more than 200 venture capital (VC) companies registered for business, and
between them had JPY100bn-JPY200bn of private and local capital invested in
VC funds.

Then the dotcom bubble burst, and most of the foreign funds closed up shop
one by one, until there were just a few remaining struggling Japanese VCs.
The situation improved somewhat with the short economic revival of
2005-2007, but in 2008 with the Lehman Shock and subsequent dearth of IPOs,
many of the survivors went through a "VC winter" from which they are only
just starting to emerge. Number two player in the market at the time, JAIC,
was symbolic of the troubles and almost went bankrupt in 2010. Currently
there are probably only 15-20 serious players left. Among them are: Globis,
Digital Garage, Sunbridge, Itochu Technology Ventures, JAFCO, Gree, DeNA,
Transcosmos, Docomo, and a few others.

What the Lehman Shock did do to the VC industry, though, was to create an
evolution, where the VCs went upstream to larger and more detailed
investments, and two new types of high-risk investor emerged: accelerators
(yes, we are using the term loosely), and Internet firms, such as Gree,
DeNA, and Rakuten, who are channeling some of their massive online profits
back into the next generation of start-ups.

[Continued below...]

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For inquiries, contact terrie at lincmedia.co.jp

[...Article continues]

Actually, on the subject of accelerators, for years US VCs criticized the
Japanese VCs for their low-effort, low-value "shotgun approach" to
investing, whereby the Japanese VC would apply a small amount of cash to
many companies in the hope that some of them would pay off. What's
interesting is that although unstructured, the Japanese approach turned out
to be much cheaper in the long run and offered an obvious way to reduce
investment risks. However, it took California-based Y-combinator to turn it
into a properly thought out business model. Y-combinator has now invested
an average US$18,000 into over 460 companies, while competitor 500
start-ups, also in the USA, has funded more than 280 companies.

Since making lots of small investments was already a natural inclination
for the Japanese (we're not talking about major VCs here), they have taken
to the accelerator model like ducks to water, and now there are a dozen or
more incubator/accelerators running in and around Tokyo. We covered these
in some detail in Terrie's Take 654 http://bit.ly/NqfUya. So if you're
looking for venture capital and you've just started your company, an
accelerator is a good place to start.

Oh, what is an accelerator? Well, in its US form, it's a 3-month or 6-month
crash course on how to create under guidance both a product and a
go-to-market plan that will cause VCs to want to invest. Then, at the end
of the period, known at Y-combinator as Demo Day, you are put in front of
an audience of investors. Some of the incubating companies will wind up
getting funding while the rest do not. We're told it's a very Darwinian
experience -- one that tells you in no uncertain terms whether the experts
think you're good enough.

Here in Japan, the accelerators tend to let their tenants stay longer (so
should we call them incubators?), and they tend to give a lot more basic
input to their charges about  how to structure and actually do business.
This is necessary, not just to give Japanese newbies a chance to learn
something that their universities fail to teach them, but also to reduce
the level of failures, which would otherwise would poison the well of
hopefuls. At the same time, since Japanese VCs tend to invest less as well,
overall there is less risk, less pressure, and everyone seems OK with
having lower expectations.

Japanese accelerators invest about JPY5m in space and services to the
companies they incubate -- sometimes they may also put cash into the
company. You might think that JPY5m isn't going to run a company for very
long, and you'd be right. You'll definitely need some outside funds to pay
salaries and equipment costs -- but then that's what friends and family are
for. We always tell people coming to our Entrepreneur's Handbook Seminar
(the next one is on February 9th, btw, more info in the Events section
below), that they need about JPY5m per person for the first year of
operation of a start-up. If you have 3 team members, that means JPY15m.
Why? Because that is their basic living wage plus costs for the 6-9 months
you need to make some sales. Japanese clients are very wary of new
companies, and no matter how compelling the product, sales take time...

...Well, unless you're targeting consumers that is, then the sales cycle
can be a lot quicker. We think that it is for this reason that games and
mobile app software is so popular for Japanese start-ups to focus on, and
that's what the incubators/accelerators are geared up for. So if you're
doing something else, then getting funding may be a lot more difficult.
Hmmm, solar and health businesses might also be OK.

Which brings us to seed-round investors. These are the third ring of
investors, after yourself and your friends and family. They are important
because they will usually be the first outsiders to invest in you because
of your business proposition rather than because they like you (although
that is important too). Anyone can be a seed investor, and if you're living
in Tokyo you're probably surrounded by people who might qualify. Generally
seed rounds go for about JPY3m-JPY5m per investor, multiplied to reach the
amount of money you think you need to make your product sellable. So who do
you know with JPY3m that they wouldn't miss if the venture didn't work out?
If you have a decent social network, probably 10-20 people.

Most entrepreneurs we know raise seed rounds of investment of about
JPY15m-JPY30m (5-10 investors), which should be enough to bring a consumer
app to the market. Is there a formal place you can go find seed investors?
There used to be an association here in Tokyo called Nippon Angels Forum,
but they appear to have been dissolved several years ago. Another
possibility might be Vic Murai's (ex-CEO of Compaq Japan) General
Incorporated Association TX Entrepreneur Partners (
http://www.tepweb.jp/e/index.html), based in Chiba, which intermediates
venture firms with about 20 angel investors. However, in the end we think
the best source of angel funding will come from those people closer you --
friends of friends, owners of companies that you deal with, etc., since
they are more likely to trust you and give you a favorable valuation. Also
they will find your approach more stimulating because they're not getting
hit up ten times a day for investments.

Your last stop for investment money is the VCs we mentioned earlier. You
can find them and more names at http://www.jvca.jp/english/. These days VCs
are quite picky about who they invest in, and are typically looking for
companies that can scale quickly and which are pretty obviously going to
make money. So your big idea will only work if it is coupled with a
competent technology platform and actual sales. If you're at an earlier
stage than doing actual sales, you should still be visiting VCs, but you
should expect that they will wait and watch until your company starts
gaining traction.

How much investment can you expect from a VC? Now in January 2013, between
JPY30m-JPY250m. Japan isn't the USA, and valuations and amounts invested
here will always be lower. Indeed, we can look with envy at how much
companies in the USA can pull from investors in Silicon Valley. At the same
time, we suppose investors there can only look in envy at how cheap
Japanese companies are here. :-)

Now is a good time to be approaching VCs. Those who are operating funds are
either funded or are raising new funds. As a foreigner in Tokyo, do you
have more or less opportunity to receive investment than a Japanese CEO? We
have found that those top tier companies who are internationalized in their
businesses are also internationalized in their investments. It seems to be
more of a language and comfort thing than a resistance to foreigners. That
said, the smaller domestic funds are narrow-minded. The best way to find
out is to ask for an appointment -- they'll quickly realize you're not
Japanese, and see what they have to say.

Chances are, based on what we've seen ourselves in the marketplace recently
and from reports from others, your chances of finding an audience are quite
good. Our understanding is that one of the biggest players, Globis just
raised a new fund GFIV, although they haven't announced it yet. Their
previous one, GFIII, was JPY18bn and it was invested into 41 companies. We
also know of several other VCs putting together new funds for 2013, which
seems to be a much more optimistic year that the last four.

However, just because the conditions are right, it doesn't mean that you
shouldn't also be taking care of all the usual things necessary for a
successful funding, like: a great business idea, a strong team, a
demonstratable version of your product, and enough of your own money in the
business to prove commitment. Good luck!

...The information janitors/


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+++ NEWS

- Hay fever epidemic expected in March
- Second year of trade deficit
- Infrared googles to defeat face recognition
- Hitachi buys US nuclear waste container co.
- Don Quijote expecting record pre-tax profit for H1

=> Hay fever epidemic expected in March

Hay fever season is almost upon us. The Environment Ministry has said that
sugi (Japanese cedar) pollen will start blowing down from the mountains
around Tokyo in mid-February and peak in mid-March (by mid-April for Tohoku
and further north). The Ministry said that pollen levels will be higher
than for last year, which was also severe. They warn that the season will
also be longer, running until early-April for Tokyo. ***Ed: About 30% of
the population suffers from hay fever each year. Including us!** (Source:
TT commentary from japantimes.co.jp, Jan 26, 2013)


=> Second year of trade deficit

The Finance Ministry has released provisional data showing that the nation
suffered its second consecutive trade deficit in 2012, with imports
exceeding exports by JPY6.93trn. The deficit was caused by a combination of
continued massive hydrocarbon imports to generate electricity after the
closure of almost all the nation's nuclear power plants, the Eurozone
crisis, and declining exports of parts and tools to China. Japan’s exports
to China fell by 10.8%, while exports to the EU fell 15%. (Source: TT
commentary from nytimes.com, Jan 23, 2013)


=> Infrared googles to defeat face recognition

Only in Japan? The National Institute of Informatics has announced a
prototype "privacy visor" goggles which contain near-infrared LEDs to blind
digital cameras trying to view the wearer, and thus protect his/her
identity. The goggles are made of clear plastic, but have near-infrared
LEDs which are generally invisible to the human eye but which are picked up
at full intensity by CMOS imaging chips, thus blinding the camera. ***Ed:
The only problem is that this device's LEDs are apparently still visible to
the human eye and they consume a lot of power, meaning that they are rather
conspicuous. Time for the NII scientists to hire a product designer...**
(Source: TT commentary from hindustantimes.com, Jan 26, 2013)


=> Hitachi buys US nuclear waste container co.

Hitachi subsidiary Hitachi Zosen has announced that it will acquire
Maryland-based US nuclear waste container consulting and design firm NAC,
for JPY4bn. NAC is a private company with sales of around US$71m in FY2011.
Hitachi Zosen makes the containers that NAC designs, and says it wants
access to NAC's know-how in sealing off radioactive materials and in secure
transportation. ***Ed: No guesses as to why they want this know-how.**
Source: TT commentary from e.nikkei.com, Jan 26, 2013)


=> Don Quijote expecting record pre-tax profit for H1

What are Japanese consumers spending their money on? Just ask discount
store king Don Quijote, which says that its H1 results (July-December) will
hit a record JPY19bn, up about JPY2bn from earlier forecasts and 15% more
than the same period last year. The firm said that while TV sales were
significantly down, shoppers were buying record amounts of beauty-related
electronic devices, watches, and other fashion products. Sales for H1 were
around JPY289bn, also about JPY2bn more than estimated, and 4% up on the
same period in 2011.
(Source: TT commentary from e.nikkei.com, Jan 26, 2013)


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


--------- Shojin Ryori: the real thing, in Tokyo ----------

Shojin Ryori is a unique Japanese temple vegetarian cuisine colloquially
called “monks’ food”. The Dewa Sanzan variant is known for using vegetables
found in the nearby Shonai Plain and wild mushrooms and vegetables picked
on the slopes of the sacred Mount Gassan. The meals are served to pilgrims
at the temple lodgings in Toge Village, which lies at the foot of Mount
Haguro, one of the other three sacred mountains of Dewa (Dewa Sanzan).

Now, Dewa Sanzan's “yamabushi” (mountain priests) have decided to travel
from Yamagata to Tokyo to introduce their cuisine to the foreign community
here, with a limited-seating sampling of dishes, teas, local sake, and some
local entertainment -- all absolutely free (first registered, first in).
One day only.

Schedule: Saturday, February 9th, 13:30-15:30
Venue: Neuro Cafe (www.neuro-cafe.com/), Jingumae
Fee: Free (incl. sampling meals, herbal tea,local sake)
Location: 2F, Jingu-mae 2-13-2, Shibuya-ku, Tokyo
Nearest Stn: JR Chuo/Sobu Line Sendagaya (9min walk)/Metro Ginza Line
Gaien-mae (7min walk)

For more information: http://japantourist.jp/view/dewa-sanzan-shojin-ryori
To register: Email info at cradle-ds.jp.


=> 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.


BiOS is urgently looking for a Senior Support Engineer, at our office in
the Minato-ku area, with experience troubleshooting users on various
issues, 2nd and 3rd level support, administrating servers at client
locations, and coordinating with colleagues, vendors, and clients. The
candidate will be responsible for troubleshooting networks, servers,
hardware, and software, Move Add Change and server monitoring, as well as
data backup (tape changing), inventory management, and assisting in
designing and setting up networks.
The candidate will also be responsible for consulting with the sales team
to provide technical advice.

Due to the technical nature and demanding work environment, this position
is suitable for someone with 3+ years of system administration experience
and 4+ years of user/desktop support, with a preference for those with some
experience in network design and site audits. In addition, since this role
requires direct negotiations with both Japanese and international clients,
business-level communication skills in English and fluent-level
communication skills in Japanese will be required.

Remuneration is JPY4.5m - JPY5.5m depending on experience and skill level.


- Support Engineer, IT integration services provider, global data center
services provider, JPY3M - 5M
- Service Delivery Manager (Data Center), large data center services
provider, JPY6M - 8M
- Staffing Consultant, IT services provider, JPY2.5M - 3M
- Server Engineer, major Japanese online company, JPY5M - 7.5M
- Software Asset Management Officer, global bank, JPY3.5M - 5M

** 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
jason.kisling at biosjp.com.

Interested individuals may e-mail resumes to: jason.kisling at biosjp.com and
check out the BiOS web page for other jobs:



----------------- ICA Event February 21 ------------------

Speaker: Gen Utsumi, Head of Sales & Business Development APAC for
smartTrade Technologies.

Title: "The Reality of Electronic FX Trading" Details: Complete event
details at http://www.icajapan.jp/

Date: Thursday, February 21, 2013
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No sign ups
at the door!!!!!!!
RSVP: RSVP by 5pm on Friday, February 15th
Venue is The Foreign Correspondents' Club of Japan

---------------- Start a Company in Japan -----------------

Entrepreneur's Handbook Seminar 9th of February, 2013

If you have been considering setting up your own company, find out what it
takes to make it successful. Terrie Lloyd, founder of over 17 start-up
companies in Japan, will be giving an English-language seminar and Q&A on
starting up a company in Japan.

This is an ideal opportunity to find out what is involved, and to ask
specific questions that are not normally answered in business books. All
materials are in English and are Japan-focused.

For more details: http://www.japaninc.com/entrepreneur_handbook_seminar

------------------ Prestigious Writing Prize --------------

The Japan - U.S. Innovation Award Program <http:/www.usjinnovate.org>,
which is produced by the Japan Society of Northern California in
cooperation with Stanford's US-Asia Technology Management Center, is
opening up a new award category this year: the "Untold Story in Innovation"

This will go to the author of a previously unpublished story of
intrapreneurial innovation inside a company (probably a large company) that
has relevance to Japan - U.S. business. This award is aimed at professional
or part-time journalists and other researchers/writers.

The award is for an English language piece of journalism. There will be one
winning author, who will receive a $3,000 cash prize. We will also
recognize two Award Alternates, who will each receive a $1,000 cash prize.
Although the cash prizes will only go to the winning
authors, the innovators and companies featured in their stories will also
be named as recipients of the honor.

The first step is to send in a "pitch" proposal to the Subcommittee for
this Untold Story award, namely:

Richard Dasher <rdasher at stanford.edu>
Dana Lewis <danalewis at mac.com>
Andrew Neuman <aneuman at usajapan.org>
with cc to John Thomas <JOHNRTHOMAS at me.com>

Deadline for the pitch is January 31, 2013. PLEASE REFER TO the attached
document for details on what to include in the pitch, etc. If you have
further questions, please contact Prof. Richard Dasher <rdasher at stanford.edu>
or Ms. Dana Lewis <danalewis at me.com>.

---------------- Share House Near Ikebukuro ---------------

There are gaijin share houses, and those that you share with others on a
casual basis, but none has the facilities and amenities of this
new-to-market offering. Large 4-bedroom house with large yard, share
kitchen-living-dining rooms, and with your own large bedroom. Available for
short and long-term tenants. Just JPY50,000/month. Includes share of
internet connection.

Only 20 minutes by train from Shibuya/Ikebukuro.

Contact the owner at hatanokawakatsu at yahoo.com



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 corrections this week.



=> Zao Ski Resort, Yamagata-ken
Top ski resort, snow monsters, and a great onsen

Zao Ski Resort, in Yamagata Prefecture is easily one of Japan's top ski
resorts. It is well prepared and offers a fun-packed winter sports holiday
for families, couples, groups of friends or colleagues. Whatever your
winter sports needs, Zao Ski Resort can cater to them -- it's particularly
good for snowboarders. There are 4 gondolas and no less than 41 chair lifts
taking you up the slopes quickly and offering access to all the ski and
snowboard courses. All-in-all, there are 14 slopes and 12 courses in an
area measuring 305 hectares. Being a top ski resort, there are many
different slopes, some for beginners and some for experts, and slopes
designed for just skiers and for just snow boarders.


=> Hitchhiking Kyushu, Fukuoka-ken
Your true Japan adventure begins now

After traveling to fifteen countries, I never imagined that hitchhiking
around Japan would become possibly the greatest and most inspiring
vacations of my life. Having never hitched before, I really had no idea of
what to expect in the seven days ahead. Most friends and family thought I
was rather nuts, less a few of my closest mates, Jason, Dan and Regina. So
with a day’s lead on Golden Week, the four of us piled in my car and hit
the road.

With nothing more than a backpack, the four of us set off South from
Shimane prefecture to Kyushu, where we would begin our hitchhiking
adventure. Our only plan was to visit all  its seven mainland prefectures
and to meet up in the exact point of origin, seven days later. The only
restriction: no funds could go to transportation. While I could write a
book on the adventure (would you read it), I’ll stick to the basics to help
you prepare for yours....



+++ JAPAN BUSINESS Q&A -- Consumption Tax and small co's

=> Q. I heard that small companies do not have to pay consumption tax. How
small are we talking about?

*** A. Whether the company is classified as “small” for consumption tax
filing purpose is determined following the below steps;

1.Is taxable sales amount recognized during two terms prior to the current
fiscal year JPY10m or less?
2.If the answer to the above question is yes, is either of taxable sales
amount or the salaries amount recognized during previous fiscal year JPY10m
or less?

If the answers to both questions above are yes, the company is classified
as “small” for consumption tax filing purpose and can be exempt from the
consumption tax filing and payment for the current fiscal year.

Although the company is classified as “small” and can be exempt from the
consumption tax filing for the current fiscal year, the company can
voluntarily elect to be a taxable status by submitting “Report on the
Selection of Taxable Enterprise for Consumption Tax” before the beginning
of the current fiscal year.

To continue reading...




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

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