Terrie's Take 849 -- Crowdfunding Takes Root in Japan, other e-biz news from Japan

Terrie's Take terrie at mailman.japaninc.com
Mon May 16 02:47:10 JST 2016

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term 
technology and media entrepreneur living in Japan. 

General Edition Sunday, May 15, 2016, Issue No. 849

- What's New -- Crowdfunding Takes Root in Japan
- News -- Apple problems hurting Japanese parts makers
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Dorayaki in Tokyo, Oktoberfest in May in Osaka
- News Credits

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For as long as we have been in business (about 30 years), it's never 
been easy to get funding in Japan. Our first experience with trying to 
get a bank loan, with the Mitsubishi Futako-Tamagawa branch, in fact, 
was a disaster. Asking for two million yen for our then advertising 
agency, we were told that "the foreign partner (your's truly) might flee 
the country to avoid repaying the money". Extremely dejected after that 
meeting, things got a little brighter when we discovered the then-named 
People's Finance Corporation (PFC, but now called Japan Finance 
Corporation) that was willing to lend us JPY5m, foreigner or not. Thus 
we began our corporate journey down the well-traveled debt track in Japan.

And so it has been for the tens of thousands of other small start-ups in 
Japan over the last 30 years. Banks spurned them as a matter of course 
and became "second base" after first dealing with the local PFC. 
Interestingly, the PFC's role was not only to finance us newcomers but 
also to educate us about financial responsibility, which meant squeezing 
performance out the small amounts of money they doled out. As a result 
they were responsible for a generation of start-ups that were internally 
strong enough that they could "graduate" to the next round of financing, 
from an actual bank. On the down side, they starved otherwise innovative 
start-ups to the extent that it took 10-15 years to earn the same market 
position that a comparable overseas businesses could do in 5. This seems 
to be one reason why Japan has been slowly but surely losing the global 
race for innovation -- at the SME level anyway.

The debt track was supplemented in the late 1990's by the arrival of 
western-style Venture Capital (VC), but wholesale risk-based investment 
never quite seemed to catch on. Even today, there are less than 50 
genuine VCs in the whole country, funding less than 150 companies in total.

But now there is a new concept which promises to radically improve the 
situation - crowdfunding.

The best known and largest crowdfunding site in the world is probably 
Kickstarter in the USA. To date the company has helped 105,595 projects 
receive "investments" of US2.4bn from 11 million backers. Of course 
their transactions are not really investments, you know, where stock is 
sold, because for most of Kickstarter's life that hasn't been legal. But 
from tomorrow, May 16th, that all changes thanks to the finally 
completed SEC rules implementing the JOBS Act section on crowdfunding. 
 From tomorrow, anyone in the USA will be allowed to buy online 
crowdfunded securities.

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Japan has had its own crowdfunding sector slowly percolating over the 
last 8-9 years. First in 2007 there was Maneo, the social lending site, 
which by last year (FY2015) had grown to 31,000 investors owning a loan 
portfolio over JPY35bn, and in FY2015 issuing more than JPY10bn in new 
loans.Then in 2012, a more western-looking crowdsourcing business, 
www.readyfor.jp, was launched by Haruka Mera, offering to fund a wide 
range of social activities and products/services. However, the real 
watershed moment was probably in early 2014, when the Japanese Financial 
Instruments and Exchange Act (JFIEA) was amended to allow easier 
venture-based crowdfunding for investment. Surprisingly, perhaps, this 
is one case where the Japanese acted quicker than the USA when it came 
to implementing legislation inspired by the 2012 JOBS Act (in the USA).

Unfortunately, "easier funding" is a relative term in Japan, and the 
rules are still sufficiently restrictive that there are still only two 
true equity-based crowdsourced sites here, although more are expected to 
pop up over the next couple of years as the systems and processes needed 
become more familiar. In exchange for easier online fundraising, the 
Japanese authorities lowered the maximum investment made through an 
online portal from JPY5m (for so-called Class 1 investments) to just 
JPY1m, and for individual small-lot investments, the maximum was cut to 
just JPY50,000. Still, if you have 300-400 such investors, even small 
lot investments can mount up.

Japan now has more than 50 crowdfunding platforms, many of which are 
extremely niche, dealing just with movies, or books, or whatever. They 
are a revelation to Japanese small businesses, and for that matter small 
investors, both of whom no longer have to deal with conservative 
technology-challenged old geezers in banks (who in any case don't want 
to deal with small businesses). Investors get to put their money where 
they think it will do social good, such as going to new or recovering 
businesspeople in Tohoku after the 3/11 earthquake, or where they would 
REALLY like to see a gadget become a reality. Depending on the site, the 
average funding is in the order of JPY1,000~JPY20,000 per person. So 
it's not a huge risk in return for some fun and action while following a 

Basically Japanese crowdfunding sites boil down into one of three types:

* Donation-driven sites similar to Indiegogo and PledgeMusic. There are 
more than 15 such players here, such as www.japangiving.jp.
* Product-driven sites similar to Kickstarter - most Japanese 
crowdfunding sites fall in this category. Japanese sites would include 
https://camp-fire.jp/, https://readyfor.jp/, and https://www.makuake.com/.
* Investment-driven sites, where the crowd buys loans, securities, or a 
hybrid of product and securities. Japanese sites would include 
https://www.maneo.jp/, https://www.lucky-bank.jp/, and 

The top Japanese crowdfunding sites are really becoming quite a 
phenomenon. Here are some examples:

1. Readyfor?
- Readyfor? is Japan's largest crowdfunding site. Its top performing 
project at the moment is a personal laser cutting tool for making 
desk-top art, engraving, and materials cutting. The tool is made by a 
small Yamanashi company called SmartDIYs, uses a 1.5 watt laser on a 
bare bones tracking platform. One month ago SmartDIYs listed their 
project on Readyfor?, hoping to raise JPY1m. The project hit a chord and 
went viral, and as of tonight they had raised 4,257% over target, or 
JPY42.5m from 756 people.

2. Makuake
- This site is run by CyberAgent and it's best known for its gadget 
projects, although in fact the top project was an anime movie that 
raised JPY36,224,000 from 3,374 people, 181% over the original target of 

3. Maneo
- Arguably the founding father of Japanese crowdfunding is this social 
lending site, which took everyone (especially the regulators) by 
surprise with the idea of crowds lending to each other. Loans generally 
sell for between 5-8% with Maneo taking a small commission on each unit. 
Maneo Market, the operator of the site, reckons they have tripled the 
loans under management to JPY10bn in March 2015, having lent out JPY35bn 
overall. You may wonder how Maneo was able to get around the old 
regulations when it first started up. This was possible thanks to the 
company's legal work-around which signs "silent partner" contracts with 
investors putting money into the actual Maneo company. Once they have 
the funds and a paper trail to record them, Maneo then takes the loan 
and lends it out.

We've always said that in Japan selling to the public (B2C) is a lot 
more logical than selling to businesses (B2B). With consumers even if 
you are new entrant, if you offer a great value proposition the sales 
are likely to happen. In contrast, selling to business customers 
presents all kinds of hurdles thrown up by politics and corporate pride.

With the new wave of crowdfunding portals, suddenly owners of business 
can think and behave like consumers, as can the lenders on the other 
side of the table. This is important, because factors like risk and time 
can be priced by the market, and both sides can pay/receive returns much 
higher than the PFC and other debt providers can offer.

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+++ NEWS

- Tokyo becoming embroiled in Olympics bribery investigation
- Auto recharge stations exceeding gas stations a big deal?
- Apple problems hurting Japanese parts makers
- Big funding for IoT MVNO start-up
- Japan Post to continue buying JP bonds

=> Tokyo becoming embroiled in Olympics bribery investigation

It seems that rumors of London being considered as a backup venue for 
the 2020 Olympics could be true. Apparently French prosecutors have 
started an investigation into a suspicious SG$2.8m payment made in 2013 
by the Tokyo Olympic Games bid organization in Tokyo to Black Tidings 
company, a firm with links to a disgraced IAAF member. The payment was 
discovered after French police arrested Lamine Diack for covering up 
failed drug test results. His son, Papa Massata Diack, was closely 
involved in Black Tidings operations and is currently on the run from 
Interpol. ***Ed: The Japanese government is of course saying that they 
are innocent of any wrongdoing, but it seems this investigation has the 
potential to blow up in their faces.** (Source: TT commentary from 
theguardian.com, May 12, 2016)


=> Auto recharge stations exceeding gas stations a big deal?

While the international press have been excitedly reporting survey 
results that Japan now officially has more electric car charging 
stations than gas stations, the fact is that the numbers are misleading. 
In fact, most of those "charging stations" are in privately owned 
locations not accessible by the general public, and thus apart from the 
company fleet directly using them, do little good for anyone else. 
***Ed: In fact, there are only about 3,000 publicly available charging 
stations available in Japan and most are clustered in the major cities. 
What's more, less than 100,000 plug-in electric vehicles were sold in 
2014 (2015 numbers not available yet), and our guess is that most of 
these would have been fleet vehicles. So we still have a ways to go 
before Japan can be considered an electric car nation.** (Source: TT 
commentary from nacsonline.com, May 13, 2016)


=> Apple problems hurting Japanese parts makers

Apple's highly publicized recent slowdown appears to be having some very 
direct repercussions for parts makers here in Japan. LCD maker Japan 
Display has announced that it will report a JPY31.8bn loss for FY2015. 
Analysts are saying that competition, higher foreign exchange costs, and 
the Apple slowdown are major reasons. ***Ed: One big problem for Japan 
Display, just as for Sharp, is that the company has totally missed the 
OLED display boat, and building out new infrastructure will not only 
require billions (of dollars) in capital but also take at least 3-4 
years to come on stream. Rumors are that Apple is going to move to OLED, 
so if that happens, Japan Display will be left high and dry.** (Source: 
TT commentary from wsj.com, May 10, 2016)


=> Big funding for IoT MVNO start-up

One MVNO that is doing things differently in Japan is Soracom, a 
Tokyo-based venture-funded firm that offers SIM-based IoT communications 
in replacement of WiFi. The company has just received its Series B 
funding, a very decently sized JPY2.4bn, from WIL and others. The firm 
says it will use the money to enter the US and other markets. ***Ed: 
Soracom runs its network over NTT DoCoMo, as do many other MVNO's, and 
because it focuses on IoT the company is happy to be using NTT's slow 
and now-unloved 3G network. Prices at Soracom are ultra cheap, and their 
customer provisioning systems are as good as any Silicon Valley 
start-up. In fact, we see that they are using some of the same startup 
tech - such as Zendesk. This is probably going to be a company to 
watch.** (Source: TT commentary from techcrunch.com, May 11, 2016)


=> Japan Post to continue buying JP bonds

A Reuters interview with Japan Post Bank Chief Investment Officer 
Katsunori Sago makes it fairly clear that the bank is planning to remain 
conservative about where it puts its funds. Sago in particular warns 
other funds about by being over-stimulated by negative interest rates 
and making wholesale moves into other assets. He says that even if 
negative interest rates are 2-3 basis points, this still allows some 
profit on 30 year government bonds and therefore JGBs are still a good 
bet. ***Ed: We're sure that the BOJ is listening to such comments, and 
if the BOJ wants to force large concentrations of Japanese institutional 
money into the stock market and private sector, it is going to have to 
increase the negative rates to a level where yields on JGBs themselves 
go negative.** (Source: TT commentary from reuters.com, May 10, 2016)


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.


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=> Dorayaki from Usagiya

Famous Japanese pancake dessert done right, Tokyo

If you know a little something about the manga that is Doraemon, you'll 
know that dorayaki is his favourite snack. He loves them and falls for 
traps whenever there is a dorayaki involved, but hey, I don't blame the 
guy - this stuff is delicious!

A dorayaki pretty much looks like a pancake burger. It consists of two 
burger bun-like pancakes with sweet adzuki bean paste (more commonly 
known as red bean paste) packed in the middle. Dorayaki are widely 
available in Japan and you can get one from any convenience store or 
supermarket. However the modern day burger-like dorayaki, as opposed to 
the traditional dorayaki which only consists of one pancake folded in 
half with bean paste in the middle, is said to have been invented by 


=> Osaka Oktoberfest 2016
A genuine beer festival experience in Japan

Another spring time event you do not want to miss in Japan is the 
Oktoberfest 2016. Yes, an Oktoberfest during the month of May. The 
opening of the "Okutoba-Festo" in Osaka took place at the Tennoji Park 
entrance area Tenshiba on May 13, 2016. It will be held in other parts 
of Japan too.

This German-originated event is being enjoyed in numerous countries not 
only during May and October, and has been adapted by the Japanese since 
2011. Now in its 6th year, Japanese and tourists from all over the world 
can enjoy an authentic experience here in Japan without having to fly to 

A huge variety of craft beers from mostly German brewery companies are 
available, such as Warsteiner, Arcobrau, Paulaner, König Ludwig, 
Löwenbräu, Erdinger, Vedett, and Spalter. These are served fresh from 
the barrel then poured into different types of glasses such as weizen, 
dunkel, pilsner, and cocktail, and these make the craft brewed beer 
drinking experience more genuine. You can pair your large glasses of 
beer with sausages, which traditionally is the perfect duo, or with 
pretzels, french fries, breaded meat, chicken chops, pizza and a lot 
more food types to choose from.




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

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