Lately I’ve been on entrepreneurship kick. As such, I’ve started to make it a point to sit down with entrepreneurs wherever I go, from Singapore to Taipei, and of course…Tokyo.
While living here in Tokyo and studying Japanese, I got a chance to sit down with a couple of entrepreneurs and hear their stories. I was interested in what brought them to Japan in the first place, their stories of starting businesses in Japan, and what the entrepreneurship landscape looks like in Japan.
Particularly: are other Asian countries (see: Hong Kong, Singapore) kicking Japan’s butt when it comes to attracting entrepreneurs and making it easy for entrepreneurs to get set up?
One week in late February, in the midst of hectic consulting assignments and missed plane flights (don’t ask), I got the chance to sit down with both Peter Galante, Founder & CEO of Innovative Language Learning (you may recognize him/them from the flagship product: JapanesePod101.com) and Biju Paul, Founder & CEO of Top Tech Infomatics.
It was an interesting dichotomy, as one (Galante) runs a B2C business focused built around fairly new technology (apps, podcasts, anything Apple), while the other (Paul) built a B2B business on something that’s probably been around for centuries: recruiting and placing talent. Yet, both are foreigners who started businesses here in Tokyo as first time entrepreneurs. Both have been through the process of expanding (both in Tokyo and globally), hiring, and adding new lines of business. For Galante: this meant going from podcasts and into new product lines such as apps, and for Paul: going from placing people to building software packages and products for clients… such as apps.
How They Got Started
I always love to hear the stories of how and when the entrepreneurial bug hits, what was happening in their life beforehand and how they handled the transition. Both Galante and Paul had been in Japan for a couple years plus when they got started. They both started under different circumstances.
Galante, a US native (a New Yorker), was a PhD student, who after being in Japan for several years and learning Japanese, was now going to school at a Japanese University, with coursework entirely in Japanese of course. He even notes, “sometimes I tried to use the language barrier as an excuse to get me out of certain things. It didn’t always fly though.” Having learned Japanese while living in the smaller villages in Japan and meeting and making friends who were “just as wild as some of my friends back in New York” came up with the idea for JapanesePod101 shortly after the introduction of the iPod and podcasts to the world. “I wanted to give people a peak behind the formality curtain and share the fun and interesting experiences I had with learning Japanese” he says, pointing back to his “wild” Japanese friends he’d hung out with over the years. The idea was to create a podcast, which featured Japanese conversations amongst friends and cultural tidbits of Japanese culture, creating a fun atmosphere for learners of the language to listen in everyday. It caught on. Being featured by Apple and ranking as high as number 16 overall on the iTune’s podcast rankings. Peter put his PhD thesis on hold and opted to run the company full-time. “To be honest, timing is a key ingredient of the secret sauce of success. Nobody else was doing this at the time, so there was a small opening for us.”
Paul’s story is markedly different. Originally from India, he came over to Japan as a “foreign skilled worker” in 1994. An IT Engineer, at a time when India was becoming well-known for IT talent. He mainly worked with the Investment Banks, and after several years in Japan, had reached a fairly senior level when the 9/11 terrorist attacks occurred in America on September 11, 2001. Following that attack – in New York, headquarters to many of the world’s top Investment Banks, panic struck the Japanese market. Cost cuts and restructuring were common, and Biju Paul was laid off.
In 2002, he spent 6 months looking for a job, meeting a lot of people, but wasn’t having much luck, when he came across a friend with a need for an IT guy. Paul, was interested, but was admittedly too senior for the role, so he opted to help some of his former junior-colleagues by referring them for the role. His friend called back, “Why refer them to me? Why not just supply them to me?” And, there was the spark. The thought had never occurred to him before. No one in Biju Paul’s family had ever started a business. He had never done market research before, never done sales. But, here it was. This idea. He weighed his options. He could spend ¥3 million to live another year in Japan searching for a job, or he could spend ¥3 million and start a company. After weighing the decision, he made his choice. Biju Paul would refer to himself as “an accidental entrepreneur.”
Initial Difficulties: Paperwork and the Need for Lawyers
Galante admits that even knowing Japanese, legalese is a whole ‘nother ballgame. Difficult to navigate even in ones native language. “Get legal help”, he says “whether an administrative scrivener (gyōseishoshi) or a lawyer – one who knows both languages.” But, Peter adds that obstacles should be looked at with a positive light, noting that the best advice he ever received is that every obstacle is like “a moat… surrounding your castle.” Once you overcome the moat, once you get passed it, it becomes one of your strengths.
Paul agrees that the process in getting started in Japan is legally complex, and also not cheap. “You pay at least ¥300,000 in lawyer fees. It can be a lot [for a small business].” He also can’t help but compare the situation to that of starting a business in India (his home country, where he would expand his business by opening up a software development branch a few years later), and Hong Kong (where he opened doors in 2011 under a similar business model as Top Tech’s Japan office.) “In both Hong Kong and India it was easy. In fact, you don’t even need a lawyer. If you have the time, you can do it all yourself.” He also noted that it is so easy to set up a business in Hong Kong, that “you don’t even have to go. You can do it all online.” You do have to go to Hong Kong however when you want to open a bank account, but just not when you want to start a company. “I think they just want to meet you and double-check that you’re not laundering money” Paul notes regarding opening the corporate bank account.
Scaling, Growing, & Hiring
Biju Paul’s business reached stability within the first year. He was going to networking meetings, trying to learn how to sell. He says it was hard at first and he felt uncomfortable asking friends for businesses, especially when a lot of times these friends were junior to him in the IT world. He decided to focus on a core set of people he knew really well. But, eventually the time came for him to expand. Should he bring in more sales people? Get an office? He did both, bringing in a bilingual salesman who was recommended to him by a friend and stuck around for about a year.
Galante’s headcount began with a partner in New York who was a childhood friend he brought in to run the tech side. He said the one of the biggest struggles was hiring people when the business was still in the early stages and had “no burn”. He brought in new employees either from craigslist or by dipping into the community well. He found that the passionate customers who were already recommending his product to friends would possibly be interested in working for the company, so he reached out to a few of them and brought them onboard. When he was ready to expand to other languages, he had job applicants create the initial survival phrase list in the new language. This way they were already building a small product as part of their interview. He was able to scale the job out from there. But admits that managing expectations and compensation is tough for a new business.
He adds that the biggest thing when hiring is that it’s important to get over the “I’m the best for the business” attitude. You have to reach a point where you are hiring managerial talent, and training the talent, building them to be even better than you.
Japan vs. Other Countries
Galante says the good thing about Japan is there is a lot of talent here. Japan attracts a lot of talented employees. There are always opportunities and it’s “an incredible place to live”. He’s sure its not the easiest place to start a business, but notes that it is a good place to start a business because its so full of big companies and big companies are just not capable of moving on things fast enough. Smaller companies can take advantage of new products quicker and get a fair share of market share – enough to live with and build with, for sure.
Paul agrees, saying, “the pie is very big, you only need a small portion to survive.” But, he still thinks Japan could do a lot more to attract entrepreneurs. He says the attitude in Japan is changing. And, the banks and ward offices are more willing to lend to entrepreneurs now than they were in the past, the government has lowered the amount of initial capital you need to start a company, and the VC and Angel scene is growing – “there still is not plenty available, but it is changing.” He says there are always difficulties to overcome and that some it is cultural, “they don’t have the culture of taking risks like you have in America. Failure is not an option. It is really looked down upon. That’s different in America where you see guys fail at multiple entrepreneurial endeavors and then still go out there and try again.” He says that attitude towards entrepreneurship is slowly changing thanks to the success of companies like LiveDoor and Rakuten.
Paul ends our conversation saying “entrepreneurship is fun.” “Once you’re out of the corporate environment and the office politics vanish, you set the rules. There’s a lot of satisfaction in that.”
Galante’s thoughts are similar at least to a point, saying that being an entrepreneur is “really fun… in the beginning.”