This is the material of the seminar at Stanford University, Entrepreneurship in Asian High-Tech Industries. It was about "Current trends among startups and how they keep momentum in Japan". You can find the movie in the link below. https://mvideos.stanford.edu/Graduate#/SeminarDetail/Spring/2015/EE/402T/6931

1. Current trends among startups and
how they keep momentum in Japan
Yusuke Asakura
Visiting Scholar at Stanford University
Former-CEO of mixi, Inc.
asakura@stanford.edu
2015/4/7
Entrepreneurship in Asian High-Tech Industries

2. 1
Self introduction
How startups keep momentum
Startup trends in Japan

3. 2
Self introduction
How startups keep momentum
Startup trends in Japan

4. 3
How startups keep momentum
after IPO in Japan

5. Overview of mixi Inc.
4
• Founded in1999 originally as
online recruitment information
media provider for Web
engineers.
• Social networking service
“mixi” launched in 2004.
• Main features were such as
diary, community and photo
sharing.
• Listed on the Tokyo Stock
Exchange in 2006
• Became dominant social
media platform in Japan

6. Market cap of mixi in the first 5 years after IPO
0
1,000
2,000
3,000
Q2Q1Q2 Q3 Q4Q1 Q4 Q2Q1Q3Q2Q4 Q1Q3Q4Q3Q2Q1Q4Q3
Market cap
(USD million; USD 1 = JPY 100)
FY2006 FY2007
IPO
5
FY2008 FY2009 FY2010 FY2011
NT acquired
by mixi

7. Sales of mixi from FY 2011 to the time I became the CEO
Became CEO
Sales
(USD million; USD 1 = JPY 100)
24
18
21
27
3133
35
38
34
3130
58
0
10
20
30
40
50
60
Q3 Q4Q4Q3Q2 Q2Q1Q4Q1 Q3Q2Q1
FY2011 FY2012 FY2013
Acquired by
mixi 6

8. Problems mixi faced with
•Competitor
•Customer
•Company
7

9. Finding out essential value of the company
8
General Value
• mixi as
Social Networking
Service
Essential Value
• Capability of service
development
• Cash : USD 120M
• “mixi” brand

10. Basic strategy
9
• Improving the bottom line of existing
business
• Diversification through
• New business development
• External business acquisition
• Recreation of corporate culture

11. Set of actions and the essential issue tackled with
10
■Developing new business
peti jete
“User first week”
Launch of innovation center
Alliance on game platform
i-mercury capital
Scrum Ventures
Deploy Gate
nohana
Monster Strike
muuk
■Cost reduction
Termination of part-time contract
Closure of call center
Closure of US office
Closure of Shangai office
Internal relocation
Assignment of business
■Governance
Redefinition of mission
Cross-division weekly check-in
Effect measurement of each
product
Regular internal survey
Split-up of mixi marketing
Management accounting
HR rotation program
Public offering : $63M
■Acquisition
mixi research
Kamado
YYC
Confianza
Mystery shopping business
Moving the company
beyond
original business

12. Triggers to regrowth
11
• Blockbuster app
• Buyout of profitable services
• Assignment of
underperforming business

13. Boosting top-line growth through business diversification
Became CEO
Sales
(USD million; USD 1 = JPY 100)
58
24
18
21
27
3133
35
38
34
3130
0
10
20
30
40
50
60
Q3 Q4Q4Q3Q2 Q2Q1Q4Q1 Q3Q2Q1
FY2011 FY2012 FY2013
Acquired by
mixi 12

14. Fiscal soundness and mega-hit app triggered regrowth
0
1,000
2,000
3,000
4,000
5,000
Q4 Q1Q2 Q2Q3Q1 Q4 Q1 Q4 Q2Q3 Q2 Q3 Q1
Market cap
(USD million; USD 1 = JPY 100)
FY2011 FY2012 FY2013 FY2014
Became CEOAcquired by
mixi 13

15. 14
• Obligation to grow
• Brave new frontier
• Forget about current sales and profit margin
• There is no synergy
• Accept cannibalism
• ‘Big Company Disease’ is preventable
Some lessons learned from the case

16. 15
Self introduction
How startups keep momentum
Startup trends in Japan

17. GDP of Japan in the last 20 years
16
SOURCE: Cabinet office Government of Japan
Real GDP of Japan
(JPY Trillion; 1994-2014)
0
100
200
300
400
500
600
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
+1%

18. Japan’s GDP doesn’t show significant growth in the last 20 years
17
SOURCE: SPEEDA, International Monetary Fund (IMF)『World Economic Outlook Database』
Real GDP
(USD Trillion; 1994-2014)
0
2
4
6
8
10
12
14
16
18
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
China
United States
Japan
5
16
0
CAGR
(%)

19. Internet and Mobile sectors are key drivers of Japan’s economic growth
18
SOURCE: GLOBIS CAPITAL PARTNERS, Ministry of Internal Affairs and Communications
Real GDP Growth
(%; Compound Annual Growth Rate; 2005-2011)
-4.4
-3.7
-1.6-1.2
-0.4
0.40.60.9
7.6
13.5
-5
0
5
10
15
Retail
-1.0
Other
IT
Electric
machinery
Transport
machinery
Mobile
communication
SteelInternet
services
Average
Trans
portation
Whole
sale
Constr
uction

20. IPO activity surged in 2014
19
Number of IPOs on TSE Mothers1 Quick Facts
44
32
24
12
6
4
13
22
40
37
2013 201420122008 2009 2010 2011200720062005
1 Market of the high-growth and emerging stocks
SOURCE: TSE, Nikkei, GLOBIS CAPITAL PARTNERS, NASDAQ, Bloomberg
• Median Market Cap
at IPO on TSE
Mothers is US 55
million in 2013
• 70% of newly public
companies are
internet-related
business in 2014

21. Aggressive economic growth policy triggered cash inflow to VC funds
20
SOURCE: Incubate Fund
501
(19%)
1,158
(45%)
922
(36%) CVC
Independent
Financial
13
(35%)
6
(16%)
18
(49%)
Newly launched VC funds
(2013-2014/10)
Size of raised funds
(USD million)
Number of GPs
Financial support through
government-backed
investment funds
Organization for Small & Medium
Enterprises and Regional
Innovation;
• has invested 580 million USD
in more than 90 funds since
1999
• invest in private VCs upto the
half amount of fund size
The Innovation Network Corporation
of Japan(INCJ);
• Capitalized at 3billion USD
• Invest in both of startups and VCs
USD
2,581
million

22. Independent VCs are playing active roles in Japan’s startup ecosystem
21
SOURCE: Incubate Fund

23. Venture capital business is becoming more profitable in terms of IPO
22
Average ratio of stock price at IPO to the value of stock at the last round
before IPO*
(Multiple)
* Please note the data may not be comprehensive
SOURCE: Japan Venture Research
4.584.77
2.30
1.55
2.04
6.26
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2.39
1.29
4.14
2.36

24. Volume of VC investment is surging
Volume of VC investment*
(USD million; USD 1 = JPY 100)
1,154
729
557
759747768
1,182
1,221
1,452
0
250
500
750
1,000
1,250
1,500
2011201020092008 20142012 201320072006
23
* Please note the data may not be comprehensive
SOURCE: Japan Venture Research

25. More cash flow to VC leads to more sizable private finances
24
* Please note the data may not be compehensive
SOURCE: Japan Venture Research
Sizable private finance cases in 2014*
(USD; 2014; USD 1 = JPY 100)
Game
83M
Commerce
16M
Commerce
12M
Commerce
25M
C2C market
38M
Utility
14M
Chemical
12M
News apps
24M
Bio tech
36M
Enterprise
14M
Wheel chair
12M
Cloudstorage
24M
Commerce
24M
News apps
35M
Game
14M
Commerce
11M
Commerce
18M
Bio tech
30M
Enterprise
13M
Bio tech
10M
Fin-tech
16M
Bio tech
13M
Automotive
10M
Bio tech
26M
Internet
service

26. More Japanese startups are going global
25
Mercari
Smart News
gumi
Metaps
Moi
Mobile C2C shopping
app.
Opened US office and
launched US version in
2014.
Android monetization
platform and credit
card processing
service.
Focusing on Asian
region.
News curation apps for
smartphones and tablets.
Opened US office and
launched US version in
2014.
Ranked #1 on App Store
Providing TwitCasting,
realtime video
broadcasting platform.
Opened US office in
2013.
Social games provider
for smartphone and
feature phone.
Subsidiary companies in
8 countries.
Listed on TSE 1st in
2014.
SOURCE: TECH IN ASIA

27. Given the current GDP, the volume of acquisition deal in Japan is lower
than expectation
26
Number of deals in 90s
Number of deals from
2000 to August of 2013 GDP
(USD billion; 2013)
12,411Germany
US
Japan
72,111
2,198
117,666
18,563
19,532 3,730
4,899
16,768
Japan X Japan X Japan X
32.8
5.6
1
6.3
1.1
1
3.4
0.8
1
SOURCE: Industrial Growth Platform, Inc.

28. Acquisition accelerating1
27
Announced Acquirer Target2 Service of target company
1 Picked up only notable cases. Not meant to be comprehensive
2 Target name is based on service name. Not corporate name except Aratana.
Aggregate
Value
(USD million)
10/2014
MERY:Ladies fashion curation service
iemo:Home-design curation service
50
9/2014
Japan's largest lifehack media site
NA
10/2013
Rewarding app for customers who visit
participating stores
NA
9/2013
C2C market place for coaches and people
who seeks lessons
10
2/2015 18
Fashion-oriented VIP flash sales site
3/2015 116
Consumer-to-consumer ticket marketplace
3/2015 30
Social app
E-Commerce solution
SOURCE: SPEEDA, Tech Crunch, TECH IN ASIA

29. • Strong demands for startup but not
enough supply
• Scarcity and immobility of talents
• More acquisitions needed
My observation about current startup environment in
Japan

30. 29
Appendix

31. Population)
Japan has the 10th largest population in the world while aging society is
going on
30
29 30 28 25 25 27 28 26 22 20 18 18 17 16 16 15 13 12
50 55 60 67 72
76 79 83 86 87 86 84 81 79 77 73 71 68 63
58 54 50 47 44
7
9
11 12 15 18 22 26 29 32 34
36
37
37
37
39
39
38
36
35
899101111
124
2015
127
2013
127
1960
93
2030
4
83
1950
5
89
117
2060
87
1955
5
97
2050
92
2055
112
2035
107
2040
102
20452025
121
20201995
125
1990
123
1985
121
1980
117
1975
112
1970
104
1965
98
6
2010
127
2005
127
2000
127
Under 14
Over 65
15-64
SOURCE: The national census, National Institute of Population and Social Security Research
Actual Forecast
Population of Japan
(million)

32. Internet penetration)
More than 90% of people over 13-59 use internet
31
100.4
96.596.194.694.190.9
88.187.585.3
79.577.3
0
10
20
30
40
50
60
70
80
90
100
110
2003 20052006 2008200920102011201220132004 2007
Number of internet user in Japan
(million)
SOURCE: Ministry of Internal Affairs and Communications
22.3
48.9
68.9
76.6
91.4
96.697.498.597.9
73.3
0
20
40
60
80
100
30-
39
20-
29
40-
49
13-
19
50-
59
60-
64
70-
79
65-
69
80-
Average
82.8
6-12
Internet penetration rate by generation in Japan
(%; 2013)

33. Smartphone)
iPhone has become the most successful smartphone in Japan
32
Penetration rate of device in household
(%)
SOURCE: Ministry of Internal Affairs and Communications, IDC Japan, MMD
0
25
50
75
100
2008 2009 2010 2011 2012 2013
PC
Tablet
Smartphone
Mobile
Domestic shipments of smartphone by
vendor
(%; 100%=5.2 million; 2014/7-2014/9)
Samsung
11%
4%
Other
9%Sony
6%
Kyocera
64%
Apple
6%
Sharp
Smartphone device survey
(%; N=18,182; 2014)
Xperia
iPhone
15%
13%
AQUOS
44%
12%DIGNO
ARROWS 7%
GALAXY 5%2%
Other
2%
MEDIAS

34. Mobile contents)
Japan’s mobile contents market shows strong growth
33
0
5,000
10,000
15,000
20,000
25,000
2011
19,061
2010
16,550
2009
15,206
2008
13,524
2007
9,681
6,465
10,085
7,345
11,716
8,510
14,997
4,835
8,689
5,525
2012
5,641
3,150
4,074
7,329
3,666 4,272
23,507
11,601
2006
9,307
2005
7,224
+18%
Market size of mobile contents and commerce
(million USD; 1USD = JPY100)
1 Calculated based on global digital goods market size and U.S. market share among global mobile contents market
SOURCE: Ministry of Internal Affairs and Communications, GLOBIS CAPITAL PARTNERS, Mobile Contents Forum, Deutsche Bank, ResearchMoz,
ITU - ICT Statistics
Mobile Contents
Mobile Commerce
US mobile contents market is estimated to be 6.8 billion USD1

35. E-Commerce)
B2C E-Commerce shows steady growth led by key players and
smartphone penetration
34
111,660
95,130
84,590
77,880
66,960
60,890
0
20,000
40,000
60,000
80,000
100,000
120,000
2008
+13%
201220112010 20132009
Market size of B2C E-Commerce in Japan
(million USD; 1USD = JPY100)
SOURCE: Ministry of Internal Affairs and Communications
1.79 2.08 2.46 2.83 3.67
Share of
E-Commerce
in Japan’s
consumer
Market (%)
3.11
Key E-Commerce companies

36. SNS 1/2)
Line is the most commonly used service in Japan. Japanese users prefer
to communicate anonymously
35
59.6
52.0
39.3
21.7
16.4
13.5
10.3
13.7
11.4
20.8
5.96.8
3.4
4.8
2.7
3.7
4.1
Facebook
Twitter
Line
4.4Twit Casting
Viber
5.2
5.0
Tumblr
Pinterest
Kakao talk
Instagram
5.3
mixi
5.2
Google+
Used previsouy
Using now
Survey on SNS/communication service
(2014; N=562)
Survey on anonymous use of Twitter by country
(2014)
75%
31%
19%
56%
60%
42%
55%
48%
36%
40%
32%
45%
13%
14%
539
France 278
UK 9%
US
13%
498
6%Japan
8%
402
Anonimity
Korea
100%
Real name
494Singapore
Both
569
SOURCE: MMD, Ministry of Internal Affairs and Communications

37. SNS 2/2)
People in their 20s is the most active users
36
Mobage
mixi
Twitter
Facebook
LINE
GREE
14.4
8.6
22.3
39.6
70.5
14.4
Survey on web service use by generation
(%; 2013)
SOURCE: Ministry of Internal Affairs and Communications
16.6
57.0
80.3
34.1
22.9
47.1
65.4
19.2
16.4
16.4
42.0
13.3
11.8
13.9
9.8
12.5
20.3
42.6
2.7
3.9
7.0
3.5
15.2
22.3
1.0
0.7
1.7
3.0
5.0
4.3
10-19 20-29 30-39 40-49 50-59 60-

38. Example of Venture Capital Firms in Japan
Investment volume*
(USD million; 2014)
37
* Please note the data may not be comprehensive
SOURCE: Japan Venture Research
8
8
8
9
9
10
11
11
13
14
14
15
19
22
24
32
40
56
69
113
JAFCO
WiL
Doll Capital Management
Atomico
Fidelity Growth Partners Japan
Nissay Capital
Nippon Venture Capital
SMBC Venture Capital
Globis Capital Partners
Global Brain
The University of Tokyo Edge Capital
Innovation Network Corporation of Japan
B Dash Ventures
Gree Ventures
Mitsubishi UFJ Capital
YJ Capital
Recruit Incubation Partners
Itochu Technology Ventures
Hiroshima Innovation Network
Mizuho Capital
Venture Capital Firms Type of VC
Financi
al
Indepe
ndent CVC Foreign
Governmental Organization
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Governmental Organization