“The Japanese mobile Internet demographic dividend is not exhausted, Chinese companies still have opportunities.”
Editor’s note: This article is from WeChat public number “One Point” (ID: TMT08181003), text tóng, edited and reviewed Yulsa; authorized release. The original title “Planning 20 unicorn companies in 4 years, is Abe talking about dreams?”
In this issue, I would like to thank the “Tóng Master” for writing the “Difficult Japanese Unicorn” series. This time, the first chapter of the series will be brought to you. “I plan to cultivate 20 unicorn companies in 4 years. Is Abe dreaming of idiots?”
There are currently only three unicorn companies in Japan, which is not comparable to Indonesia (4). The Abe regime hopes to cultivate 20 unicorn companies by 2023, but things are not that simple. The market entry threshold is high, talents are not flowing to the Internet industry, and the loose listing environment is the three major reasons for the unicorn dystocia.
“The Japanese mobile Internet demographic dividend is not yet available, and Chinese companies still have opportunities.”
1, Scarce Japanese Unicorn: The Abe regime is awkward
The number of unicorn companies is an important indicator of a country’s ability to innovate.
According to CBInsights’ statistics, there were 390 unicorn companies in the world in 2019, including 191 American companies and 96 Chinese companies. In contrast, there are only three companies in Japan, not only less than India (19) and South Korea (9), not even Indonesia (4).
2019 Japanese Unicorn Enterprise –
(Data Source: CB Insights)
The current three unicorn companies in Japan, with an average valuation of $1.36 billion, are far below China’s average of $3.6 billion, just just past the unicorn threshold ($1 billion). The highest valuation is the AI startup Preferred Networks, which reached2 billion US dollars. The founding members of the company are masters of computer science at the University of Tokyo, so they have a strong technical background and ivory tower color. The main business is around deep learning technology, including autopilot technology invested by Toyota Motor, produced by Hitachi. Invested in industrial robot technology and cancer diagnostic technology developed in collaboration with the National Cancer Research Center of Japan.
The information distribution platform SmartNews is known as the Japanese version of the “Today’s headlines”, with 20 million monthly active users in Japan and the United States. In August of this year, Japan Post Capital led the E round of financing to make the company’s total financing amount reached $116 million, and the valuation rose to $1.1 billion. In addition to its operations in Japan and the United States, SmartNews also decided to set up a technology R&D center in Shanghai in the future and hired Ren Yi, former president of DeNA CHINA, as the Chief Strategy Officer (CSO).
Liquidgroup, the operating company of Liquid by QUOINE, Japan’s largest bitcoin exchange, also completed the C round of financing in April this year, with a total financing of $22 million and a valuation of $1 billion. Among the major investors in Liquidgroup, BItmain, the world’s largest bitcoin mining hardware supplier, also appeared. Liquid hopes to become one of the leading companies in the global virtual currency market through its support with Bitcoin.
In addition to the three existing unicorn companies mentioned above, there are two “pre-unicorn” companies that have reached a valuation of $1 billion in the past three years.
Japan’s pre-listed unicorn company in 2017-2019 –
(Source: Bloomberg)
Open the trading platform mericari
The idle trading platform Mercari was born in 2013. At that time, Japan’s C2C online trading market was monopolized by Sun’s Yahoo auction. The release of goods required to pay a membership fee of about 500 yen per month, and the sale of goods was about 10 yuan. % of the handling fee. Successive entrepreneur Yamada Jintaro launched Mercari for mobile users after seeing Yahoo’s high auction fees and major traffic from the PC.
The main operator of *Mercari, the first one is the founder Yamada Jintaro
For sellers, there is no need to pay membership fees when publishing goods in Mercari. There is no handling fee for selling goods in the initial stage, which is more economical. For buyers, unlike Yahoo! Auctions, which require multiple bids to buy goods, Mercari uses the “Buy It Now” model and the shopping process is simpler.
*Do not bid, buy a price. Mericari’s idle trading market has a high popularity in Japan
In 2014, one year after the launch, the size of Mercari’s users exceeded 5 million. In 2016, Mitsui Co., Ltd. led Mercari, making its valuation exceed $1 billion. Some reports believe that Mercari is also Japan’s first unicorn company. On June 19, 2018, the cumulative number of downloads in Japan and the United States exceeded 100 million, and Mercari, which has 10 million monthly active users in Japan, was listed on the Japan Growth Enterprise Board East Securities MOTHERS.
*mercari has more than 100 million downloads in total, and Japan’s MAU has reached 10.54 million (source: mercari)
The unicorn born under the business card culture of Toyo-SanSan
Different from Mercari’s C-side, the business card management system SanSan is mainly for the B-end. In Japan, which has a business card exchange culture, it provides a service for scanning and digitizing customer business cards. There are currently more than 5,700 companies using this service for SanSanContributed 90% of the income. At the same time, SanSan also hopes to become Japan’s LinkedIn, for the workplace to launch a business platform that can scan business cards and add friends and share dynamics, with more than 2 million users. After a year of listing in Mercari, SanSan went public on June 19, 2019 at the MOTHERS, ending its unicorn company.
*Business card management system SanSan, which integrates business card scanning, management, and AI company analysis.
2, Abe’s ambitions and status quo
As a country with an Internet infrastructure starting at a very early population of more than 100 million people, even if it has listed companies, there have been only five unicorn companies in the past two years. This situation is very embarrassing. …
The Shinzo Abe regime has formulated a “future investment strategy” for this, hoping to create at least 20 local unicorn companies by 2023. The total annual financing of Japanese startups has increased from 800 million U.S. dollars in 2013 to 3.5 billion U.S. dollars in 2018, a full four times, but still a drop in the bucket compared with the nearly 100 billion U.S. dollars in financing between China and the United States. Bloomberg columnist Nisha Gopalan believes that Abe’s goals are difficult to achieve at the current rate of growth.
*The total annual financing of Japanese startups has increased for six consecutive years since 2012, but the total growth is not satisfactory
(Source: entrepedia)
3, Three latitudes to see why Japanese unicorns are difficult to produce
The reasons for the difficulty in the birth of unicorns in Japan can be analyzed from three dimensions: market access environment, 2 employment environment and 3 listing environment.
The high entry threshold for the market is the first problem that is difficult for Japan to give birth to a unicorn.
The traditional Japanese industry is developed. Most of the industries already have head players with strong capital. In such an environment, it is difficult for new players without background to set off waves. In addition, the University of Tokyo teacher Marukawa Yukio said in an interview with the Nihon Keizai Shimbun that the Chinese market is more tolerant, and that the belief that “the law is not prohibited can be “, while Japan is biased toward the “law without authorization.”
The service of many unicorn products involves legal gray areas or restricted areas, coupled with resistance from traditional head players, making it difficult for startups to negotiate with the government. This point Uber, Airbnb and Didi have a chance to enter the Japanese market.
The second problem is that in the Japanese employment environment, Internet companies lack the advantage of competitive talent.
Comparing the list of the most favored employers of the universities in China, the United States and Japan will find that Chinese and American college students are more interested in Internet, finance and consulting companies, while Japanese university graduates are more interested in tourism, food and beverage, manufacturing and other stable industries. Big company.
In Japan, Internet companies don’t pay much more than traditional companies, and they have limited appeal to talent. Yahoo, Lotte, Line, Cyberagent and DeNA, the major Internet companies in Japan, were not listed on the list of the most attractive employers for college students jointly released by mynavi and Nihon Keizai Shimbun. This has made it difficult for Japan’s best college students to enter the Internet industry, and naturally there is no technical ability to cultivate unicorn companies.
China, America and Japan are the most favored employers in comparison –
*I made it according to the statistics of 2019 Youxing Consulting and Mynavi Nikkei News
In this regard, the Ministry of Economy, Trade and Industry launched the “Programmer Year” in 2018. The plan to increase the average annual income of IT talents from the current 6 million yen (about RMB 400,000) to 12 million yen (about RMB 800,000) by 2025, salary level It is in line with Silicon Valley to attract more talents from home and abroad to engage in technological innovation.
The third problem is that the Japanese listing environment is too loose, and many companies have not yet become unicorns for direct IPO financing.
In 1999, the Tokyo Stock Exchange set up MOTHERS, the Japanese GEM, also known as the “nanny board”, mainly for high-tech and high-growth emerging companies.The two former unicorn companies SanSan and Mercari mentioned above are listed here.
Director and Managing Director of the Tokyo Stock Exchange, Mr. Komatsu, accepts CCTV Financial Interview (Source: CCTV Finance)
The director of the Tokyo Stock Exchange and executive executive, Oguma Tai, accepted an interview with CCTV Finance, saying that the Japanese economy was at a standstill and that the establishment of the GEM would attract new companies to enter the market and vigorously develop innovative industries. Therefore, MOTHERS is an attempt to invigorate the economy for further development.
But Bloomberg columnist Nisha Gopalan pointed out that the Japanese government’s practice of encouraging companies to go public and lowering MOTHERS entry barriers is one of the reasons why unicorn companies are hard to come by.
Compared to Nasdaq, listed companies must have at least 1.25 million shares available for public trading, and MOTHERS requires only 2,000 shares to be traded. This means that a small company that has just been established will also have the opportunity to raise funds through IPO, so there is no need to finance from VC. From the results, the MOTHERS index has 283 constituent stocks, 96% of which have a market capitalization of less than $1 billion. In contrast, two-thirds of the Nasdaq stocks have a market capitalization of more than $1 billion.
In summary, Japan’s domestic market access environment, employment environment or listing environment are not in line with the conditions for the birth of unicorn companies.
The founder of Softbank Sun Zheng is very upset about the status quo. Sun Zheng’s $100 billion Softbank Vision Fund has invested in many global unicorn companies including Wework, Uber, China’s Byte Beat, Ping An Doctor, India OYO, Indonesia Tokopedia, but None of them is a Japanese company (the only company in Japan is OYO Japan).
Sun Zhengyi has publicly explained the reasons. He did not want to invest in Japanese companies, but could not find a company worth investing in. Japan has fallen into developing countries in new fields such as artificial intelligence. It seems that Abe’s plan to cultivate 20 unicorn companies by 2023 is indeed imminent, but it also has a long way to go.
Postscript: Japan Mobile Internet Bonus is not completed
The past 10 years of global unicorn companiesNow, an important reason is the emergence of the mobile Internet demographic dividend. However, as the incremental market gradually becomes a stock market, new companies will face increasing pressure on user growth. Vertical market and sinking market are two breakthroughs that have been fully explored. Due to the existence of certain thresholds, there is still room for incremental growth.
The Japanese Ministry of Internal Affairs and Communications’ “Information Communication White Book” shows that in 2017, the penetration rate of smartphones in Japan reached 59.7%, a year-on-year increase of 3%, and the smartphone utilization population exceeded the PC utilization population for the first time. It can be seen that there are still a large number of Internet users in Japan in the PC era, and Japan is still in the dividend period of the mobile Internet population. The founder of mercari, Yamada Jintaro, once said that the reason why he can grab the cake of C2C online trading from Yahoo’s auction is not so much that the “price model” has beaten the “bidding mode”, it is better to say that mercari is targeting mobile phone users. The strategy has been successful.
Japan Mobile Internet has a good infrastructure background, but it is not at the forefront of the world. The take-out APP, taxi app, and electronic payment app have all been popularized in the last two years. From this perspective, Japan is still a promising incremental market. Not only Japanese local technology companies have the opportunity, but also Chinese and American technology companies can view the Japanese market as a growth point and exploit the experience in the mature mobile Internet market to open up the Japanese mobile Internet market.