Silicon Alley Hoppers

A group of outspoken New Yorkers who happen to be Japanese, entrepreneurial, and looking for funding on both sides of the Pacific. And who have some strong opinions about the Net scene back home.

What they have in common is that they're all: 1) of Japanese nationality, 2) attempting an Internet venture, either as the founder or a key employee, 3) adding a Silicon Alley standpoint or perspective to Japan-related e-commerce, and, 4) international in their fundraising.

Most are thirtysomethings and entrepreneurs in the truest sense: clinging to a key idea, hungry for funding, and facing a possibly make-or-break year.

Let's see what they're up to ...

Yoshizo Ono and Makoto Jo, Agathiyar Interactive
The goal: Bring Japanese manga and anime to the US.

Yoshizo Ono moved to the US 10 years ago to handle manga copyright licensing for an American firm, Wingel USA. He soon saw firsthand how the Internet was changing America. He ran an online mall for a while -- it failed -- but then joined with Makoto Jo to set up Agathiyar Interactive, a startup looking to transplant Japanese manga to America via whatever media a client is working with, from film to TV to the Internet. Their objectives are to be both a producer and a coordinator between the US market and Japan's manga industry. Toward this end, they are working closely with Omega, the major distributor of Japanese content for TV, CDs, and other IT-intensive media.

Currently Agathiyar is at work on adapting and marketing Cyborg 009 -- an early work by the late "King of Manga" Shotaro Ishinomori -- for the US market. They think either TV or film is a likely medium, but Jo is particularly interested in broadband.

Thus far, Japanese animation is yet to be available in the US in streaming video. Beyond that, they're looking ahead two to three years to full-scale digitization of TV in both the US and Japan. Jo sees digitization as facilitating inter-media conversions of the products of cyber-animators in Japan, and she sees HDTV as providing a growth stimulus for animated content.

In the meantime, Agathiyar is generating revenues with Web site development work for major US and Japanese companies, including Deloitte Touche Tohmatsu International, All Nippon Airways, NTV, and Hakuhodo. Shortly before this feature appears, Agathiyar will have moved to larger quarters and increased the number of employees from eight to 20.

Hitoshi Ishida, InterRec
The goal: Use wireless technologies to deliver music to American drivers in their vehicles and take orders for digital delivery of the music that they like well enough to buy.

It's wireless in the US -- and the VC market -- that drives Hitoshi Ishida, doing business in New York as InterRec. After working as an independent businessman in Japan's IT field and making several business trips to the States, two years ago he decided that New York had more to offer him than did his own country.

Since settling in the East Village, he's filed 91 patent applications and, among a variety of projects, is developing a new kind of system for the delivery and sale of music to drivers.

Like Ono and Jo, he's poised to make the most of digitization. After another year or so of development, Ishida expects to complete work on his system, which will provide extraordinarily clear sound, protect copyrights, and further diversify the marketing of music.

Ishida is hoping his system will be widely adopted in the US automotive industry -- that of course includes Japanese automobile assemblers -- starting with equipment and system installation in new cars. After that, this example of telematics will be marketable in Japan as well.

"When I started on this project," he says, "there was hardly any venture capital available in Japan, where venture businesses were mostly being started by large companies. So I shifted to America."

Yoko Sakanoue, bCrossing
The goal: Integrate machine-based translation services seamlessly into other companies' software.

Around the time this issue hits the stands, Yoko Sakanoue and her Silicon Parkway company will have completed beta marketing of translation services to manufacturers, and started talking to system integrators, B2B service providers, ISVs, and others in the software business, as well as corporate prospects.

To make global communication easier, bCrossing, where Sakanoue is vice president in charge of Asia business development, offers companies a communication and globalization platform that seamlessly folds translation resources into client software, using a software-to-software protocol. In one application, it would enable machine translation of email (and replies) in large quantities. Most email messages are about 10 lines or shorter, and few translators or translation bureaus touch this kind of work. bCrossing can work with eight languages, including Chinese, Korean, and Japanese.

This means an American company without strong East Asian language capability can easily implement email campaigns, solicit clickthroughs to shopping carts and RFPs, and welcome inquiries (and orders) from prospective customers who use Web sites in their own languages.

D-Brain, a Tokyo company that trades private equity, is an investor. Sakanoue says the company is not publicly committed to seeking capital in the public market.

The initial marketing emphasis at bCrossing is in the US; after marketing to manufacturers, Sakanoue is targeting the services sector, including financial and professional offices that can benefit from expanding their market to include Asia. What the company offers to do, specifically, is create mirror Web sites for American companies in the target foreign languages, including the translation software.

Brimming with enthusiasm, Sakanoue is as excited over the potential of the Internet as she was when it led her to quit a career as an interior-design architect, even after having won prizes in the US for her designs. The bursting of the dot-com bubble hasn't fazed her, and she suggests, "The people who have left the industry were opportunistic. They were only chasing money, not driven by the enormous potential of the Internet."

Kenjiro Mori, EBPass
The goal: Localize Japanese corporate sites for the US market.

Originally sent to the US as a programmer and system engineer for a Japanese software company in 1986, Kenjiro Mori has lived and worked in New York for 15 years. He launched his first company, recruitment firm Media Japan (www.mediajapan.com), in 1991. It was one of the first Japanese-owned outfits to specialize in recruiting IT personnel, and its continuing revenues ensure that the burn rate is not a problem for Mori's latest venture, EBPass (www.ebpass.com).

EBPass has enjoyed success designing and hosting Web sites and providing e-business solutions (such as co-location) for many Japanese companies and governmental entities operating in the US market. The company, which started business operations last October, hopes to sign on strategic investors or list on Nasdaq sometime next year (with the help of Morgan Stanley Dean Witter). It is serving more than 40 clients, including Teijin USA, Sekisui America, Gunze, JETRO, and the contingency-worker firm Pasona USA, carryovers from Media Japan.

Mori has benefited from media exposure in Japan, and writes a column for Nikkei Net Business. Add to this his earnings record, client roster, and experience in the US, and he's probably the most prominent Japanese tech entrepreneur in New York. Becoming an independent businessman was tough, though. "No one would finance me," he says, "I had no reputation, no major corporation behind me." He smiles. "Now I'm grossing $2.5 million a year." And having no difficulty getting VC investments from both Japan and America to back EBPass.

Yoshihisa Taniguchi, Busium
The goal: Help Japanese companies become Net-functional in English, and American companies Net-functional in Japanese.

You'll often find Yoshihisa Taniguchi, CEO of Busium, in the ground-floor cafe of his ancient Brooklyn Heights apartment building, tapping away on his laptop, wirelessly linked to his work station upstairs.

What "pushed" Taniguchi stateside was working with PointCast Japan. "I started trading derivatives and doing system programming for Nikko Securities," he explains. "I got my first taste of American technology when working with PointCast Japan to adapt their software for use in providing Japanese share price information to Nikko's customers." His track record in Japan earned him a transfer to the US, most recently as VP of Systems Planning for Nikko in New York.

Last September he quit and started Busium, hoping to capitalize on his ability to meld US and Japanese technology. The idea? Help Japanese companies become Net-functional in English, and American companies Net-functional in Japanese. His first America-based project was creation of a Web site for Japan Internet Ventures LLC, an Internet incubator.

Busium offers technological support for Web sites and customized database planning, B2B data exchange services, strategy consulting for Japanese clients needing a US e-commerce platform, and related professional services. Taniguchi and cofounder COO Sato Yamawaki (experienced in publishing, marketing, and FM radio, as well as Internet simulcast), recruited two more bicultural Japanese, strong on a range of media work areas, as the starting team. At deadline time, Taniguchi had started a consulting project for a well-known Japanese corporation that's already doing business in America but just starting in e-commerce.

Sakuichi Konno, EarthSector International
The goal: Sell ASP services to nonprofit orgs in the US.

Sakuichi Konno didn't go to New York to work, but to attend Columbia University. His objective in studying nonprofit orgs and earning a master's at the School of International and Public Affairs was to gain insight into his target sector, and it has also helped him develop the personal and professional relationships needed to succeed in New York.

He recently put the finishing touches on his business model -- offering ASP services for nonprofit organizations -- and has applied for a patent on it. Inspired by Peter Drucker's championing the cause of NPOs, he's building momentum for selling services to them via his EarthSector International. America has 1.1 million NPOs, and they're relatively behind in IT applications for both operations and fund raising. It was only last November that the American Red Cross used email for the first time -- cautiously at that -- to solicit online contributions.

Konno is not going to be first -- Kintera out of San Diego and others are already working this $190 billion market -- but the fundraising work of NPOs has hardly begun on the Net. One estimate gives the ratio of philanthropic donations made via the Web as 0.14 percent.

Konno has prior exposure to entrepreneurship through being a partner in Kenichi Ohmae Associates and an executive of the Attackers Business School, an entrepreneur training entity set up by Ohmae. On his own now, he has set his target revenue as $6 million in the second year (FY2002) and $30 million in the third -- ample amounts to pay for grad school and more.

Konno takes advantage of being in New York. He's published a book comparing Silicon Alley to Bit Valley and is a regular contributor to Japanese publication Nikkei Net Brain. Despite this, he expresses little interest in doing business in Japan and with Japanese organizations.

Akira Nakamura, Variety USA
The goal: Sell US mags to Japanese readers -- at US prices.

Working Japan-time hours in his cramped office in the largely Koreatown Garment District, Akira Nakamura launched a beta-version Web site (www.variety.ne.jp) late last year, and by the time this issue hits the stands he will have advanced to full-scale B2C business, offering US magazine subscriptions to customers back home. More than just an aggregator, he's a spoiler, offering Japanese readers a way to bypass the outrageous markups on publications imported by Japan's book and periodical distributors.

For decades, Japan residents have been disgruntled in a helpless sort of way over the unbelievable markups on imports at bookshops like Maruzen and Kinokuniya. Nakamura's business model provides for selling any of thousands of publications (single copies or subscriptions) at the current yen-dollar rate.

Founded last September, the seven-person startup has a high-quality vote of confidence from Yukio Iura, president and CEO of Nippon Angels Investment (see August 2000, page 22), who went to New York recently to scout for investment opportunities. "Variety is one of the companies we are interested in supporting," he says. This could be a major break for Nakamura, who went to the US to study entrepreneurship and in 1995 succumbed to the lure of the Net, cultivating skills in HTML, CGI, Java, and other areas in preparation for his current project.

Asked if Variety would handle potentially lucrative pornographic mags, Nakamura replies, "One motive for starting this company was to contribute to education in Japan. Porn doesn't qualify by that standard."

He's waited three years, while planning and preparing, for Internet access to rise in Japan to the target level of 20 percent of all households. Amazon.com's entry to the Japanese market doesn't faze him; it's selling books, not periodicals. Even without this potential challenger, Nakamura is still in a tough position unless his optimism and business plan convince investors to back him.

HOPPING THE DIVIDE
New Yorkers are famous for being outspoken, and the characteristic seems to have rubbed off on our profilees, at least when they start harping, as they all do, on the "digital divide" -- the three-calendar-year Internet lag between their homeland and the States. The way they see it, if Japan's global presence in industry is equivalent to Mt. McKinley, its presence in Net-based business is more like a rock outcropping in Central Park.

"Executives in Japan know they have to do business on the Internet, but they don't understand what has to be done," says Mori of EBPass. "So they tell the heads of American [subsidiaries] to get the job done here."

Part of the problem, suggests Jo, is that "hardly any Japanese executives are thinking of the connection between their companies' Internet presence (and quality of that presence) and share price."

"Too many Japanese sites show terrible ignorance of the interests and convenience of visitors," complains Nakamura. "Look, even Sony, whose president is aggressively promoting making Japan into an IT-strong nation, was incapable of making smart use of the US developers hired to create the Aibo site," he says. "The software for that was developed upstairs, in this building, but Sony had low standards and wouldn't let the company do all that was needed."

Are these surly New Yorkers simply out of touch with the mounting excitement in Bit Valley over the wireless Web? Not Jo. To his mind, the biggest reason wireless has been attractive to businesses and investors in Japan is that it's the only viable alternative in a country where so few households are online, access costs are high, and speeds are low. Jo is staying in Silicon Alley, he says, because the superior Net infrastructure enables him to accomplish more than he could by working in Japan.

MONEY TIME
Most of these Netpreneurs have been chasing investors since last year. Taniguchi estimates that a half million will do. Nakamura is seeking the same amount for first-round financing, with $3 million as the aggregate target, thus far to be raised entirely in Japan. At Agathiyar, Jo and Ono are having their Chapter S corporation audited in preparation for inviting investors to underwrite their expansion. InterRec will need more seed money this year. bCrossing is seeking $3 million of second-round funding. Konno at EarthSector plans to raise upwards of $3 million in the US, after obtaining first-round finance in Japan. EBPass and bCrossing, it should be noted, have already obtained funds from both the US and Japan.

Biculturalism in business is thus paying off -- through binational fundraising. To raise funds in Japan, however, it is usually necessary to take on the extra cost burden of setting up a company there because of investment-related reasons. (Many investors are restricted by policy or in-house rules from investing abroad.)

The recent growth and development of Japanese venture capital funds, including ones set up by entities other than the huge industrial or financial firms, suggests that yen now may become more readily available to these expat Netpreneurs.

It won't be easy, though. With the exception of Mori, these players are relative newcomers in managing their own businesses, and most lack startup experience. Like most entrepreneurs, they'll have to make up what they lack in business and management experience with innovation, drive, and hustle.

Our hoppers are just settling down to work. For now, they comprise an enclave. If they succeed -- and that depends to a large extent on the relative position of Japan and the US vis-a-vis the business environment, overall economic conditions, and technological development and commercialization -- we could easily see their ranks grow considerably.


Aaron M. Cohen is an economist, financial executive, and educator. Previously based in Tokyo, he is now "re-localizing" in New York.