John Nesheim is the quintessential Silicon Valley guru of entrepreneurism, and he could probably write a book on how to take a startup to IPO. In fact, he wrote the book: High Tech Start Up: The Complete How-to Handbook for Creating Successful New High Tech Companies (Free Press, 1992, 1997), which has since become the standard text on how to go public, from an initial idea smudged on a Starbucks' napkin through to post-IPO financing. Nesheim applies a scientist's approach to the process of building companies, and High Tech Start Up serves as a step-by-step manual on the legal, structural, financial, and practical requirements for starting one's own Amazon.com-to-be. Nesheim has been involved, at last count, in the capital formation and planning for some 300-plus startups, a huge number that gives him a unique insight into the practical problems faced by every founder (whether Japanese or American) -- and into the mistakes that are often repeated. An engineer by training, he clearly sympathizes with the Silicon Valley techno-nerds who abandoned their big-name chip makers and networking equipment manufacturers in the 80's to launch their own ventures, many of whom have since done extremely well. Nonetheless, he's acutely aware of the profound connection to Japan that existed at Silicon Valley's genesis, as ex-Japanese technology company insiders started brokering their deep connections into Japan Inc. Nesheim grew up in Minnesota, and worked as an engineer building jet aircraft. He later earned an MBA from Cornell, and after experiences with banking, consumer products, and consulting at McKinsey & Company, he moved to California in 1976 to experiment with applying sophisticated financial analysis methods to a new enterprise, National Semiconductor. He switched to the academic life in 1993, when he took up teaching duties at the Johnson Graduate School of Business at Cornell University. High Tech Start Up was updated in 2000, and localized for several Asian and European countries. Editor at large Daniel Scuka caught up with John during his trip last fall to promote the launch of the book's Japanese version.
Can you summarize the state of Asian entrepreneurship?
Singapore is just a collection of random individuals and doesn't yet have a focal organization. Entrepreneurs' creativity is limited by the classic attitude in Singapore about no chewing gum and things like that. Hong Kong's got some regular meetings started, and they're much more like the Silicon Valley meetings. There are no engineers in Hong Kong, though. The guys in Taiwan complain; their excuse is, "we only do semiconductors." Taiwan is really in the backwaters. Korea is way ahead -- I think they're the lead right now. Incubators got started there a long time ago before their boom took place, and as a result [people] have been working on marketing and sales training, and startup business plan writing and things like that, so there's an infrastructure there. Korea has over 300 incubators actively assisting entrepreneurs. So there are challenges in each of the countries I visited.
And in Japan?
Here, the sobering reality of the laws of economics for new enterprises has begun to settle in. Andersen Consulting Ventures has formed a venture fund to finance ideas that are being spawned in their many offices around the world, and they comment on similar things to what you hear in different countries, including Silicon Valley. First, Japan doesn't have experienced management. Second, the business plans are barely written, and they lack the classic litany of ingredients that investors want to see. Also, Japan is so large a market by itself that [entrepreneurs] can get insular and spoiled, and then they can't compete in other markets. The concept of a one-world market prevents the classic [Japanese] electronic-era business model from succeeding, which is: get an enterprise started in an industry sector and then get protected -- you know, go to MITI and say "help;" that doesn't work anymore. The Internet just destroys those barriers.
In many ways, Japan is leading (and also last) in entrepreneurship compared with other Asian countries. It is leading for several reasons. One is that Softbank has been such a success. From startup to world-class power, it has shown that a Japanese entrepreneur can succeed, big time. Another reason is that Japan was the first to crash. The Bit Valley hot nights are gone. Shibuya is a shadow of its sizzling Internet days -- boom to bust, faster than the Internet industries in the US or any other country.
What, specifically, is missing here?
Creative marketing -- starting something from nothing -- is the most common theme of what's missing in Asia, entrepreneurially. In Japan, I hope that there will be a large enough absolute number of ideas in a country this big, from the "think out of a box, act out of a box" classic group -- you know, the 8-inch platform heels kind of thing. There should be enough creative thinking in spite of culture or in spite of education. Japan's business model has not created startup marketing talent. It has created marketing managers very good at improving existing products and services. It has not grown a pool of talent that is good at creating new products and services for markets that do not yet exist.
How has Silicon Valley changed since the spring 2000 shake-out?
It's clear that B2C now has a new meaning -- it means "back to consulting" (smiles). And it's real. We talked to eight consulting firms here, and I talked to others in Korea on my last trip, and that's exactly what's happened. And B2B? It means "back to my boss begging" (laughs). But it's pretty clear the money is already flowing in new patterns, and I think the best label is "Evernet." Evernet comes from the concept of, "I want to communicate with whomever I want, wherever I want to do it, with whatever device I want to, 24 by 7. I think it's larger than wireless, although people call it wireless. I think it's larger than m-commerce, although mobile commerce is real. Evernet includes two other waves. One is the genome project, which is precipitating an attitude of forever-ness that is probably much greater than anybody ever dreamed of. I've had life scientists tell me that it's only a matter of time before [our] genes are corrected and we'll live forever. I mean, it's unthinkable, but they're saying that. The joke is that cell phones are now in serious trouble. We already have a computer in the refrigerator that works. So we're just going to do the same with cell phones -- implant it in our ears, and you know, we won't need those electronic things anymore.
Isn't that 50 years in the future?
Well, I certainly agree, but it's the sense of the Evernet concept [that is key]. The third additional aspect of Evernet is education. Twenty years ago, Drucker said that we're shifting from the craftsperson to the knowledge worker, meaning all adults have to be continuously reeducated -- and there's the sense of ever as well; forever reeducating people. There's a lot of money, billions, being poured into continuing education experiments now. It's arguably the largest new enterprise market of the century.
So those are the three legs that I think are driving the Evernet concept. The current segue into wireless is much hotter and more real; the genome stuff is maybe 15, 20 years out.
Who's in the lead with wireless?
I have found that the Scandinavians are ahead of the Asians, and the Asians are still, of course, ahead of the US, because we still can't get our standard set. Got to get rid of the FCC before that'll happen. I see Scandinavian students in my classes; every summer in Silicon Valley they come and do startups, and then part of the class is to do a real business plan. And they come up with ideas for services, content, and devices that I haven't dreamt of. Ah! They're way ahead of it. In comparison, I've heard some of the most clever ideas from some pretty leading-edge startups, in Asia, and they're way ahead.
Where is the future for wireless services?
When Yankelovitch did his population surveys that were published in 1992, some major themes came out. One is that mature boomers and Gen X-ers all had two themes that wove through their desires in life. They wanted simplicity, and they wanted control of things. As a result, the electronic gadgets we're getting now are going to have to be able to deliver that. It'll be interesting to see how that goes. We already have a fork in the road: Some are saying that one device should do all. And the other says no, no, no, I'm going to have six dedicated devices hanging around a chain on my neck, each very small but each doing something different.
What strikes you first about Japan?
Well, one is that Japan has always taken advantage of its monopolistic positions in industries. They've done that to introduce the leapfrogging to each sector, semi-conductors and so forth, which are now recorded history. And they did it again with NTT's position to leapfrog into i-mode. Japan has used Japan Inc. as a way to leverage its unfair advantage, and I would have to say quite entrepreneurially.
Are startups thinking about going global?
There are some very good strategies that do not require you to be in 3,206 metropolitan areas at once. Also, there are some businesses that only belong in one market. I mean, the kimchee market's only good in Korea. You might can it and sell it someplace else, but there ain't a big market there. And ditto in the US and Sweden and every place else.
But because of the Internet, you can go global without having to leave home in some markets. So they think that way from day one, the issue is, "Well, I don't speak good English, so how do I get to the States?" In Singapore, they think: "I'm so small, what do I do? Maybe I should just stay here." Or in Taiwan: "I want to be an Asian company." Well, what's the largest, easiest, most open marketplace, having one language and one set of laws that you can count on? It's the US. The Israelis figured that out.
Final word?
Overall, there are a few clear signs that Japan has inside it strong entrepreneurial powers. However, those powers are currently mostly being held captive by more powerful forces. It is up to Japan's leaders to put more effort into finding the secrets to freeing its entrepreneurial forces. Then once again Japan can become a leader, using its unfair advantage to improve Japan and the world. This time it could be a leader in the Evernet era, doing it in that way that makes Japan so special.
