TT-849 -- Crowdfunding Takes Root in Japan, e-biz news from Japan

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

General Edition Sunday, May 15, 2016, Issue No. 849

- What's New -- Crowdfunding Takes Root in Japan
- News -- Apple problems hurting Japanese parts makers
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Dorayaki in Tokyo, Oktoberfest in May in Osaka
- News Credits

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+++ WHAT'S NEW

For as long as we have been in business (about 30 years), it's never
been easy to get funding in Japan. Our first experience with trying to
get a bank loan, with the Mitsubishi Futako-Tamagawa branch, in fact,
was a disaster. Asking for two million yen for our then advertising
agency, we were told that "the foreign partner (your's truly) might flee
the country to avoid repaying the money". Extremely dejected after that
meeting, things got a little brighter when we discovered the then-named
People's Finance Corporation (PFC, but now called Japan Finance
Corporation) that was willing to lend us JPY5m, foreigner or not. Thus
we began our corporate journey down the well-traveled debt track in Japan.

And so it has been for the tens of thousands of other small start-ups in
Japan over the last 30 years. Banks spurned them as a matter of course
and became "second base" after first dealing with the local PFC.
Interestingly, the PFC's role was not only to finance us newcomers but
also to educate us about financial responsibility, which meant squeezing
performance out the small amounts of money they doled out. As a result
they were responsible for a generation of start-ups that were internally
strong enough that they could "graduate" to the next round of financing,
from an actual bank. On the down side, they starved otherwise innovative
start-ups to the extent that it took 10-15 years to earn the same market
position that a comparable overseas businesses could do in 5. This seems
to be one reason why Japan has been slowly but surely losing the global
race for innovation -- at the SME level anyway.

The debt track was supplemented in the late 1990's by the arrival of
western-style Venture Capital (VC), but wholesale risk-based investment
never quite seemed to catch on. Even today, there are less than 50
genuine VCs in the whole country, funding less than 150 companies in total.

But now there is a new concept which promises to radically improve the
situation - crowdfunding.

The best known and largest crowdfunding site in the world is probably
Kickstarter in the USA. To date the company has helped 105,595 projects
receive "investments" of US2.4bn from 11 million backers. Of course
their transactions are not really investments, you know, where stock is
sold, because for most of Kickstarter's life that hasn't been legal. But
from tomorrow, May 16th, that all changes thanks to the finally
completed SEC rules implementing the JOBS Act section on crowdfunding.
From tomorrow, anyone in the USA will be allowed to buy online
crowdfunded securities.

------ Spectacular Seaside Property for Sale in Chiba -----

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beyond. The property is situated on a large land parcel right above the
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just a short walk to Iwai beach. Only 60-90 minutes from Yokohama and Tokyo.

This unique designer weekend home is for sale now. For more information,
visit http://bit.ly/1V4dUig
-----------------------------------------------------------

[...Article continues]

Japan has had its own crowdfunding sector slowly percolating over the
last 8-9 years. First in 2007 there was Maneo, the social lending site,
which by last year (FY2015) had grown to 31,000 investors owning a loan
portfolio over JPY35bn, and in FY2015 issuing more than JPY10bn in new
loans. Then in 2012, a more western-looking crowdsourcing business,
www.readyfor.jp, was launched by Haruka Mera, offering to fund a wide
range of social activities and products/services. However, the real
watershed moment was probably in early 2014, when the Japanese Financial
Instruments and Exchange Act (JFIEA) was amended to allow easier
venture-based crowdfunding for investment. Surprisingly, perhaps, this
is one case where the Japanese acted quicker than the USA when it came
to implementing legislation inspired by the 2012 JOBS Act (in the USA).

Unfortunately, "easier funding" is a relative term in Japan, and the
rules are still sufficiently restrictive that there are still only two
true equity-based crowdsourced sites here, although more are expected to
pop up over the next couple of years as the systems and processes needed
become more familiar. In exchange for easier online fundraising, the
Japanese authorities lowered the maximum investment made through an
online portal from JPY5m (for so-called Class 1 investments) to just
JPY1m, and for individual small-lot investments, the maximum was cut to
just JPY50,000. Still, if you have 300-400 such investors, even small
lot investments can mount up.

Japan now has more than 50 crowdfunding platforms, many of which are
extremely niche, dealing just with movies, or books, or whatever. They
are a revelation to Japanese small businesses, and for that matter small
investors, both of whom no longer have to deal with conservative
technology-challenged old geezers in banks (who in any case don't want
to deal with small businesses). Investors get to put their money where
they think it will do social good, such as going to new or recovering
businesspeople in Tohoku after the 3/11 earthquake, or where they would
REALLY like to see a gadget become a reality. Depending on the site, the
average funding is in the order of JPY1,000~JPY20,000 per person. So
it's not a huge risk in return for some fun and action while following a
company.

Basically Japanese crowdfunding sites boil down into one of three types:

* Donation-driven sites similar to Indiegogo and PledgeMusic. There are
more than 15 such players here, such as www.japangiving.jp.
* Product-driven sites similar to Kickstarter - most Japanese
crowdfunding sites fall in this category. Japanese sites would include
https://camp-fire.jp/, https://readyfor.jp/, and https://www.makuake.com/.
* Investment-driven sites, where the crowd buys loans, securities, or a
hybrid of product and securities. Japanese sites would include
https://www.maneo.jp/, https://www.lucky-bank.jp/, and
https://crowdbank.jp/.

The top Japanese crowdfunding sites are really becoming quite a
phenomenon. Here are some examples:

1. Readyfor?
- Readyfor? is Japan's largest crowdfunding site. Its top performing
project at the moment is a personal laser cutting tool for making
desk-top art, engraving, and materials cutting. The tool is made by a
small Yamanashi company called SmartDIYs, uses a 1.5 watt laser on a
bare bones tracking platform. One month ago SmartDIYs listed their
project on Readyfor?, hoping to raise JPY1m. The project hit a chord and
went viral, and as of tonight they had raised 4,257% over target, or
JPY42.5m from 756 people.

2. Makuake
- This site is run by CyberAgent and it's best known for its gadget
projects, although in fact the top project was an anime movie that
raised JPY36,224,000 from 3,374 people, 181% over the original target of
JPY20,000,000.

3. Maneo
- Arguably the founding father of Japanese crowdfunding is this social
lending site, which took everyone (especially the regulators) by
surprise with the idea of crowds lending to each other. Loans generally
sell for between 5-8% with Maneo taking a small commission on each unit.
Maneo Market, the operator of the site, reckons they have tripled the
loans under management to JPY10bn in March 2015, having lent out JPY35bn
overall. You may wonder how Maneo was able to get around the old
regulations when it first started up. This was possible thanks to the
company's legal work-around which signs "silent partner" contracts with
investors putting money into the actual Maneo company. Once they have
the funds and a paper trail to record them, Maneo then takes the loan
and lends it out.

We've always said that in Japan selling to the public (B2C) is a lot
more logical than selling to businesses (B2B). With consumers even if
you are new entrant, if you offer a great value proposition the sales
are likely to happen. In contrast, selling to business customers
presents all kinds of hurdles thrown up by politics and corporate pride.

With the new wave of crowdfunding portals, suddenly owners of business
can think and behave like consumers, as can the lenders on the other
side of the table. This is important, because factors like risk and time
can be priced by the market, and both sides can pay/receive returns much
higher than the PFC and other debt providers can offer.

...The information janitors/

***------------------------****-------------------------***

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after groups of 10-30, and we have already assisted school, business,
special interest, and extended family groups. We specialize in creating
unique experiences by crafting a blend of memorable destinations,
dining, activities, guide, and transport options.

What does your group want to do? Drive private cars in a convoy around
Hokkaido for a week while visiting remote onsen? Board buses and
experience a series of mountain-side sake breweries and whiskey
distilleries? Cycle for 5 days around the rustic shoreline of Noto
Peninsula in Ishikawa-ken? Take a simple Tokyo-Kyoto tour but with only
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If you have a group needing assistance, we invite them to contact us at:
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Or visit our pages at: http://japantravel.co.jp/en/about/travel-agency/
-----------------------------------------------------------

***********************************************************

+++ NEWS

- Tokyo becoming embroiled in Olympics bribery investigation
- Auto recharge stations exceeding gas stations a big deal?
- Apple problems hurting Japanese parts makers
- Big funding for IoT MVNO start-up
- Japan Post to continue buying JP bonds

=> Tokyo becoming embroiled in Olympics bribery investigation

It seems that rumors of London being considered as a backup venue for
the 2020 Olympics could be true. Apparently French prosecutors have
started an investigation into a suspicious SG$2.8m payment made in 2013
by the Tokyo Olympic Games bid organization in Tokyo to Black Tidings
company, a firm with links to a disgraced IAAF member. The payment was
discovered after French police arrested Lamine Diack for covering up
failed drug test results. His son, Papa Massata Diack, was closely
involved in Black Tidings operations and is currently on the run from
Interpol. ***Ed: The Japanese government is of course saying that they
are innocent of any wrongdoing, but it seems this investigation has the
potential to blow up in their faces.** (Source: TT commentary from
theguardian.com, May 12, 2016)

https://www.theguardian.com/sport/2016/may/12/french-financial-prosecuto...

=> Auto recharge stations exceeding gas stations a big deal?

While the international press have been excitedly reporting survey
results that Japan now officially has more electric car charging
stations than gas stations, the fact is that the numbers are misleading.
In fact, most of those "charging stations" are in privately owned
locations not accessible by the general public, and thus apart from the
company fleet directly using them, do little good for anyone else.
***Ed: In fact, there are only about 3,000 publicly available charging
stations available in Japan and most are clustered in the major cities.
What's more, less than 100,000 plug-in electric vehicles were sold in
2014 (2015 numbers not available yet), and our guess is that most of
these would have been fleet vehicles. So we still have a ways to go
before Japan can be considered an electric car nation.** (Source: TT
commentary from nacsonline.com, May 13, 2016)

http://www.nacsonline.com/Media/Daily/Pages/ND0513164.aspx#.Vzc42oRcSko

=> Apple problems hurting Japanese parts makers

Apple's highly publicized recent slowdown appears to be having some very
direct repercussions for parts makers here in Japan. LCD maker Japan
Display has announced that it will report a JPY31.8bn loss for FY2015.
Analysts are saying that competition, higher foreign exchange costs, and
the Apple slowdown are major reasons. ***Ed: One big problem for Japan
Display, just as for Sharp, is that the company has totally missed the
OLED display boat, and building out new infrastructure will not only
require billions (of dollars) in capital but also take at least 3-4
years to come on stream. Rumors are that Apple is going to move to OLED,
so if that happens, Japan Display will be left high and dry.** (Source:
TT commentary from wsj.com, May 10, 2016)

http://www.wsj.com/articles/apples-slowdown-bruises-japanese-display-mak...

=> Big funding for IoT MVNO start-up

One MVNO that is doing things differently in Japan is Soracom, a
Tokyo-based venture-funded firm that offers SIM-based IoT communications
in replacement of WiFi. The company has just received its Series B
funding, a very decently sized JPY2.4bn, from WIL and others. The firm
says it will use the money to enter the US and other markets. ***Ed:
Soracom runs its network over NTT DoCoMo, as do many other MVNO's, and
because it focuses on IoT the company is happy to be using NTT's slow
and now-unloved 3G network. Prices at Soracom are ultra cheap, and their
customer provisioning systems are as good as any Silicon Valley
start-up. In fact, we see that they are using some of the same startup
tech - such as Zendesk. This is probably going to be a company to
watch.** (Source: TT commentary from techcrunch.com, May 11, 2016)

http://techcrunch.com/2016/05/11/soracom-an-iot-platform-provider-based-...

=> Japan Post to continue buying JP bonds

A Reuters interview with Japan Post Bank Chief Investment Officer
Katsunori Sago makes it fairly clear that the bank is planning to remain
conservative about where it puts its funds. Sago in particular warns
other funds about by being over-stimulated by negative interest rates
and making wholesale moves into other assets. He says that even if
negative interest rates are 2-3 basis points, this still allows some
profit on 30 year government bonds and therefore JGBs are still a good
bet. ***Ed: We're sure that the BOJ is listening to such comments, and
if the BOJ wants to force large concentrations of Japanese institutional
money into the stock market and private sector, it is going to have to
increase the negative rates to a level where yields on JGBs themselves
go negative.** (Source: TT commentary from reuters.com, May 10, 2016)

http://www.reuters.com/article/us-japan-post-bank-investment-idUSKCN0Y11FA

NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links -- we apologize for the inconvenience.

***------------------------****-------------------------***

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on 8 titles which can be developed within guidelines.

Available for asking price of US$2,000,000 or near offer. Contact
ggassoc@ozemail.com.au

http://bit.ly/1jWyelH
-----------------------------------------------------------

+++ UPCOMING EVENTS

------------------ ICA Event - June 22nd------------------

Speaker: Paul Chapman - CEO, Moneytree K.K.
Title: "Moneytree in Japan: Bringing banks to technology, not technology
to banks"

Details: Complete event details at http://www.icajapan.jp/
Date: Thursday June 22nd, 2016
Time: 6:30pm Doors open, Buffet Dinner included and Cash Bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No sign
ups at the door!!!!!!!
RSVP: By 1pm on Friday 17th June 2016. Venue is The Foreign
Correspondents' Club of Japan.

http://www.fccj.or.jp/about/access.html
---------------------------------------------------------

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> Dorayaki from Usagiya

Famous Japanese pancake dessert done right, Tokyo

If you know a little something about the manga that is Doraemon, you'll
know that dorayaki is his favourite snack. He loves them and falls for
traps whenever there is a dorayaki involved, but hey, I don't blame the
guy - this stuff is delicious!

A dorayaki pretty much looks like a pancake burger. It consists of two
burger bun-like pancakes with sweet adzuki bean paste (more commonly
known as red bean paste) packed in the middle. Dorayaki are widely
available in Japan and you can get one from any convenience store or
supermarket. However the modern day burger-like dorayaki, as opposed to
the traditional dorayaki which only consists of one pancake folded in
half with bean paste in the middle, is said to have been invented by
Usagiya.

http://en.japantravel.com/tokyo/dorayaki-from-usagiya/28796

=> Osaka Oktoberfest 2016
A genuine beer festival experience in Japan

Another spring time event you do not want to miss in Japan is the
Oktoberfest 2016. Yes, an Oktoberfest during the month of May. The
opening of the "Okutoba-Festo" in Osaka took place at the Tennoji Park
entrance area Tenshiba on May 13, 2016. It will be held in other parts
of Japan too.

This German-originated event is being enjoyed in numerous countries not
only during May and October, and has been adapted by the Japanese since
2011. Now in its 6th year, Japanese and tourists from all over the world
can enjoy an authentic experience here in Japan without having to fly to
Europe.

A huge variety of craft beers from mostly German brewery companies are
available, such as Warsteiner, Arcobrau, Paulaner, König Ludwig,
Löwenbräu, Erdinger, Vedett, and Spalter. These are served fresh from
the barrel then poured into different types of glasses such as weizen,
dunkel, pilsner, and cocktail, and these make the craft brewed beer
drinking experience more genuine. You can pair your large glasses of
beer with sausages, which traditionally is the perfect duo, or with
pretzels, french fries, breaded meat, chicken chops, pizza and a lot
more food types to choose from.

http://en.japantravel.com/osaka/osaka-oktoberfest-2016/28815

***------------------------****-------------------------***

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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