Changing gears: How Japan’s Nulab pulled off the slow pivot

From the left, Nulab’s co-founders and board members:
Shinsuke Tabata (managing director),
Toshitaka Agata (managing director), and Masanori Hashimoto (CEO)

See the original story in Japanese.

Nulab is a startup based in Japan’s western city of Fukuoka, which has developed web-based collaborative tools for use with remote workers. You may be familiar with their diagram sharing tool Cacoo or their task tracking and management tool Backlog.

In terms of business management style, Nulab does things a little differently than typical startups. Their method is incrementally progressive, similar to what typical SMEs do. They don’t show off so much, but their services are pretty great, and Cacoo in particular has a wide following around the world. We recently had a chance to hear from the startup’s CEO, Masanori Hashimoto, who told us a little more about their progress to date.

Developing Backlog

The startup’s primary revenue early on came from developing mobile and web apps for its clients. That’s how Backlog was invented.

Hashimoto: We launched back in 2004 and started our business doing software development for clients. So we were working on web productions for our clients in Fukuoka, system developments for securities companies, or even consulting work. In such processes, we had no system for tracking bugs and managing fixes. So we developed our own. That was the beginning of the Backlog app.

Using some open source code and libraries, we could finally introduce the commercial version of the tool after a couple of testing versions. That was in 2006, and at that time the tool was available for free. We didn’t care about charging to our users. (laugh) After that we picked up a lots of new users without any intentional promotion activities.

Subsequently, they released a premium version that was priced at around 8,000 yen (about $80) a month, but that didn’t quite work out. They needed to find another way to make it work.

Hashimoto: We had been developing the app from an engineer’s perspective. We hoped the tool could help software engineers design system architecture or interfaces for their work. But then we changed things and made some improvements for designers or website producers, and the premium version started showing good numbers.

As a result, the tool became widely recognized as a task management tool, not only in the Fukuoka tech community but all across the country.

The emergence of Cacoo

Following up on the Backlog app, the startup introduced Cacoo back in 2010, enabling users to collaborate on diagrams with other remote users, and even chat within the app. Cacoo would go on to become a smash hit.

Cacoo is now integrated with AdFlow, a banner ad production assisting tool.

Hashimoto: We released the Cacoo app back in 2010. During development work, we previously used wikis for sharing technical information among our developers. But we wanted to edit a diagram or an image in the Wiki easily. And that’s why we started developing the diagram editing and sharing tool.

But for them, it was a very long road to releasing both Cacoo and Backlog. By taking time away from their primary work to develop the Cacoo app, they needed two years to develop the app and get it published.

Shifting focus

Each of the three board members plays a different role. Hashimoto was in charge of managing the client software development, but since these two web services started showing good numbers, he decided to shutdown that department.

Hashimoto: Our director Tabata takes care of the Backlog app, and Agata takes care of the Cacoo app. Since these services are growing now, we shutdown my department. It used to be the primary revenue stream for the company but I think it there is less potential in the future.

We have expected to execute this pivot earlier, but it was impossible to do it so rapidly. We spent three years to shifting our resources from development work to intensifying these new web services.

The startup has also introduced an SDK, which allows third-party developers to work on system integration with the Cacoo app.

I asked Hashimoto if he’s interested in trying for an IPO. He explained:

If your company is listed on a stock exchange, it’s no longer a private company, and should serve people almost like public works. If you expect to make your business into something like that, it’s worth trying to IPO. […] Our next goal is to make this a world-class company.

With the lofty aspiration of further global expansion, Nulab launched a subsidiary in Singapore back in March of 2012. It will be interesting to see if they can use that outpost to find further opportunities around Asia and beyond.