Japanese founders discuss the difficulties of sustaining a startup

Crooz CEO Koji Obuchi
Crooz CEO Koji Obuchi

See the original story in Japanese.

This is a part of our coverage of B Dash Camp Osaka 2013.

Recently we have seen more than a few Japanese companies disappearing from the market. According to a 2011 white-paper on Japanese SMEs and Industry, 30% of companies will be gone in ten years, and as many as 50% of them in 20 years [1]. It might be relatively easy to launch a startup, but it’s still very hard to keep running one. So advice for experienced entrepreneurs is very useful for all of us. On day one of B Dash Camp Osaka, we had a chance to hear such advice from Drecom CEO Yuki Naito and Crooz CEO Koji Obuchi. The session was moderated by Septeni Holdings CEO Koki Sato.

Sato started the session by noting that even though M&A activities are increasing, IPOs are decreasing. Obuchi says that selling off your company is one of the necessary steps to accelerate the startup ecosystem, but he couldn’t say definitively that entrepreneurs should choose an acquisition as an easier option.

When I look at faces of my employees, I feel I wouldn’t be able to let them down. I’m probably very typically Japanese in that I wouldn’t be able to take a buy-out option.

Naito also says he really wants to keep running his business, explainging that if he sold off his company, it would be hard to find something else to do.

Looking at recent M&As in the Japanese startup scene, he pointed out that prices for startup buyouts are still low.

Mostly the prices ranging from 500 million yen to 1 billion yen, right? (from $5 million to $10 million) For startup founders, if you still hold half of your company’s shares, the amount is much more than what you can spend on your petty expenses. Your startup is what you want to do, but you will lose it after the sell-off. And you probably wouldn’t be able to spend the money so easily because it represents the fruit of your contnuous efforts. I’m not sure how one can so easily sell off a company.

Tough times

Naito reflected back on the times when he suffered the most:

Drecom CEO Yuki Naito
Drecom CEO Yuki Naito

One year after the IPO of my company Drecom, it still showed a loss. In 2006, we took over a company for 1.3 billion yen ($13 million) but we were forced to borrow money from the bank for it because Drecom had a low evaluation due to the Livedoor Shock. When I looked at the acquired company’s fiscal report, it still had 2 billion yen ($20 million) in short-term debt. If your company shows a loss for more than two consecutive fiscal periods, your bank will take something in security for your future pay-back and attempt to collect money from you.

At the time, Naito was in his 20s but had to make his company profitable, even lending the company money from his personal account. When they got investment from Rakuten, a total acqusition by the e-commerce giant was one of their possible options. But he rejected the proposal since he would not really be motivated to keep running the business if he lost ownership.

Obuchi let his social gaming business mature after pivotting seven times. The moderator asked him if his employees were confused with those pivots, and he said they were very tolerant, and probably understood it was necessary for the company to survive.

Naito emphasized the importance of quick execution in business, explaining:

If you know your business in feature phone content (for example) will suffer, you need to take action as soon as possible. If you start working on it when you see a loss, that might be too late.


  1. Issued by the Japanese Ministry of Trade, Economy.