Quan, creating messaging characters, snags $3.6M to strengthen China, Thai expansion

The Quan team
Image credit: Quan

See the original story in Japanese.

Tokyo- / Bangkok- / Shanghai-based Quan, the Japanese startup creating and offering character stickers for online messaging, announced today that it has raised 400 million yen (about $3.6 million) in the latest round. Participating investors are Nissay Capital, ABC Dream Ventures, OLM Ventures (a subsidiary of Imagica Group), Mizuho Capital, SMBC Venture Capital and CiP (Contents Innovation Program). The amount of the fund includes loans from Sumitomo Mitsui Bank and Mizuho Bank.

This follows their funding from Japanese film and theater production company Toho back in 2017 (Nikkei reported it was about $450,000), several million dollars from six VC firms back in 2014, and an undisclosed sum from Netprice.com and East Ventures back in 2012. All these bring Quan’s total funding raised so far to about 800 million yen (about $7.2 million). With the latest funding, the firm focuses on establishment of character licensing business, acceleration of the merchandise business and character development for VTuber, blockchain, and other new technology-based services.

Quan’s characters
Image credit: quan

Quan was founded by the current CEO Kazuhiro Mizuno in 2011. The firm initially focused on the Lounge message app targeting the Asian market but subsequently pivoted to the character sticker creation business in 2012. Their unique characters became popular as distributing them to major messaging apps like Line, Facebook (Facebook Messenger), WeChat and KakaoTalk. As of December of 2018, their stickers have been downloaded over 2.6 billion times while the total number of exchanged messages containing their stickers has exceeded 24 billion to date.

Gaining the popularity of their characters by distributing stickers foe free, Quan monetize through merchandising sales and letting enterprises to use these characters for their promotional activities. With the establishment of local subsidiaries in Thailand and China, the startup has begun their business operations in these markets since around 2017. Both of the heads of the two subsidiaries are still 26, and we could interview them to hear about their recent business development in each market.

LtoR: Masato Okugawa (Head, Quan Thailand), Kazuhiro Mizuno (CEO, Quan), Munetaka Sato (Head, Quan China)
Image credit: Quan

Munetaka Sato was working for Quan while at Keio University in Japan but once left the company at the time of his graduation. After finihshing studying at Beijing University, he started his business and came back to Quan to support their sales force as an outsourcing contractor. Having been targeting the Chinese market since around 2013, Quan decided to appoint Sato as the head of Quan China (可澳恩信息技术) for their full-scale operation. Sato has been managing the startup’s business in China for two years.

While Quan China covers business in Mainland China, Hong Kong and Taiwan, the business movement has been moving northward from southern China. In Hong Kong, the startup succeeded to tie up with a local shopping mall while their flagship character was chosen for Otsuka Pharmaceutical’s online promotion campaign. The counterfeit goods problem is a major concern for IP (intellectual property) businesses in China, but Sato explains that IP business environment in China has been gradually improved and monetization has become easier in recent years as unlicensed products are being eliminated in the market. Since Alibaba established the Alifish copyright trading platform, Quan China became able to grasp the exact monthly sales numbers of their character goods on Taobao.

Team of Quan China
Image credit: Quan

Since his graduation from Thammasat University in Bangkok, Masato Okugawa, had served Quan as a director of mobile game development. He was subsequently appointed as Quan’s business manager in the Thai market. In the Southeast Asian market where Quan Thailand covers, the Korean entertainment industry’s business expansion strategy, such as allowing local companies to use K-POP content for free at first but subsequently recouping the initial investment by monetizing through merchandise, is doing well. Since the character business born out of internet culture looks slightly challenging in the region it may be hard to make money with licensing deals only. They are looking to monetize by having their characters used for companies’ promotional activities.

Mizuno told us that some companies have been hiring Japanese advisors and introducing cartoon characters born out of internet culture such as Ali the Fox (阿狸) and Budding Pop (长草颜団子) but few companies have secured funding with the character sticker business in the Chinese market. He talked about a future plan to strengthen the startup’s sales department to monetize these opportunities, aiming to grow it as another Sanrio that can link online and offline businesses.

Team of Quan Thailand
Image credit: Quan

Translated by Taijiro Takeda
Edited by Masaru Ikeda