The Rude VC disappeared to Japan last week for a combination of business meetings and some spiritual re-calibration I return refreshed and pumped up.
Pumped up because the country that the West likes to deride as the one of the “lost decade” is demonstrating a renewed appetite for expansion abroad, especially in the tech sector. This makes sense for several reasons.
With a population of over 120 million and a mobile penetration of exceeding 106%, Japan boasts a strong domestic market. The technological sophistication of its populace (we joked about the contrasting qualification of “broadband” between Japan and Europe), the ubiquitous and reliable mobile networks (though thankfully I managed to find one zone that was off the grid), and the relatively high disposable income levels hold the promise of high ARPU for new innovative products.
The flip side of this is that Japan remains an island. The population is aging; the political system is gridlocked, and its domestic market is isolated and hence limited in growth.
Combine this conjuncture with a relentlessly strong yen, and a number of leading Japanese tech firms are exploring growth internationally. Recent forays overseas by leading mobile gaming networks Gree (which recently invested in Amsterdam-based eBuddy) and DeNA, or by mobile carriers like NTT Docomo (which recently acquired Italy’s Buongiorno) and Softbank, or by e-commerce leaders like Rakuten (which just today acquired France’s Alpha Direct Services) attest to this trend, which is not limited to just the adventurous players either.
The world witnessed a temporary overseas m&a frenzy in the past by Japanese firms, such as of golf courses in Hawaii and baseball teams in Seattle, so a bit of perspective is warranted.
The difference this time, at least for the moment, is that many of these tech firms genuinely aspire to become global leaders, and are cultivating the corporate culture and talent to succeed internationally.
I’m cautiously optimistic because I see a lot of complementarity with European innovators. Here in Europe, we have some fantastic technologies and consumer products (take Criteo’s arrangement with Yahoo Japan as one example), a set of markets with generally high ARPU rates (even higher than the U.S.), and perhaps most importantly, the insight into how to serve this substantial market of 300 million that represents really a collection of very disparate national markets.
During one of my previous visits to Tokyo around a conversation about Japan’s macroeconomic situation, a suggestion was made that Japan should look to France as a model for how to gracefully manage a once-leading economic superpower in its gradual decline. The suggestion that Japan could actually learn something about economics from France definitely caught me off-guard. But it was a typically Japanese thing to say, a phrase filled with humility and perspective.