Startups Are Not Tiny Enterprise Companies

Lemonade StandStartups are not small versions of large companies. They are fundamentally different in every way other than their basic legal status. Japanese (and foreign) entrepreneurs frequently look to large companies as the model of the way things should be done, and it rarely serves them well

It’s an easy mistake to make. Small companies want to grow into a large companies, and so it seems intuitive to structure accordingly. Unfortunately, even the minimal administrative overhead large firms require to function will suffocate small companies.

One of the worst examples of this I ever encountered in Japan was a six-month old, five person start-up with a ringisho. (For those who don’t know a ringosho is a document that is circulated among all stakeholders of a proposal. These stakeholders must all sign-off in a specific order before the decision is final. As you might imagine, the ringisho is the center of a lot of passive-aggressive infighting.)

The three founders explained that the ringisho would help them avoid conflict and ensure all founders were involved in the decisions.

The company was out of business six months later.

Are You a Noun or a Verb?

Start ButtonOver the years, I’ve interviewed hundred of candidates for dozens of positions. Both companies and candidates like to discuss jobs in terms of nouns, and maybe a few adjectives. Employers are looking for a “VP of Sales” or a “Java Developer with five years of experience” and resumes
dutifully present candidates as a list of nouns enumerating their previous roles and titles.

But nouns are static. They are dead.

Never define yourself as a noun. You are not a sales manager. You will double the companies sales next year. You are not an experienced Ruby programmer. You will increase development speed and decrease defects.

Be a verb, not a noun.  Who you are doesn’t matter. It’s all about what you do.

Outsourcing the Community

Hack OsakaDuring one of the breaks at this year’s HackOsaka event I was talking with two budding entrepreneurs about the local startup scene.  They complained that one of the biggest challenges facing new Osaka startups was that there was no real community of entrepreneurs they could turn to for support. There are plenty of entrepreneurs in Osaka, they explained, but they don’t really get together to share ideas and support each other.

I suggested the obvious; that the two of them start such a community. After all, we were discussing this problem in the middle of a venue specifically dedicated to promoting local entrepreneurship and filled with people looking to connect with other entrepreneurs.

“Well, it’s harder than you think,” one demurred, “but someone should  really do something about it. It would be very valuable.”

Whoever Has the Most Points Wins!

GooooooooalThe best explanation of Japanese risk aversion I ever heard came from my old department manager back when I worked at Fujitsu. He was fond of saying:

“In both America and Japan promotion is based on the point system. Whoever has the most points gets promoted. The difference, however, is that in America you start at zero and earn points for doing things right. In Japan you start at zero and lose points for making mistakes.”

Stories are Simple: Solutions are Hard

Lovely StoriesI spent a week attending a series of startup events in several Japanese cities and was frustrated by the amount of time people spend telling each other stories and making excuses. I head stories that explained why, because of its history, a certain city is particularly good (or bad) for start-ups. And far too many stories about how today’s challenges are the inevitable result of some ancient aspect of national or local character.

I understand that many people are uncomfortable discussing the details of real problems, and in most cases there are no obvious solutions. I can’t even say that these stories are wrong, because most of the time there is no way to test them one way of the other.

The problem is that the stories we tell each other about about our problems give us an excuse to avoid talking about practical solutions. They give us an excuse to do nothing.

Stories are simple and comforting, but they are a waste of time.

Stories don’t solve problems.

Advice to Singapore Startups

The MerlionI recently spent some time in Singapore and had a chance to talk with a number of startup founders there. The startup environment in Singapore is radically different from that in Japan or America; in both good and bad ways. The last day of my visit, I gave a presentation in which I offered three pieces of (rather presumptuous) advice for Singapore startups.


1) The Map is Not the Territory

Singaporean founders are incredibly well informed about the mechanics of running a startup. In fact, on average, they seem better read on the subject than most founders in Silicon Vally. However, Singaporean founders trust too much in this knowledge. There is a widespread, if unspoken, belief that if one executes the “right plan,” they will succeed. Nothing could be further from the truth. Doing all the right things increases your chances of success, but there is no right plan. Whatever plan you have is wrong. You just don’t know exactly what parts of it are wrong yet. You’ll discover the defects soon enough, and if you are skilled, you’ll figure out how to fix them before you run out of money.
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We Are All Afraid

Scream in FearThe other day an aspiring entrepreneur said he admired me because I was not afraid of failing. It’s true that I enjoy complements more than I probably should, but I was shocked that he actually thought that of me.

I had to set him straight.

The truth is, not only have I been afraid at the start of every big project I have ever undertaken, but I have been utterly terrified at times while running them. Both the media and some founders love to portray entrepreneurs as bold visionaries who don’t question their convictions and never doubt what their next move should be, but that is pure fiction.

If you are starting a company and are not at least a little bit afraid, you either don’t really understand what you are attempting, or your project is not ambitious enough.

It’s good to be afraid. Just don’t let your fear get in your way.

Death of the (Japanese) Salemen

SalesmanThe traditional Japanese salesman in heading for extinction. The information they provide is more completely and efficiently obtained on the Internet. Salesmen today not only slow down the sales cycle, but having to employe a salesforce increases the cost of the product which makes it less attractive to the customer.

The human touch is nice, but price and convenience will win out eventually just as they are doing now in the Japanese retail market.

The Japanese salesman should be placed on the endangered species list. The business environment is changing, and soon they will only survive in niche markets with highly complex and expense products.

Turn On. Drop Out. Start Up.

Turn On Drop Out Start UpOver the last year, I’ve attended several events where San Francisco-based VCs have exhorted college students to drop out and start a companies. Every one of them mentioned both Bill Gates and Mark Zuckerberg to support their argument.

This advice strikes me as slightly misleading and extremely self-serving. The business of venture capital requires a steady stream of new ideas and companies. VCs invest in the most promising 5% knowing that 80% of those they invest in are going to fail.

Having a portfolio company fail after a few years is not a big deal for an experienced VC. It’s a very different experience when a 25-year old finds himself exhausted, broke and without a college degree. Some deal with the situation well, other don’t.

The truth is that your odds of winning a lottery are significantly higher than the odds of your startup idea resulting in the next Facebook or Microsoft.

Despite the long odds, however, I do agree that if a college student passionately believes that he or she is sitting on a billion dollar idea, leaving school to pursue it makes sense. But the idea and the passion needs to come first. Dropping out, moving to San Francisco, and then trying to figure what you want to do is likely a recipe for disaster.

Falling Down in Japan

Failure in JapanJapan and the West have very different ideas of what constitutes failure.

When I sold Vanguard to Digital Garage in 2001, my Western friends called me up and told me

“I read about the acquisition. Congratulations! I know you have been working on it for a long time. Let’s get together and I’ll buy you a beer!”

However, without exception, my Japanese friends called me and said

“I read about the acquisition. I’m sorry to hear you lost control of your company. I know you have been working on it for a long time. Let’s get together and I’ll buy you a beer.”

I drank a lot of beer that month.