Back to Contents of Issue: November 1999

Tokyo's InterQ: Those Crazy Market Caps Come to Japan

by Noriko Takezaki

The IPO boom has finally come to Japan, and several Net businesses have recently surprised industry watchers here with the U.S.-style high prices to which their stocks have climbed. The market-watching chattering classes are eyeing one company in particular, Tokyo-based ISP interQ. This newcomer sprang into existence, seemingly overnight, and has attained an aggregate market valuation of some ¥100 billion since its debut on the OTC (over-the-counter) market in August.

High on success
The company's stock price has benefited from the double boost of being the first Net-based venture and the first ISP to do an IPO in Japan. Initially priced at ¥4,200, shares reached the ¥20,000s on launch day, and in September ran into the ¥30,000s, when the company announced the start of its Net advertisement subsidiary MagClick, a JV with Kyoto-based Net ventures United Digital-who is the operator of MagMag, Japan's hot consumer e-zine.

"We're feeling a tremendous amount of pressure from the market . . . expecting us to succeed," says the 30-something CEO of interQ, Masatoshi Kumagai. "In response, we plan to be the success model for other Net ventures in Japan, and we're aiming to be the undisputed number one player in the Internet infrastructure and service business."

InterQ's service consists of interQ Original, an Internet connection service for individuals offered via NTT's contents billing service "Dial Q2"-which allows users to access the Internet without having to sign up for a fixed account; interQ Members, a traditional subscription-based access service; and interQ Office, targeting corporate clients and including add-ons like immediate domain registration and network management outsourc- ing. As of December 1998, total operating income from these services reached ¥1.9 billion, with revenues from the Original and Member services accounting for 40% (each) of the total, and the remaining 20% generated by the Office service. In the future, Kumagai plans to concentrate on new e-commerce infrastructure businesses, and for this, the newly created Net advertising subsidiary will definitely play a key role.

It's not what you know, it's who you schmooze
Mostly due to Kumagai's networking with outside experts -including executives from related business fields, consultants, lawyers, and ac-countants-interQ has proven to be an agile Japan player. After starting its ISP services in 1995, it took interQ four years to reach the IPO stage, much shorter than average for Japan, where 20 years is generally considered about right. "There were actually a lot of difficulties and a lot of work was required," Kumagai recalls, "but encouragement from several top executives of companies that have already done IPOs, as well as some good VC support, helped us along the way." VC players in interQ's IPO included JAFCO, Diamond Capital, Tokyo Venture Capital, Orix Capital, and Daiichi Life Insurance Capital.

A company is born
The success of interQ is all the more interesting when considering Kumagai's rocky youth. One year after dropping out of a prestigious high school affiliated with a major university in Tokyo, Kumagai joined his father's company operating in the entertainment business. After several years there, he decided to quit and start his own business, which, in 1991, led him into the communications field. The shift in direction was influenced by an encounter with a then-college-student entrepreneur who was also pursuing new ideas in the media field. That same year, Kumagai founded Voicemedia, a multimedia communications business that served as interQ's predecessor. In 1995, he decided to start a new ISP business using the Dial Q2 service, and that service's popularity allowed interQ to grow quickly into the second tier of Japan ISPs. Japan's access industry comprised some 2,000 ISPs at the time.

While maintaining their enthusiasm, industry analysts are starting to voice some concern for interQ, wondering if the firm can succeed in the long run. Brushing aside the skepticism, interQ is already looking for additional revenues based on its now-rather-deep pockets, and is considering several possibilities. With Kumagai's networking skills, the chatterers shouldn't underestimate interQ.

Company Profile

interQ Inc.
Shibuya Infoss Tower, 10F,
20-1 Sakuragaoka-cho,
Tokyo, 150-0031

Phone: +81-3-5456-2555
Fax: +81-3-5456-2556

Capital: ¥1,742,600,000 (August 1999)
Employees: about 70 (August 1999)

Noriko Takezaki ( is senior editor at J@pan Inc.

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