Back to Contents of Issue: December 1999

Back to the future with Fujiyo Ishiguro, president and COO of Netyear Group Inc.

Fujiyo Ishiguro
president and COO of Netyear Group Inc.

Tokyo's Netyear Group, headed by Satoshi Koike, is one of the more dynamic players in Japan's startup game. The firm aims to identify and utilize best practices found both in the U.S. and Japanese Net markets, and it has helped incubate several notables, including: NetAge, owner of Net Dealers, Yahoo! Auto, and Space Finder; and the Tony Awards Online. Fujiyo Ishiguro -- a poised, bilingual, and U.S. MBA-educated 30-something - divides her time between Tokyo and the West Coast. She operates in a rarefied, Net-generated bicultural space, where barriers between people, companies, and ways of thinking are fast dissolving.

Managing Editor Daniel Scuka spoke with Ishiguro in Netyear's Tokyo offices about Japan's Net, startups, and going back to 1994.

Netyear is one of the new netpreneur incubators working in the Japan-U.S. space. How did you get launched?
The Netyear Group started in October 1997 as part of a JV between GE and Dentsu. We were doing systems integration and a little Net-based business. But we found that focusing on the Internet was the more important of the two, and going in this direction required that we react quickly. Sitting as we were under the GE umbrella, it was difficult to achieve this, so in 1998, Netyear was spun off under a management buyout. GE's a good corporation and all, but we wanted to move quicker than what was possible. That's one reason for the name "Netyear" -- a year in Internet time now is what, a few weeks or days?

Who did you hire for your U.S. office? Japanese who were living in the States?
When we started, almost half were Americans, and half were Japanese.

What is Netyear's focus today?
We operate in two areas. First, as you said, is in incubating Internet startups. This includes all the usual: helping netpreneurs develop their business concepts, providing them with facilities, funding, strategic advice, and introductions to potential partners. Second, we offer strategic Internet professional services. This is aimed more at existing corporate clients who are launching Internet projects. Again, we've got a pretty solid offering, and we'll do interactive marketing projects, design consulting, website development, product promotion, market re-search, and international business development. There's more.

What's more important: a global approach, or the Japan/U.S. connection?
The Japanese connection is very important for us because the Internet is becoming as valuable here as in the U.S. But we see that not so many people in Japan understand the Internet here. In some areas Japan is ahead, but in most America still is, so it's really to our advantage to maintain a presence in both. Japan's Internet is probably three to five years behind the U.S. -- the numbers I've seen show usage here this year being equivalent to the U.S.'s in 1994, and the U.S. really took off after that -- opened in 1995.

So it's a very important time right now?
Yes, 1999 is terrifically important for Japan. When I speak with my colleagues at startups in the States and tell them about Japan, I usually hear, ". . . I'd sure like to go back to '94." I graduated in 1994, and I remember one of my friends started working for some Internet company. I met up with him and asked where he was working? He said, "I've started working for an Internet company that's growing tremendously. It's called Netscape."
But there's a big difference between Japan's situation and that prevailing in the U.S. in 1994. Back then, no one knew how to use the Net. Everyone was talking about it, but no one understood how to make a buck. This time, in Japan, people can learn from the States' experience, and the Japanese Net can take off even faster.

In Japan, what do startups need from the very beginning? What do they need to grow?
I think the same things as in the United States. Capital, technology, and management. At the beginning, technology is probably not as important as good management. The challenges can really get quite overwhelming. Manage-ment-things like cash flow management -- is key. So if startups can get this kind of advice, they'll have a better chance.

Next year should be a banner year for startup opportunities. Third generation mobile technology is coming and you'll be able to download MP3 files right into your cellular phone at two megabytes per second. Where do you see opportunities?
I really think this is one area where Japan is ahead. And this is Internet technology that we may in some part take over or be able to export. Japan is, fortunately for mobile technology, very crowded, very congested. There are a lot of people in Tokyo. So there's a good market here. Also, the Japanese are well known for their skill at miniaturizing technology. Also, with NTT dominating telecommunications for so long, there is a countrywide infrastructure in place. So I think any company that can develop technology which can take advantage of the huge customer base and the love of miniaturized devices can do well.

What about differences in entrepreneurial culture between Bit Valley here in Tokyo and Silicon Valley?
In general, in Japan, it has been difficult for entrepreneurs, but I would say this has now totally changed. Before, there was no venture capital in this country, but we're now seeing independent ventures. Even just one year ago, young people who had only an idea -- no assets or property -- had no access to money, because business people did not invest in startups. They didn't take risk -- it's not a risk-taking culture. But I am really surprised by the young people I see today, and they have very good ideas. And they're starting to see some money come in. My advice to someone who wants to invest is just do it . . . go ahead and take the risk.

Are the young entrepreneurs self-reliant?
Yes. Maybe they're even overconfident, and I never expected this to happen in Japan. In the U.S., people say, "Go ahead and try," but here that sort of encouragement didn't traditionally exist. In Japan, right from kindergarten, no one's encouraged to do anything on his or her own. But it is now happening. To be honest, I'm not sure how or why, there are encouraging signs.

In the U.S., if I'm looking for early seed money, I max out my three credit cards, I talk to my family and friends, and I borrow from anyone I know. What happens here?
Most families don't want to see their sons leaving a big company, giving up that security, so there are cultural difficulties. Entrepreneurs can find angel investors, but if this happens, we're talking really limited numbers, maybe ¥100,000 to ¥500,000. That's why Netyear's doing what we do. Remember though, even this can be a really big boost for a startup company.

In the U.S., we're seeing incredibly fast IPOs. What about Japan? Is it the same kind of deal?
No, but again this is changing. Tokyo is changing. There are new markets opening [NASDAQ and Mothers -- Ed.], and things are becoming more relaxed. It used to take some 15 years of solid, profitable business performance before a company could even think about listing.

But with NASDAQ opening, this will change?
I think so. The time it takes to do an IPO will drop dramatically. It already has.

For the American VCs who are looking towards Japan, where should they go? How do they find the entrepreneurs who have good ideas?
Japanese people understand Japanese community best. And it's kind of a risky market. So I'd say anyone looking into this market needs a Japanese partner or advisor. They'll help you find the targets you're looking for. In our case, after we understand your goals, we'd look on mailing lists, our personal networks, people who contact us. Then we'd help analyze the business model, and provide a solid measure of the target company.

Any final advice?
The Internet is tremendously exciting in Japan right now, but to become part of it, you've got to be sharp. For example, if a U.S. company wants to do something in the Japanese market, what do they do? Traditionally, they line up with some trading company, print some brochures, put up a site, and hire a local country manager. In this way, they can start a business in one or two years. Our approach at Netyear is totally different.We understand how to use Japan's Internet model. Do it this way, and you can start doing business from today.

Netyear Group:
Tokyo +81-3-57772-2133
Silicon Valley + 1-650-631-9666

Daniel Scuka is managing editor of Japan Inc.

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