Soho-Seeding the Field

Back to Contents of Issue: January 2000

The Soho Center Nurtures a New Crop of Entrepreneurs

by Gail Nakada

The SOHO Center, an incubation facility, sits in the old Silk Center building overlooking Yamashita Park and Yokohama Harbor. "Incubation" sounds like something Scully and Mulder ought to be investigating. And indeed-even without the presence of a mysterious conspiracy-the SOHO Center is fostering the growth of a life form that is becoming very common here: the Japanese entrepreneur.

Corporate-driven Japan hasn't exactly been the ideal petri dish to grow young independent minds. It's no accident that Steve Jobs and Steve Wozniak of Apple, Yahoo!'s Jerry Yang, Jim Clark, and Marc Andreesen from Netscape, et al., made it in America. That country's freewheeling anything-goes approach to making money has been the national mind-set since the '49 Gold Rush. Right or wrong, venture capitalists in the States claw over one another trying to discover the Next Big Thing. Ironically for Japan, a survey by the Ministry of International Trade and Industry shows a drop in the number of new startups compared to way back in the '70s. Back then, new companies made up 10-20% of all firms, now that figure is only 3.5%-the lowest ever.

iromi Saito, CEO and president of SOHO Inc., and her business partner, Sam Steffensen, Ph.D., believe their venture can bring some of that entrepreneurial energy and funding to this side of the Pacific. SOHO occupies the former premises of the Silk Center Hotel. The rooms have been converted to offices and the center is equipped to provide much more than the usual range of business-related services: It can help fledgling businesses draft a business plan, find or mediate in a partner search, and introduce sources for public or private financial assistance. By any standards, rent is low: from ´40,000 ($388) to ´100,000 ($971) a month. The project is aimed directly at entrepreneurs who do not want to walk the corporate walk or talk the corporate talk. Right now SOHO has 70 tenants, and more are wait-listed to come in. Though they are not exclusively targeting high-tech startups, the breakdown is about 45% in IT-related fields. Other tenants are working in urban and architectural planning, space creation, industrial design, publishing and translating. "Some of the people when they come here," says Steffensen, managing director for the enterprise, "don't even have a business plan, just an idea. Others are already out in the market but need office space and support. It's fascinating to watch them grow and their work to mature. Though not all of them do!" Steffensen gave up tenure at the Copenhagen Business School, where he was assistant professor and head of the Japan Center's Department of International Business & Management, plus a position as chief researcher at the University of Tokyo to come in with Saito. "After all," he shrugs, "setting up this type of business is a once in a lifetime chance."

In business since 1998, SOHO equals Small Office/ Home Office, right? Wrong. Here, it's "Super Office Human Office." Yes, it's from the "for beautiful human life" and "smokin' clean" school of copywriting but, says Saito, the image they are trying to convey is that "Though we have everything you need for a high-tech, efficient office, this place is very much about connecting people to people. Entrepreneurs and independent workers don't have a corporate culture or "group" to fall back on for support. Here they meet others who are independent, like them. We have lots of common areas and organize socials. They can talk and network. It's very important that they not feel isolated, it gives them the courage to go on." Even nontenants can benefit by joining the SOHO Club. After paying the registration fee plus a low annual payment, members can share in many of the same networking benefits and services.

This is probably one of the true strengths of the center and why it has gotten such good word of mouth through the entrepreneurial grapevine. The SOHO management team works actively to connect tenants to tenants, tenants to clients, and clients to tenants. Saito's reach stretches across a number of fields. She works tirelessly for her startups, besides developing revenue-generating projects for her own team. Saito is herself an entrepreneur. Currently, SOHO Inc. is working under MITI funding to put together an advanced open-system server and network security project. The product is aimed at supporting dynamic small-scaled, networked businesses. When the team decided to subcontract part of the work, she checked first with her tenant list. System Engineering startup IT Brain is now developing some of the systems for this project. The SOHO Inc. techno lab is available to take on information network management proposals, Internet domain and set-up services.

Saito is all high-energy. Striding through the corridors, greeting tenants, knocking on doors, pointing out the original wooden paneling in many of the rooms, she says the Silk Center Hotel was exactly what she was looking for. The place had sat vacant for 15 years before Saito and her group decided to lease it. The owners let it go for next to nothing, deliriously happy to find a tenant at last. "I love these old buildings. Japanese always want to tear them down and put up something new, but these places, they have character." She gestures to the view out the window of her own office: a huge white ocean liner is tied up at the dock outside, smaller craft cruise back and forth. "Creativity takes the right atmosphere. Sometimes you have to look out the window and let the thoughts come, that's part of the process. That's why this place is so perfect." She also knows that IT venture firms need more than a nice view-they need fast, hot communications systems capable of handling anything they can hook up. "We ripped out the whole electrical and telephone system. Completely," laughs Steffensen. He's a big man, standing several heads taller than most of the Japanese staff.

They've done a good job. Systems engineer Hirofumi Miyamoto, president of IT Brain and a tenant for nearly a year, is no novice at getting the most out of a server. Says Miyamoto: "One of the reasons I chose this place was that they had the Internet and communication capabilities that I needed. Their system is very fast."

Though many of the offices and corridors upstairs look somewhat shabby and dark, the common areas in the lobby have been totally renovated. They are open and airy with a Scandinavian sense of interior style. The reception area has meeting tables and chairs and a small business center sits off to the right of the receptionist. Past the meeting tables is what was once the hotel's restaurant, complete with rooftop garden. Now, with the help of Apple Computers, it is being turned into SOHO Station, a cyber cafe fully loaded with ten iMacs. The cafe will be open to the public and can host in-house events by SOHO and the tenants. All in all the SOHO Center is a place small business owners can feel at ease bringing even important clients to. Those that are willing to come down to Yokohama, that is.

"It is somewhat inconvenient," says Miyamoto, "the center is a long walk from Kannai station and I have to commute from my home, but the low rental price and their services offset that."

SOHO has its work cut out for it. They are pioneering the sort of small business infrastructure that Americans take for granted but is hard to find in this country. Japan Inc. is relationship driven and the corporations are still in the driver's seat. If your company is out of the corporate loop, contracts can be impossible to come by and funding next to impossible. "There's definitely a wall there," Miyamoto admits. "As an entrepreneur I've run up against it, that corporate indifference to new things. The big companies won't even give you an appointment no matter what you're selling. You have to go after the smaller firms first and build a client list." Miyamoto worked as a salaryman for ten years before striking out on his own. "Ever since high school I knew I wanted to have my own company and it would be something to do with computers." When he started he was the staff. Now the company has six other employees, and they are expanding into another office in the center.

Isao Shimozaki, president of the engineering integration company Blast, is more positive about the chances for entrepreneurs here. "If you have a good product or service, really good, I don't care if you're in China, Russia, America, or Japan, you can find a market for it. Location isn't the issue. It's a matter of timing and understanding your market. A bad product is a bad product and it will fail, but not because of corporate attitude." Shimozaki was a successful engineer working on missile systems and medical equipment. (There's a complimentary couple of fields . . .) Like Miyamoto, he had planned all along to become independent. Currently he and a partner are setting up a separate company specializing in engineering medical devices.

Saito has been working since she was 14 years old. Starting out in graphic design, she moved into the fashion world and from there into architectural design. Her interest in venture capitalism led to work as a consultant for the Long Term Credit Bank of Japan. She has established, financed, or become owner of several companies, including Space Creation, which specializes in next-generation highway design. Saito has plans to build a network of SOHO Clubs around the country. She and her team are already scouting old buildings that can be leased for next to nothing before converting them to low-cost offices. "The high-tech wave is here in Japan, and it will create more opportunities for independent businesses and entrepreneurs, I believe that. Corpora-tions are already looking to cut costs. That will mean more outsourcing plus, as technology becomes more complex, they will discover they just don't have the capabilities in-house to handle the convergence between different media. That means that IT specialists will become more and more important and encourage all sorts of new business to grow." Now if only she could start to work on securing equitable credit rates for small buisnesses . . .

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