Breaking Down the Barriers

Back to Contents of Issue: November 2000

B2B online marketplace TradeKu wants to simplify the import/export biz.

by Daniel Scuka

TradeKu crewTRADEKU IS A BIT VALLEY B2B startup building an online marketplace that simplifies access to markets and allows importers and exporters to bypass the elephantine trading houses that have a lock on the industry in Japan. And the import/export business isn't simply a matter of finding out which tariffs and duties apply to which shipment. Even after ponying up to the governments involved, global trading still involves byzantine customs regulations, a hodgepodge of industry practices in each country, a witches' brew of shippers, carriers, and freight forwarders all angling to take a healthy commission, and, last but by no means least, pirates running rampant through the Philippine Sea. While TradeKu can't help with the pirates, it should bring some semblance of order and transparency to the practical problems of international trading -- including differences of language and culture between importer and exporter.

TradeKu is developing a Web-accessible electronic multilingual trading system that will help customers work through the complex trade and communication barriers faced by importers and exporters, and serve as a neutral e-marketplace, aggregating buyers and sellers from the (now highly fragmented) market. Businesses wishing to export products to Japan will no longer have to set up subsidiaries, use government-related institutions, or navigate through complex trade regulations with the aid of often-recalcitrant brokers. "The complex regulatory and tariff systems, complicated distribution structure, and cultural and language barriers make Japan an ideal launching ground for this type of system," says COO Grace Moon. "The rules are opaque and there are no real answers," adds CEO Ryan Imaizumi, with more than a touch of frustration in his voice.

Considering the myriad tasks that any trader must address, including market selection and market research, customer identification and evaluation, financial arrangements including securing credits, and dealing with trade consortia and tendering, TradeKu will have its work cut out trying to move these functions onto the Web and disintermediate long-established relationships. In addition, some industry watchers point to offline social factors that will affect any shipping-related Net play, in particular Japan's longshoremen, felt by some to be the world's most overpaid, underworked, and generally mollycoddled (on Sundays, Japan's ports close up tighter than a sumo's grip for longshoremen's day off, a practice unheard of elsewhere in the world). Further, international brokering has long been the domain of the telephone and fax, and many traders here have yet to Web-ify.

But TradeKu's management team is pretty impressive, it already has a Silicon Valley office, and you've got to admire the tight ship they run -- the angel round was financed by two of the founders' parents, and senior staff went without salaries for several months. Both founders -- Moon and Imaizumi -- are particularly proud of the fact that TradeKu is building its site by itself, without relying on a large trading house or systems integration partner. "We've applied for patents in Japan and the US," says Imaizumi, emphasizing the firm's independent strategy. "Later, we'll expand our e-trading service into a global trading portal," he adds. Pretty substantial dreams for a six-month-old startup that until recently was still working in friends' apartments.

The patents, in particular, could prove key. "TradeKu is in a good position to license their patented technology, if they can defend it," says Chikara Okada, from the Tokyo office of M&A specialist Broadview. But he also points out several risks, including timing and the difficulty of finding the right partners. "They face the chicken and the egg problem," says Okada, explaining that, like other vertical B2B services, they need a critical mass of customers to make he site work, but it's difficult to attract customers until the site is up and working. On partners, Okada adds, "In general, it's easier if you have an introduction in any relationship in Japan. But B2B is hot enough that people will probably come out and [meet] any entrepreneurial proposal." Okada also says that Japanese businesses are very rational, and although they care somewhat about brand name and image, they care far more about trust. It's still difficult for any B2B play to differentiate itself based on name alone.

With launch scheduled for the first quarter of 2001, the firm is still in stealth mode, and working hard on backend development. (TradeKu was mentioned in a press release on their Belgian VC's Web site. The FLV Fund mainly invests in companies that specialize in speech, artificial intelligence, and language, giving a good indication of the type of technology behind TradeKu's multilingual Web site development efforts.

A spokesperson for FLV explained that TradeKu's system "constitutes one of our main areas of interest.")

And when the hours get long, who inspires the two young cofounders? "Anyone who pokes holes in the old economy," says Imaizumi, and "my parents -- who encouraged me to take risks," says Moon.

Note: The function "email this page" is currently not supported for this page.