The reality of setting up a foreign company in Japan -From equity negotiations to organizational challenges-

In December 2019, an event with the theme “Country Manager as a Way of Life” was held. This is the report of the event. In this episode, speakers talked frankly about setting up a Japanese company with a foreign capital, based on the discussions up to this point.

Takahashi: Thank you very much. So I would like to ask Mr. Tomimatsu the same question. You have also experienced being a country manager for four companies. With that experience, please tell us if you have met issues that Foreign-affiliated Japanese Corporations are likely to encounter.

Tomimatsu: When your business is growing steadily, your mission is to hire more and more people. But after doing that, I realized that it probably would have been best to take a step back and calmly reassess the situation.

It was an Indian company, and the business in Japan was growing so fast that I hired more and more people. But eventually, the business stopped growing halfway. Actually, it wasn’t the Japanese market whose growth had stopped. It was the markets overseas. Japan was just about to grow even more.

We have been told that our cash flow wasn’t looking good at our headquarters and that offices globally would close, including our Japanese office. Due to this, our newly hired staff was fired in a matter of weeks.

In times when the business is performing well, I thought that it was all the more best to evaluate carefully the company’s performance both locally and overseas.

Left: Kiichiro Tomimatsu (MediaMath Japan Corporation)

Right now, I work for Media Mass, an ad tech IT company based in New York, USA. But nowadays, there is also a way to outsource work from another company without having to hire new employees. It is also possible to request staff from these outsource agencies.

By doing so, for example, it would be better to pay the commission and even have a bigger impact. In this way, you can use agency contracts etc. to substitute for heavy recruitment. I think this case would be plausible. In fact, Media Mass has done this in Korea, India and South America.

Lastly, there is a process of setting up internal regulations of Japanese corporations, right? I have the terms from Google, where I used to work for. You usually get it when you join the company and you don’t have to return it when you leave.

I have proposed these terms to a new company and at that time, Google was the benchmark in the market.

I think that it has made more progress now, but at that time, the headquarters did not agree nor disagree with the terms. They just lowered the retirement rates and just copied everything else in the terms.

You can get it from any place, but I hope you would have such a benchmark. Even a Japanese competitor is fine. With that, you can negotiate with the head office, so that you can secure above industry standards.

Also, regarding stocks. If you’re aiming to be a country manager, be sure to get a lot of the company’s stocks. If you do your job well and the company’s performance goes up, you could be gaining about 3-5 times the normal amount invested. This in return, will help increase your motivation. 

Well, in my case, I have a few stocks that have become paper scraps (laughs). But, I still think it would be worth the challenge if I am trying to achieve my dream.

Takahashi: Thank you. So, Mr. Ido please take the floor.

Kiminari Takahashi (RTB House Japan K.K.)

ldo: When you set up a company, you have to be aware of both your own perspective and that of the company itself.

From my own point of view, I think it’s better to make a very precise decision on stocks, as Mr. Tomimatsu mentioned earlier.

I will talk about a case when I joined Anker. At that time, it was about a year and a half since the Anker group started. It was less than a year since the main members had joined the company, and it was a phase where there were only a few dozen people at the headquarters. So in a sense, it was a relatively favorable situation to negotiate.

First, as I mentioned at the beginning (Part 1), I went to explain my business plan, and when we decided to work together, I was told to join the company first as an employee. But I refused and said I didn’t want to.

I said that I wanted to advise on starting up the Japan entity, and that I wanted to work as a business partner instead of just an employee of the company. Of course, I would not provide anything but my time, skill and knowledge because they have all the resources and products, as well as a proper supply chain and operations.

Of course, I was a minor investor, but I negotiated that the company should be a joint venture. Otherwise, I told them that I would not join the company as an employee.

I was the minority and they were the majority when they created the corporation. As a global company group, there was no choice to only get the Japan entity listed. Therefore, there was no use in having stocks of the Japan entity. 

I needed to leverage my experience and knowledge I gained in the financial industry. We agreed to have a clause for stock conversion, with which stake in the Japan entity will be converted to stake in the parent company under certain conditions.

Left: Yoshitsune Ido (Anker Japan Co., Ltd.)

Since the conditions were discussed in detail, I asked my friend who was a lawyer to be involved from the very beginning to negotiate with the headquarters.

I revised drafts repeatedly and negotiated with help from him. I had some experience for financial structuring and documentation, and was able to carry out negotiation at my own pace.

I was negotiating so persistently that headquarters side got tired.  . And finally I tried to push and said “I want another5% stake.” But they said, that was no good. I was told not to play around (laughs).

So, I took one step back and concluded it. But actually right now, I no longer own any shares of the Japan entity. My stake in the Japan entity has been converted into one in the headquarters.

That was one of the most important points for me during negotiation. Even if I wason the verge of breakdown of negotiation, I was not able to compromise on that.

Even if you start up the Japan entity in a good shape, if you do not grow business in the Japan market, your stock will run out of value. So as their first member in Japan, I was tackling the issue of how to expand the business and organization.

However, we were fortunate that the business was growing in the United States and Europe, mainly Amazon. So, we had a development and production background that could be used in Japan as well, and we had a strategy and tools to track sales that were starting to be developed.

In Japan as well, we decided to focus on Amazon Japan, which can be used as the primary sales channel, and we clearly set strategy to invest all the resources on it first.. We determined a very simple strategic goal of being first place in one category.

The business in Japan started in 2013, and we concentrated on all that, and in 2014 we were able to become the number one brand in mobile battery category at Amazon Japan.

I figured out what I could do to become number one.

However, there is a limit to what you can do alone. You have to recruit members, but in order to do that, for example, you have to think what kind of organization Anker Japan will be in 2-3 years? You have to do some analysis.

I sorted out what functions were essential for growth, and which functions must be born by the Japan team or headquarters.

I coordinated and helped define the scope that distinguished the role division between China and Japan, so that there will be no function leakage. This was where I put my communication efforts to. 

Thanks to that, it was made clear that the hardware development itself will not be done in Japan but done entirely in Shenzhen. Everything else was done in Japan.

The structure of this role division has not changed from that time and continues until today. 

Takahashi: Thank you very much. Due to time constraints, I would like to move on to the last question.

(To be continued)


Speaker Information

Country Manager Year End Party 2019

-Speaker-
Yoshitsune Ido
Anker Japan Co., Ltd.
CEO

He graduated from the University of Tokyo, Faculty of Economics, Department of Management in 2002. In the same year, he joined Goldman Sachs Japan Co., Ltd., and engaged in M&A transactions for client companies and advisory services in capital markets in the investment banking division. In 2006, he joined TPG Capital, a private equity investment firm where the focus was investing in Japanese companies and increasing corporate value. In 2013, he established a Japan subsidiary of the Anker group and became CEO. He grew this business with sales exceeding 10 billion yen within 6 years. Fifth ‘Dan’ (grade) in Kendo.

Keiichiro Tomimatsu
MediaMath Japan Corporation
Representative

Joined P&G Marketing Department as a new graduate, then worked at Reuters News Agency (Sydney), Citibank, GE Capital, 20th Century Fox Movie (now Walt Disney Studios), Google, etc. Established two Japanese companies, most recently DAZN Media Japan, UK representative. Received numerous awards, including the Japan Academy Awards, Tokyo Interactive Awards, and Dentsu Advertising Awards. Advisory board member of the first Ad Tech Tokyo 2009. Completed the MBA from the # 1 Macquarie School of Management in Australia.

Akira Shintaku
Wolt Japan
Marketing Manager (First employee in Japan Branch)

After leading the strategy of direct response advertising on Twitter, engaged in marketing at UNIQLO and Apple. In November 2019,  joined Wolt (Japanese branch), which develops food delivery based in Helsinki, Finland, as its first Japanese employee.

-Moderator-
Kiminari Takahashi
RTB House Japan K.K.
Sales Director of Japan

After graduating from Tokyo University of Foreign Studies, joined Recruit as a fresh graduate. After entering the ad tech industry, joined Criteo, Appier. In January 2018, joined the retargeting advertising company RTB House from Poland as its first employee in Japan. Within just two years of joining, led Japan to become “RTB House’s fastest growing global market”.