Creating the cross-border company
Mr. Kenzo Ishida, President and CEO of Aidi USA, Inc. & Mr. Alan Tafapolsky, Managing Partner, Tafapolsky & Smith

While the number of Fiber to the Home (FTTH) subscribers in Japan may already be in millions, the number of such subscribers in the US is still in the thousands. What this means for manufacturers of FTTH related equipment is that there is opportunity in both countries- each with its own sense of urgency. As the country with the most number of FTTH subscribers in the world (over 2 million), Japan is a proving ground for FTTH technology. As the country with one of the largest potential markets for FTTH (over 100 million households), the US presents a massive revenue growth opportunity. So what is a FTTH startup supposed to do when it has the technology and manufacturing capabilities but limited financial resources? If you’re Aidi Corporation, maker of PLC Optical Splitters, you find a venture capital firm willing to let you do a concurrent setup in Japan and the US. At a recent Keizai Society event, the two founders of Aidi, Kenzo Ishida and Alan Tafapolsky described how their cross border operation came into existence and expressed their thoughts on doing business in both markets.

Mr. Ishida and Mr. Tafapolsky first took some time to discuss their background . Prior to founding Aidi in 2004, Mr. Ishida co-founded Scion Photonics(also an optical company), which was acquired by JDSU in April of 2004. Before that, his 28 year career included management positions at Intel Japan and IBM, where he had two US assignments, in Vermont and Florida labs. Mr. Ishida graduated from Osaka Institute of Technology and a MS from Osaka University. He has numerous patents in optical and semiconductor packaging and materials. Mr. Tafapolsky, meanwhile, co-founded the firm of Tafapolsky & Smith in 2000 after more than 7 years as an immigration attorney, both in California and Washington D.C., specializing in business immigration law. He has numerous post-baccalaureate degrees focusing on law and diplomacy and certification in dispute resolution from Univ. of Wisconsin, Georgetown, Tufts and Harvard University respectively. Mr. Tafapolsky explained that he is currently General Counsel to Aidi USA after helping the company get funded and off the ground.

The two gentlemen focused their presentation on the exact process of starting up the company, which largely relied on fundraising. Although the no preference was given to either US or Japan VCs- the two found some unique differences in investing criteria. A critical distinction was that while U.S. VCs were not warm to the idea of “seed” funding an immediately cross-border company, the Japanese VCs had no issue with it. The Japanese VC they ultimately chose was Nikko Ant Factory who gave them surprisingly favorable terms. Ant Factory’s only major condition: that Aidi give them extensive reporting on the status of the business at very regular and short intervals. Aidi was ultimately funded in October of 2004 to the tune of $2.7 million.

The two Aidi founders also talked about their China/Japan manufacturing strategy and gave the audience some tips for dealing with Chinese manufacturers (they also have a satellite office in Chain). For example, in Mr. Ishida’s experience Taiwanese owned operations tend to more sensitive to intellectual property protection. Another very interesting discussion was how at one point, the company formation was entirely reliant on Mr. Ishida’s VISA status. Mr. Ishida was waiting for green card approval while fundraising- the VCs would not fund the company without it. Mr. Ishida mentioned that without the help of one of his former Intel suppliers who sponsored his VISA, the green card would not have even been possible.. Mr. Ishida also have credit to Mr. Tafapolsky’s immigration law representation for making everything work out smoothly- the two originally met when Mr. Tafapolsky was representing one of Mr. Ishida’s former employers in getting Mr. Ishida a Visa.

While Aidi has much ground to cover and much work to do in taking on the US and Japanese market (the company targets manufacturers who sell FTTH equipment to Carriers such as Corning and ADC), the results so far seem positive. Aidi is already expecting revenues of approximately $2.0 million for 2005. Aidi USA is located in Downtown San Francisco in the offices of Tafapolsky & Smith LLP. The company’s website is www.aidicorp.com . For more information on the Keizai Society, please visit them on the web at www.keizai.org . 

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