How one American “made it” in Japan
Mr. Jay Smith, Visiting Lecturer, Kyocera Venture Business Program, Kagoshima University

It’s difficult enough for an entrepreneur to find business success in Japan: the red tape, the tight fund raising, the over-complex supply chain, the stigma associated with entrepreneurs. It’s as if the system conspires against the newcomer, stifling whatever creativity and innovation a business founder can bring to bear. But imagine the added difficulties the foreigner faces and you can understand why there are so few Americans who’ve successfully built businesses in Japan. It’s simply too much of a challenge. But for people like Mr. Jay Smith, those challenges can be turned into a source of strength. The Asia-Pacific Student Entrepreneurship Society (ASES) at Stanford recently had Mr. Smith speak on the topic of US-Japan entrepreneurship. Mr. Smith regaled the audience with his success story and gave some helpful advice for anyone interested in working within the Japanese marketplace. This month’s Bridge Builder features key highlights from his presentation.

Mr. Smith gave the audience some historical perspective by explaining that when he first went to Japan in 1989 as part of his studies at the Harvard Business School, Japan was still very much “a mecca for business”, the envy of economies worldwide. He was so impressed with the country that he decided to work there, first as a consultant for a Booz Allen- spinoff consulting firm. Mr. Smith said his most interesting consulting experience was the sale of cup noodles via catalog in Russia. What impressed him about the project was that he actually found someone at the Japanese noodle company willing to work on the concept. The point of learning being that even in conservative Japanese companies, you can find youthful mid-level managers, “young turks” he called them, willing to become a champion for an idea they believe in.

After his consulting employment, Mr. Smith decided to go the entrepreneurial route by starting IAC, initially an import/export company focused on selling wines in Japan, art, and software. Eventually the company grew into IT services and as the Internet started to take hold in Japan, IAC turned to providing a BBS service complete with free e-mail. IAC became known, particularly in the foreign community, as a local resource for all things Internet: registration, advertising, and dialup. As the company expanded it required capital and Mr. Smith spearheaded the effort to successfully raise $4 million from a foreign hedge-fund active in Japan. The increase in capital allowed IAC to take on website creation, access, and training for the Internet and even delve deeper into online content. The company bought and ran the Tokyo Journal magazine from 1996-1997. IAC eventually grew to 60 employees and several million dollars in sales. Competition from local ISPS eventually caused a cash crunch, forcing the founders to sell the company in 1998. However, the company’s free email service (Jmail www.jmail.co.jp  ) remains today as a testament to the company’s achievements.

Throughout his presentation and the ensuing panel discussion, Mr. Smith continued to share his thoughts on doing business in Japan as a foreigner. One theme was that the incumbent Japanese bureaucracy simply didn’t understand the Internet and the plight of the entrepreneur back in the mid-1990’s. For example, to make IAC into an official corporation (which at the time meant having $100,000 in capital in the bank), Mr. Smith had to buy a defunct company and change the name to get around the cash requirement. To get an Internet address, IAC was told by JPNIC (the Japanese registry) that the rule was “one company one domain”. So IAC asked to register “japan.co.jp”. In response, JPNIC was puzzled as to why IAC would want such a name. Mr. Smith clearly recalled the question from JPNIC: “Why would you want such a domain name? Everyone will come to your website.” IAC ultimately got the domain, a fact that later became an embarrassment for JPNIC for not realizing the significance at the time. However, Mr. Smith was also quick to point out the advantages rather than hurdles faced by foreign entrepreneurs in Japan. He mentioned that when he started doing business in Japan at the age of 24 he found it much easier to obtain meetings with senior executives than his local counterparts of the same age. Mr. Smith and the panel attributed to this to the general attitude in Japan that foreign businessman are welcome and respected.

For more information on Stanford ASES, please visit them on the web at http://ases.stanford.edu/. Mr. Jay Smith can be reached at jay@bizsmith.com .

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