Can Japan’s “Anti-Uber” disrupt global airport transport?

Once the disruptors become the incumbents they are ripe for disruption.

Uber, Grab and rest of the ride-sharing startups have clearly disrupted the global taxi industry, but that doesn't mean they got it right. That doesn't mean their market position, or even their business model, is secure.

Today we sit down with Sota Kimura, founder of SmartRyde, a Japanese startup focused on getting airport ground transfers right.

We talk about building a business based on quality and brand in a traditionally price-sensitive, low-margin market, what Japanese universities are doing to support startups, and how getting ripped off at the airport inspired Sota to start a startup.

It's a great conversation, and I think you'll enjoy it.

Show Notes

Why airport transfers are ripe for disruption & what Uber is missing Pivoting from B2C to B2B during the pandemic How getting ripped off at the airport inspired a startup Japan's University startup support outside the majors Entrepreneurship share-houses How to compete on quality in a low-margin business Can ridesharing work in Japan Why Hiroshima was an ideal launch market How to create more university startups in Japan

Links from the Founder

Everything you ever wanted to know about SmartRyde

The SmartRyde video Coverage of recent fundraising

Follow Sota on Twitter @kimura5008 Friend him on Facebook Connect on LinkedIn The Entrepreneurial Sharehouse Fespa Kyoto

Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we're going to talk about how to disrupt a fragmented market. I mean, that's a startup founder's dream, right? You find a market with low quality, confusing products, and no global coverage, and then disrupt it with an innovative business model and establish a trusted global brand. That's the dream. But as you'll see today, sometimes markets are fragmented for a reason. Today we sit down with Sota Kimura, founder of SmartRyde, who's trying to solve the problem of airport transfers and of foreign travelers being ripped off at local airports, and Sota's up against some strong competition, not only from business challengers but from human nature itself. Let's face it, ripping off travelers has been a popular custom for a long time. Herodotus was complaining about it 2,500 years ago. We talk about why Uber is not a threat, the new entrepreneurship share houses popping up in Japan, and how Japanese universities can better support founders. But most of all, we look into the question of whether quality can win if quality can act as a differentiator in a market traditionally focused on price competition. But you know, Sota tells that story much better than I can so let's get right to the interview.

Interview Tim: So I'm sitting here with Sota Kimura, who is the founder of SmartRyde, who is changing the nature of airport transfer and ground transport service. So thanks for sitting down with us. I really appreciate it. Sota: Yeah, I appreciate too. Tim: So that's a really brief explanation of your company. But can you tell us a bit more about what SmartRyde does? Sota: We are operating airport transfer service around the world, mainly business-to-business sectors. For example, we integrated with online travel agency OTA, such as booking.com, and Expedia. And also, we are connected directly local transportation company like taxi and limousine and buses. Tim: So fundamentally, this is the airport transfer when you get off a plane and you need to get into a cab. Sota: Yes. So we focus on the airport transfer. So from airport to hotel, or hotel to airport. Tim: I agree, like, airport transfers, the ground transport, it's a messy process right now. But is your main competition rideshare companies like Uber and Grab? Sota: Similar business model. Transfers are a very fragment of business. And also, our company, all professional drivers, and also various model is business-to-business. So very different from ride-sharing companies. Tim: So what's the biggest difference there? Because I think a lot of people, when they hear this business model, they might think, yeah, getting off an airplane in a new city is just a pain. You don't know who to trust, you don't know the local vendors. It's all a bunch of, I don't know, SEO competition. And a lot of people say, oh, well, like Uber's a strong brand or grabs a strong brand. So what's your real value proposition to the customer? Sota: Yeah. When someone book through the travel, so airline sched and accommodation and activity, so something like that, at that time, customer can book airport transfer service. Tim: Okay. So they can just get everything done beforehand, have everything arranged. Sota: Correct. Tim: All right. And tell me about your customers. You mentioned it was mainly b2b, but who's using SmartRyde? Sota: Now it's mostly family, small groups, three or four, five people. First is leisure. So leisure travel is 90% user is leisure travel. And also, our service is used in resort areas like Bari and Phuket. Yeah. Tim: All right. COVID must have really changed everything, it must have been a very difficult two years. Sota: Yes. Very, very serious situation for us and our industry. Tim: So during the time, have you tried to pivot to a new direction, or has your strategy been more focused on the core value and get through this rough time? Sota: So before COVID-19 situation, so we focused on APAC areas, so Southeast Asia and Japan. But APAC area is biggest damage for travel industry. So in 2020 we decrease more than 90% revenue. Tim: Yeah. APAC countries, especially seem to have, on average, much stricter travel restrictions than European or American countries. Sota: Yes, yes, that's great. So after that, we move the focus areas from APAC to Caribbean and Latin America from 2021. Tim: Okay. I want to dive really deep into the business model, and I think there's some interesting questions I want to get into there. But before that, I want to back up a little bit and talk about you. So you started SmartRyde in 2017 after being inspired in a very interesting way. Sota: Yes, yes. So when I was travel abroad, I often travel with transportation from airport to hotel. At that time, I realized this point is a very big pain for everyone. So I established SmartRyde on March 2017 when I was college student, Tim: Before you're talking about you were ripped off by a cab driver from was a Bangkok airport? Sota: That's correct. Bangkok and Taiwan. Tim: We've all been there. I've been ripped off by taxi drivers at Bangkok airport myself a couple of times. Sota: So almost people, yes. There is one time for less travel and land transportation abroad. Tim: Yeah. I definitely think there's a need, no doubt about that. And you are still a university student when you were starting this. So at Ritsumeikan University, did you get much support in starting your startup from the school? Sota: No. So sort of very unique story, I studied Business Administration in the Ritsumeikan University. And after, I lived in entrepreneurs sharehouse for a year in total. Tim: An entrepreneurship sharehouse. Sota: Yeah, correct. Tim: Oh, cool. What is that? How did that work? Sota: Almost people is entrepreneur or freelance, so maybe 25 people stay in sharehouse together. Tim: So how many people from the sharehouse, from your cohort, from your team went on to start companies? Sota: Each other is different business established in the sharehouse. Every night, pitch each other in same room, so very good experience for me. Tim: Excellent. I'll have to look into that. That sounds like a super interesting project. Sota: Yes. I recommend all students. Tim: It's really interesting. So the difference in experience for college founders between the really big universities and the smaller universities is so different. So when I talk to founders from Todai or Keio, they're saying, oh, yeah, we had these VCs came in, and we had these mentors come in, and they had this great support from the universities. When I talked to a lot of student founders from other schools, it was like, well, I went onto the internet and figured this out and talked to customers. Sota: Yes. I really recommend you, all students stay in entrepreneurs sharehouse. Tim: That sounds interesting. We'll put some links to that on the website. I want to know more about that. But that's going to be a topic for a different podcast. Let's talk a little more about the business model here. So, it's interesting that I think everyone can look at this and agree like okay, airport transfers, this is user unfriendly, highly fragmented, lots of low quality companies in the business, lot of scammers. But once you've identified that market, how do you compete? How do you make SmartRyde different from the hundreds of other companies that claim to be trustworthy and reliable? Sota: Yes. I think it is the most important part for our company to build. Service control and service quality is very important for us, so we manage directory, local suppliers. And then we built our operation each airport. For example, in Bangkok before COVID situation, we have more than 2000 trip commerce. In Bangkok, arrival hall is many passengers, so sometime traveler cannot find the driver. So we put our assistant in airports so passenger can find assistant, after that connect to our driver. Tim: That's an important commitment to quality. And I can see how that would be a much better experience for the user. But building the business, there's two sides to it, you have to build the quality product, which sounds like you've done, and then you have to tell the world that you've built this high quality product. And you have to convince your customers that no, no, no, you're different. So how have you reached your customers?