Foreign Startup Founders Have Secret Advantages in Japan

The single most common question I get asked are variations of "How do you start a business as a foreigner in Japan?" or "What's it like to start a startup as a foreigner in Japan?"

It's always been a hard question to answer simply because it is such a big one, that it can be hard to know where to start. Well, today we are going to start to answer that question, and over the next month or two, we are really going to dig into it.

Jordan Fisher is CEO and co-founder of Zehitomo, which is an online marketplace for off-line services.

This is not an easy space. There are many such sites in Japan, but Jordan explains why the fact that he and his co-founder are both foreigners has given them a competitive advantage not just in the marketplace, but in recruiting and marketing as well.

Unsurprisingly, there are a few things that are much harder for foreign startup founders than for Japanese founders, and we talk about those as well.

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

Show Notes

Why charging commission is a losing strategy One surprisingly popular kind of offline services Why its hard to start a startup as a foreigner in Japan What it's like raising money as a foreigner in Japan Ho to use your gaijin-ness to your business advantage Why some Japanese have a hard time in foreign startups How to differentiate your startup in Japan Why the fear of failure is still holding Japan back

Links from the Founder

Everything you ever wanted to know about Zehitomo Connect with Jordan on LinkedIn Friend him on Facebook Zehitomo is Hiring

Main recruiting page Wantedly page

Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

How do you start a business as a foreigner in Japan? What’s it like to grow a business as a foreigner in Japan?

These are the two questions I get asked the most, not only by our non-Japanese listeners who make up 80% of the Disrupting Japan’s audience but also by our Japanese fans as well. And you know, I’ve always found it hard to answer that question because it’s just such a big question that it’s hard to get your head around it. It’s hard to know how to even start to answer it.

Well, today, we’ll be talking a lot about exactly that. We’ll be sitting down with Jordan Fisher, the CEO and cofounder of Zehitomo.

Now, Zehitomo is an online marketplace for off-line services and we will dive deeper into their business model during the show, but really, we talk a lot about how Westerners or at least Jordan, this one particular Westerner approaches of doing business in Japan. Both as an individual and a company, there are certain things that you can get away with and some things that you just can’t. There are certain advantages you’ll have over your Japanese competition and there’s certain disadvantages that you might not be able to overcome.

But you know, Jordan tells that story much better than I can, so let’s get right to the interview.

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Tim: So, I’m sitting here with Jordan Fisher, the founder and CEO of Zehitomo which is a marketplace for matching professionals with those who want to hire them, so thanks for sitting down with me.

Jordan: Yeah, great to be here, Tim, thank you.

Tim: So, I mean, I gave a really brief description of what Zehitomo is, so maybe you can explain it a little better than I did.

Jordan: Sure, sure. In a nutshell, it’s what you said, we’re a marketplace for local services. I think a lot of people don’t really immediately click when you say ‘local services,’ what that actually means, and I generally summarize it by saying that it’s the jobs that happens off-line, not the ones that happen online, so think about your photographer, your plumber, your personal trainer, all these scenarios where you’re connecting directly with a vendor, usually a small business or a freelancer off-line, and as opposed to maybe a programming job or a design task, or a legal paperwork that could be done through some sort of online crowd works or something like that.

Tim: So, are most of the services offered on Zehitomo being offered by professionals or is it more like TaskRabbit where there are people who are just coming in and helping you assemble, like, yeah, furniture?

Jordan: Yeah, yeah, great question. So, that is one way that we differentiate ourselves, so we are a platform for professionals. The average job size is closer to around $500 or ５万円, and when you look at that, we look at the LTV of the job, so a lesson might be a recurring service and kind of looking at the average, getting hired several times, etc., but these are professionals that do this job for their living. Some of them, it is fukugyo or there’s kind of second work when it comes to some of the lesson related categories, but the vast majority are actually small businesses, and then followed by many freelancers in the case of photographers or personal trainers, and stuff like that.

Tim: So, I mean, that simplifies thing because you can expect a bit of professionalism from that side of your marketplace.

Jordan: Exactly, and I think people talk about the gig economy and how AI is going to automate everything, but I think when it comes the local services and really, the high-end – not the higher-end jobs but the jobs that you really need a professional or a specialist to take care of, those are the things that I don’t see, or I don’t think anybody sees us automating away anytime in the near future.

Tim: Well, yeah, there’s just something that can’t be done online. If you need someone to photograph your wedding or paint your apartment.

Jordan: Exactly, yeah, and I think one of the really frustrating things about local services is that it’s just a really, really inefficient and nontransparent market, so if you wanted to hire somebody to take photographs of your wedding or to hire somebody to renovate your kitchen, you have no idea how much that’s going to cost or who to actually ask, right? And generally, what happens in Japan is you go through a series of different agencies that all take cuts in between, and you’ll finally arrive at some sort of packaged solution which may or may not have been what you’re originally looking for, right? Wedding venues will usually charge you around $2,000 for a wedding photographer where they’ll get paid around $300 in the end, right? Like, 85% cut, it’s ridiculous.

Agencies – my personal experience that I’ve given before is when I bought a place in Japan and ordered – this was a few years ago and our place is near the train tracks, and so we wanted to soundproof the windows just to make it extra sound tight for myself, I just had a newborn daughter, and we spent – this was a business major real estate developer in Japan, they have their own kind of concierge desk and everything to kind of suit the place up as you need, and it took us a month to get a quote for soundproofing the windows, right? And we’re based in Tokyo, they’re based in Tokyo, their people come down from Osaka to measure the place, right? You’re going through the layers and layers. It was just so inefficient, and yeah, it took a month, and the price that came back was close to $40,000.

Tim: Well, you know, Japan is famous for these kind of inefficiencies. Hasn’t the Internet done a lot to change that? I mean, aren’t there specialty, like wedding photography sites and specialty kitchen renovation sites that are supposed to have cut through that nonsense?

Jordan: You would’ve thought so. So, I think in Japan, everybody loves what’s called tesuryou, right? Margin, and that’s why they’re recruiting businesses is still very much a margin business here, anybody that can continue to take that will generally try to continue to take that. The bottom line is, this doesn’t actually add any value to either side, right? If the problem you’re trying to solve is how do I make a payment? And then you take a margin off the top of that, that makes sense, right? You’re facilitating a need, but in the case of local services, you don’t actually add any value to the requester or to the professional by taking a cut in between.

Tim: So, all of these niche vertical marketplaces online, is it a case that these marketplaces are also playing the same game and trying to get a high margin, a high commission, or just people aren’t taking to those sites?

Jordan: I think there’s no good solution out there right now, and what you have, if you look at the evolution of local services, you could say, in Japan, it’s called Town Page which is very similar to the Yellow Pages overseas, and then you would have maybe the Town Page online, right? And that’s where we are right now, and there’s some sites that will do maybe a bit more matching for C2C jobs or have a list of trainers, but at the end of the day, you still have a list, you’re still going through the list, you’re filtering the list, you are calling off the list for number one, you’re trying to become an expert in whatever it is that you need. In my case, I had to become an expert in trying to understand how soundproofing glass. So, it got more convenient in that I don’t have to look through a book, I can look online, but one of the real challenges is that you have very custom requirements, but when it comes to ordering a service, you need a custom set of requirements and you don’t know what those are unless you’re actually a subject matter expert, and so when I hire a photographer for an event, I might not know that I would need to tell them if it’s indoor or outdoor because the lighting will change based on that.