How This Startup Makes Money from Children’s Old Notebooks – Arcterus

Education is one of the hardest sectors to disrupt -- or even improve upon -- and most EdTech startups struggle.

Today we sit down with Go Arai and we talk about how his company, Arcterus, is taking a bottom-up approach to improving education. Arcterus has developed a service called Clear, which profits by helping students help each other study.

Clear is basically a study-notebook sharing platform, and now Go and his team are building it out into something much more than that.

We talk about Arcterus’ recent Asian expansion and why some seemingly small cultural differences made their product unviable in certain countries. We also explore why it's sometimes hard for Japanese startups to pivot and the effects of the company and the team when a radical change in direction is needed.

It’s a fascinating discussion, and I think you’ll enjoy it.

Show Notes for Startups

Why notebook sharing works in Japan but not in America How lessons from a corporate turnaround were applied to a startup How a terrible skiing accident ended up launching a startup Why it took the team five pivots to find product-market fit What makes pivoting hard in Japan How to use Twitter to drive business Why other Asian countries are ahead of Japan in EdTech What today's textbooks will evolve into

Links from the Founder

Arcterus Homepage Everything you ever wanted to know about Clear Friend Go on Facebook

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Transcript from Japan

Disrupting Japan, episode 87.

Welcome to Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me.

You know, for a few very good reasons and many very bad reasons, education is particularly hard to disrupt. I think a big part of this is that the goal of public education is far more than imparting a set of skills onto the students. Although my libertarian friends might disagree, public schooling provides not only the hard skills that students need to function in the society, but universal education provides us with a shared experience and shared frame of reference that helps us define society. It’s something that binds us together.

Now, different countries have different approaches to creating this shared experience. In Japan, the Ministry of Education defines precisely what every child in the countries learning, in any given week. In America, there are no national requirements at all, and tremendous latitude is given to the states and to the individual school boards. One approach is not necessarily better than the other but startups that try to disrupt the way we impart skills to our children at the expense of that shared experience, are likely to fail. Or worse, succeed and do long term harm to our society.

Well today, we’re going to sit down and talk with Go Arai, CEO of Arcterus, a EdTech startup that is trying to help students learn more effectively but also contribute, just a little bit, to that shared experience.

Arcterus is a platform that allows students that share their study notebooks with other students and then profit from that sharing. We also talk about Arcterus’ recent Asian expansion. You know, we in the west often make the mistake of thinking about "Asian" culture. But there really is no such thing as Asian culture. Asian countries have an incredible diversity of cultures and Arcterus ran straight into that as they discovered that very specific cultural traits determine whether they will succeed or fail in a specific country.

But you know Go tells that story better much I can. So, let’s hear from our sponsor and then get right into the interview.

[pro_ad_display_adzone id="1404" info_text="Sponsored by" font_color="grey" ]

(Interview)

Tim: So we’re sitting here with Go Arai of Arcterus it’s a social learning app based on notebook sharing, but you can probably explain it much better than I can, so why don’t you tell us a bit about Arcterus and about your products?

Go: The main product that we have is called Clear. It’s a platform for the students to share their study notebooks like Youtube users can publish their notebook, others users can see it and use them as textbook to solve their study problems and if you are very popular user, you can sell your notebook in the platform. Globally, we call it “Youtube of Study Notebooks”. In Japan, we call it a “Cookpad of Study Notebooks”

Tim: Cookpad being a really popular sharing recipe site here in Japan.

Go: Yes, yes. It’s very popular in Japan.

Tim: Tell me about your customers. Who are your main users? The high school, or junior highschool, college or crams schools?

Go: The users are mainly middle school students and highschool students. We also have university students and also primary school students. They use it mainly for preparing for school exams and entrance exams. So, when they difficulties solving the mathematic problems, they look into the notebooks in Clear.

Tim: I can see why in Japan it’s easier to market a product like that because the curriculum is very standardized throughout Japan. The National Government has pretty much established the curriculum you know, every tenth grader in Japan is learning the same part in history this week as every other tenth grader?

Go: Yes, exactly. So that is something, that’s something that might be a little different from the case in the States as you say, the learning and the studying of standardized across the country and that makes it easier and more sense for the users to publish their notebook.

Tim: About how many active users do you have now?

Go: Accumulated users is almost one point five million (1.5M) users globally.

Tim: Before we dig into the company in detail and into your marketing strategies, I want to talk a bit about you.

Go: Okay, yeah.

Tim: So, you seem kind of an unlikely entrepreneur. Your background was management consulting and you worked in the management of hospitality industry for a number of years. So, why start an Ed Tech company?

Go: Yes, so right before starting out there I was CEO of turnaround business between Hoshino Resort and a private equity fund and that was about almost ten years ago. I had this business plan regarding education and I proposed this to Mr. Hoshino, to the joint venture with me and Mr. Hoshino agreed to do this business with me. But after I did this feasability study, I find that this business won't make money. When I told that to Mr. Hoshino, he told me that, he said that the thing I am lacking here is management experience and he offered this position to manage a new business that they are studying in Hoshino Resort and that was the ski resort turn around business

Tim: You went into the path of your career strictly to learn how to manage people or learn how to manage companies?

Go: Learn how to manage company, learn how to do marketing and make money, and yeah manage the team.

Tim: It’s always interesting to when I talk to people who used to work at Oracle, Mitsubishi who are now running companies about how little they have learned applies to start-ups, but coming from a mid-sized company and one where you are expected to turn things around. Was you experience the same? Did you find that what you have learned there apply to start-ups or did you have to learn everything all over again once you started your company?

Go: Similar I think between turnaround business and start-up business is that both are in chaotic situation of strong leadership and strong will of their management is the key. What I learn in that situation from Mr. Hoshino can be applied to a lot to what I’m doing right now. So, yeah start-up is a, I would call it a series of pivots. Every single time of pivoting, you need to lead your team members with strong will with strong will.

Tim: So was the Ed Tech start-up you had in your mind this whole time you were doing the turnaround business?

Go: The basic concept is very similar. We call it ‘adaptive learning’. A lot of people use this term for adapting the contents and the way they learn, to study. Our product is based on that concept and I always had that concept in my mind even before joining management consulting.

Tim: Okay, so what was the final trigger that made you decide to take the plunge and to start the company?

Go: There were two triggers: one is that my very good friend from business school decided to join me he had a very good experience in start-ups, he decided to join me. Another trigger is very interesting so when I was working in a ski resort, and I was skiing outside of the course with my team members, I had an incident with a tree. I bumped into a tree and I broke my three of m rib bones and two of them stick into my lung and the lungs was exploded

Tim: Wow. That’s pretty serious.

Go: Yeah, that was pretty serious actually. So I couldn’t move and all my team members went down to the course. I was along in a ski resort outside of the course, injured. I thought I was going to die and luckily someone in my team found out that I was lost and I came back and called the rescue team and I luckily I got rescued and sent to a hospital. During that time waiting for my team, waiting for rescue if I can live through it and get back to Tokyo, I have to restart my career as entrepreneur and education.

Tim: I can see an experience like that and being in the hospital just makes you stop and think about a lot of things in your life but what exactly about that experience made you change? What was it?

Go: When I though I was going to die, I didn’t want to die before finishing what I was going to do, what I wanted to do and what I wanted do when I started my career as a management in the turnaround business, is provide a new education service to the world.

Tim: Now,