Why boring startups are actually the most interesting

Some of the most important startups are ones you never hear about.

Some industries are so complex and arcane that its hard for people on the outside to understand the problems that startups are solving or the long-term gain of solving them.

Freight forwarding is one of those industries.

Today we talk with Taka Sato of Shippio, a startup trying to change the way freight forwarding works in Japan. We talk about the challenges involved in trying to disrupt a low-tech, low-margin industry and also the potential rewards if Shippio succeeds.

We also cover some of the bight spots in Japanese entrepreneurship and talk about how one large company, in particular, has had to change their hiring practices to respond to the fact that so many of their best young employees are leaving to found startups.

It's a great discussion, and I think you will really enjoy it.

Show Notes

What is freight forwarding and why is it important? The biggest advantage of moving from corporate life to startups Why so many startups are coming out of Mitsui The challenges of building a platform in a low-margin industry How to decide between a service-based or SaaS-based business model Why there is finally enough pain in Japan to drive change How the logistics industry reacts to new technology Why the global logistics industry is a myth The paradox of Japanese logistics quality

Links from the Founder

Everything you ever wanted to know about Shippio Connect with Taka on LinkedIn

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.

You know, there is nothing more interesting than startups in boring industries. They are the ones that are taking on entrenched interests and business convention, and because so few outside of their industry really understand what they do and the problems that they solve, they tend to get a lot less funding and a lot less media attention than consumer-facing startups.

No, the startups in boring industrial B2B spaces are old school startups. They may not have the party atmosphere or the easy customer adoption, but the truth is that on average, they have the best chance of success.

Today, we sit down with Taka Sato, the co-founder of Shippio, a Japanese startup trying to change the nature of the freight forwarding business in Japan, and if you're not exactly sure what freight forwarding is, don't worry, Taka explains it simply and really well at the start of our conversation.

We also talk about the challenges of pivoting in a B2B space in Japan and how to balance the very real trade-offs between the scalability of offering B2B SaaS products with the stability of offering a service direct to the customer.

And if you're interested in the freight forwarding industry, and by the end of this interview, I think you will be, we also talk about how the global market is likely to play out. Freight forwarding might seem like a winner take all marketplace, but Taka explains that this is probably not going to happen.

Oh, the industry is going to be disrupted -- that's already happening, but it's not going to play out quite the way that Silicon Valley thinks it will.

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

[pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ] Interview Tim: So, I'm sitting here with Taka Sato of Shippio. Thanks for sitting down with me.

Taka: Thank you. Thank you for inviting me today.

Tim: No, it's been great. We've been trying to make this happen for a long time now.

Taka: Yeah, I know, I know.

Tim: I'm glad you're finally here. So, Shippio is a digital freight forwarder, but for the audience, let's explain what freight forwarding is, so let's say for example, I've got some construction equipment sitting in a factory in China, I've got to deliver it to a construction site in Japan, what happens and what does the freight forwarder do in the process?

Taka: Okay, so if you want to ship your equipments from China to Japan, firstly, you need to study the regulations of China and you need to arrange trucks, warehouse, and custom clearance from China, and then ocean freight, and then when you bring it to Japan, then you need to again study the Japanese regulation and you need to pass Japanese custom clearance and you need to arrange Japanese trucking, warehouse, and everything, but freight forwarder will arrange it on behalf of you everything and they arrange everything by using foreign email or faxes.

Tim: No, that makes sense, so a freight forwarder makes all the arrangements, prepares all the documents, but they don't actually own the warehouses or own the ships, or the plane.

Taka: Yeah, we have access to the actual asset holders' warehouse, like planes or vessels. We arrange it on behalf of those guys.

Tim: So, freight forwarding is a really well-established business, but tell me about Shippio's customers. Who's using Shippio?

Taka: Okay, right now, our customer is SMB, like small, mid-size companies, especially we have like middle class companies, they have 10 to 30 shipments per month.

Tim: Is it a particular type of company? For example, do you work with a lot of, I don't know, apparel companies?

Taka: Right now, a lot of furniture companies and generic goods, maybe.

Tim: Okay, and is it mainly outbound of Japan or imports to Japan?

Taka: Imports to Japan, mainly.

Tim: What is the size of a typical order in terms of container size?

Taka: Okay, we quote through container. Inside the container, we have 100s of furniture sometimes or if it's a bigger table, then two or three tables inside the container, so it sort of depends, yeah. Obviously, we don't ship a bottle of wine, or if we import the wine, we did once from Italy to Japan, it was like, 8000 bottles.

Tim: So, I mean, a typical order would be something that would be at least what, a quarter of a container or something like that?

Taka: Yeah.

Tim: Okay, that makes sense.

Taka: We also have the air freight, so we have ocean freight and also, we have the air freight. We cooperate with ANA, plane company.

Tim: Yeah, actually, I want to talk about that. Actually, I want to talk a lot about the business model, but before we dive into that, let's talk a bit about you.

Taka: Okay.

Tim: So, I mean, you started Shippio in 2016.

Taka: 2016, yes.

Tim: But before that, both you and your co-founder were at Mitsui, a very traditional Japanese trading house, and you joined Mitsui like, right out of university.

Taka: Yes.

Tim: So, when you joined, did you think you were going to be a lifetime salaryman?

Taka: That's a good question because my father and my grandfather, they ran their own business, so since I was a kid, I just see what they were doing. I don't think I will be the lifetime salaryman, but yeah, I did enough.

Tim: Just like a safe path?

Taka: Yeah, yeah.

Tim: Yeah?

Taka: Yeah, yeah, yeah. Actually, my father, he was happy I joined Mitusi because he knows all risks about entrepreneurs.

Tim: Oh, so what did he think when you announced you were quitting Mitsui to start your own company?

[pro_ad_display_adzone id="1652" info_text="Sponsored by" font_color="grey” ]

Taka: Yeah, after 10 years, he was also glad to hear that?

Tim: Yeah? That's great. You know what, I find that so many Japanese startup founders now have -- one of their parents is some kind of a role model, either they were a startup founder themselves or they had kind of a different career that it seems to be really common.

Taka: Yes, yes.

Tim: I mean, after six years, like one changed your mind, what made you say yeah, this is what I want to do?

Taka: So, after 10 years, actually, 10 years in Mitsui. I lived in China five years out of 10 years. I saw a lot of challenges in entrepreneurs in China. At that time, in Japan, it was like 2015 or something like that, at that time, there were not so many entrepreneurs and yeah, we had a chance to dive in that market. We built our own business model, so I asked my co-founder Takashi, and because we met in China, in Beijing, I asked him like, "Hey, let's go back to Japan and let's build our business model," and he said, "Yeah, why not?"

Tim: So, you both had that experience in logistics between China and Japan when you were at Mitsui?

Taka: Actually, not really. I'm really focusing more on investment side and Takashi was handling the logistics, especially energy.

Tim: All right, so why logistics? It's a tough low margin business. I mean, it's a hard business to be in.

Taka: Yeah, yeah, but I saw a lot of logistics in Mitsui and I knew they're so inefficient, like it's really annoying. Everything is done manually right now -- at that time, 2016, but I always explained that that logistics, especially the global logistics of freight forwarding, it has not changed in the last 50 years.

Tim: So, you still have to send a lot of faxes?

Taka: Yeah.

Tim: Yeah, actually, Mitsui though, Mitsui -- I mean, because they're a trading company, so they kind of have this kind of deal-making in their DNA, I think, but there's a lot of pretty successful startup founders that have come out of Mitsui in the recent years.

Taka: Yes, liek Terada-San from SanSan.

Tim: Inada-san?

Taka: Inada from AtamaPlus. Actually, he's my douki.

Tim: Oh, yeah.

Taka: And we stayed at the same dorm in Mitsui.

Tim: So, is Mitsui, are they supportive? Is there like a Mitsui alumni group?

Taka: We have Mitsui Alumni Association, kind of, but it's just like situations.

Tim: Just casual over drinks kind of thing?

Taka: Yeah.

Tim: All right.

Taka: Actually, venture capitalists, we also have ex-Mitsui guys. For example, Kuraboashi-san from DNX, Ito Kengo from DforB.