Why The Sharing Economy is Different in Japan – Spacee

Spacee has staked out an interesting position in the sharing economy. Spacee enables companies and individuals to rent out unused meeting room space to people who need to hold a meeting. It's an interesting take on applying a sharing economy model to business.

I’m generally very skeptical of startups who define themselves as “Uber for X” or “Airbnb for Y”, particularly in the B2B space, but Spaceee has already been in business for several years in Japan, and they are seeing strong traction and increasing revenues. They might really be onto something.

Taku has some fascinating insights on why Japan, and Tokyo in particular, might be far more fertile ground for sharing economy startups than almost any other place in the world.

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

Show Notes for Startups

Why the basic business case makes sense How large the meeting space market can grow The challenge of expanding outside of Tokyo Why Spacee turned down venture financing to bootstrap for three years Whats wrong with the current fundraising environment in Japan Which other companies are coming into the meeting room rental space Why Japan is uniquely suited for the sharing economy

Links from the Founder

Learn about Spacee Follow them on twitter @spaceejp Friend them on Facebook An interview with Spacee CEO on fundraising

[shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 59.

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

You know, the world is full of start-ups that define themselves as “the Uber of X” or the “Airbnb for Y.” Frankly, most of those business models don’t really make sense when you dig into them. Spacee, however, might just be onto something. Spacee rents out unused space around Tokyo to salesman, co-workers, or people who just need a quiet place to conduct a little business. As Takuya Umeda explains in the interview, it’s not just meeting rooms that are being rented out.

The sharing economy is relatively new in Japan and Takuya and I talk not only about some of the problems its facing here, but why, in the long-run, Japan might be better suited for sharing economy companies than anywhere else in the world. He also explains why Spacee decided to delay taking outside investment for almost three years while they built their business and how that turned into an advantage later on.

But you know, he tells the story much better than I can, so let’s hear from our sponsor and then get right to the interview.

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[Interview]

Tim: So I’m sitting here with Takuya Umeda, co-founder of Spacee. Thanks for sitting down with me.

Taku: Thank you, Tim.

Tim: Spacee is kind of like Airbnb for meeting spaces, but that’s a really overly broad description, so why don’t you tell us a bit of how it works.

Taku: Spacee is really like the Airbnb of business. In Japan, wherever you have a meeting, if you have an outside meeting, the only place you go is like Starbucks or a café.

Tim: Right. Everyone meets in coffee shops.

Taku: If there is a professional conference room, it costs really expensive. It’s probably like 5,000 yen per room, per hour. And at that price you can’t really do much, like brainstorming and start up some business plan. Stuff like that you can’t really do. And a café is not really good at it too. So we found that there is a gap between an expensive conference room and a Starbucks, so we fit into the gap.

Tim: So something a little more formal and private than a coffee shop, but not quite as formal as a hotel meeting room or a service office. So tell me about your customers. Who is it that’s renting out these spaces and why are they doing it?

Taku: You know, there is a lot of salespeople around and they stay locked in some business meeting, and I thought those people need some sort of private room. But we now run this firm for a little over three years and we found out that not only the sales guys are using it, but also like the regular firm, the marketing people, they don’t have enough meeting rooms in their office. So a bunch of business people are actually using our meeting space.

Tim: Interesting. So people are using it for internal meetings?

Taku: Yes.

Tim: Do people usually rent it out for one hour or do they rent out a space for an entire day?

Taku: Unusually they use like a little less than three hours.

Tim: Okay. So morning or an afternoon. And on the supply side, what kind of places are renting space?

Taku: We have three different types of rooms. One is like an office room, professional working space, and co-working space. There is a professional rental space and another one is a business office.

Tim: So just someone with a little extra space in their office?

Taku: Yes, or they have a meeting space but they have a new time. We have tutoring schools, language schools, karaoke places, and like an actual office.

Tim: Karaoke spaces?

Taku: Yes, karaoke spaces.

Tim: Well that’s an interesting one. Who is renting out karaoke spaces? I go on a lot of sales calls and I’ve done a lot of sales meetings at Starbucks, but I can’t imagine doing sales in a karaoke booth.

Taku: Right. Exactly, but sometimes they only need confidential, like they don’t want someone else to hear, or they need to quietly have a table so they can put the documents and stuff like that. So sometimes they don’t need a fancy conference room, they just need privacy. In that case, a karaoke room is fun to them.

Tim: So in that case, are these people who are, “I need to find a place right now,” and they’ll find something locally? Or is it more people planning meetings in advance?

Taku: It depends, but usually our customers book a room within 10 days.

Tim: So 10 days in advance?

Taku: Less than 10 days.

Tim: Oh, okay. And do some people book it like 15 minutes in advance?

Taku: Yes, sometimes they do that.

Tim: Okay, that makes sense for those karaoke booths or small places but what about the offices? Isn’t there some resistance in these office of having people walking through? Doesn’t it disrupt the flow of everyday business?

Taku: I think that happens too. So those people who care that they don’t [UNCLEAR 07:00], obviously. But think about it this way: a meeting room in an office used by employees to employees, employees to clients—those are the only two ways that normal office meeting space have use. But a known businessman and a known businessman has a meeting, you’re into the meeting room, but what’s the problem, right? If that is okay. And also, the room is like completely separated from your workspace. Those who use our website book the space. They don’t really come near your workspace. So the office way out, is like separated.

Tim: Okay, so the companies who are renting out their own office space, are they companies that tend to have a receptionist who can guide the people too? All right, that makes sense. And of the three types you mentioned, the conference rooms, the individual offices, and the more general spaces, which are the most common?

Taku: I forgot to tell the third one. We have another one, it’s like an Airbnb type. They rent out a small room and then post it on our website.

Tim: So it’s a small room on a home?

Taku: It’s like a one-room studio-type apartment. Like a SoHo mansion, really small Japanese studio type.

Tim: Like 200, 300 square foot or 20, 30 square meters?

Taku: Right.

Tim: And of those three types, which are the most common?

Taku: As amount, like professional rooms, maybe 50% of our rooms are from those of professionals. Then 10% are from those Airbnb type, but the most common user types are the everyday type rooms.

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Tim: So most of the bookings are to these dedicated rooms that are just used for this? Is that because they’re so much cheaper than the conference rooms.

Taku: I think there is two reasons. There is one that is location and the other is pricing. Because we basically use unused space, and unused space—we don’t know where it is. Sometimes it’s in a different location, sometimes it’s not. But the one Airbnb type, we put like 2 minutes from Shinjuku Station, or like one minute away from Shibuya Station, so it’s very close to the high-demand area.

Tim: And it’s something that can be booked 15 minutes in advance, as needed.

Taku: Like maybe 2 minutes or 1 minute is the least time that you could book.

Tim: Okay, now you’ve clearly already got a lot of traction already. You’ve got over 700 spaces and over 300,000 bookings so far. My question is, how big do you think this market is?

Taku: It really needs to change the game though, like let’s say, Uber. In the U.S., nobody raises their hand and catches a taxi anymore. You use a smart phone and tap the pin down, then call the taxi. Nobody has a booked room at the moment. Only a Spacee user does.

Tim: Well that’s the interesting thing because with something like Uber, for example, they’re displacing the taxi industry. There is a behavior that the customers already have and they’re just substituting their product with another product. With Airbnb, people understand hotel rooms or bed and breakfasts, and they’re just replacing their service with another. But Spacee seems to be kind of different in that way, in that there’s not an existing market for people renting this kind of space.

Taku: They already had a meeting in their business, in office hours, they have a bunch of meetings everywhere in there. They have meeting rooms in the office, fixed-cost meeting rooms, and if there is a valuable cost meeting room in an office,