The dangerous defect in most SaaS startups

You never hear the names of some of the world's best SaaS startups.

Why waste money building awareness among consumers when you can quickly and steadily grow your B2B business across Japan then across Asia?

Today Yu Taniguchi founder of TableCheck returns to the show and answers that question. TableCheck is rapidly expanding their table-management system business by throwing out a lot of the traditional SaaS playbook, and Yu lays out a model for sustainable, scalable SaaS startups. It's a great conversation, and I think you'll enjoy it.

Show Notes

How the TMS market has changed in the last five years Why the first mover advantage is not really an advantage Maintaining differentiation in an increasingly competitive market The huge flaw in the current generation of SaaS "best practices" Demand-side vs supply-side startups Why you should only take the VC investment that you actually (desperately) need Why Japanese (and otter) startups need to be thinking about global markets from day 1 Concrete (and sad) examples of what's wrong with Japan's education system

Links from the Founder

Everything you ever wanted to know about TableCheck

TableCheck Twitter @tablecheck LinkedIn Page TableCheck on Facebook

Follow Yu on Instagram Friend him on Facebook Connect on LinkedIn

Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Some of the most important and successful B2B startups fly under the radar. And that makes sense when you think about it. When success depends on dominating a specific business niche, who really cares if most consumers have never heard of you? In fact, as we'll see, that can actually put your whole startup at risk. Today, Yu Taniguchi, old friend and founder of TableCheck joins us again on Disrupting Japan. Now, TableCheck makes a table management solution for restaurants, and Yu and the team have taken a very different approach than most of the competition in this space. The last time Yu came on the show, we talked about his business model and how to expand globally with very little capital. There's a link to the episode in the show notes, and I strongly recommend you listen to it because it was really a good one and we'll be covering a hundred percent new ground today. Today, as we catch up with Yu, we find his strategy has worked with some refinements, and TableCheck is expanding rapidly across APAC. This is a great real world case study of how Japanese startups can go global. Yu and I also talk about how the current generation of SaaS business models is broken, how to protect your startup from market downturns, and some really good advice about the two kinds of fundraising plans you need to have to survive. But you know, Yu tells that story much better than I can, so let's get right to the interview.

Interview Tim: We're sitting here with Yu Taniguchi of TableCheck, who is making integrated reservations, CRM billing and more for restaurants. Yu, it is so good to have you back again. Thanks for sitting down with us. Yu: Thank you so much for inviting me. I'm very honored and excited to be here. Tim: It's been four and a half years since you were last on the show and so much has changed since then. You were growing fast then, you've continued to, so tell me about your customers today. Who's using TableCheck and how many are there now? Yu: We have roughly 7,000 restaurants using our solution both in Japan and overseas. Back then when we did the interview, I think it was around 2,000 restaurants. Roughly we've more than tripled since then and taking in consideration that out of the four years, two years have been during the COVID. Tim: Let's talk about what's changed in the market. Four and a half years ago, you were saying that your biggest competition was paper and pencil. Most of your customers were using these manual processes, but over the last four years we've seen this huge SaaS boom in every market. How was your market and your competition changed in that time? Yu: It depends market-by-market, but the Japanese market back then most of the restaurants were managing their reservation and customer data by paper and pencil. Nowadays, we have two, three competitors in the Japanese market. Globally we have, let's say, 10 major competitors. Now more and more restaurants are starting to use table management system, TMS. So now the market is becoming more mature and the restaurants are starting to use TMS as a standard restaurant operation. The competition is becoming more fierce, but at the same time rather than trying to educate the restaurants to switch from paper and pencil to TMS, convincing that our solution is better than whatever TMS they're currently using is, I would say, easier. Tim: That is so true. And I think so many startup founders misunderstand the first mover advantage. On one hand, it's great to be first to market, but on the other hand, you've got to convince your customers that they need you. Yu: Exactly. It's like going out to a country where nobody's wearing shoes, but once everybody starts wearing shoes, it's much easier to sell better shoes. Tim: You can compare yourself. And the biggest hurdle of like, do I need a table management system, that's already taken care of. There are some global companies like OpenTable, but is your competition the same in every market? Are there global players or is this really a country-by-country market? Yu: Good question. I think it has both aspects. Each market has strong local player. At the same time, there are some players which are going global, including ourselves, TableCheck. This is a good question, actually. Because some local players they tend to sell to smaller margins and global players like ourselves target, for instance, global hotel brands or larger restaurants. Tim: Okay. There's a lot more competition today. You're no longer having to convince people that they should not be using paper and pencil. What's your main differentiation? What does TableCheck do differently than most of the competition in the market? Yu: First of all, we support 18 different languages, which is by far the largest number in the market. And also, we invest a lot in localization. Localization, including functions and features. Not only that, but we integrate with major local players, such as POS vendors or payment vendors, because each country has strong players and dominant players in many areas. Some of our competitors, they enter different markets, but they only support globally usable POS vendor or payment vendors. Tim: Okay, that makes sense. Another thing I've noticed, or at least it appears to me from the outside, that TableCheck, you seem to work hard to avoid lock-in, whereas a lot of SaaS companies, the standard strategy is you want to own the marketplace, you want to own the relationships. And it seems like TableCheck, you guys have gone out of your way to ensure that you can take reservations from any platform. You can use a CRM and reach your customers through channels outside of our ecosystem. Am I reading that right? Is that unique to TableCheck or is this sector just different? Yu: Actually, we don't want to lock margins with contracts but with the value we provide to the restaurants. We want to be a sticky product, of course. We want lower churn rate, obviously, but we don't force the restaurants to keep using us. Some of the TMS are provided by OTAs, we call, online travel agents, restaurant websites like Yelp, in Japan that would be GuruNavi, in Singapore that would be Chope. Those players, they try to force restaurants to keep using their TMS with contracts, which state that the customer data belong to OTAs. And also, they don't allow the customer data to be exported when the restaurant decides to stop using their TMS and switch to another one. In our case, we allow data export at any time. We don't have any strong contractual limitations for the restaurants. Tim: Yeah. It seems like you guys are having a much more traditional software approach. You're selling tools rather than a ecosystem. Yu: That's a good point. Our current state is that we are just a tool for the restaurants. And also, like from the diner's perspective, when they try to make a reservation, visit the restaurant website, they happen to land on TableCheck reservation page. We are just a tool but our business strategy is that we want to evolve ourselves to provide more values in the ecosystem and connect the diners and the restaurants. We are going to build more functions and provide more values to the diners in the future phases. Tim: Have you found that your customers are getting more educated and more skeptical about some of this lock-in and these ecosystem claims? Yu: Yeah, exactly. I think that's why we are rapidly expanding our client base. We've been trying to deliver the message to the restaurants that using OTAs' TMS is very dangerous. They'll have to continue to use it. The longer they use it, the more customer data is stored in those OTAs' TMS. And finally, when they decide to stop using that, they have all these customer data as hostage. Tim: I think this is a real problem across almost the entire SaaS model. A lot of customers end up getting burned because the entry price seems so low. Yu: Yeah. That's exactly why we are expanding our market share. We let the merchants know what the risks are. Let's say restaurants want to accept online reservations. Okay, here's Chope, here's Yelp, here's GuruNavi. They're not even aware that the customer data belong to the OTAs or they're signing a contract where they cannot export their customer data. Tim: Well, yeah, because they always bury it on page 35 of this 75 paid license agreement, right? Yu: Exactly. Tim: Does TableCheck bill on a transaction basis or is it a fixed monthly fee?