Inside Money Forward’s journey from a 6-person team to a $680m firm
“In my opinion, money is just a tool,” says Yosuke Tsuji, co-founder of Japanese fintech software-as-a-service (SaaS) company Money Forward. “Our goal [is] for everyone to enjoy their lives. [We hope] that people don’t have to think about money,” he adds.
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This is what motivated Tsuji to set up the company, where he serves as CEO, president, and representative director.
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Launched in 2012, Money Forward has built personal financial management (PFM) apps that allow people to track their money, plan their financial future, and optimize their spending, savings, and investments.
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Meanwhile, its cloud services for enterprises let companies streamline their back-office and accounting services, as well as their business-to-business-to-customer (B2B2C) cloud offerings.
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Yosuke Tsuji / Photo credit: Money Forward
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Money Forward is the first fintech and SaaS firm in Japan to go public, having listed on the Tokyo Stock Exchange in 2017. It recently had a US$680 million valuation.
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It is expanding its business to include areas such as artificial intelligence and cryptocurrency services. It has also opened new development centers in Kyoto and Ho Chi Minh City earlier this year.
nHumble startn
Money Forward’s headquarters is in a new building next to Tamachi Station, a train stop to the southwest of the Japanese capital. The space has glass walls and pastel-colored seats as well as an airy atmosphere with commanding views of Tokyo Bay.
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That’s a far cry from its early days, when the company’s six-person team was cramped into a tiny office near Tokyo’s Takadanobaba Station, an area renowned for its grunginess and student-centric boisterousness.
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“In 2012, nobody knew the word ‘fintech,’ so we didn’t think of our services as fintech. But the name of the building where we worked was ‘Finetech Building,’” Tsuji shares.
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It was a fortuitous meeting between Tsuji and fellow founder Toshio Taki in the US that laid the foundations for Money Forward’s creation.
nLucky striken
Back in 2011, Tsuji was on sabbatical from his job at Monex, one of the biggest online securities companies in Japan. He was taking up his master’s in business at the Wharton School of the University of Pennsylvania, while Taki was part of the MBA program at Stanford University.
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After they were introduced by a common friend, they met each other for the first time via Skype. Financial matters were at the heart of their wide-ranging discussion, which included questions like: “What are the major societal problems in Japan?” “What kind of services do we need to solve them?”
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Tsuji also wondered why people always had money-related issues. Part of the answer, he believes, is that people often don’t have the opportunity to learn about personal finance while they’re in school. “I think that’s a big problem,” he says.
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Money concerns are not limited to individuals, points out Tsuji. Based on his experience at Monex and Sony, where he worked in the accounts department, he knows that companies also find it hard to optimize their finances.
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After finishing his MBA, he returned to Monex, where he proposed creating new business opportunities around financial services.
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“However, this was just after the ‘Lehman shock,’ so it was a very difficult situation. No company could afford to invest in new services,” he recalls. Tsuji was referring to the 2008 collapse of financial giant Lehman Brothers, the biggest bankruptcy filing in US history.
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That’s why he left Monex to co-found Money Forward.
nWinning formulan
In the beginning, the startup lacked resources and was beset with challenges – not least of which was persuading people to share their financial data with the company. But perhaps, the most trying of these concerns was finding product-market fit.
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“The first service we released was called Money Book. It was like Facebook plus money or a social network combined with money services. One hypothesis of Money Book was that everyone wants to see the portfolio of rich people, including, for example, the stocks that successful investors buy,” Tsuji shares.
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The idea seemed simple enough. If you show your portfolio, you can see other people’s portfolio as well, and you can learn from each other’s investment strategies. But there was a hitch: while users were eager to peer into others’ portfolios, they weren’t keen to open up their own.
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“No one used that service. So six months after its release, we gave it up,” Tsuji says.
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However, the startup didn’t give up on Money Book entirely. Instead of an open platform that aggregated and shared personal finance information with others, Money Forward made a closed service where people could see only their own financial data.
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And while the company only had a web-based platform at first, it began offering smartphone-based services in December 2012. The result? Its first hit, which is now known as Money Forward Me.
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Today, Money Forward Me’s premium service has around 165,000 users – that’s 2.5 percent of the 7 million users for such services in Japan.
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Photo credit: Money Forward Facebook Page
nnPremium modeln
According to Tsuji, Money Forward’s journey from its first successful product to a US$680 million valuation has been anything but easy.
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However, the company’s user-first approach to service and product development has been key to its success.
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This was the case as far back as the first iteration of Money Forward Me, when users wrote in with worries about how their data was to be treated.
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At that time, the app was free, so users raised concerns about how secure their data was and whether their data would be sold to raise revenue.
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To allay such fears, Money Forward created its first premium service, giving users the option to pay 500 yen (US$4.51) for the app. “We took into account our users’ opinions and decided to offer premium services to show that we would not sell their data,” recounts Tsuji.
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The move not only reassured users but also helped the startup establish a successful subscription-based revenue model and boost customer retention – a problem that many app service providers face.
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“We found that once users connected financial accounts so that their financial data, such as bank account activities, could be viewed in our services, they tended to keep using our services,” observes Tsuji.
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In 2018, the company’s net sales for PFM services, which include Money Forward Me, went up to 1.77 billion yen (US$16 million) from 1.38 billion yen (US$12.4 million) in 2017. This was a 28 percent year-on-year growth and was 12 percent higher than its forecast.
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In the same period, net sales for premium charges of PFM services also rocketed by 52 percent to 811 million yen (US$7.3 million).
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For Money Forward, figuring out how to keep users was more important than merely adding to their number.
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As Tsuji explains, “Many startups simply want to increase users by, for example, paying for ads or doing publicity. But if the service has a hole, there’s no meaning to [such campaigns].”
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At present, the company’s main competitors in Japan’s PFM market is Zaim and messaging platform Line, which entered the space late last year.
nOutperforming the competitionn
To stay ahead of competitors, it has been necessary for Money Forward to expand its portfolio of services and products and to break into new verticals.
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The startup has a footprint in four main categories: Money Forward Business (cloud services for back-office operations), Money Forward Home (PFM offerings), Money Forward X (B2B2C fintech services), and Money Forward Finance (AI and cryptocurrency).
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“I think that we are the only player who provides not only fintech and cloud services but also financial services, including lending services,” Tsuji claims.
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As part of its growth strategy in FY 2019 through FY 2020, the company is looking to drive up investment across its cloud and financial service offerings for enterprises and seek opportunities for mergers and acquisitions.
nUser first, money secondnn
The Money Forward team / Photo credit: Money Forward Facebook Page
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Money Forward has 400 employees and plans to add another 200 this year. The team includes a rising number of non-Japanese.
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The company’s Kyoto office will lead operations for AI-powered lending services and a crypto exchange, whose license application is pending approval.
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Meanwhile, Money Forward’s product development center will be in Ho Chi Minh City. The company chose this location because of its close working relationship with engineers from Vietnam as well as the city’s pool of quality talent.
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Despite their meteoric expansion, the startup’s mission remains the same. That’s clear from the branding on Tsuji’s black hoodie – “UserFocus.”
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“Mission, vision, and value are very important for Money Forward. We have three values: user-focused, technology-driven, and fairness. So the first value is we should focus always on our users, not only on earning money.”
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Currency converted from Japanese yen. Rate: US$1 = JPY 110.75