The highs and lows of a Japanese serial entrepreneur

This article is from an episode of Disrupting Japan. This is heavily revised from the original show transcript. For the full episode, go here.

Hajime Hirose is a Japanese serial entrepreneur. Throughout his career, he built and sold startups, and he also bankrupted them.

We talk about how Japanese attitudes toward startups are changing, but also how in Japan, a bad rumor – even a completely unfounded one – can kill an otherwise promising enterprise. We also discuss the importance and the difficulty of going global and some interesting stories from his startup stints.

Hajime Hirose / Photo credit: Alphaus

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Tell us a little about yourself.

So I was born in Tokyo, I grew up in Yokohama, and I went to Seattle for university. I’ve been living outside of Japan for the last 26 years.

I worked in Microsoft back when it just bought Hotmail in 1998. I was lucky to be one of the only two Japanese guys on the project.

I worked for the company for 10 years until 2008. In 2004, Microsoft decided that we needed to go to China in order to secure more talent. My boss – he was a Caucasian guy – thought I looked Chinese enough and thought that I could speak Chinese.

So they sent me there, and during weekdays, I was working on my project. But then on weekends, I went around the universities in China to interview and hire people. I got to meet a lot of smart people, and I would bring them in.

But you eventually left to join a Chinese company.

In 2007 – that was when iPhone and the App Store just came out – and I thought, “This is my chance where I can actually do my own startup.” I had always wanted to do my own startup, but I was a little bit hesitant.

So, I bought my iPhone and MacBook, and my friend and I went to Silicon Valley to visit VCs. I developed an app and showed it to them, and they liked it in general. But word got out that I was trying to leave Microsoft, and I got offers from five companies.

One of these companies – it was based in China – said that they will give me pre-IPO stock, which was really attractive for me. With this job, I would also be able to manage a subsidiary of the whole company. I thought that that was a good experience.

I was in charge of the software and service group. When we had our initial public offering on the New York Stock Exchange, the company wanted to expand even further. We needed to globalize the company, so we brought in talent from the US and stuff like that. But these people could not really adapt to our culture because our core was so single-minded.

Even when we brought in a very talented salesperson from the US, we would have heated discussions, and the people in the room would talk in Chinese and we’d feel like we don’t belong there. So that was a lesson that I learned: If you want to build a truly global company, I think you need to build it into the DNA from the get-go. Otherwise, it’s going to be very hard to change later on.

After you left the company, you joined a startup called Milog as their co-founder.

Yes, I was in London at the time, and I was introduced to this young gentleman who was very smart. He goes, “I don’t want to build a Japanese startup; I want to build a global startup from the get-go.” At the time, I was ready to start my own company, but he asked me to help, so I thought, “Oh, we can build a global company together.”

The company was doing a lot of stuff before I joined – from Twitter-like services to social games. But when I joined, they had something called a “mobile ad network.”

That was around 2012, and at that time, the internet economy was about US$1 billion and mobile ads were an US$11 billion industry. So there was money there. We were working around retargeting. So we created an app that would allow us to find out what other apps a customer was using. And by analyzing this, we can pretty much tell a lot about who our customers are.

But we received negative attention for this. Our users felt that we were invading their privacy.

The problem was that we did not explain enough. The feature was legit, there was opt-in, and it was mentioned in the terms of use. But what we needed to do was to make sure that users really knew what they were signing up for. Nowadays, everybody does this already, but since we were the first one, we got bashed.

We got bad media coverage, which was inaccurate. They said our company was a spyware firm and that we were spying and making money from the data we stole. We couldn’t even stop it.

How did you fight that? What did you do?

That was a very tough time for us, and the issue just went so viral that we couldn’t actually make a comeback. We decided to fold the company because the brand name was so damaged.

At that point, most of our staff wanted to leave the company. Even if they knew we weren’t doing anything wrong. We got featured on all the media sites, and nobody wanted to associate with spyware, right?

So we sold the tech, gave the money back to investors, and folded the company.

What did you do after that?

After that, I thought, “OK, now I need to do it myself.” I need to raise my own money and build my own team. And that’s what I did.

I decided to build my own company, BuzzElement, and make it global from the start. My co-founder and I traveled outside of Japan to build a team.

So the idea for the startup was centered around shopping malls. We found that in Southeast Asia, especially Malaysia and Singapore, the shopping malls are huge, and usually, people get lost or can’t find where to go. I thought, “OK, this is a business chance.”

I built an app where people could find good deals. They could find the indoor map of the mall they’re in, view ads, and pay with these ads. In return, we learned about their location, what their interests are, and what they buy. We also tailored advertisement to them.

So we had the data of what people were interested in, but what we needed was the purchasing data. We came up with a device that acts like a printer. It intercepts the printing of a receipt from a point-of-sale system and then sends the data on the receipt to the cloud. Now, we knew everything – the shop’s name, the timestamp of the transaction, and the items the customer purchased.

Our business model was that we get the ads to the users, and then we take 20% of the transaction amount.

But we had competitors who came in and thought that it was a good business. They started offering it for free, so we had to go down to zero to fight back.

It was difficult. Their business model was getting big enough merchants on their platform so that they sell the data to big Chinese companies.

How did you fight against that?

Well, by raising more money.

The first round, we got funding from a Japanese firm, and the second round, we got it from a German company. The third round, while I was talking to Singaporean, Japanese, and US firms, we decided to go with a Japanese investor. This investor wanted to buy us 100%. They thought that our technology could be better applied to the Japanese market.

BuzzElement was acquired in 2018.

It’s interesting that you are Japanese, but you ended up doing business and starting companies just about everywhere except for Japan. Do you think it’s a good idea for Japanese people who speak English and have technical or business skills to go to Singapore or Southeast Asia to start a startup rather than doing something in Japan?

It really depends on what type of business you are doing. But in general, I would like to encourage people to go out because you can always come back.

If you want to do a consumer business, I think Southeast Asia or elsewhere is a good idea. While you can certainly go global in Southeast Asia, the US, or Japan, by living in Southeast Asia, you get more input and more feedback from the market. You are also able to hire people from the US, Europe, and Asia.

But if you want to do a business-to-business startup, I think Japan – Tokyo in particular – is the best place because all the big players are in Japan and you can get anywhere in 30 minutes.

If you were to change anything about Japan, what would it be?

I will say education. Education is the answer to everything, right? No one is born with a fixed or a growth mindset. Our beliefs are shaped by messages we receive from our environment – our interactions with our parents, teachers, friends, and everyone around us, not just in the classroom. So, I think education is the key to everything.

I would like to change people’s mindset to be more growth-oriented and more positive about the future.