Rude VC: The sun is rising again

May 21, 2013
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japan-pieAs I have crowed many times in this space before, Japan is demonstrating renewed energy and enthusiasm in the tech sector. Mobile gaming giants like Gree and DeNA, explosive social networks like Line, and e-commerce leaders like Rakuten, are inspiring success stories for France which recently began venturing abroad.

Now Japan’s overall economy seems to be following suit. This week’s Economist offers a fantastic assessment on Japan’s sudden rebound. Only The Economist could link references to Superman, Soapland, and a Scarlett Johansson / Bill Murray film in a macroeconomic report and keep a straight face.

With a cover of Prime Minister Abe in superhero flight, the series recounts Japan’s economic awakening since the last elections: a galloping stock market, GDP growth of 3.5%, $100 billion in stimulus, an export-boosting currency devaluation, adherence to the Trans-Pacific Partnership espousing free trade, and more.

Given the Bank of Japan’s deliberate policy toward inflation, it’s no wonder that the U.S. government complains about currency manipulation, nor that many investors like Mark Cuban have made a massive short bet on the yen.

For a variety of reasons, I have a strong personal affinity for Japan. Yet beyond personal attachments, I believe the country’s renewed tech sector offers a ton of inspiration for France.

Let’s start with mobile gaming. Platform companies Gree and DeNA have become household names in Japan and are increasingly looking internationally. Both firms have cracked the nut of freemium, with revenues of $422m and $567m respectively per quarter, profit margins exceeding 30%, and ARPU figures that put Zynga to shame, even at its peak.

Meanwhile, GungHo, the developer of the jawdroppingly successful mobile game Puzzles & Dragons, generated $113m in April alone and now boasts a market cap that exceeds Gree, DeNA, and Zynga combined (surpassing Nintendo even).

Take a related topic which I submit poses tremendous potential: HTML5. Japan’s Docomo embraces this new standard, throwing its weight behind new O/S Tizen and Buongiorno’s efforts here. KDDI Mugen Labo, the tech incubator by Japan’s second largest telco, has set up a special application category for HTML5-engineering startups.

With an eye toward building a global leader in e-commerce, in 2010 Rakuten CEO Hiroshi Mikitani embarked on a program of global m&a (including among several the acquisition of PriceMinister). And one day Mikitani unleashed an edict of “Englishnization”, suddenly requiring all company business to be conducted in English.

And it’s not just the proven success stories that are looking abroad. Many seed-stage firms in Japan exhibit global ambition from the start (this great piece from SD Japan zooms in on five of them).

More generally, take design. The same simplicity principles of wabi-sabi that so inspire Jack Dorsey lend themselves to the design of user interfaces on some of France’s best consumer tech: mobile apps like Bankin, or hardware like Invoxia’s voip console. There still exist too few examples like this in France, though I am encouraged by the upcoming generation of French entrepreneurs with global aspirations and audaciousness in mind at inception. Hopefully both the government and financing sector will catch up.

A word of caution, of course: Japan’s growth trajectory will probably not be full-ahead, full-time, and witness a 70% stock market rise every 6 months. There will likely be some throttling. The weakening yen may dampen the lofty valuations of foreign acquisitions. Already Gree is retrenching a bit from its international adventures in China. What matters is the long-term trend. And right now, the fundamentals look positive.

In an interconnected world, insularity leads to economic ruin, wrote Mikitani in his new book.

Yeah, I’d say France could draw a lesson or two from Japan.