Bright, handsome, outspoken, tech savvy and most of all—young, Mike Eidlin ticks all the right boxes for becoming the next Mark Zuckerberg. Investors jump all over themselves to invest hundreds of thousands of dollars on young digital entrepreneurs like Eidlin. The 26-year-old Japanese-American (hafu) pivoted business ideas three times while raising $450k from Japanese investors, since his arrival in Tokyo two years ago. Now the purveyor of dreams is pivoting yet again, this time to Los Angeles to raise $1m in pursuit of an even bigger mobile app idea.
Eidlin must keep his balance on an increasingly fast moving seed-funding treadmill while searching for a valid business model. Each idea he trials is an experiment to discover if people (and advertisers) will pay for the use of services and products he creates. Most experiments fail. Maintaining a positive attitude when they do is crucial. Should investors lose confidence—perhaps because they sense he doesn’t listen to good advice, isn’t learning from past mistakes or has lost self-confidence in his ability to succeed—its game over.
Eidlin was born in Tokyo, raised in Northern California and educated at UC Davis. After graduating from college in 2014, he worked on the trading floor at Citi as a summer analyst. He didn’t like it, so he switched career paths by learning to code. Coding bootcamp taught him he wouldn’t make a good software engineer, but he thought he might enjoy working with developers, designers and top management. So he did an internship as a product manager. Not only did he enjoy working as one, he was brimming with ideas. Eidlin decided to start his own business, encouraged by the ‘can-do’ Silicon Valley culture in which he was immersed.
The first venture he cofounded was a social network app for book lovers called bookmarq. VC firm 500 startups accepted bookmarq’s founding team into their San Francisco pre-accelerator program, giving them $15K seed capital to boot. But the venture quickly ran into difficulties. “We had some cofounder issues,” he admits.
The second startup he cofounded in late 2015 was a social network app for pet owners called Cutesy. People love looking at cute puppies, kittens and rabbits. Cutesy was a “rate my pet” app that delivered cute pet pictures into people’s Facebook feed. To fund the venture, he sought advice from Kiyo Kobayashi, a well-connected Japanese serial entrepreneur and investor now based in San Francisco. Kobayashi, when aged 29, famously built and sold Nobot Inc to KDDI for $19m in 2011. As everyone knows, raising money is all about who you know. Those with the right pedigree can raise up to $500k of seed capital in Tokyo today, Kobayashi advised Eidlin, adding, “If you speak Japanese and you’re from Silicon Valley—that makes it cooler.”
Startup activity in Japan is small in global terms but has grown dramatically over the past decade, as has Japan’s startup ecosystem. Before 2014, for example, there were no big annual startup events. That changed when Singapore based Tech in Asia launched a yearly Tokyo startup event. The Finnish based Slush organization shortly followed suit with an even larger annual Tokyo event, helped by leading Japanese entrepreneur and investor Taizo Son (watch the new Slush Tokyo 2018 Aftermovie). Startup incubators, accelerators and countless co-working spaces started popping up everywhere. Eidlin notes, “In Japan the startup ecosystem is only growing. There are more entrepreneurs than ever. Valuations are the highest they’ve ever been.”
Kobayashi provided Eidlin with introductions to other Japanese entrepreneurs living in the Bay Area. They in turn introduced him to Tokyo seed investors. Eidlin flew to Tokyo with 40 investor pitch meetings lined up over the course of a few days. However, none jumped at the idea. Perhaps he sensed a tough sell? Privately, Eidlin worried. It was not as though Cutesy uniquely cured people’s boredom problems on long commutes. There were many competitive entertainment apps already on the market from which to choose.
The next day in the middle of pitching Cutesy to another investor, he said, “This is so weird. Just yesterday I thought of this prototype. Why don’t you check it out real quick?” Eidlin slid his presentation for a new unrelated business idea to them. They must have been impressed because they replied, “If you do this new one, we’ll invest in it!”
The idea, called ‘PeraPera’ (meaning ‘fluent or talkative’ in Japanese), shares article translation costs among readers with similar interests. Eidlin had hit on it while surfing Japanese tech websites from his shared workspace located at Shibuya’s Hive Tokyo. Website articles written in kanji are difficult to read, even for a bilingual hafu. He often ran kanji text through Google translate. However, the translation quality was poor.
Turning to other Internet entrepreneurs seated near him, he asked, “How can I translate this?” They pointed to online translation services like Gengo which produce good results, but were too time consuming and costly for his purposes. Eidlin got excited, reasoning like minded entrepreneurs would happily pay shared translation costs to read the same interesting blog posts as he. “In an hour I had a basic pitch deck and a design” for a new business, he says.
Early capital for PeraPera came from two angel investors associated with Tokyo Founders Fund, a seed fund founded by 8 Japanese entrepreneurs (including Kiyo Kobayashi). Japanese angels liked the idea because it solved a real problem they themselves had. Eidlin then set PeraPera’s valuation price at $3m, much higher than most early-stage Japan startups.
Within a short time he raised $30k, $60k, $100, $120k and then $150k of cumulative seed funding by playing one investor off another. Each new investment added to fundraising momentum. Eidlin flew to San Francisco, grabbed his engineering cofounder and both moved together back to Tokyo to start building PeraPera. Soon they had raised almost $400k from Japanese investors. Along the way, he and his partner sold Cutesy to a PeraPera investor interested in buying the pet app. They didn’t sell it for much, but it was a ‘feather in their cap’ nonetheless.
Shortly after launching PeraPera, Google announced they would add AI (natural language processing) into their machine translations. “I realized it was us versus artificial intelligence,” nods Eidlin. “That’s an uphill battle we didn’t want to face for the next five years,” he adds. Users were also willing to pay for business content, but not entertainment content. “My market was a lot smaller than I had thought,” he concluded. It was best to search for another business idea.
About then his engineering cofounder decided to leave the company to work for a bigger firm where he could earn a proper ‘Silicon Valley’ salary. Alone in Tokyo with most capital still unspent, Eidlin began searching for proven business models which could be brought to Japan from the US.
All entrepreneurs seek to create a new product or service which is minimally ten times better than available alternatives. Rarely, an especially creative entrepreneur can luck out on the first try, as did 26-year old Akiko Naka in 2011 when she founded the hugely successful Japan social network, Wantedly. Many entrepreneurs try and fail several times before achieving success. Most give up trying, typically for lack of cash. Nine out of ten startups fail.
Eidlin considered an Uber style 60-minute delivery service for flowers, a lunch subscription service and similar businesses. The company bank account shrank as he experimented building new apps. They proved costly to build, given he now had to pay for outside software development. Finally Eidlin launched a live-stream game show app where users could win prizes called MyQ Trivia, based on the US smash hit ‘HQ Trivia’. But as he began to build the app, many other big Japanese firms like Line and Gunosy jumped into the market with similar products. They spent more on marketing and prizes than he could. They also had more engineering resources. Soon he had burned through almost all his cash. “If I continued, I would’ve ended with zero money,” he recounts.
It seems remarkable that investors supported Eidlin as he pivoted from Cutesy to PeraPera and then to MyQ Trivia. Ten years ago entrepreneurs who ‘failed’ in Japan would not have been given a second chance. Many people thought entrepreneurs were then punished for every mistake. Yoshito Hori, the entrepreneurial founder of GLOBIS Capital Partners and GLOBIS University dispelled that outdated notion in a 2012 Beacon Reports interview. Hori told this author, “In a country that practices ‘bushido’ (the samurai code of chivalry) it’s not the dimension of success or failure that matters, it’s more the attitude of the entrepreneur that counts. People think that others must be sincere, well-mannered, open-minded good listeners and learners. In Japan, I didn’t find anyone failing or being punished that had that kind of character.” Eidlin is living proof that entrepreneurs with the right attitude are given second and third chances in Japan today.
The hopeful entrepreneur is pivoting yet again to Los Angeles to build a live-stream dating app called Happy Hour. To do so, he’s starting a new company. Current investors, unfortunately, will likely lose much if not all their investments to date. Pivots within the same corporation often occur when significant money is still in the bank and circumstances haven’t changed, argues Eidlin. In this instance, he has a new technical cofounder. They’re building Happy Hour in a new country. Importantly, potential investors say they would only invest in Happy Hour if it operates as a new business entity.
Will his new venture succeed? Nobody knows. Successful ideas are fiendishly difficult to predict in advance. Consider Uber. Who would have thought that people would get into the cars of total strangers?
Eidlin is shifting into high gear. He plans to raise $1m in seed capital on a $4m valuation for his new venture. “The market is bigger. The idea is bigger. So our valuation capitalization is bigger,” he says confidently.
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