Why do Cybirds suddenly appear? The migration path of a mobile Internet company - Upfront - Company Profile

Japan, Inc., August, 2003 by Alex Stewart

CYBIRD LISTED ON THE JASDAQ over-the-counter market in December 2000, just as the Internet bubble was deflating heavily in Japan. It was probably one of the last Internet startups to catch the wave before it crashed. It began life in the prehistoric Internet year of 1994, with the suitably Edenesque name of Paradise Web. As the moniker suggests, it was started by youthful idealists, not long out of college. The Internet was just starting to enter mainstream consciousness, but outside the US it was still more of a "student happening" than a business tool. It was a post-hippy period when anything seemed possible, in Hori's words the Internet was "too convenient." From the beginning, he and his co-founder, Yosuke Iwai, were convinced that users would swarm to it when they discovered the convenience.

The founders of Paradise Web--Kazutomo Hori (known as "Robert" in the gaijin community) and Yosuke Iwai--both graduated in 1989 from the School of Law, Kwansei Gakuin University, a prestigious private university on the outskirts of Osaka. Hori left to continue studies in marketing, social welfare and other subjects, first at the University of London, and then City Polytechnic. It added an interesting overlay of "global cred" to his more earthy Osaka roots. Iwai went straight front college into Recruit.

Initially Paradise Web provided an AOL-type service. "We had an incredible number of subscribers, but they couldn't find a payment model," says Hori. It was the need to find a way to get paid which helped position Cybird as one of the most important Internet pioneers. As Hori explains, they badgered the operators incessantly to charge users a billing fee, which the operators could share with the content providers. It seems an obvious business model now, but it was revolutionary back then. At that time mobile phones were not an obvious medium for the Internet: Handsets were large, battery life limited, screens were small and there was no content.

It was on the streets of Osaka that the company developed what Hori considers its key advantage over softer companies in Tokyo--its ability to maintain tough financial controls, and to negotiate on price. This was highlighted in a previous interview with J@pan Inc (October 2001) when Hori was speaking of his contacts with the major European mobile operators.

"The big guys are willing to place an order with Cybird; of course they try to bargain and try to be as tough as possible. But we don't sell things cheap. It's establishing mutual relationships that is important. Actually my background and education is not IT or diplomacy, but negotiation."

The emphasis on negotiation rather than intellect is a key feature and distinguishing point of the Osaka business mind-set versus the Tokyo one. Hori speaks enthusiastically about how all of his directors worked their way up. Tetsuya Sanada, the CTO, was in considerable debt, working it off in another technology company in Tokyo when he met Hori again. Shinichiro Yamashita, the director currently responsible for sales, was a friend of Sanada's from university days and hit hard times when the company he joined failed. Kenichiro Nakajima, who runs marketing, ran a student business at university, like Iwai. He went on to become one of Recruit's star salesmen in Osaka before he joined Cybird in 2000. Tomosada Yoshikawa, in charge of corporate plannning, was a high school classmate of Hori's and in the same faculty of law at Kwansei Gakuin; he earned an MBA in the US, which later ran into trouble. He was persuaded to lend his more professional business knowledge in the run-up to IPO. The only non-Kansai director, Mikio Inari, was born in Fukuoka, but attended university in Tokyo. He joined via an executive placement agency.

The board is extremely careful about managing money. As Hori explains, "None of the board want to pay money up front; they want to see it and touch it. I call it Kansai management style. It is the unique feature of Cybird." He credits it with helping them to steer through the Internet bubble.

"During the Internet boom there was always talk about M&A. It was very easy in the bubble to do this, but we were very careful and didn't follow the bankers' advice. We need to make a realistic assessment of everything. We ask 'Does it really bring out the synergies they claim?' We do a triple check when we assess any company."

Due to this management style, and despite raising a lot of money at IPO, Cybird invested in only two companies, both of them strategic stakes. "We did not participate in WAP when it was the fashion [in GSM mobile countries]," Hori says. "A lot of companies seemed to fear they would miss the boat, but that kind of thinking doesn't bother us."

Could this be called a Kansai trait? It could certainly be called the "Kyoto way," where a spirit of independence bordering at times on eccentricity has characterized the ventures that have now become global companies--Murata, Rohm, Kyocera, Horiba and Omron. There are fewer such illustrations in Osaka, which is noted as the home of akindo tamashii (the spirit of the Osaka merchant). Companies that exemplified it, like Matsushita, are now the stuff mainly of folklore.