Naoaki Mashita, chief executive of V-cube, started his company in 1998 as a 20-year-old student in his university dorm room in Japan. In the two decades since, he has grown V-cube into a leading visual communications services company, with products spanning web conferencing, video conferencing, telephone conferencing, online education and telemedicine.
This “Founder Q&A” with Mashita was originally published by Intel Capital on the firm’s website. It is republished here with the permission of Intel Capital.
Q: You started what is now V-cube at a very young age, while still in university. How did you learn to grow a company and how did you develop your management style?
A: To be honest, I faced many challenges and failures professionally. I’m not the type of person that likes to learn by reading or sitting through lectures. I tried to figure things out through trial and error, but it was a struggle. I wasted a lot of time and money in order to learn something from the failures, but those lessons were invaluable and ultimately helped lead to bigger growth.
Q: By most accounts, your career would be measured as a success. How did you start out?
A: I started a small web solutions services business when I was 18 years old in university. I was looking for an interesting part-time job, and I discovered website development was an immature industry. This was in 1996, and back then even a student who had just learned how to create a website could get business and make good money from customers.
My first deal was $2,000 for two weeks of work. As a student, this was amazing! Unfortunately, I didn’t know that I was charging only 10 percent of the going market price. Although my price was cheap, the quality and service were on par with more professional firms. The business quickly grew via word of mouth, and I brought on some of my friends to help manage the work. That was actually the starting point of our company.
Q: How did you transition the business from web development to visual communications services?
A: From 1998 to 2004, our focus was on website development, mobile applications, EC [embedded controller] systems and CRM systems. In 2004, we faced problems communicating between our two offices in Japan and the US. Email and phone calls were not as efficient as we hoped, and monthly business travel was too much work and too expensive. We wanted a video conferencing tool, but the major incumbent provider charged in excess of $100,000 to set up the infrastructure in two locations. This was almost impossible for small companies like us. When our CTO couldn’t find an alternative solution, we decided to develop one for ourselves.
After using our own product for awhile, we realized there was a market opportunity to provide this service to enterprises as well as small and medium size businesses (SMBs). We started to provide this service in 2004, then in 2006 decided to focus on visual communications exclusively.
Q: As a small company that was not well known, how did you compete against some of the more established players that were already in the market?
A: Cloud and web-based services provided us a great opportunity to disrupt the market. In Japan, there were limited web-based video conferencing options – only more expensive, hardware-based video conferencing.
There was a huge gap in the market and a lot of potential customers with limited budgets and high expectations for video conferencing. We could offer a much cheaper price than the hardware-based players, and customers who couldn’t afford to purchase the hardware or who wanted to see different options were willing to at least try our services.
This allowed us to enter the market and gain traction, even though we didn’t have a well recognized name or established brand. In 2007, after just a few years of offering the service, we achieved the number one market share position in Japan in web conferencing. And we’ve been number one for 10 consecutive years.
Q: What challenges did you overcome to grow the business during that period?
A: The big challenge for us was to change the culture and mindset of the enterprises. In Japan, enterprise customers and SMBs are very conservative by nature. Their basic mentality is to not change. So even if we offer a very good deal, it takes them a long time to try our product. The sales cycle and sales process is very long. We had to closely manage the sales cycle and borrow money from banks to fund our operations and buy time to close customers.
For 10 years we’ve been talking about changing work styles and lifestyles. It’s still a work in progress, and overcoming conservative mindsets and changing corporate cultures remains a challenge across other Asian countries as well.
Encouragingly, the Japanese government recently started promoting the idea of new work styles that enable people to live anywhere and maintain less stressful lives. Also, large Japanese enterprises, like financial institutions and auto manufacturers, are starting to explore new ways to structure work.
Q: V-cube was the number one player, growing rapidly, and you were in the final stages of preparing for an IPO when the financial crisis hit. What impact did that have on your business?
A: That was a challenging period but ultimately led to more opportunity for us. We were profitable and had kicked off the IPO process, but when the financial markets seized up in September of 2008, we lost a number of our financial clients and other deals and had to postpone our IPO.
At least two developments came out of this that had a profound impact on our business.
First, as the financial crisis deepened, companies needed to save on travel expenses, so they started looking for web conferencing or visual communications services. The hardware-based video conferencing market was too expensive; everyone was looking for cloud-based solutions. During this period, inquiries on our website increased tenfold and our customer base increased significantly.
Second, in 2009 we took investment from Intel Capital.
Q: What did taking that investment do for your business?
A: The extra capital was great to have, but even better was being able to tap into Intel Capital’s global network. We met and interacted with Intel’s technology leaders as well as its business partners, customers and other portfolio companies.
As a result, our organization and mindset changed. We started to recognize opportunities outside of Japan, and we capitalized on Intel’s network in Asia to connect with some of the region’s largest telecom carriers, manufacturers and financial firms to grow our business even further.
With our newfound global mindset and global network, we started our overseas business in 2009. Today, a quarter of our revenue is from overseas, which is quite rare for a Japanese IT company. This actually helped us attain a higher valuation when we eventually completed our IPO in Tokyo in 2013.
On the personal side, until 2009 I couldn’t speak English. The exposure to Intel Capital and its global business network helped me pick up the language much more quickly. This has been an asset, as English is the international language of business and is spoken throughout much of Asia.
Q: Did you face any stumbling blocks as you expanded beyond Japan?
A: There were many challenges, but we quickly learned one of the keys to success in China and other Asia countries is to be very local. We try to build a local company, absorb the local cultures and business customs and customize our applications to local needs. Our teams in these markets are almost entirely made up of local staff.
We have also expanded our focus beyond traditional corporate online meetings or trainings and into social infrastructure sectors like healthcare, education, financial and robotics. We don’t provide service directly to consumers, but we work with local private tutor schools, for example, to provide their online education to their students. This B2B2C model is working very well for us in places like China, Singapore and Indonesia.
Q: Your shift into those new sectors has been driven by M&A. How have you utilized M&A to support and grow the business?
A: This is one of the advantages of being a listed company. Before we were public, acquisitions were not easy. Now we can proactively use M&A as part of our growth strategy.
We did three acquisitions in the three years following the IPO that fit into our social infrastructure initiatives. Pioneer VC gave us a foothold into the education and government sectors, which were not previously strengths for us. Wizlearn brought us corporate learning and management systems and content to supplement our education services, and a client base that included government organizations, multinational corporations and public schools in Singapore. IStudy helped further expand our education sector portfolio and added customers including mega banks and large Japanese enterprises.
Q: What is the biggest future opportunity for the industry?
A: The visual communications industry has really just started to evolve in Asia. Even with existing products, there is research that predicts the market will grow 10x in Japan and more than 100x from 2017 to 2026 in developing countries in Asia. So providing visual communications services to all organizations, schools, hospitals and others still has huge potential in Asia.
We also have formed partnerships with companies like Logitech and Microsoft whereby cloud-based services can help accelerate the penetration of visual communications services.
Q: Is mobile part of the platform, or is that potentially a disruptor?
A: We believe it is disrupting the existing video conferencing and broadcasting system. Progress is different depending on the country, but mobile is more popular than PCs or other devices in many developing countries. We already moved to the mobile-first concept and are pushing the mobile application to all industries now.
We also released a hardware-based video conferencing solution that utilizes normal PC or mobile devices, but at a price that is one-third of the major players. It’s growing rapidly and really shaking up the existing hardware-based video conferencing market now.
Q: How would you describe your management style?
A: In one word: empowerment. I try not to get bogged down by the day-to-day detailed operations. The most important thing for leadership is to show the team the dream and where we will go, map out the vision. I focus on the big picture and moving the business in the right direction.
I like to find the right people, appoint them to the right places and empower them to do their jobs. I have a good operations person in each country, and they do a good job keeping the organization organized and running the business in these countries. I provide direction, goals, feedback and show them the dream, but leave it to them to deliver.
This decentralized decision-making process benefits the business by allowing us to be more locally driven in overseas markets, which makes us faster and more efficient.
Q: Have you received any advice that has helped carry you through the many ups and downs during your career?
A: Be positive about the future and believe that you are lucky.
Entrepreneurs face so many problems, issues and crazy things that come up every day. You need a surviver mentality. Maintaining the right frame of mind is quite important, maybe just as important as having a strong business sense.
If you believe that as long as you are alive you can do something great, it can carry you through the toughest times.
Photo of Naoaki Mashita, chief executive of V-cube
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