“About 95% of winning is more about enduring.” – Innovation Insights from H.E.R.O. Innovator CyberAgent’s Susumu Fujita | H.E.R.O. HeartWare | 23 July 2018 (Issue 11)

“About 95% of winning is more about enduring.” – Innovation Insights from H.E.R.O. Innovator CyberAgent’s Susumu Fujita | H.E.R.O. HeartWare | 23 July 2018 (Issue 11)

“My management style is tolerating most of the time, to endure. About 95% of winning is more about enduring, amongst various things. The remaining 5% is when you make an offense… The work of advancing each piece peacefully without losing sight of the original purpose is perseverance,” said Susumu Fujita, founder and CEO of CyberAgent (TSE: 4751), the innovative internet ad, gaming and media platform in Japan with a market value of over US$7.5 billion commanding over 20% share of the smartphone ad and 23% of the video ad market, and powering the popular and unique Ameba social media & virtual community platform with over 3 billion monthly page views, Japan’s leading dating app ‘tapple’ with over 3 million subscribers and the leading subscription-based digital music streaming service AWA, as well as the innovative internet television AbemaTV with over 11 million monthly active users.

“After listing for 18 years, we have repeatedly made a lot of upfront investment. We have invested in Ameba blogs, smartphone & video advertisements in advance, but thanks to that, we have been able to update our record high profits in existing business and will continue active investment in AbemaTV while the existing business is doing good. To start a new thing, anxiety and disturbance will occur. However, it is the job and mission of management to believe in yourself,” commented CEO Fujita-san on how CyberAgent is able to keep innovating, stay relevant and thrive by investing in new businesses for future growth, compounding 100X since January 2001 to over US$7.5 billion in market cap.

On how he copes with the stress of his work, CEO Fujita-san shared a profound inner thought, “‘If it is not depression, it is not a job’, there may be some people who wonder about this catchphrase by Goethe, since ‘if you enjoy your work, life is pleasant’. But it seems to be the case that the work gets bigger when you twist your body to the more depressed one, to think about doing the difficult work. To do that, I must take a postponement of my head and I must feel like bleeding blood. But I have thought that this is the correct attitude toward work. So, if you suffer, the pleasure after doing your work increases proportionally. I think that is the real pleasure of work.” Fujita-san added, “What is important is the strength of the heart in adversity. In order to grow, we need a strong heart that does not move even if what people say around me is not positive. It is different from the heat of the heart. The heat ends with a short lived span but strength is not so. It is something that can be trained over time. We also experienced various ups and downs such as the collapse of the Internet bubble, the collapse of the stock price, the major turnaround in the business. I was forced to make a decision each time. I do not think that the decision power is smart or bad, I think whether the mind is strong or weak. For being disturbed by the numbers in front of me or being swept away by the surrounding opinion, my heart is weak. Conversely, if you are strong, you can push through the path you believe is correct.”

Another emerging H.E.R.O. innovator, Daisuke Sekine, founder and CEO of OpenDoor(TSE: 3926), shared his insights on how he has been able to innovate, stay relevant and stand out amongst bigger rivals from to trivago and TripAdvisor to buildTravelko to become Japan’s leading one-stop travel comparison and reservation site with a market value of US$650 million supported by over 4 million monthly active users, especially enjoying strong loyal support from the F1 layer, or female of 20-34 years of age who are said to be the most discerning and sensitive to price and richness of content/products as they find compellingness, convenience, and accuracy in Travelko’s most comprehensive range of travel-related services instead of just hotel or airline tickets like other competing sites, from domestic (~25,000) and international (~800,000) hotels and air tickets (~500 airlines) to domestic (~300,000) and overseas (~700,000) packaged and dynamic tours, day trips, bus tours, express bus and night bus, car rental, overseas Wi-Fi rental, etc.

CEO Sekine also shared the meaning and purpose of what his company stand for, “The origin of our company name OpenDoor was always from my strong desire to open the door to continue the challenge, seeking the possibilities of a new field at all times. Do not be afraid of new challenges, continue to contribute to society’s richness, joy, and the future with constant innovation. Since our establishment in April 1997, we have steadily expanded our business and steadily continue to grow, but we believe that the root of this is the result of thoroughly looking at the customer’s perspective and pursuing quality without compromise. Travelko is the pillar of our business and it is widely used as the largest travel comparison site in Japan, endorsed by the largest number of customers who use it and the largest number of travel-related companies published on the website. We open doors and will respond quickly to customer’s needs through the Internet business in a wide range of fields and strive to maximize customer satisfaction. For that purpose, we will continue to challenge the realization of the business as the No.1 from the endorsement of both customers and markets, constantly seeking the possibilities of a new field with a venture spirit and we will continue to challenge ourselves further.”

Intrigued and want to read more? Download this week’s H.E.R.O. HeartWare: Weekly Asia Tech News with brief highlights of the inspiring entrepreneurial stories of tech leaders in Asia whom we have been monitoring over the past decade in our broader watchlist of over 200 listed Asian tech companies and our focused portfolio of 40 HERO Innovators who reveal their problems and successes behind building the company. In Issue 9, we have:

(1) Susumu Fujita 藤田晋, co-founder & CEO of CyberAgent Inc サイバーエージェント (TSE: 4751, market cap US$7,578m), one of Japan’s leading internet ad, gaming & media platforms with three pillars of businesses: media (Ameba blog & social media platform which includes the innovative Ameba Pigg, a virtual community in which users can customize an avatar to socialize with people around the world and decorate their own rooms with virtual currencies; Japan’s leading dating app ‘tapple’ with over 3 million members; subscription-based digital music streaming service AWA in a 50-50 joint venture with Avex; internet TV AbemaTV in a 60-40 joint venture with Asahi TV), internet advertising agency and smartphone game (e.g. Cygame), as well as an investment development business CyberAgent Ventures with a proven successful track record to invest in, nurture and list start-ups. CyberAgent commands 20.6% share in the smartphone ad market and 23.4% share in the video ad market in Japan. AbemaTV was started in Apr 2016 and now has 20 channels, including original live programming, and monthly active users (MAU) which exceeded 11 million and total viewing hours which exceeded 50.72 hours. CyberAgent was founded in 1988 by Susumu Fujita and Yusuke Hidaka in 1998 and is headquartered in Tokyo;

(2) Daisuke Sekine 関根大介, founder & CEO of OpenDoor Inc オープンドア (TSE: 3926, market cap US$654m), which operates Travelko (, Japan’s leading one-stop travel comparison and reservation site with the biggest range of travel-related services from domestic and international hotels and air tickets to packaged and dynamic tours, day trips, bus tours, express bus and night bus, car rental, overseas Wi-Fi rental, etc. Travelko commands the highest brand recognition rate (Feb 2018: 30% vs 13.6% in Sept 2016) with its catchphrase “Let’s find the lowest price of your trip” and over 4 million monthly users (vs 3.05 million in Mar 2016 and 2.2 million in Mar 2015), especially enjoying strong loyal support from the F1 layer, or female of 20-34 years of age, who are said to be most discerning and sensitive to price and content. Travelko also covers all the information requested by the user concerning the trip by posting local information by local professionals such as tour guides and informational travel blog. OpenDoor also operates TRAVELKO (, a multi-language travel comparison meta-site (English, Chinese, Korean) aimed overseas and inbound markets. It is also useful for overseas residents to search for inbound trips to Japan, as well as to search for trips to their own country and other countries. Travelko is able to not only survive but importantly stand out as the leader amongst the hyper-competitive market with rapid changes by distinguishing itself through (1) the largest number of registered domestic and overseas travel agencies and booking sites at over 500 (vs 300 In 2016) to bring about the most competitive and lowest prices for users; (2) providing the most comprehensive range of travel-related services instead of just hotel or airline tickets like other competing sites: ~25,000 domestic hotels, ~800,000 overseas hotels, ~500 airlines, ~700,000 overseas tour, ~300,000 domestic tour, etc; and (3) the successful transformation to the pay-per-use performance fee model (over 90% of sales are pay-per-use income). OpenDoor was founded in 1997 by Daisuke Sekine and is headquartered in Tokyo.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. There is a structural break in data in the market’s multi-year appraisal of “exponential innovators”, the type of business models that can compete and thrive in an exponential world.

Yet we do not want to chase the highly popular megacap tech stocks, or fall for the “Next-Big-Thing” trap by overpaying for “growth”, or by chasing to invest in fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to separate the winners and losers. The H.E.R.O. HeartWare Weekly highlights interesting tech news and listed Asian emerging tech innovators with unique and scalable wide-moat business models to keep yourself well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy in Asia as part of our thought leadership for our ARCHEA Asia HERO Innovators Fund to add value to our clients and the community.

Some of the HERO Innovators in the focused portfolio include the largest online-to-offline pet insurance company in Japan with over 60% domestic share of the growing pet insurance market with over 636,000 policies in force generating over 98% sticky recurring revenue income & cashflow (Japanese households own 20m pets and only 1.3m or 6.3% were insured vs 22% of the 15m pets were insured in UK), and is a tech innovator with services that include allowing insurance claims to be made via LINE in just three minutes, an industry first, enabled by its powerful database & analytical prowess of more than 10 million insurance claims tied to illnesses and accident that allow the company to propose preventive measures by examining how animals become sick and how accidents occur. This highly profitable online pet insurance with a healthy net-cash balance sheet founded by an inspiring and down-to-earth entrepreneur with an agricultural economics background who started his career at a top insurance company is an archetypal H.E.R.O. Innovator.

Beyond Moat: Catapult Your Business to Exponential Value Creation | From Economic Moat to Catapult Analysis of Business Model Quality to Discover Tech Innovators

The Catapult is our analytical framework within the 4-step H.E.R.O. investment process to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators.

(1) “Curiosity” Edge

Does the company create or generate curiosity and discovery amongst the users and customers for its products and services? Is there a riveting effect that leads to engagement?

  • User-centric customized recommendations, engagement depth in time invested, etc
  • Examples: Amazon Prime, Netflix, Tencent Music, Kakao M (KOSDAQ: 016170), Syuppin (TSE: 3179), etc

(2) “Community” Edge

Does the company build a community/platform/environment where customers/users/members can connect and interact repeatedly with one another to forge longer-term relationship and emotional connections Vs mere transactions-based exchange?

  • User-generated content (UGC) in reviews; ratings to foster trust, credibility, collaboration and celebration in the many-to-many interaction; feedback loop to improve; brand advocates/ raving fans/ whale curve; is there social capital capacity to expand into complementary products and services to serve the community
  • Watch out for unusual capitalization of customer acquisition costs (CAC), goodwill in balance sheet
  • Examples: Apple iOS, Benefit One (TSE: 2412), Itokuro (TSE: 6049), Bandai Namco (TSE: 7832), CyberAgent (TSE: 4751), etc

(3) “Compellingness-Craftsmanship” Edge

Does the company create and deliver products, services or solutions with compellingness and craftsmanship?

  • Process IP, intangible know-how/system and mastery to bring about comfort, convenience, “customized” pain-killing solutions to customers
  • Compellingness (external) combined with Craftsmanship (internal)
  • Craftsmanship: Think Steve Jobs shared the story of how he was inspired by his dad who taught the young Jobs that it was important to craft the back of cabinets and fences properly, even though they were hidden. “He loved doing things right. He even cared about the look of the parts you couldn’t see.”
  • Examples: Amazon, Microsoft, MISUMI Group (TSE: 9962), MonotaRO (TSE: 3064), Synchro Food (TSE: 3963), Koh Young Technology (KOSDAQ: 098460), etc

(4) “Circumspection” Edge

Does the company deliver/enable circumspection and acumen/insights/intelligence for the customers with usable framework of knowledge, tools and analytics to bring useful insights to help them think better and make better decisions?

  • Examples: Google, M3 (TSE: 2413), e-Guardian (TSE: 6050), MonotaRO (TSE: 3064), Appen (ASX: APX), Vista Group (NZSE: VGL), Supermap (SZSE: 300036), etc

Hope you find the weekly report to be useful and insightful. Please give us your candid feedback and harshest criticisms so that we can improve further to serve you better. Besides the BATTSS (Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung), do also tell us which Asian tech entrepreneurs & CEOs whom you admire and respect and why – we will endeavor to do up profiles of them for sharing with the community. Thank you very much and have a beautiful week ahead.

Warm regards,

KB | | WhatsApp +65 9695 1860

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