Global Themes

On Globalization & Venture Capital

Apple, Sony and Nintendo: A Stunning Comparison

Courtesy Gerhard Fasol of Eurotechnology Japan, a fascinating comparison between Sony, Apple and Nintendo

…On October 22 APPLE announced spectacular full-year results with a year-on-year net income increase of 38%.

…on August 29, 2008 Nintendo revised the forecast for full-year net income upward by +26.2%

…in contrast, on October 23, 2008, SONY said that full-year net income (for the financial year ending March 2009) is expected to be 37.5% lower than previously predicted

Lets look at today’s (Oct 22nd) market caps:

APPLE market cap = US$ 85.6 Billion

NINTENDO market cap = US$ 37.2 Billion

SONY market cap = US$ 19.9 Billion

Why this dramatic difference? We believe its focus. Apple and Nintendo are companies with clear focus.

…In terms of sales, SONY = 3 x APPLE …(and)…SONY = 4 x NINTENDO

annual revenues of SONY, Nintendo, and APPLE








In terms of operating income, APPLE = 3 x SONY…(and)…NINTENDO = 3 x SONY

operating income: Apple, SONY and Nintendo









In terms of operating margin, APPLE = 9 x SONY…(and)…NINTENDO = 15 x SONY

operating margin: nintendo, sony and apple

November 5th, 2008 Posted by | Global Competition, Japan, Miscellaneous | 2 comments

Of India, Japan and “Client States”

A few weeks ago while I was in Japan, a mini-storm was brewing up in the blogosphere precipitated by the somewhat careless choice of words by Daniel Altman on the IHT blog.

In a piece on the occasion of Japanese Prime Minister’s visit to India, Daniel wrote:

“…Not so long ago, there were only two countries that collected client states around the world: the United States and the Soviet Union.

These days, it seems like anyone with some economic clout can join in the fun. China has Sudan, Venezuela has Bolivia, and now Japan has India.”

Predictably that kicked up a furore (and not just because of the ill-considered comparisons).

Our friends at Wikipedia describe “Client States” as:

“Client state is one of several terms used to describe the subordination of one state to a more powerful state in international affairs. It is the least specific of these terms and may be treated as a broad category which includes satellite state, puppet state, neo-colony, protectorate, vassal state and tributary state.”

Clearly this was not a flattering description.

Daniel went on to say that, “One day, India’s economy may be bigger than Japan’s. But for now, the Japanese government is happy to underwrite India’s growth, in return for a share of spoils.”

The brief post elicited several comments with readers pointing out that:

  • Japan’s increasing interest in India was also at least partly due to its growing suspicion of China
  • A $100bn investment does not make a client state make
  • On a PPP basis, India’s economy is now larger than Japan (link courtesy Suraj Swami on the IHT blog)
  • Sino-Japan economic trade and ties dwarf the relationship between Japan and India (A related piece on IHT had noted Japan’s trade with India was about $6.5 billion in 2006…about 4 percent of Japan’s trade with China)

On the Indian Economy Blog, Shefaly posted a more balanced perspective. In her post she pointed out several flaws in Daniel’s hypothesis, notably:

  • …the assumption that investing in infrastructure is going to produce spoils worth sharing, and produce them post haste
  • Daniel’s diregard of the “strategic” reasons for such a investment and the influence that sovereign states wish to exercise through such measures

Shefaly had kindly asked me for my take on all this. I decided to wait for the dust to settle down before jumping in.

Here is what I think (in “ugly” bullet points; sorry for not crafting this more elegantly – I am fast loosing whatever skills I had learnt in the diplomatic service!):

  • Whatever Mr Altman might think, India is unlikely to become anybody’s client state – ever
  • Daniel’s piece was meant to provoke – which it did. It was not meant as a serious expression of opinion – hence it is best ignored beyond a point
  • Financial aid is – almost always – linked to political objectives (however strenuously denied) and rejecting it also sends political signals
  • Japan’s increasing (and belated; in my opinion) interest in India has as much to do with geo-politics as it has to do with economics & trade
  • Japan’s investments in India – as elsewhere – are based on economic as well as political considerations and a combination of perceived political & economic benefits
  • No doubt many people see the shadow of China looming over this relationship – but clearly that is not the only factor driving trade and commerce between the two countries

I will stop here.

P.S. For more on client states, read “We are now a client state” by David Leigh and Richard Norton-Taylor that talks about how “Britain has lost its sovereignty to the United States”

Will we ever see that kind of relationship between India and Japan? I think we all know the answer.

September 6th, 2007 Posted by | China, Economics, India, Japan | 6 comments

The Pink Cow Conspiracy…

…now, if that did not grab your attention, I dont know what will!

I chanced upon this great post by friend and fellow VC-blogger Shin on Japanese VCs and the entrepreneurial/VC environment in Japan.  The post was prompted by an event organised by The Pink Cow (a cuter version of Open CoffeeClub – check it out!).

pinkcowtoplogo.jpg   Shin included some Q&A from the event in his post – which I think are very interesting and worth reproducing here for anyone who is interested in Venture Capital in Japan and the general VC ecosystem:

Q: What is the difference between the Japanese and US VC models?

[Ans: If you look at the history of the Japanese VC model and the background of the major VC players, you soon realise that the traditional Japanese VC is something quite different from the US (SV) VC model. But things are changing as business practices and competition become more global. Japanese VC is changing, or at least diversifying, in the business models it employs.]

Q: There seems to be a lack of Japanese VCs who really understand technology?

[Ans: Again, traditionally, that was indeed the case, with most of the major VC firms being affiliates (to one degree or another) of stock brokerages, commercial banks and goverment agencies, and the human resources at their disposal were limited, given the traditional lack of liquidity in the human resources market. But again this is changing, with VCs recruiting from industry (people like me), and with boutique VCs also springing up. Most of the top Japanese VC firms are large organisations, and as with any organisation, there are many different types of professionals within the organisation. The key is to find the right person to take your idea to. Stop thinking about the VC firm, and think about the individual VC.] [I thought about this question a bit more afterwards, and I think that the questioner may have some misconceptions about how we evaluate businesses. I wouldn’t say technology is not important, but I think many entrepreneurs overestimate the importance and superiority of their technology or technological skills, and the correlation between focus on technology and business success. I know that some entrepreneurs complain about the fact that VCs focus on issues which they feel to be peripheral, but we do that with justification. Our experience tells us, especially in Japan, that many businesses fail due to issues other than technology. Lack of financial planning, lack of sales/marketing ability, lack of corporate discipline in other areas, etc. It is our duty to point those out and inject some reality into many a technological daydream. The aim of a VC is to invest in a COMPANY, and help make that company successful so we can cash out and return money to our investors. I certainly only invest in businesses where their goals are aligned with ours.]

Q: Don’t VCs stack the odds in their favour with preferred stock structures?

[Ans: That is indeed the US VC model, and although it does happen in Japan too, the reality of the Japanese VC model is that currently the vast majority are common stock investments. (certain investment heavy sectors are more likely to feature preferred structures) There are signs that preferred structures are on the increase, but it is still a small minority of deals which see such structures in place. I personally think that barring a severe downturn, there will be VCs willing to continue using an ordinary stock model, and it is up to the entrepreneur to decide which set of terms and which VCs they want to work with. After all, no one is forcing them to take our money. But this ordinary vs preferred issue has to be understood in context, such as the fact that historically structuring preferred stock was subject to various limitations which made it difficult in practice to use the structure effectively. The small average size of investments is also probably a factor which has prevented VCs pushing for preferred stock and the associated liquidation preference, as is the lack of much M&A activity.]

Shin also mentions in his post that he has been thinking “seriously about…creating a venue for entrepreneurs to meet with each other and with investment professionals in a casual environment“. Perhaps Tokyo is ready for an Open Coffee Club?!

…which reminds me that I finally managed to cross an important “To-Do” off my list last week: went to the Open CoffeeClub meeting at Waterstones (24th)…more on that later.

May 30th, 2007 Posted by | Entrepreneurship, Japan, Venture Capital in Asia | 5 comments

The Power of the World Wide Web…

A friend sent me this link reminding me of my past life…the document details a meeting that happened almost 13 years ago  – in far away Tokyo!


Incidentally that was just a year after I first “discovered” the internet…thanks to a dear friend, Rodrigo – at the time with the Ecudaorian Diplomatic Service – today running a very successful business in his home country…

How the world has changed…

March 7th, 2007 Posted by | India, Japan, Miscellaneous | no comments

“The Pain of Second Place” – excerpts

In the Feb 12, ’07 issue of Forbes, came across this piece by Jerry Flint: “The Pain of Second Place” – very readable…  

It has this graph that shows the staggering and relentless growth of Toyota over the past 30 years which will culminate this year in its finally overtaking Ford as the world’s largest manufacturer of autos.


Some excerpts from the story:

“The General Motors era is over. This year Toyota will overtake General Motors as the world’s largest manufacturer of autos, selling something more than nine million vehicles, probably half a million more than GM. This seems certain. It is even plausible that in, say, 2011, when Toyota has built more factories and hired more dealers as GM sales keep falling, the Japanese Godzilla will outsell GM in the U.S. I am not predicting this, just saying it’s possible with present trends.


The psychological effect of GM’s fall to the number two position will be enormous. Sure, there is maybe one good side to it. People will stop blaming General Motors for everything that goes wrong in the world. The company won’t be blamed for destroying the air we breathe, for not doing enough for safety or diversity, for not saving the polar bears. People don’t pick on the second-ranked guy. 


…At first GM will try to prove that it hasn’t lost. We call that denial. When GM ruled, it led in technology, inventing or popularizing the automatic transmission, the high-compression engine, the collapsible steering wheel, the catalytic converter — and those great designs…


But this preeminence has been fading for decades. GM puts four-speed transmissions into its big Cadillac when Toyota has an eight-speed in its biggest Lexus. We all know about those hybrid Priuses. And when it comes to engines, GM still is catching up to the newer overhead-cam designs pushed by the Japanese. We may not understand what overhead cam means, but we buy them.

Keep Reading…

February 20th, 2007 Posted by | Global Competition, Japan, USA and Asia | no comments

Aftershave…by email !

Read this on a flight to Tokyo last month (courtesy JAL in-flight magazine, “Skyward”):

A group within the Tokyo Institute of Technology has developed a gadget that can analyse and record odours in a digital format. The gadget uses 15 sensors to analyse odours and is then able to reproduce the “digital smell” using a combination of up to 96 different chemicals.

The inventors claim it has commercial application in the food and fragrance industries and even digital media (i.e. smells can be recorded onto and sent via email!)

Here is some more detail on how the machine works.

Wait, there is more: A new service from NTT will attempt to offer a completely different experience to cine-goers in Tokyo with by synchronizing “seven different smells to scenes from The New World starring Colin Farrell”.

“A floral scent accompanies a love scene, while a mix of peppermint and rosemary is emitted during a tear-jerking scene. Joy is a citrus mix of orange and grapefruit, while anger is enhanced by a herb-like concoction with a hint of eucalyptus and tea tree.”

Apparently, “the smells waft from special machines under the seats in the back rows of two movie theaters, which create different fragrances by controlling the mix of oils stored in the machines”

NTT has also been offering a machine for home use with this function: “Owners of the $620 home version can download different programs to emit smells to accompany a horoscope reading or work as aromatherapy”! Unfortunately, “NTT Communications would not disclose how many machines it has sold”.

Fine examples of innovation at the “Top of the Pyramid”?

Finally, link to a parallel effort that is (was?) going on in France.

January 4th, 2007 Posted by | Japan, Miscellaneous | one comment

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