He started his company, Venture Republic, in January 2001, a few months before the dot.com bubble burst. He then launched travel.jp in June 2001, a few months before September 11.
Then in 2008, a month before the Lehman Brothers shock, he took the company public on JASDAQ. On February 2 this year, about a month before the tsunami and earthquake, it formed a partnership with Lawson, Japan’s leading convenience store chain. This is the first partnership of its kind – between an online business and a brick-and-mortar retailing organization.
“The lesson is, luck is very important. You have no control over it. If you try hard, you will succeed. And you might want to have last mover advantage as well,” he smiled.
“When we started travel.jp in 2001, we were the last mover in the Internet space. We saw so many cases of failure before we started. Many companies were growing too quick, they had too much money and they fell apart.”
Of course, first mover works too. Look at Rakuten, he said. “It’s the middle movers that fell apart.”
He cites the example of tabini.com, the Japanese version of Orbitz, a joint venture between JAL, ANA, NWA, Travelocity and 13 other international airlines with US$28 million of raised capital. It went out of business in 2005.
Shibata hit on the idea of a travel search because he saw that the travel market, while it was dominated by the big wholesalers, also had a lot of mom and pop shops selling discount air vouchers. (The air market in Japan is unique because companies in Japan are often given discount vouchers by airlines and those that are not used are sold to these mom and pop shops who then sell them to the public.)
“I thought, why not aggregate these small mom and pop shops? In Japan, there are many local fares that are not published in the GDS and there was an opportunity to aggregate that.”
Shibata who worked with Mitsubishi Corp and went to Harvard Business School, was determined to start travel.jp with as much money as possible. “We didn’t want to be caught out.”
So he and his partners raised US$4 million in seed funding from two major investors. In return, they gave away 99% of the equity. The company broke even in three to four years and today, the co-founders together own 20% of the equity.
“We decided this was the best way to do it – to start with minimum equity and increase it as the business improved.
“The first three years were tough but cash is king. We had the money and we wanted to save it as much as possible. Even at the most difficult time, we still had a million dollars in the bank.
“Most entrepreneurs spend their time raising money even though what they want to do is spend their time doing the business.”
Today, Venture Republic is into four verticals – travel, hotels (Hotel.jp), consumer goods (Coneco.net) and tuhan.ne.jp.
And this is where the Lawson partnership will add value. In Japan, a key to customer loyalty is points and Lawson plays a significant role with its 10,000 stores nationwide that attract eight million users every day. Ponta, one
of the largest points system in the country with over 31 million members initiated by Lawson and Mitsubishi Corp, now allows customers to use their points for anything from gas to groceries to clothes. Shibata wants to integrate the Ponta point system..
While air continues to grow, Shibata is excited about Hotel.jp. It has 28,000 hotels and the largest collection of ryokans, one of the hardest segments to aggregate. It carries reviews, mostly in pictures and videos, which Shibata said is easier to scale internationally.
And that is what he wants to do with hotels.jp – to add international content – so that Japanese travellers can book hotels overseas, something they are becoming increasingly comfortable with. (Rakuten Travel for instance says it is seeing more customers book hotels in popular destinations such as Korea, China, Hawaii and Guam.)
Shibata’s also started talks with a Chinese media company and has China in his sights.
In air, he’s excited about the arrival of low cost airlines which he said would transform domestic travel in Japan. Skymark is seeing some success, international carriers like Jet Blue and AirAsia have arrived and All Nippon Airways has announced plans for a low cost subsidiary.
“It will be interesting to see how this market develops. If any market needs low cost carriers, it’s Japan.Ë�
Note: Kei Shibata will be speaking at WIT Australia in Sydney on June 21. He will be sharing the latest trends in the Japanese online travel market and how suppliers can make use of the new channels to reach the Japanese traveller. Sign up here for WIT Australia.
