 Okay, we're back. We're live. It's the 5 o'clock block. I'm Jay Fidel. This is Think Tech, Tech Talks. We have two austere visitors today, and both of these guys have big connections with Japan, so this is all about... So I have one statement to make, you guys. Konichiwa. Konichiwa. Very good. Yes. Okay, so can you give us a handle, Stephen, on who Alan is and how you know him? By the way, I should add that you are a professor at the Shaita School of Business, and you also are the American Chamber of Commerce in Japan. You're with that Chamber of Commerce. Yes, I'm the vice president of the Kansai region, which is the Kobe Osaka Kyoto region. Okay. So yeah, I'm a professor and dean and a former businessman in Tech for over 25 years. Okay. How I know Alan is actually, if my wife is watching, she probably doesn't want me to tell this story. But my wife was a student at Berkeley, an MBA student back in 1988-1999 during the dot-com period. At that time, students didn't study. They just started their own businesses. So that's what my wife did without telling me. She contacted Alan, attempting to get funding. So Alan and his wisdom decided that the company wasn't worthy of funding, and I found out about it later. But that's how I actually met Alan about 20 years ago now that I've known him. And we've been in touch over the years. We have somewhat a similar background in working for corporate interests and then doing business development in Japan. So Alan, I think, has a remarkable history. He started with Oracle Japan. He was a founder of Oracle Japan in Japan and went through the initial period there until the company IPO in Japan. And then with the proceeds from that, became a venture capitalist around during the dot-com period. So he's been in venture capital in Japan and also in the United States as well for over 20 years. Some remarkable things. And he and I now are working on various investment groups and we have some projects that are working on together now. That's an overview. Alan, welcome to the show. Very nice to have you here. Do we shake hands? We have about 10,000 questions. Well, we're going to do this in half an hour anyway. So, I mean, really interesting that you were well-behaved. Yeah, I actually listened. No, you were well-behaved as a child. I was well-behaved. In YouTube, you were well-behaved. Everybody knows this. Yes. Why do you say you were well-behaved? Oh, I've never heard this story. It's the first time I've ever heard this question. Well, I was born in a multi-generation Mormon family, went to church every Sunday, believed it through and through. And grew up and went to Japan for the first time as a missionary for the church when I was 19 years old. Grew up no doubts about the truth of America, the truth of Santa Claus until I was in second grade, the truth of the Mormon religion, and grew up a very faithful, well-behaved child. Didn't cause any problems for my parents until I wasn't married in my early 30s. And mom and dad started to worry a little bit. Lucky breaks, one after the other. It started with the church, didn't it? Yeah, yeah. So they send you anywhere. And I hope that I might be sent to England, where my mother is from, New Zealand, because I heard so many wonderful stories from intermediaries about experiencing Maori culture. And Japan, because that's where all my friends were going. And it was in the beginning of the 1980s when Japan was just starting to emerge as an economic power. And so those were the three places I thought I might like to go and I was lucky enough to be sent to Japan. Yeah, putting it in perspective, you know, like we hardly had the IBM PC XD going on. No, we didn't. I was fooling around with an Apple II cassette tape player, a teaching business school student how to write databases in basic when I was a freshman. And then when I came back from Japan two years later, the IBM PC had just been rolled out. They had just introduced a 10 megabyte hard disk. And I was working as a programmer. I was so excited that I did not have to flip, swap floppy disks back and forth. Compile the software as we're going to put it all on one 10 megabyte disk. And away, away, away. I bought one. I bought one of those 10 megabytes. It cost me a thousand dollars, that 10 megabyte disk. Well, don't get me started on the history of the computer industry. We can spend all night. So how did you know that you're really at the beginning? This is at the inception of the whole thing. And you're in Japan, which is a little behind us at that time. How did you get there from Larry Ellison and all that? Well, that's kind of a surprising story. I was looking to become a programmer. I was really interested in computer graphics. They were just trying to figure out how to represent wood grain and granite and marble with algorithms or artificial intelligence. And Steve Jobs had just started the next computer was talking about, I'm going to create a computer that will let you talk to Albert Einstein or Jesus Christ or anybody in history and feel like you're really talking to them. And so AI or computer graphics were really interesting to me. And Oracle came to interview. My professor said there's this database company called Oracle and they were paying a salary about $4,000 more than anybody else. Well, the salary is good. I'll listen. The interviewer came in and the first question he asked me, he looked at my resume, the first question he says, you speak Japanese. He said, yeah, but how is that relevant to anything? He says, well, we have people distributing our software in Japan. The database doesn't process Japanese characters and the distributors are anxious to get it done and we need to hire somebody who can figure out how to do that. That's really interesting. I can do programming and stay connected to Japan. And database didn't sound that interesting to me as a category of software, but I went and met all the people that I would be working with, really, really sharp. It was the beginnings of the heyday of Silicon Valley. The industry was shifting from a Boston, New York-centric computer industry to a Silicon Valley-centric industry in the mid-80s. And I was really, really lucky to join when Oracle was about 400 people. There were a dozen or so of us in the international division and to work on figuring out how to get the Oracle software to process Japanese language was an interesting technical challenge. But from then on, I got much more interested in working with customers and figuring out how to build the business for Oracle in Japan. And you did? Yeah, I was really, really fortunate. Both with our first distributor I worked with and then later on we hired a CEO out of IBM Japan to take it from $10 million a year to a few hundred million a year and to take it public. Really, really lucky with the people I worked with at Oracle. Well, I guess they liked you because they put you in the headquarters not too long after, yeah? Yeah, yeah. So I was there in Oracle in Japan, in Japan, from 87 to 96 and then went back to headquarters to work on some projects with Fujitsu and NEC and Hitachi to get their computers to run Oracle better than anything else. And the last project I was working with Fujitsu, both myself and Mark Benioff, who's the CEO of Salesforce.com, see that as the birth of the current generation of cloud computing, software as a service, Oracle in the mid-90s, Larry Ellison decided that there's no reason we should be putting software on CD-ROMs, printing books, sticking it in boxes, putting it on trucks, shipping it out for people to put on computers in their data centers. It's all bits and bytes and networks are getting faster and faster. We ought to be able to deliver software through the internet, never have a CD. And we were working on this in 1996 in Oracle, but Oracle Salesforce could never get their head around how you sell software without moving expensive boxes. And both Mark Benioff and the founder of NetSuite had to leave Oracle to build this outside of the constraints of the culture, the sales culture that was so dominated in Oracle in the late 90s. And I left Oracle also, and Mark and I both left within a month of each other and coincidentally reconnected a year later and said, well, I'm doing this thing called Salesforce. And I said, I'm doing an incubator in Japan. NTT's come to me about coming into Japan. What do you think I should do? I said, well, why don't I help you find a CEO and we'll set up Salesforce Japan for you. So after doing Oracle Japan, I had, again, an incredibly lucky opportunity coming out of the past relations with Mark that I was engaged with the company that really set the game for the new generation of software delivered over the internet. It's well on one point in the numbers. The Arabic numbers are the same in Japan. Yeah, the numbers are the same. And the code, the code would be English anyway, right? Right. It's just the interface that has the Japanese characters. Right. So for example, if you wanted to keep a record of all of your customers, Fujitsu, you can spell it in English, but Fujitsu doesn't do that in Japan. They have kanji characters for it. The names of all the employees, the names of all your customers, any documents that you've written that you might want to pull up in a database, it's all going to be in Japanese kanji characters. And American computers didn't deal well with kanji. In fact, there is almost no American software that had figured out how to deal with the Japanese language in 1986. It's like a miracle that it happened. Yeah, it's a miracle that IBM sold the equipment there. In fact, the person that we hired to run Salesforce Japanforce had invented customer relationship management software as a category for IBM Japan to prove to headquarters that they were losing business because they could only do the katakana alphabet, which is used for animal sounds, nature sounds, and foreign imported words. That's what that character set is used for. But it was the only thing that IBM computers could print in the 1970s, early 1980s. And the fellow who ran Partnersforce at Oracle Japan and then part of Salesforce Japanforce, he said, we're losing business to NEC and Fujitsu and Hitachi because IBM computers can't print kanji characters. And headquarters didn't believe that. There's got to be all kinds of things you can do with a computer that don't require the use of kanji. And Oracle was saying the same thing to its distributors. There's got to be a lot of applications you can do with a database. A lot of things you can do with a database just using numbers. It's like doing numbers and keeping statistics and processing numbers. Why do you need Japanese language in it? So there's this debate in the early generation of the software where... I'm just kidding. Of course. I was trying to say, why do you need to put it into Japanese? Why is localization so important? Same battle. Can you step back for a minute and put yourself in that period of time when these things had not been resolved, not been solved, where you could see the power of it. You could see that it's like a bacterial colony. It was getting stronger underneath the hood. It was knitting together. The technology was coming together and the people were coming together. These were the best people you could find anywhere were involved in the industry at that time. So, could you ever have imagined what would happen? Did you see into the future what would have happened, what was going to happen, what happens now? A few times. A few times I think I actually have. For example, being in Oracle in the mid-90s, both Mark Benioff and I saw that Larry was absolutely right. The industry was going to move. The software delivered over. Oracle and Microsoft both tried to build proprietary networks and compete with the internet as a public service system and own the network. And that model where Microsoft and Oracle tried to own the network didn't play out. But the idea that software should be delivered over a network rather than on CDs and physical devices, it was obvious to us, to Mark and I, and it was not obvious to everybody at Oracle. There were a lot of doubters and second-guessers at the time. But for Mark and I, that was an obvious truth, that that was the way software should be done. We grossly underestimated how hard it would be to get all of the influencers in the industry, the companies that build their business around selling hardware and software and integrating it and taking care of the version upgrades for customers. The whole system integration industry shrinks dramatically when you don't have all that complexity that each customer has to deal with independently. So that was one transition that I think we both saw. And there was quite a bit of debate in 2000, 2001 whether open source and Linux were going to be the future of computing or whether it was going to be the SaaS. And for me, it was clear that although open source took a lot of cost out of the equation, you still had the complexity of individual systems and people having to install and maintain their own computer stacks where with delivery through the internet, all that kind of goes away. Whatever you want to do with a computer, you sign up for the Adobe software or you get the latest version of Microsoft running in your computer or sometimes running through the internet. Email was all on-premise now and almost nobody uses email that they've installed on their own computers anymore. It's all being managed out of Microsoft or Google servers anymore. So that whole transition was obviously going to happen. It has taken a lot longer than we expected, but that was clearly going to happen. The other thing that I like to brag about was that the iPhone was introduced before it had any software on it. Just the incredible innovation of the touch screen, multi-touch screen interface and being able to zoom in and out a web page and see a full PC or Macintosh-style web page on a small device like that was also the month that Microsoft Vista rolled out. And I was in my biannual upgrade cycle. My computer slowed down too much and rather than cleaning it up, I had to buy a new computer that's with faster CPU, more memory, move all my stuff on a new PC. And I was in my PC upgrade cycle at the time Vista rolled out. And none of the shops in Akihabara where I would go to buy my computers in Tokui each time I had an upgrade, none of them would sell a new PC without Vista on it. And I wanted to get Windows 95 because it would run faster and lighter and didn't have all the extra security stuff. And so when Vista rolled out and the latest software from Microsoft made me not want to upgrade my computer and the iPhone demonstration at Zeevex made me desperately want to have an iPhone and it was clear to me that it was going to become a platform. They were going to introduce software on it and it was just a matter of time. That was faster. But that month, I was giving a presentation, Mark my words, this is the month when we will look back in five to ten years and say Apple took over the leadership of the software industry from Microsoft. And this was still a time when Microsoft would stop it. Did you know what your time? I knew it. The month that Vista came out and I didn't want to buy it and the iPhone came out and I was desperate to play with it. When those two products were announced within a month, this is the moment in time when the industry recognized the value. And that's the context then. It's hard to imagine, but at that time there were many, many PC journals and experts who were saying the iPhone was going to be a huge failure. Who's going to pay that much money for this thing? There was actually more negative press on it. The battery life is terrible, so I used to joke about it. They call this a smart phone. What's smart about having to recharge your phone three times a day? I have a flip phone, I can charge it once and use it for three or four days. That's a smart phone. Right. So my take on your question, Jay, one of the start-ups I worked for in the mid-80s in the Valley was a very preliminary version of networking. I could go into an office. It was like Easy Land, if you remember that. I could go into an office and set up the software and connect the serial ports together. All of a sudden the users could share files across the PC or they could use the remote printer. I would go in and that was like magic. People were just blown away that these separate PCs could just so easily be tied together. It was also a very, very cheap product. Novel. Well, yeah, that was before Novel came along. This was one of the first iterations of this. It was actually developed by a Stanford AI guy. This is a side project. I was working for him. But then, if I looked at that, I thought, this is remarkable. This is software that's best. It's like magic. But to where we are today, to be all of us are now interconnected. We're constantly interconnected. Sometimes I think back to those days, we have progressed beyond anywhere where I could have possibly imagined this technology to take us. The fact that software, like Andreessen says, is eating the world. It basically is taking over everything, every industry, everybody, is affected by tech now. Those were the early days. It was fun and magical to begin with, but I just could not imagine that it would be developed to the point that it is today. What are we going forward from here? I could never have imagined that that 10 megabyte hard disk in my first IBM PC, where I didn't have to swap disks in that compile anymore, I could fit 100,000 of them on my fingernail and a microSD in 30 years. So looking back on it, you moved from actually developing these companies, being inside of these companies, you know, with Ellison and Benioff and all that. But after a while, you got out of that and you got into venture capital and you tried to help other people develop companies. Looking back on it, would you have done better had you stayed inside? Jay, that's a very good question. The simple answer is yes. At one point Mark asked me if I wouldn't leave Sunbridge and take over as chairman of Salesforce Japan having some issues with the CEO at one point. I said, yeah, that's pretty cool, but this is like 2003, 2004. I think you've just gone public in the US. And I said, but yeah, but Sunbridge is so much more cool because I get to work with all these companies and I have a big deal in Japan and Salesforce is just one of my portfolio companies and it's nice, I've liked you a lot, but we'll figure it out. And looking back now, that was when I didn't call right, in terms of the economic impact. But actually the reason I started Sunbridge in the first place in 2000, as many of us did, is like an ethical year. So it's the time for ethical New Year's resolutions. It says, well, what are my millennium resolutions? And a couple times in my life, I've looked at about seven years and imagine what my life is like in seven years. What's my perfect life seven years from now? And we were still in the middle of the internet bubble. I had done pretty well with my public equities and I bought Amazon a couple days after it had gone public. I avoided some of the overpriced things and I was charting my stuff and Oracle Japan had just gone public. I said, wow, in seven years, if this trend for the last three or four years keeps up, we believed it was going to. If you remember, in the heady days of the year, we believed this was somehow a reality. You should have been, don't you think? Well, there were some clear signs. For example, I forget the name of the company, but there was a healthcare website which basically the only thing it had going for it was that they had licensed the name of the head of the National Health Institutes in the United States as a brand and was earning through $50 million in cash with five million net losses and had a $2 billion valuation going public. Anyway, there was a lot of crazy stuff happening in 1999. But if this keeps up, in seven years I'll be a billionaire. But I've already got enough money to take care of my grandchildren without them having to work or they can become artists or do whatever they want. What's the point of being a billionaire? And in that moment, wouldn't it be so much more cool if I could be involved in creating a thousand millionaires? And I'd had a goal when I turned 30 if I wanted to be a millionaire so that I could leave tech and teach debate at my high school and go back and be a high school teacher without going back and be a teacher without having to worry about living on a high school teacher's salary. I want to be a millionaire for that. This is community service in its own way. That insight, if I have within me the capacity to create a billion dollars worth of net worth, wouldn't it be so much more interesting to see how a thousand people's lives change than to have that on myself? But there are days when I would say, I really should have taken that chairman of Salesforce Japan job in 2004 with the stock options. And I would be a billionaire. So, if Alan had come to you then and asked you for personal advice on what to do, what would you have told him? Well, at that particular time I would have said you're making a good decision. Yeah, Sumpridge was a big thing. Not at that point, but I agree. Now looking back at it, he made the wrong decision. You know, I left HP and after my mother stopped crying, I wanted to get back into the software world. I wanted to be with startups because it was more exciting. But, you know, a software's HP is not done as well over the years, but probably financially I would have done better if I had stayed in HP over all the years. And lots of research indicates that if you're doing well in a corporate setting, probably you're going to do better than if you take the risk of going out. There's also the failures that we've been involved with. And I have as well, maybe half a dozen different startups in the Valley and none of them really came through. Alan told me recently, I don't know if the number's still correct, 20 angel investments and you're 0 for 20 at this point? No, no, I've got a couple. Watch out for angel investments. Yeah, but I think I do a lot better choosing, selectively choosing public companies. But you like bigger ones. You like the $100 million contract. Oh, yeah. Yeah, I like that you succeed. Sure. They've already succeeded. But actually, in a lot of ways, it's a lot more fun working with the early stage startups. You have people who are trying to figure it out and if you're someone like me who enjoys brainstorming and can make connections and see possibilities, I find that sometimes the biggest problem with me making angel investments is I add a lot of my own ideas on top of what they're telling me. And often when I make an angel investment, I'm investing in my version of their vision out of them theirs and that I find is dangerous. It's a lot of the fun of being an investor in early stage companies is you get to have those conversations and sometimes your ideas resonate and they take them and run with them. But if you make an investment decision, making a decision to invest, including your vision of the possible outcomes So what's interesting and what brings you guys together at least in my view of it is the Japan thing. Japan was a different kind of market, a different kind of place. I call it intellectual arbitrage. What we were doing in the U.S. and Silicon Valley in America was maybe not entirely present already in Japan. Japan was behind us and you were there, you had experience, you were learning there, you knew the market, you knew the language, you knew the whole thing and now you could bring not only your own investment with Sunbridge but you could bring all that know-how, the best practices from the United States and help Japan in extraordinary ways. Can you talk about it? Well that was a huge part of our goal and our vision and our sense of mission when we started was that Japan, the Japanese are very dehydrated, very reliable, very predictable, extremely smart and innovative and creative in their own way and Silicon Valley had a culture of going fast and quick and fixing the mistakes as you go Silicon Valley actually operated more in a continuous improvement sort of model than Japan did. What did Zuckerberg said? Go fast and break things? Yeah, and Oracle was infamous for that. We always were bothering customers because the software was never quite finished but we were always introducing new features and Larry famously in a conversation about the quality of software in Japan said our customers don't buy our software because they want it to work well. They buy it because they know there's something new and cool coming and they want us to keep the innovation pace going quickly and they can live with the rough edges. They want new and improved, not tried and true. Japan is the other way around. What we were trying to do is there's some way that we can bring the best of those two processes together, those cultures together. When we started doing venture capital in Japan there was no law of legal framework allowing for stock options. Companies could only be formed corporations could only be formed with 200 shares priced at $200 per share. There were very, very specific rules and part of my journey was advising government panels on how does Silicon Valley work? How can we adopt their contracts? Once the legal framework was in place, Japanese VCs didn't use the Silicon Valley style preferred shares. They wanted old fashioned contract common stock so it's been a very interesting process over 20 years to see how Japan has taken Silicon Valley processes in their own context of companies having a real, real strong sense of mission and longevity and commitment to the community and the employees. And over the last 10 years or so the total amount invested has gone from a billion a year, which is where I've been tracking forever to about $4 billion in the last year. There are some really interesting companies emerging in Japan that are clearly leaders globally in their category. Not all in some in software but a lot more in materials, in robotics and some of the kinds of things that you might expect to happen. As a venture capitalist you get to see all of the new ideas that come. But looking at software just for a moment we only have a minute or two left here. Where is Japan going? Because Japan is competing with other places now and although it may have great natural human resources and all that, very smart, educated, committed, great labor force world class labor force. But the fact is, they got a lot of people in China who are also interested in doing that. And hopefully I'm not sure of this but a lot of people in the US too. And it's a global industry now. And software runs the world. You know that better than anyone. And so where is Japan going on this? That's a long way to go. Even in the university environment I see that the education processes that are set even for computer science degrees are just not state of the art. They're not producing graduates. Son, soft bank son, he was in the news just a couple of days ago saying that Japan is a developing country compared to a third world in terms of AI capability. And if you look at the number of engineers that can do AI in Japan it's really down ranked. It's like number eight or number nine in the world. This long-term weakness having to do with software development and Alan was explaining earlier it's put Japan even further behind as software has become more and more important. So that's a little bit of a catch up game right now. But we think that we can help that. Does that mean opportunities for you? Oh yeah. There are a lot of good software companies that are dominant in a category domestically who stand up well when foreign companies in the category come in. But the Japanese software community in particular has not yet figured out how to get exposure for how to hire and manage teams outside of Japan. And there are enough products that have good solid legs in Japan I think with the right leadership and right support outside. Just like when we brought Salesforce in Japan, Concur Marketo using that same kind of approach to help a handful of select software companies out of Japan be viable in the U.S. and Europe. I think there are some real possibilities. It won't be easy. It never is. It's not easy for a startup in Silicon Valley to really catch the wave because you want your product to be a mobile product. Real success is global success. So my ultimate goal with Sunbridge was prove that there are enough creative people in Japan that you can produce good investment returns as a venture capital here. That was goal number one. Second one, and we had done that by 2000-2004 we were producing investment returns similar to the best funds in Silicon Valley. The second goal which we have still not achieved and no one in Japan has achieved is to show that Japanese tech entrepreneurs, Japanese software entrepreneurs can complete globally with if not necessarily the best of Silicon Valley there are a lot of companies that are viable good solid companies in their categories that come out of Silicon Valley that come out of Europe, come out of Australia that come out of Canada and there's absolutely no reason why in a category like robotics or factory automation or even office software with a really good creative idea there are a number of companies that you would expect a sales force alumni to create in Silicon Valley there's some really good sales and marketing software coming out of Japan we're not coming out of Japan, it's being stuck in Japan and so the second goal of helping the better Japanese software startups figure out how to go global is a goal that we've not yet been able to go around. So the big question is you've been on both sides you've been all over the spectrum as a venture capitalist and dealing in large companies with big prospects and I just wonder where you're tilting in the future are you going to be tilting more or to these other developing sciences? Yeah, my because my expertise is in software and because I believe I still believe that it is absolutely possible for a Japanese software company to be viable globally and I know how to execute on that better than any other industry my heart is there my mind is telling me that there are some other opportunities if I look a little more broadly if I think that my competitors are financial investors who don't understand the details of the industry any better than I do and I have a personal network that I can leverage in Japan, I figure that I ought to also be looking at some of these other companies that are outside of my enterprise software comfort zone where there's clearly a world changing technology that I'm certainly not at a disadvantage to a financial investor finding these and bringing them to the state so I am going to be looking at some other types of categories of company you know this may be the most exciting time of all for you Alan I think so, yeah I think it will be so Steven we're out of time but I want to offer you the opportunity to make sense of this conversation and to summarize what we've learned here today we've learned that when you get old guys together you can talk about their youth the good old days no I agree Jay with your last question there is the great thing about being in this industry and I'm so fortunate that I also was able to get into the software industry in the early days is the constant change in the innovation and the opportunity and as industries decay other industries or other developments take their place it's just wonderful how that occurs within technology it happens faster so you can see it up and much much at a faster pace so you know I'm getting older now myself but I'm more excited about this opportunity that Alan was just explaining about helping Japanese companies be successful abroad I think part of it is we've helped American companies come into Japan for so many years now decades and I kind of feel an obligation to help Japanese companies do the same to go abroad to address the 90% of the market that's outside of Japan so I'm equally excited about this I don't know if that's a summary Jay but anyway that's what I feel at the end of this interview Alan so it's part of a profound relationship we have had with Japan over the years and I think it works to our benefit to help them and you guys are helping them and that's more important than anything even the money I agree great to talk to you