opinion

Think about community not ICO.

Omise CEO Jun Hasegawa

The article was authored by Jun Hasegawa, CEO of Bangkok-based FinTech startup Omise, and was first appeared on his own Medium feed. It has been reproduced by The Bridge with the approval of him.

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While ICOs have been around for a number of years, only until 2016–2017 did we start to the a whole hosts of ICOs and ICO funded projects entering the mainstream world. I for one have made the decision to step into the center of the ICO activities with hopes that through this unprecedented experience I would challenge myself to learn and grow, while also contributing back to strengthen the blockchain ecosystem in the long run.

How did I get here?

The Omise team introduced their beta service at Echelon Thailand in 2014.

In 2013 I founded Omise as an e-commerce platform based out of Thailand. Though the efforts to grow out this business I experienced first hand how outdated payment processors, gateways and financial institutions impeded e-commerce growth across the Asia-Pacific region. In realizing this, my co-founder and I pivoted Omise to became a fully-devoted fintech company focused on providing the most reliable and secure online payments services.

About a year after we launched Omise payment I stumbled across this technology called blockchain, and more specifically Ethereum-based blockchain. This was back in early 2015 when ETH 1 was valued less than US$ 1. I immediately became fascinated by this technology and the promise it brings to scaling Omise’s business.

Since my introduction to the blockchain technology, Omise has committed itself to supporting and strengthening ways to bring this promising technology into mainstream business.

Blockchain community

There are several aspects of what makes blockchain technology so attractive to me personally. The first is, of course, the technological potential. However, there is also another very important aspect that often is glazed over by mainstream world but I feel deserves a greater spotlight: the blockchain community and its ecosystem.

Having submerged myself in the open source technology world both through OmiseGO blockchain and Omise payment, I am truly convinced the unique value of open source technology is its surrounding community. With this, I believe it is Omise and OmiseGO’s responsibility as a member of the wider community to help contribute to and grow it.

From the very beginning of OmiseGO (initially called Omise Blockchain Lab) Donnie and I took the approach of viewing community contribution, sustainability and scalability as a core part when benchmarking our “return on investment”. For instance, Omise provided funding to support the Ethereum’s DEVgrants as well as to DEVCON 1 and 2. Every time we decided to provide funding to support a community initiative,

I’m certain our board members were thinking to themselves “Crazy Jun, here we go again”. However, I fully believe in the community approach and I do believe our contribution, though modest, have provided us with the opportunity to build stronger network of relations amongst the blockchain and Ethereum community.

I would like to reaffirm that Omise and OmiseGO are committed to continuing it’s support to the blockchain and Ethereum community as we move forward into the future.

One example is our long-term supportee “Raiden network” which has been based on Ethereum (Git link). Heiko Hees, CEO at Raiden network, is a distinguished person who has been taking an approach, from an early stage, to the problem of transaction speed (known as “TPS”) that Ethereum will sooner or later be confronted with.

Subsequently, we continued to build more and more relationship with other members including founders of Ethereum and other leading roles in this community-crypto society.

Cryptocurrency for Society

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Have you ever attempted to take apart the field of finance? Today’s society employs cash, credit cards, points and other units which both express and alternate primary values in a real form. Thanks to a variety of units, it enables us to make an exchange from one unit to another. Because barter trade was often difficult to apply a measure properly to every single value, people were willing to make a common system that we all agree on.

Accordingly, community was born and currency as a common system was invented. (You can imagine a situation like “This chocolate is worth $1. Do you agree on a price?”) The idea of currency began to widely spread and the society admitted the use of currency as a measuring tool for measuring thousands of values.

Nevertheless, the political (“centralized”) orientation favoring some particular belief by each nation led to produce separate currencies which are in need of some form of administration. As it turned out, the society found a value-alternative method in a temporary sense but ended up with more complicated societies and stood too far from the establishment as a united world.

Furthermore, a form of cash advance into credit cards and other convenient figures. If you are ought to take apart credit cards, they project the amount of money he or she could afford for in advance and gather used-values into one place. In spite of this, due to the spread of the internet across the world, our societies were in search of more convenient methods.

After all, that is where cryptocurrencies came in. The cryptocurrencies were epoch-making architecture which remedies a problem caused by the centralized authority that human history has been facing for a long time. Thanks to its architecture, they make a progress of decentralized system in the true sense.

The other side of the coin is that, this unique system requires greater coordination amongst multilateral participants since participants could influence on the system itself. To put it shortly, participants in the community are really important. It has to be designed to ensure that decision-making is based on whether a majority of participants in the community agree on.

The standard practice is that we can hardly claim a majority of the population becomes the thief in our society, in the same way, wholesome and right decisions are almost surely made for the community.

Yet it is no longer the case with ICO; ICO could potentially demolish the ecosystem in the society & in the community. You might come up with the question “Why OmiseGO is associated with ICO then? We consider ICO as a revolutionary method to raise funds in the next generation and it has an unbelievable potential unless we mistake the method of investment.

Therefore, OmiseGO conducts ICO. In the meanwhile, we are aware of some points.

  1. Ensure many participants can participate.
  2. Raise funds only we need.
  3. “Giving without expectation in return” mindset.
  4. Always stay close to the community (pre & post ICO as well)
  5. Transparency.

We came to the conclusion with these elements in accordance with the active discussions in Slack, Twitter, Reddit, and so on. On the basis of the above, we have been updating our ICO, including a shift form Public ICO to Private ICO.

Image credit: lightboxx / 123RF

It is quite possible to raise xx M USD in 30 seconds from a viewpoint of a demand in the current market if we release the address to the public. Still, we cannot leave the theory “rich grow richer” in this manner. Therefore, we decided to take an opposite direction, departing from a conventional wisdom in terms of the ICO. Of course, we neither treat our approach as consensus -gaining among all, nor wish that will happen. However, after all things considered with a decent amount of time we spent on the discussion on how to wholesomely sustain the ecosystem, we arrived at such conclusion.

A method of ICO will keep progressing and come into common. It is not surprising that a government will engage into ICO one day. Yet until then, testifying whether ICO is a better solution over the conventional methods in terms of the fund raising will ultimately affect our society in the future. Moreover, it is essential for a new society of the cryptocurrencies too.

We don’t mean to mention their names, but if you are the member of the society, you should keep in mind that disruption only occurs in a state with “already-developed”, not with “under developed.” We are meant to raise the standard in order to develop an ecosystem by coexisting and less conflicting each other. Harmonization is the key success factor. Personally, I am not very pleased with the ICO that seemingly intends to raise a mint of money in one year or money with no upper limit because it might corrupt the ecosystem.

(I do not deny the projects. All projects seem interesting and splendid.)

Ecosystem by OmiseGO

OmiseGO has set a goal: Online payment for everyone. Throughout our experience as a business operator in the past two and a half years allows us to explore pain points of customers and infrastructure providers. In order to solve their problems, we kept running full speed. And then we realized that in order to achieve our goal in a true sense, we are in charge of building our ideal ecosystem. Some may say our proposals are quite unrealistic and other giant corporations with sufficient financial resource will eventually take actions instead.

But what is the most important is how fast to put it into practice.  It is certainly possible that only we cannot achieve that. But as stated above, if we work together in the society in full harmony, our idea is more likely to become reality.

Omise boosts to our full speed ahead in a true sense. Omise payment continues to provide business and individual customers an acceptance that can receive values. OmiseGO constructs a network as it will serve as a useful venue for exchanging values. And above all, we are looking forward to making a more exciting announcement in Q3/2017.

Relationship Companies vs. Product Companies

Tim Romero

This is a guest post by Tim Romero. Tim is a Tokyo-based entrepreneur, podcaster and author who has started four companies and led Japan market entry for others since coming to Japan more than 20 years ago. Tim hosts the Disrupting Japan podcast and is deeply involved in Japan’s startup community as an investor, founder and mentor.

The Japanese translation of this article is available here.

Image credit: bakelyt / 123RF

There is a common misunderstanding among Japanese startups that is causing many of the to go out of business just as they should be hitting their rapid growth phase. Correcting this misunderstanding would do more to promote the success of Japanese startups than all of government startup programs and academic accelerators combined.

the difference between a relationship based company and a product based company is important, often not obvious at first. All famous consumer brands are product companies, Facebook, Nike, Honda, Apple, Seiko, Google. Customers are attracted to them, because of the product they make. On average customers feel a greater loyalty to those companies than those companies do to their customers.

Sure, all of these companies developed a brand that acts as a kind of halo, that lets them charge a premium price and sell a greater range of products than their competitors. But, in the end, it’s all about the products they make. Product based companies can scale globally. But, just because you make a product, doesn’t mean you’re a product based company.

These relationships were more important back then

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In fact, most Japanese companies with products are not actually product based companies at all. They’re relationship companies. This is slowly starting to change, but the cultural importance of relationships has a long history here. When I started my first Japanese company back in 1998, the goal of almost every startup was to become part of a large company supply chain. Having that kind of relationship guaranteed a steady, if low margin, stream of business.

These relationships were more important back then, because although the keiretsu were starting to crumble under their own weight, most companies still preferred to business within their own corporate groups. And, small to medium enterprises had very little independent buying power. In fact, these captive, protected keiretsu micro-markets, is one of the big reasons Japan did not develop a globally competitive software market in the ‘80s and ‘90s.

At the time an independent Japanese company that would sell its products across multiple keiretsu groups, was a rare and powerful beast indeed. For the most part, the way to survive was to build what your client, very often your only client, to build what they told you to build.

Things have improved a lot in the last 20 years, but still a huge number of Japanese startups are really firms that have one major client and no hope of scaling. They have a relationship that guarantees a certain level of orders, but they have no product that can stand on its own in the marketplace.

Don’t get me wrong, although way too much importance is placed on relationships in Japan, it’s great to have those relationships. Knowing the right people can give you a huge head start in getting your first customers and in getting distribution. But, your product has to be more important than any single customer you have or things are going to break down eventually.

Relationship Companies vs. Product Companies

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Now, it can be hard to tell if a company is truly a product company or if it’s a relationship company in the early stages. And, nearly all companies with a product will insist that they are product companies. But, a few giveaways are:

  1. If you are still, or if you are planning on doing custom development work after you receive funding, then you’re almost certainly a relationship company.
  2. If your product requires extensive customization and you’re the only company doing that customization, than you’re probably a relationship company.
  3. If your product started out as a project you did for one customer and then you decided to turn it into a mass market product, then you are most likely a relationship company.
  4. If losing your two biggest clients would put you out of business, then you are certainly a relationship company.

There’s nothing intrinsically wrong with relationship companies of course. In fact, in the early stages, relationship companies often see traction sooner and grow faster than product companies. But, relationships don’t scale and growth will eventually be limited by the strength of the CEO’s industry connections. Of course, relationship companies can still make a lot of money. And, powerful, well connected CEOs can even take a relationship company public, but they can never scale to be a global player.

Actually, relationship companies are fine, if you have strong relationships and want to leverage those into a company, do that. More power to you. The real problem is that this relationship thinking is holding back Japan’s startup community.

The tendency to value relationships over products, is probably the single largest obstacle preventing Japan from really developing a pay it forward startup culture. I see it constantly. Far too many people view their connections and their network as something to be jealously guarded, as some kind of competitive advantage. And, people who think along these lines are unlikely to make introductions without trying to extract value from them.

Advice for Japanese startup founders

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Of course, there are plenty of Japanese who have, or at least try to, embrace the idea of open networks and paying it forward. But, we’re in the minority. At least, for now. But, we’re going to change that. So, advice number one for Japanese startup founders comes in two parts.

Part A, never pay for an introduction of any kind. Never agree to let an organization take a percentage of financing that might result from an introduction to a VC or from coaching you on how to present to them. Most of these people are trying to scam you anyway. Likewise, never give someone a percentage of a deal that might result from introducing you to a potential customer. Of course, affiliate programs and reseller programs are powerful tools. Use them when appropriate. But, as a startup founder, if someone ever tells you that they know a prospect that you should approach, but will only make that introduction if they get a percentage of the deal, politely walk away. You’re dealing with a gatekeeper or a parasite and their opinion is probably not highly valued by the person that they are promising to introduce you to.

Part B, let’s all start making a conscious effort to pay it forward. Promise yourself that at least once a week, no matter what, you’ll introduce two people who would benefit from knowing each other. Or, recommend another startups product to a potential customer. Now, I’ll warn you in advance, if you do this right, it will feel unfair. You’ll feel like you’re making five times as many introductions and ten times as many recommendations as you receive. But, that’s fine. It means you’re doing it right and you’ll greatly benefit from this in the long run. I promise.

And, best of all, if all of us commit to this, open networks will win and we can put the gatekeepers and the parasites out of business.

Now, I sometimes get accused of being a cheerleader for Japan and it’s true. I’m quite optimistic about the future of Japan in general, and Japanese startups in particular. I suppose part of the reason it looks that way is because so many people, including the Japanese themselves, are often hesitant to point out all the things that are going right in Japan. People also tend to ask me about top down ways of improving things for startups in Japan, but top down things are going pretty well. The trends are all moving the right direction and there’s only so much you can do top down anyway.

The real power for change in startups is and will always be bottom up.