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Month: March 2019

New Policy At Tokyo Stock Exchange

As anticipated, TSE (Tokyo Stock Exchange, Inc.) announced its new policy about the companies listed in the 1st section as well as restructuring plan for other 3 sections.

First off, I really like the ideas behind these changes. TSE 1st section has been criticized by foreign investors for so long by the fact that there are simply too many companies listed and very few companies are doing disclosure in English.

To them, the TSE 1st section is a hard-to-choose market and hence wasn’t appealing until now. Plus, there wasn’t a clear set of rules for the companies to be disqualified from the 1st section. Now that a company whose valuation is below $250M and not doing disclosure in English will be disqualified and forced to be out of the 1st section.

It’s not just a matter of IR. It’s a matter of CEO running a public company as well. There has been a clear message made by TSE, saying a CEO needs to communicate with foreign investors with his/her own words.

Apart from the new policy introduced in the 1st section, the other 3 sections will be merged into 2 sections, namely Emerging and Standard. I assume current Mothers and JASDAQ will be merged into one and the 2nd section will remain as it is under a different name.

What I would like to point out here is the existence of TOKYO PRO Market, which is TSE’s 5th section that no one ever knows about. The original inspiration of the TOKYO PRO Market was AIM (Alternative Investment Market) at the London Stock Exchange.

For those who don’t know history of TSE, TOKYO PRO Market was named after AIM and it was called TOKYO AIM back in 2009. Unfortunately, there wasn’t a single company that went public in TOKYO AIM for years. Eventually, TSE decided to change the name to TOKYO PRO Market upon dissolution with the London Stock Exchange in 2012.

To me, a concept of the TOKYO PRO Market is still valid and sounds promising. Japanese startups definitely need this kind of alternative market where only professional investors are allowed to participate. By professional I mean, institutional investors who make a decision based on a company’s long term vision and future value created by the company. Not ones who buy and sell a stock based on short term observation.

We still don’t know the exact criteria about the new Emerging and Standard sections. However, there is a rumor saying the hurdles for these two sections will be raised too. I’m hoping TSE will do something about TOKYO PRO Market so that startups can choose a proper market according to the nature of their business when going public.

If a startup is B2C, then what used to be Mothers where a lot of individual buyers/sellers participate might be appropriate. If a startup is B2B, biotech or R&D oriented, then TOKYO PRO Market might be the right one.

The biggest problem about TOKYO PRO Market is there is no unicorn listed there and the amount of transactions is nearly zero. It’s a chicken and egg problem, but it can be solved. We need to create demand first so having a unicorn going public in that market is crucial.

RISC-V Is Not Free, But It’s Open

I’m writing this blog post in Hsinchu, Taiwan. I’m here to attend the RISC-V Workshop, which is a 2-day event where people in the community come together and share their latest activities regarding RISC-V development.

For those who don’t know, RISC-V is an open-source hardware instruction set architecture (ISA) based on reduced instruction set computer (RISC) principles. Because it’s open source, everyone can make their own RISC based processor without paying a royalty to anyone.

There were so many things I learned from not only the speakers but also the people I’ve met during a networking session. Among them, I want to bring up this one in order to highlight the biggest misconception about this new ISA.

“RISC-V is not free, but it’s open.”

RISC-V is free in the sense that it’s a royalty-free architecture, but it does not mean cost free. In fact, RISC-V could be more costly than the established architectures like ARM since there aren’t enough tools out there in the market yet and you will have to create them by yourself at least for the moment.

However, it’s completely open in the sense that anyone can refer to its specification, download the RTL, run it on FPGA, make necessary changes and even propose changes to the RISC-V Foundation if they should be part of the specification. There are some physical boards available so that you can run your code on actual RISC-V processor if performance is a crucial factor.

I’m happy to see the workshop is taking place here in Taiwan. At the same time, I’m a bit disappointed by the fact this whole movement is happening without much involvement from Japanese companies.

This reminds me of the days when Linux just came out. Japanese companies insisted to keep using a proprietary OS like Solaris and WindowsNT because they could get an enterprise level support from vendors. Now that we have RedHat and no one argues the cost-effectiveness of Linux today.

In exchange for not being part of early Linux adoption, Japan lost its position as an innovator in the Linux community. Japan could make the first Linux based smartphone. Japan could be the major PaaS player built with Linux. Now, these seats are taken by Android and AWS respectively.

I always tell my team, “the longer you delay getting feedback, the more risk you will have to deal in the future.” This applies to the release of new products and services to potential customers as well as the understanding of game-changing things like RISC-V.

Right now, the best way to get real feedback and minimize the risk is to listen to the people in a community and become an early adopter by ourselves. I’m hoping Japan won’t miss this opportunity and make the same mistake twice.

Should A Company Pay Dividends?

February and March are the busiest months for IR, CFO, and CEO since a fiscal year ends at the end of December for many Japanese companies and they publish their annual report during the following February and March.

I try to read a relevant company’s report as much as I can. In fact, I enjoy reading it a lot. It shows where the company was and where the company is heading in the future. While I was reading it, I stumbled upon a quite interesting comment from the CEO who runs a big Japanese public company.

He said that people who buy a stock just because a company pays dividends are not looking at the core value of the company. According to his theory, these people are willing to make extra money by holding a stock that yields dividends and not willing to re-invest into a company that paid the dividends. That was the reason why his company never paid dividends.

I’m not sure if he really means it, but that’s how it was said during the briefing. Assuming it’s true, I thought this is a very self-oriented way of looking at the stock market.

Every CEO who runs a public company needs to ask himself/herself this question: “Where is this money coming from?” People are buying your company’s stock because they have extra money to spend, and that extra money might come from the dividends paid by other companies.

If your company doesn’t pay dividends, then there is less money going back to stockholders. Hence, there is less money going to other public companies because these stockholders do not have extra money to spend. Simple.

If all CEOs start to think like that, it means the beginning of the market shrink. The amount of money floating within the market becomes less and less over time. You need to give first before you get.

It’s almost irony to see CEOs whose company doesn’t pay dividends are the ones criticizing difficulty of raising money from the stock market. These CEOs say like buying the power of people is weakening or there is an economic winter making stockholder not to buy anything.

Well, think again. That’s because your company is not paying dividends.

Power of GPU: 20 Years Ago and Now

When I got my first job at Sony, I was assigned to work on the graphics library development of PlayStation2 gaming system.

My job at that time consisted of writing code with assembly-like programming language called microcode, packing that code together with polygon and texture data, sending them to Vector Units (aka GPU) via DMA, and letting GPU do the rest of work while minimizing involvement of CPU.

I had to adopt every technical tweak in order to get the best performance and achieve the highest frame rate out of that gaming machine and GPU. That’s simply because the library was intended to be used by so many developers that make blockbuster game titles and they relied on it.

Time passes and now GPU is used for more generic purposes including computation of neural network. If I were a software engineer who just graduated from university today, I would jump straight into the world of neural-network-on-chip bandwagon without thinking much.

I didn’t realize that my knowledge and experience of GPU programming had to do anything with AI back then. I believe NVIDIA didn’t realize it neither.

To me, it’s quite interesting to see young software engineers learning how to write code against GPU without CUDA these days, especially ones trying to use Raspberry Pi as a deep learning accelerator. Special thanks to Broadcom for making its VideoCore specification public.

At the same time, it’s sad to see that Japan is a bit behind of this movement. The country used to host many GPU engineers. We had Sony, Sega and Nintendo. Every gaming system had such a sophisticated graphic library that pulled nearly 100% performance from its GPU.

I cannot stop wondering what if the engineers behind these gaming machines were given a chance to work on today’s neural network chip development. Maybe Japan could be in different position in AI industry by now.

The Best Movie of 2018

Most of my blog posts are about startup and entrepreneurship, but this one is slightly different. Let me introduce my personal best movie of 2018 called ALPHA.

The reason why I liked this movie so much is that it’s a story about father & son, what it takes to be a leader (or losing one), and how a dog (a wolf, ALPHA) became a long lasting human’s companion animal. Somehow I felt it’s about entrepreneurship too.

Without further ado, just watch the trailer below.

A little disclaimer: I have a Miniature Schnauzer at home so this is a definitely another reason to like the movie.

I watched this movie almost by accident while I was on the flight to Germany. Then, I bought a Blu-ray version and had it shipped from United States since the movie is not available via both download and disc here in Japan.

I watched it again at home (with my own dog shitting right next to me), and it still struck at my heart. This is really good movie.

Before this one, Seven Samurai and 300 are the ones that I related with the spirits of entrepreneurship and leadership although they are not exactly made for that purpose. ALPHA is now my new addition to the list.

Deciding When to Change a Reporting Line at Growing Startup

On March 1st, we welcomed a couple of new employees to the company, which make 38 people in total. We grew to this number just in 2 years.

In my experience, one of the first things you as CEO need to do before a number of employees hits 30 is to change reporting lines in your organization. Thanks to Slack, Hipchat and other modern communication tools. It is now possible for a single person to handle so many 1-on-1 conversations with people in an organization today.

However, you will run into a serious trouble later on if you continue to let employees report to you directly. For employees it’s always a preferred way of communication because they don’t have to deal with intermediate people in organization and they can get a straight answer from CEO whether the answer is yes or no.

A problem gets much worse once that habit becomes a part of company culture. I’ve seen few CEOs who struggled with this communication overload problem because their startup stayed in 10-20 people stage for too long, which resulted in everyone at the company getting so used to report to CEO directly. It will require great effort to change the reporting lines in such organization since it’s equivalent to changing a company culture.

So here is a list of action items I would recommended before that happens.

1. Remove yourself from unnecessary Slack channels

There is a tendency for employees to bring you into every new Slack channel they create. Remove yourself immediately if you find it irrelevant from the perspective of company management.

Product update or project specific channels are the usual suspects. Do not feel guilty about removing yourself from these newly created channels. Do it fast before they assume you are in the channel.

2. Stop attending product/service update meeting

If you are involved with every product/service update meeting, stop attending it. Instead, get updates from CTO, VP of Product or a person who is in charge of product/service. Again, employees tend to bring you into these meetings without thinking much about the value of time given to CEO. Say no when you get such an invitation from Google calendar.

In my opinion, there should be clear distinction between management and execution even in startup at early stage. You as CEO and other C-level people are responsible for management. Employees are responsible for execution. Product/service updates are considered as execution. Attend these meetings if and only if they are absolutely necessary.

3. Narrow down your reporting lines

The ideal scenario is that you get product/service update from CTO, sales update from CFO, and everything else from COO. These 3 reporting lines should be enough for you. CEO has additional reporting lines that no one else at the company has. These are the reporting lines to stakeholders, which include investors and key partner companies.

The information goes the other way around through these additional reporting lines. It’s CEO giving updates to the stakeholders, and it requires careful and thoughtful preparation by compiling the updates you get from CTO, CFO and COO.

4. Be clear about your communication policy and state it company-wide

Once you decide to change your reporting lines, then share your communication policy with all employees at the company. This helps them understand why you are doing it. Again, the time given to CEO is one of the most valuable assets within the company and everyone should understand it.

Successful startups are organized in such a way where CEO can maximize his/her time for the things that only CEO can handle. Startups grow slower or sometimes fail because CEO is always busy with the things that someone else can handle.

Hope above list helps a startup CEO do the right thing. I know my suggestions are a bit extreme to some extent, but running a company in resource constrained environment requires a high-level discipline. Without it, a company cannot grow beyond 30, 50, and 100 people. It’s up to CEO to make the call as soon as he/she can.