Kii | Interview with its Co-Founder & CEO – Masanari Arai
In San Mateo (CA), we meet co-founder and CEO of Kii, Masanari Arai. He shares his story how he co-founded this startup and how the current business model works, as well as what the current plans for near future, and some advice for young entrepreneurs.
The transcript of the interview is included below.
Martin: Hi. Today we are in San Mateo, in the Kii Office, with Masanari. Kon’nichiwa.
Martin: Who are you and what do you do, Masanari?
Masanari: I’m the CEO of Kii Corporation.
Martin: And what is it? What is Kii Corporation?
Masanari: Kii Corporation is focusing on solution for the mobile. We are providing backend technology to mobile application developers. And also these days, one of the famous segments is IoT, Internet of Things, we are also providing backend for the IoT devices.
Martin: What did you do before you started this company?
Masanari: I was focusing in my entire career after the university on mobile. After I graduated in the university and got a master’s degree, I joined IBM. That was IBM-Japan. I was in ThinkPad group. When I joined IBM in 1984, and there was no notebook PC at that point. So IBM was working on a new notebook PC. ThinkPad was that PC, and I was the product manager for ThinkPad.
Then, I spent 10 years in IBM. When I was doing product management for ThinkPad, I was travelling around Silicon Valley, meeting with a lot of innovative people and start-up companies. What I was looking for was the technology that would make ThinkPad more attractive. So we tried to partnership with many start-ups to acquire their technology into ThinkPad and to make ThinkPad more attractive for the people. Because I have spent so much time in Silicon Valley, I started to love Silicon Valley. So after 10 years in IBM, I decided, “Okay, maybe it’s time to quit at this big company.” I wanted to join a small, small start-up, so I joined the company called Intellisync. Intellisync was providing mobile software to synchronize mobile device to the backend system like Microsoft Outlook Exchange Notes, that kind of stuff. When I joined, the company had only five people. We really started from scratch at that point. From a 200,000 people company like IBM, I joined a five people company. I was one of the original members in Intellisync. Then, I spent more than 15 years in Intellisync. So what’s happened, Intellisync was focusing on mobile solutions. I joined in 1995. Then, in Intellisync went to IPO in 1996. So that was a great experience because 1995 was the start of an internet bubble because that year Netscape went IPO. I had many experiences there. But in 2000 everything crashed. Then from that point, we started up again. In 2006, Nokia started talking to us because they wanted enterprise mobility solutions by using data synchronization technology. That was what Intellisync was focusing on and making Nokia devices for the enterprise grade device. Then Nokia started talking to us and finally decided to acquire us. So in 2006, Nokia acquired Intellisync. So that was what happened. At that time, I was the general manager Asia in Intellisync.
At that point as Nokia was acquired, Nokia was not really doing well in two countries—Japan and Korea. They wanted to get a lot of knowledge about the Japanese market from me, and so I became country manager for Nokia Enterprise System. So I was working for Firewall, ECEs forms, and also in Intellisync Mobile Software Technology. So we were setting those things. Then in 2006-2007-2008 time frame, Nokia was fading out from Japanese Market. At that point, I proposed to MBO, originally Intellisync Japan business from Nokia. We got an agreement in 2008 and acquired a small portion or the original Intellisync software business back to us and that was the start of the company Kii. At that time, the company was named Synclore instead of Kii. So we got only 10 people and started all over again in 2008. What happened was, Intellisync originally started from Silicon Valley and became a worldwide company, but the portion we acquired back was just the Japanese portion. So I wanted to expand my business to the entire world again. Because I spent so much time in Silicon Valley, my nature became like a Silicon Valley guy. When I want to expand, usually Silicon Valley acquires companies. So we decided let’s find a company to acquire. At that point, we looked for many companies but they were so expensive because that was another bubble in 2008. We spent one year in that phase, expanding in the Japanese business and tried to expand outside of Japan. However, in 2009, the Lehman show happened and everything was changed. EM became so high and all venture money in Silicon Valley stopped. As result, a lot of companies were in trouble and so we could acquire a company at that point. So we found a company who is providing mobile smart phone technology to Korea. We also provided the latest technology to Korea, so this was a very good synergy because that company has smart phone client technology and Intellisync spin-out had java side technology. So by combining cloud technology to moving the data around and smart phone client technology, that makes a new world. So we decided to merge the two companies together. The company name was called Servo. Actually, it was Christof, the German guy… I think he came from Munich. So we merged together and then became Kii.
Martin: Okay, great.
Masanari: Sorry, long story.
Martin: Okay. But how is it for a Japanese guy who is normally supposed to normally work in one company for 30, 40, 50 years to step out of a big company, join a small company, and justify that to his family?
Masanari: What was happening inside of IBM was like it was having an internal battle and a lot of conflict inside. So ThinkPad was created like a PC company, but at that point, IBM was always pushing an IBM operating system for PCs. So they were fighting with Microsoft but from a PC viewpoint, we have to have to support both. However, they were always pushing too hard and so that makes the IBM PC business so hard and uncompetitive, because you have to support another operating system because of IBM. At that point, I was really, really frustrated about IBM strategy. As a part of a big company, I cannot make decisions quickly enough to move to the next step. At that point, Compaq, Gateway, so many PC companies were competing with each other. So three months is a really, really long time for the PC work. However, IBM wanted to spend one year to decide to do anything. At that point, I was so frustrated. Actually, I became sick. I had fever for two years because of the stress I got. So I just wanted to have freedom and make the decisions by myself quick and wanted to move ahead. So that came from the frustration of working in a large company.
Martin: Masanari, how did you come up with the company name Kii?
Masanari: We have two stories, which one do you want to hear?
Martin: The true story.
Masanari: Okay. So I mentioned the two companies merging together with almost the same size and kind of operation. If we would proceed with one name inside the company we would create a kind of perception that one company acquired the other company. I may start seeing people’s conflict. So, I didn’t want that to happen. So, this is a new company, we merge together, and we are creating a new company from now on so let’s work together. So that was the concept. I wanted to have a new company name to make that happen. Executive teams from both companies spent almost three months to decide the new company name. We had more than 200 candidates. Some people liked it, some people didn’t. We had a very long battle about the company name and we couldn’t decide. Then one guy went to godady.com, trading domain names, and we found that Kii.com is on sale and I thought this may be a great name for the company but I wanted to make sure that everybody was happy. At that point, we had employees in United States, Japan, China, Spain, and Germany. We asked everybody how Kii sounded. And everybody said “Wow, it sounds really good.” The US people said, “Kii is key”. We wanted to be key company. Japan said, “Wow, Kii is like a place, originally where the Japanese god came from—Kii Peninsula,” and the Chinese people said, “Wow, that sounds really good, sending Kii, or Qi.” So everybody loved it, so we decided to have the company name Kii. So after a while, we talked about Kii came from the origin of the Japanese god, so this name was decided because we want to be the origin of that new business. But truth is that.
Martin: First domain, then the story, and then the other way around.
Masanari: Yes, yes. That’s right. Yes.
BUSINESS MODEL OF KII
Martin: Masanari, how does the business model work right now?
Masanari: So we are providing a platform to mobile application developers and also IoT device manufacturers. How this works. Basically, our company body proposition is when you want to develop a mobile application, you can develop everything by yourself. But typically, start-up people have frontend application, something they want to concentrate on, because they have idea around the application. But the backend side is really painful because you have to hire a server engineer, you have to operate the server, and you have to scale the server if you have a number of users. If you spend a lot of time on this, you cannot spend more time on this application side, that’s the most important thing. So our value is we take care of all the backend and you don’t have to do anything, so you just concentrate on the application side, so you come up with total scalable solutions. So we have a lot experience working with mobile carrier in the previous company, Intellisync, like Entity, Docomo, and SoftBank. We have about 50 million users in the Southeast and that kind of stuff. So we have a lot of experience and can provide a scalable backend. Basically, our business model is walking this application developer to kick-start their activity with providing free service at the beginning. Then, if those people start growing, we basically charge a fee based on the usage of the server for storage space, CPU power, and that kind of stuff.
Also, we are working with device manufacturers. When you come up with a webcam or a smart power, whatever, you usually want to have a companion mobile application and also want to understand how to manage the device. So we provide device management and device analytics so people can understand how to use the device and also mobile application development platform. So we provide those three key elements to make mobile IoT device successful and we basically charge them based on the number of device.
Martin: So if I am a mobile developer, I can concentrate on my frontend, designing how the interaction with a customer will be, and then I will use your servers and get some analytics on how the user behaviour was without needing to develop all the kind of data sourcing and analytics stuff. And in addition, you will take care of all the hosting stuff?
Masanari: Yes, yes.
Masanari: The basic idea here is you don’t have to do any server side coding and you don’t have to do operate the server. Also, we provide a lot elements of functionality you need to develop mobile application. For example, I can user management, data management, push notification, analytics, and so on. So to prove our power, I asked our engineer to develop a copy of the Instagram and he finished it in one week. So that is the kind of power that we have.
Martin: How do I connect the frontend with the backend provider by you then? Is this some kind of framework that you provide, or is it something else?
Masanari: When you start developing applications then you can come to our developer portal, and that is developer.kii.com, then sign up, download the SDK, then just plug-in the SDK, then your application is just talking to the SDK, and then you can get all the functionality for the backend. For example, to do user management, such as issuing a user ID and the password, verify password, and manage the user ID and password, you can just add two or three lines of code into your mobile application, then that code will talk to SDK, and basically everything is done. If you do the coding for all those user management, you have to spend a lot of time, and you don’t have too.
Martin: Okay, understood.
Martin: So let’s talk about corporate strategy. What makes you unique in this market place? Are there any other players who are doing similar things?
Masanari: Yes. Actually, we are not the first company doing this mobile backend, there are many companies that were established before. For example, a company called Parse was acquired by Facebook, StackMob was acquired by PayPal, and we have many competitors. But our uniqueness is maybe a couple of things. One is, we have started from Japan and have a big operation in China. So, we have a big strength in Asian market, not only focusing on U.S., but also on Japan, China, and all other Asian countries.
Martin: Do you have some kind of cost-competitive advantage or not?
Masanari: No, actually. The advantage is, for example, you are the developer, and you have to deal with English all the time, but because we have a big operations in Japan and China, we are providing Japanese and Chinese, including documentation support. Also, in Chinese market for example, if you want to publish your application into China market, there is no Google Play. In China, it’s really hard to access Google Play. As a result, you have to publish your application into China local app store, and most people don’t know how to do it. So we provide a program called Kii to China. By using Kii to China, you can publish applications very easily. Just give us the APK, and then we will publish the application on behalf of you to the Chinese local market. There are 200 different local markets. We select and partner with 20 China local app store and do the publishing. This is like a technology and language barrier because a lot of the people in China and Japan don’t want to deal with English documents, so we also support a Japanese and Chinese local community so that everybody understands the local situation in the technology program. Like I mentioned, we also help in distribution. Distributing mobile application to the Asian market is a mystery, right? You don’t know how to do it, so we are helping into appropriate distribution.
Martin: On a success-base or is it included in your basic product?
Masanari: Basically, we are always open. So if someone comes in and says, “Please help us to distribute,” we put them, for example, into the Kii to China program and everybody can use that service. And also, we start to see the growth and jump in to help those applications make better. For example, ASTRO File Manager, that’s one of the partner, that’s a famous file manager for Android. When we started working with them, they had only 15 million downloads, that’s pretty good, 15 million. After we helped, now they got around 75 million downloads and 25 million active users. That is huge, right? We helped them to make that happen. So sometimes we jump in and help the application developer.
Martin: In terms of market development, can you give us some kind of overview how you perceive the current development in the mobile market sphere worldwide, maybe some kind of subsequent trend?
Masanari: You mean, like the mobile market in general?
Masanari: Yes. Basically, what happened was, before smart phone, feature phone, everything was closed. When you wanted to create some innovative application for the feature phone, feature phone is so closed and cannot do so many things. Even the Symbian Operating System, that was a pretty open operating system, but for the developer, it’s not easy to use and easy develop something. However, when Apple opened, like the API, for any kind of hardware features, for example, a gyroscope or a touchscreen, everybody started thinking, “Maybe I can use this hardware feature to do something.” So everybody has thrown so many ideas. What happened was that so many interesting applications people never thought about started evolving. For example, by using the iPhone now, you can check the golf scene.
Martin: Yes, yes. You said that you were a golf fan.
Masanari: Yes. How many people can imagine that service before opening access to the hardware features? That basically changed the whole thing. Now there are a lot of applications.
- First of all, there are so many smartphones now that are available in the market and everything is so open, so you can come up with many interesting applications. Basically, after the hardware opened, a lot of people could think about innovative things by using those hardware features.
- The second thing that happened was that Apple created a market, the app store. Before the app store happened, you always have think about how to distribute my application to the world. But now, by just publishing the application to the app store, you can now access all over the world in store-based. So, that’s a big change.
That’s the smartphone, and then this entire application ecosystem has started to happen. My view is that it’s going to expand to the IoT devices also, like you have the iPhone, iOS and Android, now you have the webcam, the smart light bulb, and smartkey which you can open them from a mobile application whenever you want. So my view is that iOS, Android, and all those kinds of IoT devices are going to be open API to a third-party, and then many people will start thinking about very innovative applications. For example, like combining webcam, smartkey, iOS, and smart light bulb, you can come up with an interesting application, right? So, I think that kind of world is happening for the mobile these days. Then everybody can have the opportunity to monetize it.
Martin: I mean, one cool application might be having Google Glasses, being on the golf court, and then seeing which angle and what kind of strength should I use to hit the ball.
Masanari: If you play golf like me.
Martin: And you don’t need that.
Masanari: No, no, no. I think technology is still pretty much early. Golf is so sensitive and you really cannot control by just seeing the information on the grass. Yes, but in navigation devices, the application is pretty good for those golf courses, and you can just see how far you would like to hit and that kind of stuff.
ADVICE TO ENTREPRENEURS FROM MASANARI ARAI
Martin: Masanari, imagine you daughter comes to you and says, “Daddy, what advice can you give me for starting my own company? What should I do and what shouldn’t I do?” And maybe you have some other mistakes that you can share with us.
Masanari: First of all, I think, some people like start-up, some people don’t like start-up. Even if you do like start-up, some people are not start-up people and some people are. If you want to start-up, I’ll basically say “Yes, that is really a great thing.” However, I think you have to understand that when you are in a big company, you learn a lot of good things because a large company has nice processes and also a way to organize people. But in start-up, you don’t have any kind of that. So, you don’t have enough skill to start a company. To fix that, you have to, first of all, create a team. It doesn’t have to be big. You may get one person with an opposite characteristic to you who can help you. Hopefully they will have more experience. Then make a team and think about the business. I always say, for Silicon Valley people this is kind of common sense, but for people in Japan, China, and sometimes in Europe, they want to start a business by spending more money. But I say, “Don’t spend your money even if you have a lot of money, don’t spend your money,” because if you don’t spend your money, you will have to get money from someone else. To get the money from someone, you have to convince that person. So this process is very important to kick-start a start-up. You start seriously talking to the people and try to convince them to give you the money to start a business. If in that process, you have talked to 20 people and have failed, it’s okay. Every time you talk to those people, you get new stuff that adds to your knowledge. Sometimes, your business plan is pretty much as if dreaming of something that has never happened. Those people always talking to you will tell say, “You’re wrong and you have to fix this,” and “If competitor come in, how do you compete?” So all those information people are giving to you for free is like a process. So, don’t spend your own money, start talking to the people, get the money, and then start your business. I think that is a very important thing. There are many tips, important concepts like for example lean start-up… But I think, in the beginning, having a good team and talking to people who have experienced and gone through building a company type of process is very important.
Martin: Great. Masanari, thank you very much for your time.
Masanari: Yes. Thank you very much for coming.
Martin: Sure! And if next time you start a company, maybe you should create a very great team, and then think about how you can get in touch with investors to check your hypothesis and validate your business model.
Martin: Thank you very much. Good.
Masanari: Dōmo arigatō gozai mas. Thank you very much!
Martin: Good. Thank you very much.
Masanari: Okay. Thank you very much.
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