Sabra meets sushi?

Viber deal may pave the way for Israeli tech to Japan

The world’s third largest economy remains largely ignorant of the Start-Up Nation, but this may all change soon, expert says

Professor Kenneth Grossberg (Center) with members of the Waseda Marketing Forum (Photo credit: Courtesy)
Professor Kenneth Grossberg (Center) with members of the Waseda Marketing Forum (Photo credit: Courtesy)

Business deals between Japanese multinationals and Israeli tech start-ups have been few and far between. But the announcement by Japanese online sales company Rakuten that it was spending $900 million to acquire Viber (seen by the world as an Israeli company) for the first time puts Japan in the spotlight as a place for Israeli tech companies to do business.

Does this mean that Japan has, at long last, discovered the Start-Up Nation? Not quite, said Professor Kenneth Grossberg, a professor of marketing and business at Tokyo’s Waseda University. “As business people, the Japanese are very conservative, and usually do not ‘think outside their box,’” Grossberg told the The Times of Israel. “Innovation via start-ups and bootstrapping, the things that Israel does best, are not things they are comfortable with.”

Grossberg teaches at Wasdea University, one of Japan’s (and the world’s) top universities, and is a big booster of Israeli tech in Japan. For the past several years, he has, via the Waseda Marketing Forum, organized tours of Israel for Japanese students and business executives giving them a sense of what the Israeli tech scene is all about.

“The book Start-Up Nation has been translated into Japanese, but its meaning hasn’t yet been absorbed by the Japanese corporate establishment,” said Grossberg. “So far, the only real openness to start-up innovation is at the periphery, the companies that are not part of the ‘old guard’ of Japan’s corporate elite, represented by the brand names in electronics, the automotive industry, and other industries that everyone has heard of.”

By way of example, Grossberg points to his experience with a former head of strategic growth in one of Japan’s huge “old-line” electronics firms. “After much effort I was able to convince him to come on our Start-Up Nation Study Tour,” which brings Japanese groups to Israel for a week to check out start-ups in tech, biotechnology, and environmentally-oriented industries. “The executive was very excited about what he saw and went back to the company, and tried to convince them to start looking at Israeli technology, but they wouldn’t even consider it.” Considering the reverence reserved for senior executives in Japan, that refusal says a great deal about Japan’s reluctance to engage with Israel.

However, said Grossberg, the good news is that this refusal is not due to anti-Semitism, anti-Zionism, or BDS considerations. “It’s more a matter of ignorance than anything,” he said. “Believe me, I could never push my Study Tour at any university in the US like I can here. Even advertising a trip like that on a US campus would generate all sorts of protests, whereas here I can freely recruit students and business people for the trip.”

Although Viber is domiciled in Cyprus, it’s likely that Rakuten’s president, Hiroshi Mikitani, was aware of the company’s roots and reputation as an Israeli start-up. But Mikitani, who owns a company known as the “Amazon of Japan” — an online sales platform with billions in sales annually — is not part of “corporate Japan,” the way a top executive of Sony or Hitachi would be. “He has worked extensively with Western business and banking officials in the past, so he is aware of what is going on in the rest of the world,” said Grossberg. “That it would be him to ‘break the ice’ with Israel makes perfect sense.”

Just days before the Rakuten deal was announced, Viber CEO Talmon Marco denied that the company was for sale. Speculating on how much Viber would fetch if it were for sale, most analysts pinned the company’s value at a maximum of $300 million. After all, Viber is hardly the only chat and IP telephony platform on the market, although it is one of the most successful.

Rakuten president Hiroshi Mikitani (L) shakes hands with Viber Media CEO Talmon Marco in Tokyo on February 14, 2014. (Photo credit: Yoshikazu Tsuno/AFP)
Rakuten president Hiroshi Mikitani (L) shakes hands with Viber Media CEO Talmon Marco in Tokyo on February 14, 2014. (Photo credit: Yoshikazu Tsuno/AFP)

So why did Mikitani spend $900 million on the company? “Well, it could be because the last few deals with Israeli tech companies have been in that neighborhood,” Grossberg quipped, referring to the purchases of Waze (by Google) and Trusteer (by IBM), both of which were in the $900 million-plus range. More likely, Grossberg said, the reason had to do with another Japanese tradition. “If you recall, in the 1980s when Japanese investors started aggressively buying companies and buildings in the US and Europe, there was also a tendency to overpay,” said Grossberg. “When they see something they want, they just write out a check.”

But the Japanese are evolving, and the Viber deal could be a first sign of change. “Innovation is just too important in business today, and Japan, which still has one of the world’s biggest economies, understands it needs to innovate. Sooner or later, Japan Inc. is going to discover Israel, and when they do, there will be many more deals,” said Grossberg. “It’s just a matter of getting them over to Israel. When I bring them on the Study Tour, you can see how their eyes light up at what they see going on in Israel.”

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