Options for SaaS Companies to Enter the Japanese Market: Why We Started Nihonium

Introduction

The Japanese market is highly nuanced. Both the language and processes are unique. The Japanese culture contributes to the unique processes that manifest in Japan-specific CTAs, a dependence on resellers/distributors, unique sales processes, and a Japan-specific growth strategy. Global companies shy away from entering Japan because these Japan-specific nuances seem to be difficult to overcome. However, companies that overcome these challenges and successfully enter Japan enjoy healthy revenues from loyal customers and end up being a dominant player with limited competitors. Successfully entering Japan, the fourth-largest global economy, would be an amazing achievement, but the options that are available today require a significant upfront cost or are less reliable and are limited to large enterprises.

Option 1: Setting up an entity

One of the most common ways of entering Japan, similar to any other market, is establishing an entity. As part of setting up an entity in Japan, companies hire a country manager and bring on a few local teammates. The Japan team then focuses on localization and go-to-market. This approach is great if there’s conviction that Japan is a suitable market. This conviction could be from paying customers in Japan or requests from Japanese companies for a localized version of the product.

The risk with this approach is the high upfront cost of setting up an entity and bringing on teammates. Even with a small team of two (Country Manager + sales/marketing) would cost close to $400k, including the costs to operate the local entity. If Japan isn’t validated, $400k is a significant amount of budget for an experiment for most companies. This $400k figure is on the lower end of the spectrum as it only assumes two teammates and doesn’t include any go-to-market expenses.

The other risk factor with setting up an entity and hiring a country manager is the key person risk. The Country Manager is a crucial hire, as Japan is a very relationship-driven culture. If the Country Manager is not able to perform, the chances of the Japanese entity succeeding become very limited. The brand itself is also an important factor in Japan entry. If the company has global brand recognition, the DIY approach to Japan entry becomes more plausible. The companies that are willing to take on these risks and fit these criteria are likely to have reached a certain level of maturity — As a result, setting up an entity is usually limited to global enterprises.

Why We Started Nihonium

SaaS in Japan is growing rapidly, but the number of SaaS services offered is still limited. One way to drive SaaS adoption in Japan is to provide more options to the end users. We want to contribute to the Japanese SaaS ecosystem by providing more SaaS solutions.

The barrier to entering Japan is too high for global SaaS companies. Japan’s entry is limited to large enterprises that can bear the risk of potential financial loss or to globally recognized brands. Nihonium’s goal is to be a local partner to companies that may not be at the scale of establishing a joint venture or a local entity. We also want to help companies validate the Japanese market for companies that may need further validation before making any major decisions. As a local partner, Nihonium hopes to provide a more measured, low-risk way of entering Japan with localization, marketing, sales, and support as the core services. If you’re considering Japan entry and would like to learn more about our approach, book a consultation here.