Japan

Japan's tech startups bet on wearables - in the U.S.

April 2, 2014: 11:17 AM ET

Having missed the smartphone surge, Japanese tech companies see wearables as the next wave. But this time, they plan on riding it with an American mentality.

By Michael Fitzpatrick

Logbar CEO Takuro Yoshida holds the company's Ring wearable device at the Wearable Tech Expo in Tokyo on March 25.

Logbar CEO Takuro Yoshida holds the company's Ring wearable device at the Wearable Tech Expo in Tokyo on March 25.

FORTUNE -- Stung by the country's inability to profit from the smartphone revolution, Japanese ingenuity is betting on doing better with wearable technology. But, somewhat counter-intuitively, is going all-American to do so.

At the country's first wearable technology expo, held recently in the heart of Tokyo, a common thread emerged: The Japanese model of bringing technology to market wasn't working.

Japan has long been a force in making consumer electronics, specifically hardware. But as some of the country's brightest young innovators in attendance at the expo noted, the rules have changed -- and Japan's tech companies and their investors have failed to capitalize on the new order.

"Previously in Japan, only hardware was created here. Now we have to develop hardware, software, and the cloud," said 37-year-old Akinori Takahagi, CEO and co-founder of a startup called Moff that is developing interactive wearable devices. His Kickstarter-funded startup -- now searching for U.S. and not Japanese partners, he emphasized -- will sell the wearable "Moff" smart toy on Kickstarter by July, priced at $49.

MORE: Could wearables become bigger than tablets?

"There are very few here who can understand these new rules in Japan," Takahagi said. "So when I wanted to fund and launch my product, I looked to Silicon Valley" -- despite just six month's training in the English language. Takahagi said his compatriots "simply did not get" his idea for the Moff, a wearable wristband that responds to playful gestures, such as air-guitaring with matching audio.

"They would complain Moff was too simple," Takahagi said. In contrast, people praised the toy as "simple genius" when he brought it to the South by Southwest Interactive festival in Austin, Texas. The difference in mindset was startling.

"They felt our uniqueness and originality, describing Moff as 'awesome' and 'cool,'" Takahagi said. "In Japan people were just cool towards it."

After the festival and positive coverage on U.S. tech websites, Takahagi decided to start a U.S.-based Kickstarter campaign to develop and market Moff. Only after a successful Kickstarter drive continued U.S. publicity did Japanese investors step onboard.

MORE: How a secret iOS feature could change the Internet

Japanese tech investors are far too conservative when it comes to taking a risk on new ideas, Takahagi said.

"There are no such smart formulas here, especially in our big enterprises," he said -- a state of affairs, he added, that is very much holding back Japanese innovation, especially in technology.

Takuro Yoshida is another chief executive of a company that makes wearable technology. His firm, Logbar, makes a "smart ring" that allows gesture-based control over multiple digital functions. When Fortune asked him about the U.S.-Japan divide in terms of support for young tech startups, he responded that his homeland often overlooked talent.

"There is so much more enthusiasm in the [United] States for Ring," Yoshida said. "They react to the fact that it is cool. In the U.S., people like our product and just want to use it. Japanese are more interested in the business model" -- to the point that it prevents experimental products from ever making it to market.

"I have met a lot of VCs and angel investors in Japan, but their thinking is very national -- not international," he said. "They are too domestic-focused, and their minds are passive."

MORE: Pebble sold 400,000 smartwatches last year

Yoshida said Logbar also plans to launch Ring, which has 5,000 pre-orders already, in July for $180. The product has since accepted some Japanese investment.

Japan can still benefit from a wearable technology revolution, Yoshida said, because the country "still excels at miniaturization" despite higher prices than Asian neighbors China and Taiwan.

But history must not repeat itself, Tokyo-based tech consultant Serkan Toto warned.

"Japanese phonemakers missed out on smartphones because of complacency, extremely inward-looking management, and the long, rich history of the domestic feature phone ecosystem," he said. "It remains to be seen if Japan will get their revenge on America leapfrogging them in the mobile phone market with iOS and Android. But Japan leading the world in wearable tech is definitely wishful thinking, at least at this point."

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