Betaworks, the New York-based startup factory that bought social news aggregator Digg in 2012, has received investment from Japanese company Digital Garage. Together, the companies will "jointly invest in and accelerate" both Japanese startups keen to push their business abroad, and foreign startups aiming to expand into Japan. The deal will see Betaworks receive $10 million, with $7.5 million coming from Digital Garage, and $2.5 million reportedly coming from angel investors.
Digital Garage has experience in helping foreign companies move into the Japanese market. The Tokyo company localized and promoted services such as LinkedIn, and Path in its home country through "partnerships and investments." Most significantly, it also partnering with the Twitter in 2008, striking a deal to bring the micro-blogging platform to Japan. The Japanese market quickly took it to heart: it now reportedly has more reach than any other social network in the country.
Betaworks has been best known for its purchase of Digg in 2012
John Borthwick, Betaworks' CEO, said he was able to meet with Digital Garage through "mutual friends" at Twitter. He wants to repeat the process of successfully launching foreign products in Japan and the rest of Asia with his own firms. "We're hoping they can help us to bring companies like Dots, Digg, and Giphy to the same audience."
Betaworks, who created link shortener Bitly and web analytics company Chartbeat, is perhaps best known for its purchase of Digg at a time when the news site was at its lowest ebb. The company retooled the site, reduced operating costs from $200,000 to $20,000, and helped revitalize the depleted user-base. Betaworks also invested in Tumblr early, long before the service was sold for a billion dollars. Most recently it has been hosting a steady stream of eager hackers who spun up new projects such as GIF search engine Giphy and mobile game Dots.
Attitudes towards startups in Japan are changing
Despite Twitter's success, the Japanese market is often tough to crack for western companies. Microsoft, Vodafone, and eBay all failed to break into the country despite significant investment. Even Google doesn't dominate the way it does in the English-speaking world, with Yahoo! the most commonly used search engine for Japanese people. Betaworks and Digital Garage will also have to deal with a reticence toward startups in the Japanese business world. Although changing over time, there's less of an infrastructure for small, mobile companies to get off the ground in Japan, where job stability is important and large corporate entities still pull many of their workers straight from universities into a career for life.
But by combining Betaworks' speed and eye for a startup success in the US with Digital Garage's knowledge of its home turf and proven track record, both companies think they can open markets to small and exciting companies on both sides of the Pacific. Joi Ito, Digital Garage's co-founder, said he thought the investment would "create a stronger flow of US startups entering Asia," and also "open up robust opportunities for Japanese startups to enter and compete in the US market." With headline-grabbing successes already under their belts and the comparatively low costs of startup creation, both companies may be able to find ways to tailor their investments to appeal to very different markets both hungry for innovation.