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19 years in business
Chairman Kawata talks about hardships, growth, and the 100-fold sales plan

On February 3, Nanophoton celebrated the 19th anniversary of its founding. Since its birth as a venture company originating from Osaka University, the company has overcome many challenges to reach its present state. We asked the founder, Satoshi Kawata, President and Chairman of the Board, to look back on the journey since its inception. Currently, he is thinking about how to increase sales 100-fold and listening to what designers have to say. (Email Newsletter Editor-in-Chief / Freelance Writer, Takeshi Nemoto)

American professors were making things in their garage.

— Congratulations on 19 years in business. Chairman Kawata founded Nanophoton in 2003 when he was a professor at Osaka University. At that time, I think there were still very few university-launched ventures. First of all, please tell us about the background of your founding.

Chairman Kawata: From 1979 to 1981, I worked as a research assistant at the University of California, Irvine in the United States. At that time, all the professors in the U.S. were building various things with their students in their garages. Some were making electronics circuits, others were polishing lenses. It was a time when a company started in a garage. This was also the time when Steve Jobs and Steve Wozniak founded Apple Computer.

Since I had seen such a situation in the U.S., I thought it would be great if I could not only write papers but also create things and hopefully sell them.

— What kind of research did you do in the US?

In 1979, X-ray CT (computed tomography) won the Nobel Prize, and I was aiming to do that X-ray CT with light. I wanted to put it inside a microscope and see the cross-section of cells. However, that was just my idea. The professor who hired me was focused on finding cancer from X-ray CT pictures. But he was talking about learning a lot of patterns, like deep learning nowadays, and I wasn’t really interested in that because it wasn’t scientific.

Fighting Precedent and Founding

— You watched professors in the U.S. who were making things in their garages, and after you returned to Japan, you found …….

I wanted to do the same. But when I was invited to join the faculty at Osaka University, that was not possible. It was a time when academics were not allowed to get involved with the private sector. That’s why I couldn’t get involved for a long time, but after the deregulation of dual employment for university faculty, I decided to start my own business. I had a very hard time fighting against the precedent-setting principle.

At that time, the word “venture” was emerging. However, what I was seeing in the U.S. was different from the venture business we are talking about now. In the U.S., there were town factories, or ……, and everyone was enjoying making things. It wasn’t like they were trying to make money. Even Steve Jobs wanted to see if people would accept what he had created. That’s why I wanted to try my hand at a small business using advanced technology. That was the reason why I founded Nanophoton.

— What do you mean by venture business now?

So-called venture businesses aim for mergers and acquisitions or going public. But my image was different. I didn’t want to sell the company, I wanted to sell the product, saying, “I made this. Besides, selling a company for tens of billions of yen or going public is not realistic, and I don’t want to do something where only three in a thousand will be successful. For example, a person who leaves the business world. They don’t want to suddenly create a great company, but they want to make a living first. Whether it’s a noodle shop or a freelance job, he or she would want to make a living doing what he or she wanted to do but couldn’t do at the company. You don’t want to take risks, right? It’s the same as that.

— Did you start the company to make Raman microscopes from the beginning?

No, it’s not. As the company name “Nanophoton” clearly indicates, I wanted to create something useful for the world with my nanotechnology and photon technology. The first Raman microscope was released in 2005, so it has been two years since the company was founded.

Start from a corner of the laboratory.

— Please tell us what it was like when the company was founded.

I was extremely busy with my work as a university professor and had neither the time nor the experience to run a company on my own. That’s why I took over as the chairman and asked the former head of the development department of a company to be the president. He had the know-how to create products that could be sold to the private sector, not just university research level products. We started out with a desk in a corner of the laboratory in my laboratory. I started without getting any money from the investment company, so I was in great trouble.

— Your first product was the second harmonic microscope (SHG microscope). In an interview with Professor Katsumasa Fujita of Osaka University, who is a technical advisor, I asked him about this.

I had an idea and made it, but I think the price was about 100 million yen. It was so expensive that it was hard to find customers who would buy it. So we decided to make it a 30 million yen device. The reason why we decided on 30 million yen was because at that time, university professors could spend up to 50 million yen for research. This means that the equipment we could buy was only about 30 million yen. Since this is a single year accounting, it cannot be divided into two years.

We scientists try to build the most advanced laser spectroscopy equipment. That’s interesting and good for writing papers, but it’s too maniacal and unnecessary for ordinary customers. So I made a 30 million yen device using ordinary lasers. It was a Raman microscope. I thought this would sell well. It was a well thought-out device.

Not much sales at first.

For two years, not a single unit was sold. The reason it didn’t sell was because everyone didn’t know about the Raman microscope. We had no sales force at all. During this time, we were getting by taking orders to assemble custom-made microscopes and other products. I think most of them were related to universities.

— So the first one was sold two years later.

Everyone is very happy. A company in Hyogo Prefecture bought it for measuring diamonds. The order came from a completely unexpected source.

Even after that, we suffered from poor sales. Then, the first president decided to step down. We had to find a new president. That was in 2007, I think. What I found was a person who understood both technology and company management. He had come from China to study at the University of Tokyo’s Graduate School of Engineering, where he earned his doctorate, then moved to a private company and graduated from the Graduate School of Management. He created the structure of the company.

However, there was a loss and he too moved on to another venture business. Another search for a president. This time, we got someone who was the Japanese representative of a German company. It was in 2015. He helped me get my first investment and put the company in a better financial position. He created local subsidiaries in China, Korea, and Germany and worked tirelessly for us. However, he had to leave the company in 2017.

Became the fourth president.

— Then Dr. Kawata will now also serve as president.

Just in March of that year, I had retired from university. I was planning to go to various universities around the world for three months at a time without belonging to any particular university and live a relaxed life, but the company was in a terrible state of management and I couldn’t hire a president, so I decided to do it on my own.

— After that, it was time to rebuild the company.

We made a three-year restructuring plan. The venture capitalists who had invested in us were very critical of us. I had to close my office in China in tears. They pressured me to close the Korea office as well, but I insisted that I didn’t want to do that.

— Now, Nanophoton is increasing its performance.

In spite of the COVID-19 incident, sales for this fiscal year are up 30% from the previous fiscal year, and we have secured a 10% profit. We are definitely stabilizing. Since we outsourced the manufacturing, we don’t need to hire many people to do the manufacturing, and we don’t need to have a factory. But we had a hard time getting to that point.

— What has the past 19 years been like for you, Dr. Kawata?

It was a crazy good experience for me. I learned a lot. If I were younger, I could use this experience elsewhere.

— By learning, do you mean management?

There is management, there is manufacturing, there is research and development, and there is sales. In addition, there is the question of what new products should be developed.

100 times sales plan

— How do you think nanophoton will change in the future?

We have a plan to increase our sales fivefold in five years, but that’s not enough, we’ll get saturated. That’s why we are now thinking about what we should do to increase our sales 100-fold. For example, if we say, “We will not only use Raman microscopes but also other existing microscopes,” we will only be able to increase our sales by 2 or 3 times, not 100 times. In order to multiply it by 100, we want to take it to a whole new level by utilizing the technology we have now.

Innovation is not technological innovation, but new coupling. It’s okay to use old technology. We just need to combine it with another technology. So Roomba is just a good combination of vacuum cleaner and robot technology. That’s what saves us from having to spend time cleaning. Even a smartphone is a combination of a cell phone, a camera and an app.

I always say that science is not innovation, but heresy and denial of common sense, but I think innovation and new combination is good for the company’s technological development. In the future, I would like to aggressively promote new combinations.

And one more thing. I am going to listen to the designer. Designers look at a product and say, “This part is in the way,” based on their sensitivity. And we would immediately say, “It’s impossible. But after a few months, we came up with a way to improve it. We use a combination of technologies to make it happen. As a result, besides the improvement of the “hindrance,” there are many other benefits.

Customers don’t say this to me. That’s the way it is,” they say. The same goes for our salesmen and engineers. Only the designer will tell me that it is ugly.

— I see that the stimulus from the outside, the designer, is the catalyst for new bonding. I will continue to watch the evolution of Nanophoton. Thank you very much for your time today.