�We found a bank that supports the challenge of a venture business with flexibility�

Founder & CEO,Terra Motors Corporation
 Toru Tokushige

Business Incubation Department, VBI Promotion Division
Shinsei Bank
 Takao Ishikawa

Today we interview Mr. Toru Tokushige, the CEO of Terra Motors Corporation (�Terra Motors�), a venture business that started off in 2010 in an office no larger than 7.5 square meters, and burst out into the world with an aspiration to sell two-wheeled Electric Vehicles (�EVs�) in the rapidly growing Asian markets.
Shinsei Bank sees itself as a bank that supports the growth of its customers, from companies that have successful businesses mainly in the Japanese market to venture businesses like Terra Motors that picture themselves expanding on a global scale, and offers the function and knowledge of the Shinsei Bank Group to the full extent.

Question 1

What impression did Shinsei Bank give you throughout this investment?

Tokushige: Our company business ranges from the manufacturing to the selling of EVs overseas. Southeast Asia, which is our target market, is now facing quickly developing air pollution caused by rapid economic growth and the spread of gasoline-powered vehicles, and hence has an extremely increasing need for EVs. The EVs that our company offers represent the accumulation of Japan�s advanced technology, and by generating innovation in the Asian EV market, we hope to be involved in the solution to the social issues in these countries. I personally think that a venture business that dares to aim at business expansion in Asia from the beginning is setting quite a reckless goal. While our business has finally started to form shape recently and is giving us some confidence, Shinsei Bank invested in us when our company was in its infancy. It was not a loan but an investment, and moreover the investment came from the main body of the Bank. I myself have worked in a major insurance company, so I understand the difficulty for a bank with a business model different from a venture capital (�VC�) to make a venture investment, and I assume that the investment was made only after many discussions within the Bank. My image of a bank had been that it was �rigid,� and that it needed a lot of time to scrutinize financial statements and write many documents for a managerial decision; however, Shinsei Bank was impressively different from conventional banks in that it was flexible, and that it took a good look at our overseas local bases in Vietnam and the Philippines, on top of our principles and business areas.

Ishikawa: Shinsei Bank has the vision to �offer support to companies to enable their best possible growth with an approach different from conventional commercial banks,� based on the concept of Venture Banking Initiative (�VBI�). We found the principle and business model of your company attractive, and considered that you were a good partner that met the vision of VBI exactly. We also feel that it is meaningful as a financial institution that through investments in your company we can contribute to the improvement of the environmental issues in Asia, and that we can support the global development of a venture business which uses an outstanding technology from Japan.

Founder & CEO,Terra Motors Corporation Toru Tokushige

Founder & CEO,Terra Motors Corporation
Toru Tokushige

Business Incubation Department, VBI Promotion Division Shinsei Bank, Takao Ishikawa

Business Incubation Department, VBI Promotion Division Shinsei Bank
Takao Ishikawa

Question 2

How has the business evolution of your company changed after the investment from Shinsei Bank?

Tokushige: Owing to the fact that the investment was from the main body of Shinsei Bank, the credit rating of our company increased, and we were able to receive investments from VCs not only in Japan but also overseas. We achieved the challenging initial objective of raising 1 billion yen in funds. We are about to begin our full-scale overseas business, and our business in Bangladesh is gradually taking shape. The funds we have raised have helped us to conduct the necessary market research and product development for our overseas business, and to secure human resources and sales channels. We now have a deeper understanding of the regulations of the authorities in each country and a higher certainty of pursuing business there. Sales will hopefully be generated from this year, and we are almost certain that the EV market in Asia will expand.

Ishikawa: Although I am aware that your company is not currently in a stage to make huge investments, the solid way in which your company uses money is quite impressive. I even feel a sense of dedication in this incubation office in Shibuya no larger than 7.5 square meters which has not changed since your foundation, although some square meters have been added.

Tokushige: Once we see the time coming for our target market to expand rapidly, our plan is to invest our funds at once without delay and to take a proactive strategy. We expect that chance to come this year. From the outside our company may appear to always be taking an aggressive approach; however, I myself endeavor to ensure a very solid management.
The reason that we position ROI (Return on Investment) as a particularly critical index is two-fold: One is the return on the money used, and the other is the return on the time used. These two aspects must be managed with tight control. When I was in Silicon Valley, I started a business on my own with investments from a Japanese company, who told me that they were not able to provide me with any more financial support. In short, I was told, no sales, no salary. At the root of myself I have the experience of always being conscious that the money for one to live must be earned by oneself. My previous life in a major company with a stable salary changed at once to an environment where nothing in the future was guaranteed, when I acquired an MBA and started my business. In an environment where you have no job unless you yourself make the move, ideas spring up about small things such as exchanging business cards. Even now I tell my staff to use their brains to save money when printing out their business cards. I believe such experiences are also valuable for our company employees, who will possibly aim to become an entrepreneur later on. It is alright to spend money when it is time to compete for business or when things are critical. Apart from that, we are committed to being stingy, and we are thorough about this. It is the same with how we use time.

Terra Motors is a venture business established in 2010, and has been aiming at developing their EV business overseas since its foundation.
The Company�s electric bike A4000i, equipped with a 3-element lithium-ion battery, achieved a cruising distance of 150 km, and is planned to be developed in full scale from 2014 as the flagship product for the Company to advance into the Asian markets.

Question 3

Please tell us about your future business strategy overseas.

Tokushige: I think the Indian market is exciting. A great advantage that we have over our competitors worldwide is that we are a �Japanese� company. If we can sell 10,000 of our EVs in India, it will have a considerable impact in the world. It will also give the Japanese people a strong message that says, �Let us challenge ourselves more overseas.� One of my dreams is for Japanese venture businesses to join hands with local Asian companies with a sense of speed, to grow big and ultimately contribute to the Japanese economy.

Ishikawa: Shinsei Bank also hopes to proactively support companies like yours that are small but have a conviction to, for example, aim at large markets overseas. It would be great to see more such companies in Japan. On the other hand, isn�t there a sense of risk in the Asian countries to join hands with venture businesses from other countries including Japan?

Tokushige: Asian countries do not see venture businesses in a special light. For them, everything is about to begin and expand and all companies advancing into their country are a �venture�, whether a major company or a venture business. I hear that people who have produced results under such an environment are highly regarded. In practice, major companies would first send in a couple of people to conduct a market research prior to entering another country, which is not very different in terms of scale from what a venture business like us would do. Venture businesses, on the other hand, have a much higher commitment and speed, which make it more likely for them to be selected as a partner of local companies compared to major companies.

Ishikawa: So you are implying that motivated venture businesses should aggressively move into Asia and compete for business. Are there any difficulties in securing human resources overseas?

Tokushige: In our case, we have succeeded in having people resonate with our vision to �create innovation with EVs and create a clean and sustainable society� and are able to attract good people locally. Particularly the Indian EV market is more like in the Warring State Period, where there are no top players or telling of who will win. People anticipating that our Japanese brand EVs could win the fight and wanting to take on a courageous challenge in an environment of a venture business that has the advantage of being flexible and speedy come to work for us.

Question 4

Please tell us what the issues are for your business to evolve.

Tokushige: Although for me our business evolution is slightly delayed, I understand that things may not always proceed as envisioned in light of being a manufacturing business and having the features of the new EV industry. My greatest learning in having engaged in this business is that I have gained a true feel that ideas must be based on �price� in any business. To gain a volume zone to boost sales, price is the key. Quality, on the other hand, does not necessary have to follow the Japanese standard. If we spend time until launch to ensure quality, other foreign companies including those from the US will pass us with reasonable quality. A comparison of the Japanese and US companies in the same industry shows that Japanese companies are behind, with an overwhelming difference in market capitalization. The difference is probably an indication of the expectations from investors asking how much exposure the company has in emerging countries with markets expecting growth. Japanese companies need to change their conventional minds.

Ishikawa: It may take time for the Japanese major companies to change gears, which makes it all the more likely for venture businesses to do it.

Tokushige: Our company aims to be a mega venture beyond Apple and Samsung. Being a venture business makes this possible to achieve. We need to capture more and more volume zones to enlarge the size of our company in the future. It is crucial that we plan our business strategy with a cautious evaluation of the remunerability and scalability in pursuing the business.

Ishikawa: What you point out also causes pain in the ears of financial institutions like us. Financial institutions have always assessed companies in terms of the product quality and completeness of technology, especially when financing with loans. It is necessary to create a framework where we can provide flexible funding to venture businesses based on our evaluation of the marketability of the goods and products despite the fact that their product quality and completeness of technology may not be sufficient at that time. Shinsei Bank can offer various types of financing including investments and capital loans, and is ready to flexibly address the needs of our customers.

Question 5

What are your expectations of Shinsei Bank in the future?

Tokushige: Our company has a business model in which capital needs will increase with growth. I believe this was one of the aspects that attracted the investment from Shinsei Bank. I am sure that minute business risks of our company will become visible to Shinsei Bank during the long years of our relationship ahead, and we anticipate that you will provide us loans when the right time comes. Your introduction to potential customers through your domestic branch network and customer network has also helped us; introduction by a bank expedites matters.

Ishikawa: We do not expect the investment we have already made in your company to be the last. Our decision to invest in your company was based on your business plan, and took into account the various opportunities in the foreseeable future including funding for your overseas plant construction which we intend to continue to support. We also wish to make the finance frameworks and the wide range of financial tools offered to corporations and individuals by the Shinsei Bank Group including APLUS and Showa Leasing available overseas.

Tokushige: Shinsei Bank has a flavor that is different from other Japanese banks. I believe that banks have a significant role in the development of industries, and I look forward to seeing Shinsei Bank help the growth of many Japanese venture businesses in Japan.

Ishikawa: While there are increasingly more Japanese firms that challenge overseas markets, we particularly hope to support many of the venture companies that challenge the world. The history of Shinsei Bank points to our mission to contribute to the growth and evolution of the Japanese industries, and the theme of our VBI vision. Our hope from these perspectives as well, is to support our customers through long term relations built on multiple layers of business deals. We hope that we can generate a feel of the Shinsei Spirit as we continue to do business with each other.

(March 2015)