Tips from the best – Raising capital in Los Angeles (NZ INC)

Tim McCready

Panel discussion: Investor Guidance for Raising Money in Los Angeles

  • Mr Bruce Stein, Principal, Westridge Consulting, LLC
  • Mr Robert Perille, Partner, Shamrock Capital Advisors
  • Mr Craig Cooper CCP, LLC
  • Chance Barnett, CEO, Crowdfunder
  • Moderator: Mr Mitchell Berman, Managing Partner Zen Media Entertainment Group

People in the private equity space are miserable at the moment because they are finding valuations at a record high. That means that there really couldn’t be a better time than now for venture funding – for the entrepreneur. There is no shortage of capital in Los Angeles or the United States, but there is a shortage of really good ideas.

Investing used to just happen in boardrooms. Now it can happen online. The floodgates have opened for people to advertise – it is an entirely new industry and crowdfunding allows you to get yourself in front of potentially thousands of investors. Last year saw $14B in crowdfunding. The estimate for 2015 is $34B. Crowdfunding doesn’t have to come at the expense of angel and VC funding. There are a host of investors that are using the internet to find funding opportunities.

Investors are now looking for those businesses that have had some traction. That may mean they have established themselves, have customers, or are experiencing some kind of growth. They don’t have to be profitable but it has to be a profitable business model that makes sense.

Investors like to invest in people that have an unfair advantage. It could be that you have a PhD in a very specific area that no one else would ever know about.

Richard Branson is very candid about not taking much credit for his wins – he chalks some of them up to being in the right place at the right time. In saying that, the team is critical to any investor. An investment decision is generally made 80 percent on the team and 20 percent on an idea. A great team can make a mediocre idea work – but a bad team will kill a fabulous idea.

To get the attention of an investor, try to teach them something. If you are solely pitching for investment, your pitch may or may not be heard. But if you teach someone something, they will take notice of you.

When you are pitching, make sure you are able to deliver it so that someone can understand the core idea immediately. You don’t want to ask someone to delve deeply into a topic area they don’t understand. You will get a false negative if your presentation material is poor. Equally, flooding a pitch with keywords like ‘big data’ will never count for anything if it isn’t clear what your business does.

LA investors will be looking for something that is not a provincial application. This is a risk coming from New Zealand. Your product must be immediately globally applicable. If you don’t have a platform to leverage and build on then you will have a very difficult time to gain the attention of the investment community.

Be persistent and resilient. At seed and early stage it is hard to differentiate people from one another. Investors hear a lot of pitches all the time and they tend to blur together. It is a very competitive market. A big mistake is to not be persistent in follow up. More people lose opportunities because they fail to follow up until someone says no. It is a huge differentiator if you’re kindly persistent to the investor. It demonstrates resilience and that you are more organised than most other people are.

NZ INC. traveled with the Auckland business delegation to the tripartite summit in Los Angeles. Representatives from 43 Auckland businesses took part in the inaugural Tripartite Economic Alliance Summit in Los Angeles. This follows the signing in November 2014 of an alliance designed to boost economic co-operation between Auckland, Guangzhou and Los Angeles. Len Brown and councillors Bill Cashmore and Denise Krum led the delegation. Auckland Council organised it with the support of Auckland Tourism, Events and Economic Development (ATEED), NZTE and MFAT.

Media contact at Auckland Council: Glyn Jones 021 475897
ATEED (Auckland Tourism Events & Economic Development)
NZTE (New Zealand Trade & Enterprise)

Living and working in Los Angeles – the reality (NZ INC)

Tim McCready

Through no fault of their own, New Zealand (and even different parts of America) have a cartoonish view of cities in the United States. People tend to think of Los Angeles solely as Hollywood and made up of “fake” people. New Zealand companies – particularly those involved in technology, think of San Francisco or Silicon Valley as their default launchpad.

The United States is a very large country – a market of markets – and it is very important to consider that it may be Austin, Seattle, or Los Angeles could offer the best opportunity.

The reality is that Hollywood is highly visible, but makes up only a fraction of LA’s economy. The vast majority of marketing money for Los Angeles goes into tourism. The tourism dollar for the city is so valuable that it has made it difficult for the start-up community to shine.

LA is the third largest tech ecosystem in the United States (behind Los Angeles and New York), but it is the fastest growing. 12% of early-stage start-ups are located in Los Angeles, and there is now a large number of companies including Snapchat ($10B), SpaceX ($5B), Beats ($3B and aquired by Apple) and Oculus ($2B and acquired by Facebook) that were built in Los Angeles.

Los Angeles is the largest manufacturing centre in the United States, and a hub for aerospace, logistics, clean technology and innovation. Los Angeles port is the largest seaport in the western hemisphere. Southern California graduates the most engineers in the United States from some of the most prominent schools, including USC, UC San Diego, UC Santa Barbara, UCLA and others.

Los Angeles Mayor, Eric Garcetti, describes Los Angeles as ‘the western capital of North America, the northern capital of Latin America, and the eastern capital of the Pacific Rim’.

Despite all of this, there is no denying that Los Angeles is the creative capital of the United States, specialising in video content. One in seven people in LA are employed in a creative field. It is the number one metro area for art, design and media employment, and the creative industry provides more than $140B of annual economic impact to the city.

Video and content start-ups are succeeding in Los Angeles. Maker is the number one producer and distributor of online video, with 6.5 billion monthly views and 450 million subscribers. DeviantArt is the leading artist social network, and Mitu Networks is the largest online Latino video network.

New Zealand’s fastest growing export is IP. It grows at 10-15% each year, and has done so since the GFC. The United States is our number one intellectual property export market. Venture Capital companies in New Zealand do not have the scale of connectedness as capital that comes from the United States. It is important to think about the people behind capital – the right objective shouldn’t be to raise $5-10 million. The right objective is to find the capital provider that can help your business grow in line with its strategic objectives.

The stereotype about Los Angeles traffic is largely true, but if you can base your office near the people you want to attract for work, it is very easy to have a choice about where you base yourself. There is no one tech hub. Pasadena, Silicon Beach, USC, UCLA, Santa Monica all have significant human capital, infrastructure, and co-working spaces.

Los Angeles can offer a great lifestyle. LA is a city of cities – it offers a beach lifestyle, Hollywood, an urban downtown experience, hiking, and ski fields close by. Los Angeles has 300 days of sunshine every year and is offers more affordable living compared to other tech centres like San Francisco or New York City.

Without forgetting that California is currently facing one of the most severe droughts on record, a water metaphor was used to describe the nuances of Los Angeles which stuck with me. “New York is a river, Los Angeles is a lake”.

If you step outside in New York you will naturally go somewhere, because the city itself will take you and it is simple to navigate. In Los Angeles, to get anywhere you have to actively swim there, or you risk never getting anywhere at all. It’s a city that increasingly unfolds as you spend more time there.

But that’s what makes it so exciting.

NZ INC. traveled with the Auckland business delegation to the tripartite summit in Los Angeles. Representatives from 43 Auckland businesses took part in the inaugural Tripartite Economic Alliance Summit in Los Angeles. This follows the signing in November 2014 of an alliance designed to boost economic co-operation between Auckland, Guangzhou and Los Angeles. Len Brown and councillors Bill Cashmore and Denise Krum led the delegation. Auckland Council organised it with the support of Auckland Tourism, Events and Economic Development (ATEED), NZTE and MFAT.

Media contact at Auckland Council: Glyn Jones 021 475897
ATEED (Auckland Tourism Events & Economic Development)
NZTE (New Zealand Trade & Enterprise)

From Soju to Sauvignon blanc – Korean FTA (NZ INC)

Tim McCready

When the New Zealand – Korea free trade agreement signed in March enters into force, tariffs will be eliminated on 48% of current goods. New Zealand’s exports to Korea current attract $229 million every year in duties.

In the first year alone the free trade agreement will save an estimated $65 million in duties, and within 15 years of establishment the remaining tariffs will be largely eliminated. The industries that will see the most benefit are those exporting dairy, red meat, kiwifruit and wine.

The current tariff on wine exports to Korea is 15%, and this will be wiped immediately as the agreement enters into force. This tariff concession will provide a good boost to exporters, but despite the removal of tariffs, exporting wine to Korea remains a challenge for New Zealand.

This is largely due to the tax and distribution system. When wine arrives in Korea, a liquor tax of 30% is applied, along with an education tax of 10%. This is even before it hits the distribution networks, a value-added tax of 10%, and retailer markups.

Korea produces and consumes a large amount of liquor locally. Beer and Soju make up 86% of locally produced alcohol. Wine makes up approximately 20% of imported alcohol. Wine is considered to be a luxury product and is consumed by only a small fraction of the population. Red wine is dominating wine imports at 71%, but white wine is beginning to gain more traction.

With the removal of tariffs, New Zealand wine producers will now be placed on an equal playing field with major international competitors in the market including the US, EU, Chile and Australia. However, the rest of the taxes that make up the total cost of wine are payable whether a free trade agreement is in place or not.

The combination of taxes, high distribution costs and mark-ups can make New Zealand wine significantly more expensive in Korea than in many other countries. And because New Zealand wine is typically sold as a premium product, and tax is applied as a percentage of price rather than a cost per unit, this can increase the markup on a bottle of New Zealand wine significantly when compared to budget brands of wine. This differs to Japan where tax is applied per bottle, and education tax doesn’t exist.

In the year ending June 2014, South Korea accounted for just $2 million of New Zealand’s $1.3 billion wine export business globally. That said, New Zealand wine is increasingly becoming of more interest to South Korea. Until 2001, only one New Zealand winery had a presence in the Korean market. The number grew to 38 in just six years. Demand for New Zealand wine is growing as consumers become more aware and curious to try white wine.

But we still have a way to go.

I visited three cities during my visit to Korea, and one thing that surprised me is that I was frequently asked if New Zealand produced any alcohol. High-end restaurants had New Zealand wine on their wine list, but my experience demonstrated that the average consumer was largely unaware of our ranking in the wine world.

The free trade agreement will undoubtedly be great for New Zealand’s dairy, meat and horticultural industries. But the wine industry will be one to watch. Chile had a noticeable boost in wine exports after their free trade agreement was signed with Korea, and it is likely that New Zealand will see a similar lift.

But it could be that the free trade agreement gives New Zealand the impetus it needs to boost the recognition and acceptance of our wine brands in Korea. And if that occurs, the benefit of the free trade agreement would vastly exceed any reduction in tariffs.

http://nzh.tw/11447897

Tim McCready

Silicon Valley investment an art, not a science says expert.

A leading American venture capitalist, Bill Reichert, believes entrepreneurs and investors have a huge opportunity in New Zealand, particularly in the areas of graphics, animation and agriculture.

Reichert, managing director of Garage Technology Ventures which is based in California’s Silicon Valley, says New Zealand has a unique and compelling advantage across a variety of sectors and is ripe for disruptive innovation.

He says New Zealand now has strong angel groups that have made good investments, and some have graduated to small venture-style funds. However, he feels angel resources could be more aggressively pooled so that capital is set aside for follow-on investment when companies go global. A beachhead adviser for New Zealand Trade and Enterprise (NZTE) Reichert travelled with SVForum chief executive officer Adiba Barney to Auckland and the other main centres, making presentations and meeting entrepreneurs, investors and business leaders.

They were supporting Callaghan Innovation’s incubator programme and providing local technology businesses with a connection in Silicon Valley. Barney believes New Zealand should leverage the success of technology companies like Xero — just as Sweden, her home country, has done with the likes of Skype, Spotify, Minecraft and Candy Crush. They have strengthened the Swedish innovation ecosytem.

She says Xero is a trailblazer and the network it has created will make the path easier for future companies to follow.

Reichert outlined his 10 investment myths New Zealand angel investors and innovators could learn from (below):

His parting advice was that the water separating New Zealand and Silicon Valley shouldn’t matter – there is also a lot of space between Silicon Valley and New York. New Zealand should recognise its strengths and successes, feel the pride and not be afraid to brag about it.

Myth 1: Invest in what you know.

If you have become an angel investor, what you used to know is unlikely to be relevant. Instead, you should be technology agnostic and consider all opportunities. Most winners are black swans – random opportunities where success seems obvious with the benefit of hindsight.

Myth 2: Focus on making money

You can’t look at a start-up company the way you look at the stock market. The margins and projections an inventor or CEO provide are almost always wrong. Focus on whether they are creating value, and in turn, a valuable company.

Myth 3: The key is good due diligence.

Investors often feel a robust due diligence process will result in a good decision. But you cannot capture the data required to show if there is inherent value in a start-up. Instead, you have to develop good intuition and use your heart to make decisions. This is not something that fits into a standard due diligence checklist.

Myth 4: Don’t let emotions cloud your decision.

Since start-ups can’t give you reliable data, you have to pay attention to your emotions. If, for whatever reason, you don’t like the founders, it doesn’t matter how amazing their business model is.

Myth 5: Build a consensus among a syndicate of investors.

Most investors look for consensus. But historical data shows the best investments are controversial. If an idea is obvious it is unlikely any particular company will dominate the industry.

Myth 6: Success comes from adding value.

Everyone working in investment likes to think they add value. The harder you have to work for an investment the less likely it is to succeed. Instead, invest in a team that has the technology and understands the market. Investors don’t build companies, entrepreneurs build companies.

Myth 7: Protect yourself from follow-on investment.

By including protective provisions for yourself, you will likely poison the company. If you think you need them because you don’t trust the entrepreneur, don’t invest in the company.

Myth 8: Valuation is important.

You can focus so much on valuation that you lose sight of what is important. So often after signing a deal investors go through a surprise at the first board meeting. They were buried in term sheets and negotiated from a presentation that is now long out of date.

Myth 9: It is cheap to start a company now.

This is true, but it is more expensive than ever to build a successful company. Anyone can start a company, which means there is a lot of competition. Growth costs money, and a flat open world doesn’t necessarily make things cheap.

Myth 10: Diversify your portfolio.

There is no point diversifying into arbitrary categories. Diversify your entire portfolio, but not your angel investments. Instead of chasing hot sectors, invest in ideas that are exciting and have an edge – things that could be the next black swan.

Touring the UN Memorial Cemetery in Busan (KBS News)

Visiting every London Underground station

When I arrived in London, I asked several of my London-born friends if they had visited every station on the London Underground. Once they finished laughing at me, they told me they hadn’t  And that it was a ridiculous idea. Which only made me more determined to do it.

The world record for passing through each station (without getting off the train) is 16.5 hours. There are near weekly attempts to beat this record, so I couldn’t help but feel an attempt at the record was futile. Besides, the stations are what interested me.

I thought it would be far more interesting (and yet to be done), to get off at each platform, and get a photo taken next to the station name. This meant that I saw some fascinating things on my journey, and spotted interesting anomalies at each station. It also meant that I needed to get out at each stop, take a picture, and wait for the next train, which took a minimum of two minutes, and in some cases up to 40 minutes. In addition to this, my idea of creating a stop motion animation of my movements once the photos were placed in alphabetical order meant that I had to carry a fairly sophisticated spreadsheet with me – to tell me where I should be standing and what I needed to be wearing, holding, and doing at each station. Altogether it took about 50 hours to complete, spread over seven (non-consecutive!) days. You can view the finished video below.

My story has been featured as part of the London Underground’s 150th anniversary celebrations on the BBC, CNN, London’s Evening Standard, The New Zealand Herald, and Italian media.

TimMcCready_newspaper

Spending 50 hours on the London Underground meant that I experienced a lot. Some of the more memorable moments include:

  • Being told over the loudspeaker at Clapham Common “Can the person taking pictures on the platform turn their flash off. It is distracting to our drivers” – even though a flash was never used.
  • Having friendly Londoners (usually older people) spot me as a ‘tourist’ and tell me interesting facts about the underground (some of which I knew were incorrect but I enjoyed their stories nonetheless!)
  • Realising that the Central line trains out in the far east loop come only every 20-40 minutes. That was not fun in the winter, especially when every station required taking off my scarf, jacket and gloves for the picture. I spent a lot of time in the heated waiting rooms – until they were locked at 9pm!
  • Six of the underground stations (Barking, Gunnersbury, Kew Gardens, Richmond, Upminster and Wimbledon) don’t have the iconic roundel signs installed on the platforms. I had to compromise somehow so I held up the sign (underneath whatever signs they did have on the platform).
I often get asked which was my favourite station. That’s tricky. A few that stand out are:
  • Marble Arch, Tottenham Court Road, Baker Street and Charing Cross for station art
  • Canary Wharf and Westminster for station design
  • Epping for its garden – with all the plant pots and tulips around it seemed like I’d popped up in someone’s garden
  • Greenford Station was memorable because it has the last remaining wooden escalator in the underground system after the Kings Cross station fire.

Converge+UK: creative, business & technology abrasion

When I arrived in the UK from New Zealand I was chatting with two friends who had also recently relocated – Peter Thomson and Klaus Bravenboer, about the types of business events being held in London. We were surprised that the events we had been to tended to be very sector-specific, and that innovation, collaboration and access to capital in London didn’t seem as far ahead of New Zealand as we had expected.

We recognised that the most exciting part of working in start-ups is when people from different backgrounds come together to make something exciting happen. Aristotle was exactly right: ‘The whole is more than the sum of its parts’ (we prefer the term ‘creative abrasion’,  proposed by a little known book from the 1980’s with the same name, which postulated that genuinely new ideas emerge from the debate, disagreements and diversity that only happens when really opposing viewpoints collide).

Off the back of this conversation we created a non-profit organisation – “Converge+UK”.

GET SHT DONE POSTER PRINT

Converge+UK runs events that bring together disparate groups of people from creative, business, and technology sectors.

For the first event we partnered with Google and hosted at Google Campus. Continuing to run our events in London start-up incubators we have also held Converge+UK events in the Innovation Warehouse and at Wayra.

Over time we have refined the event to include:

  •  Three blocks of “5in5“ presentations – five slides, one minute per slide. Five minutes is enough to cover five key points of a topic, and one minute per slide is a good length for storytelling and
  • Two group exercises before breaks
  • Plenty of networking opportunities between blocks of speakers

Bringing designers, developers, entrepreneurs, scientists, angels, corporates and industry leaders together has provided the opportunity to produce remarkable solutions to extremely disparate problems. Group exercises we have run include discussing how LOCOG (the London Organising Committee of the Olympic and Paralympic Games) could have better dealt with the problem of empty sponsor seats in the Olympic stadium, and how we could use ‘creative abrasion’ to better educate the community about the problem with payday loans – an increasing problem in the UK.

converge_TimMcCready

converge_TimMcCready_Klaus

To find out more about Converge+UK, visit our website, follow us on Twitter, connect with us on facebook, or sign up to come along to our next event at Meetup.com.

“There were just so many meetups in London that it’s overwhelming, there’s something on every night, but it’s impossible to know which events are worth going to and even when you find a good event, it’s all people from the same discipline. It’s like partying in a giant echo chamber. I wanted to start something that bought people together in new ways.”

– Klaus Bravenboer

“There is a rebel spirit to most entrepreneurs that is somehow lacking in the events and support for innovation in the UK.”

– Peter Thomson

“Innovation is now so important to every sector. In every industry from supermarkets to social networks, if you don’t constantly delight your customers then two guys in a garage somewhere are coming for you.”

– Tim McCready

Converge_Wayra

 

APEC 2012 CEO Summit – Vladivostok, Russia

In 2012 I was asked to represent New Zealand at the APEC (Asia-Pacific Economic Cooperation) summit in Vladivostok, Russia.

The summit is the Asia Pacific’s premier business event, with the Asia-Pacific’s political leaders and the regions leading CEOs in attendance. The theme this year was “addressing challenges, expanding possibilities”, and with it being held in the Russian Far East, delegates were shown an impressive country with bold ambitions – many embedded in the Asia-Pacific, that dispelled myths and stereotypes.

Video 1: APEC 2012 Overview

Video 2: Behind the scenes in Vladivostok

Political Leaders
One of the biggest highlights of attending APEC was the opportunity to attend the plenary addresses from global leaders, as they outlined their visions, experiences and perspectives on issues of discussion. Leaders included:

  • His Excellency Mr. Hu Jintao, President of the People’s Republic of China, who spoke about the challenges and opportunities China has in their relations with Russia. He also outlined the measures and leadership China is aspiring to take on intellectual property, and inward and outward foreign direct investment throughout the APEC economies.
  • The Honorable Hillary Rodham Clinton, Secretary of State of the United States of America, addressed the importance APEC plays with members accounting for 54% of world GDP. She spoke about the potential of the platform for economic growth, and the responsibility we have in areas such as security, and assistance for women and minorities in small business in developing countries, so they can also reap these benefits.
  • His Excellency Mr. Vladimir Putin, President of the Russian Federation, spoke of opportunities in Russia and outlined measures being taken to ease logistics through upgrades to the Trans-Siberian railway. He fielded questions into Chinese investment in Russia and the on-going negotiations into a New Zealand – Russia/Belarus/Kazakhstan Free Trade Agreement. President Putin acknowledged that developing regions will continue to grow far more quickly than traditional markets, and that the former Soviet-era port of Vladivostok is poised to become a gateway for Russian trade and investment with Asia. Russia has finally joined the World Trade Organisation after an 18 year wait, and having Vladivostok chosen as the APEC venue marked an exciting time as Russia becomes more integrated into the global economy.

I formed part of the Small and Medium Enterprises working group at APEC, and was elected by my working group to present the declaration back to the wider APEC community – which included Russian media and APEC officials.

Tim_McCready_APEC

Meeting with New Zealand Prime Minister John Key

The New Zealand Voices of the Future delegates were fortunate to have twenty minutes with New Zealand Prime Minister John Key. Meeting their leader wasn’t possible for every Voices of the Future delegate, and spoke volumes to the accessibility and transparency of the New Zealand government. The meeting offered a great opportunity to hear more personally about New Zealand’s priorities at the APEC Summit, and openly discuss topics ranging from:

  • New Zealand’s place at the APEC table and what is being done to ensure the voices of smaller developing nations are being heard at forums like APEC and at trade agreement negotiations such as the TPP
  • recent calls for the strengthening of the Waitangi Tribunal, and where the government thinks the Treaty of Waitangi stands in New Zealand’s future.
  • how to best harness business opportunities in Russia, given New Zealand’s limited capacity of SMEs and the current focus on opportunities in China, India and other parts of Asia
  • the Prime Ministers upcoming meeting with Russian Federation President Vladimir Putin, and the status of the New Zealand – Russia free trade agreement.

Tim_McCready_John_KeyNew Zealand Prime Minister John Key, Tim McCready

Business Leaders
As well as leaders from the APEC economies, the Summit had addresses and panel discussions into many critical areas of focus for the Asia-Pacific from prominent CEOs and business leaders throughout the region. These sessions included:

  • Food: Feeding seven billion people. Speakers including Sergey Polyakov (General Director of United Grain company) and Samuel Allen (Chairman, John Deere & Co), who discussed the challenges we have with a growing global population and depleting resources.
  • Health is wealth. Panelists included the CFO of Johnson & Johnson, the Chief Research and Strategy Officer of Microsoft, as well as New Zealander Ian McCrae (CEO, Orion Health). The changing landscape of healthcare was discussed, and it was noted that we have reached a time where medical knowledge has surpassed what healthcare practitioners can know, which creates a discontinuity in how medicine is practised around the world. One of the most inspiring moments was when the panel discussed how investment in health can provide a significant social and economic return to economies. The panel agreed that people should be thought of as an investment, not as a cost – because without people, you won’t have a company.

Tim_McCready_working_group

Concluding thoughts
The theme of APEC this year was “addressing challenges, expanding possibilities”, and the summit did a great job of covering these topics. On a more personal level, having the opportunity to attend APEC as a Voices of the Future delegate has encouraged me to reflect on my own challenges and possibilities within the Asia-Pacific region. I have previously done business with major Asian markets, but my eyes have truly been opened to the opportunities within emerging APEC economies. Business and political leaders from those regions are excited about their potential – and they have good reason to be. That excitement has been infectious, and the experience and insights I have left Russia with will stay with me always.

Tim_McCready_debate

 

Japanese Agriculture, Horticulture & Business

In 2010 I was invited by the Japanese government to visit Tokyo and Hokkaido in an initiative to foster closer connections between New Zealand food producers and businesses. This visit has resulted in continued collaboration between New Zealand and Japan, and taught me a great deal about Japanese business and culture.

Below is an email I sent to colleagues mid-way through my visit to Japan to share what I had learnt.

From: Tim McCready
Sent: Sunday, 11 July 2010 6:21 p.m.

I’ve been slow to write an email to everyone since I arrived in Japan – the Japanese government have done a fantastic job of packing our schedules full of interesting meetings, and I haven’t had a chance until now. Every day we’ve started at around 6, and not back to the hotel until after midnight! Loads of fun though. I’m really loving wandering the main streets with modern skyscrapers, and then turning into an alleyway and seeing the traditional buildings tightly packed together and hidden underground restaurants. A real eclectic mix.

I flew into Sapporo (in Hokkaido, the top part of Japan) today and will be having an early night because we’re going to the fish markets tomorrow at 5am to watch the wholesale tuna bidding. Tokyo has been ridiculously hot and humid, so it’s nice to be in a city now that is still quite warm, but with no humidity at all. There was even a cool breeze tonight, which makes for a nice change!

 

I visited Asakusa (one of the oldest parts of Japan, and one of the only places packed with souvenir stores) to see one of Japans oldest temples. What our guides didn’t realize was that the day we went (July 10) was the day of 46,000 blessings. Worshiping on that day is apparently equivalent to performing acts of merit for 46,000 days. We weren’t told this until after we left, so, unfortunately, I missed out on 46,000 days worth of merit. I did manage to pick up a few souvenirs but I don’t think I’ve ever seen a crowd like that before.

Part of my programme here allowed me to participate in a formal Japanese tea ceremony. This was particularly interesting because we learnt the rules of the tea ceremony, the kimono they wear during the ceremony, and the art of Japanese flower arranging. It was amazing to see the tradition that is still followed, and how important that still is to people.

We visited an organic farmers market about two hours out of Tokyo. This is an initiative they’ve been using to introduce farming and agriculture to the people of Japan, where people can buy a small allocation of land, and come out from the city a couple of times a month to care for it. While there we got lessons on making some of the fanciest sushi I’ve ever seen in my life (which included sushi shaped into pandas, snails, and flowers). It was ridiculously fiddly and not something you’d be too keen on if you were in a hurry for a meal.

We carried on and visited one of Japans oldest terraced paddy fields. It was interesting to see them up close – the ecosystem at the base of the plant is really interesting (with frogs and tadpoles living in the water). The plants are grown on a bed of clay that has a base of water on top, which is slowly drained down to each paddy field. It was interesting to hear that the farmers with the paddy fields at the top of the hill have the best quality rice because the water is cleanest – but everyone pools their rice together so that the quality remains consistent and there is no difference in the money farmers get for their rice.

On the same day, we visited Japan’s top (2010 gold medal winning) sake brewery in Minnami-no-sato. They also grew their own rice out the back to produce their sake. I never knew you could have so many different varieties of sake – the owner had testing stations (similar to a vineyard), but with over 30 varieties. Some of the sake tasted extremely mild, but some (particularly the 1998 vintage) tasted suspiciously diesel-esque. One of the people in our tour had a bottle of 42 below vodka they had picked up from duty-free on their way to Tokyo, and traded it with the brewery owner for a bottle of sake. The owner picked out his most expensive bottle (over NZ$200 worth) for the exchange – so it worked out a pretty good deal for the kiwis!

The Japanese government is definitely taking good care of us, and taking us to some pretty impressive restaurants. Yesterday we went to a place where sumo wrestlers fight, and had a traditional sumo wrestler (protein rich) Japanese meal. It consisted of your traditional bento box, as well as an enormous bowl of soup cooking on the table that was full of seafood, chicken, plenty of chicken skin, fish, shiitake mushrooms and (one or two) vegetables!

One of the most interesting things I’ve seen here is the fruit and vegetable section at supermarkets. We’ve heard constantly at the talks we’ve been to that Japanese like their food to be safe, healthy, packaged nicely, perfect and consistent – and it’s true. I’ve never seen fruit of the same standard back in New Zealand. People buy individually boxed apples that have absolutely no blemishes on them. The rockmelons are perfectly spherical with the stems left on, which are then trimmed to look exactly the same as all the others.

They have square watermelons here, which are grown inside a container to create the cube shape. The only benefit I can see from this is that it makes them easier to stack in the shop, and they can be wrapped with ribbons and bows to resemble a present. I don’t think this justifies the price – 20,000 yen (about $330 kiwi dollars!), but people seem prepared to pay for it!

I was wondering what they did with fruit that wasn’t perfect. When I asked in meetings I was told that most of it would never be sold – but I did stumble across a seconds bin at one of the supermarkets. They had a bunch of bananas in it – one of the bananas had a single blemish on it – they were far nicer than any bananas I’ve ever seen anywhere else in the world – and they were reduced to clear for $1.50 for the bunch. (No one else in the supermarket seemed interested in buying them so we picked them up and shared them around the delegation!).

Most Japanese produce and meat have little barcodes on them that customers can scan in the store with their mobile phone, and they can instantly see a photo of the farmer, facts about the farm, and how long the farmer has been in business (it comes down to the importance of the safety of food supply again).

We were told that foods labelled as Organic don’t necessarily sell very well in Japan. All Japanese food is of such high quality that consumers assume all products meet that quality, which means there is little differentiation between standard and organic products.

We have had some great meetings with the Ministry of Foreign Affairs and the Ministry of Agriculture, Forestry and Fisheries. The Minster talked to us about a potential Free Trade Agreement with New Zealand, but explained that Japanese farmers are worried that an FTA could threaten their already tight profits. They also feel like New Zealand played its hand when we reduced the tariffs on their car imports into New Zealand, so we have a lot more to gain on an FTA than the Japanese do.

The meeting with the Ministry of Agriculture made it clear that Japan is extremely worried about global warming and greenhouse gas emissions. They are doing a lot to reduce or offset carbon emissions and believe that they are already seeing the effects of global warming on their fruit quality.

The government is also worried about the safety and security of their food supply. Japan produces only 40% of their required food source, and imports the rest from around the world. They are trying really hard to push this up to at least 50%.

Japan does, however, produce almost 100% of its required rice – there are rice paddy fields in every spare piece of land you can imagine. The profits in rice production are ridiculously small, and even though it is a staple of their diet, Japanese people are becoming more westernised and starting to eat alternatives for breakfast. As a result of this, the government is running a huge marketing promotion right now to promote eating rice – they’re even rolling out a lot of new rice products (including rice ice cream and rice pizza) to encourage people to eat it. Some farmers are converting from rice growing to livestock – but because rice paddy fields are mostly located in marginal land this can’t always happen. The rice farmer told us that the farmers in this position can’t even sell their land – no one would want it.

The other big issue facing Japan (as well as the rest of the world) is an ageing population. The population of Japan is ~120 million, but they expect this to almost halve over the next twenty years. Unfortunately, most of their farmers are older people too, because the younger generation isn’t interested in farming and move toward the cities. The Japanese government provide income support to encourage younger farmers into the industry and entice farmers to increase their competitiveness with innovation.

On our visit to the National Institute of Fruit Tree Science (their equivalent of Plant & Food Research in NZ) in Tsukaba city, we got to try a new peach variety that is in development. It was really delicious. Although not as juicy as peaches back at home, it as much sweeter and had more flavor. We also saw some pretty interesting technologies they are experimenting with in the orchid to for nashi pear and apple growing too – they are working hard to produce trees with lower hanging fruit – so that the older generation can continue working and picking fruit well into their 80’s.

Most farms in Japan are run as family farms, and not as an efficient business. We had a 25-year-old farmer from Tokyo come and speak to us at a function in the New Zealand embassy. It was interesting hearing his perspective – he only has 40 cows (on three hectares) and had his whole family of five working full time on the farm. He had spent a bit of time on New Zealand farms with over 1000 cows trying to learn how to improve things. His take on it was that Japan could never compete with New Zealand’s efficient agriculture, so his plans are to add value to his milk by turning it into gelato and setting up a shop near his farm to sell it. A lettuce grower we visited explained that his farm runs at a loss. He works six months of the year away from the family farm in order to provide the money required to run it.

There are 1.28 million more men in Japan than women. Additionally, marriage is happening increasingly later in life, and is even becoming unpopular for women (who often see having kids and a career as mutually exclusive). By 2020 it’s expected that 36% of men in Japan will be single. This means that there are a lot of things sold in supermarkets for individuals (a box with a single apple in it, tiny packages of condiments etc).

One of our speakers told us how Japanese people love new innovative ideas – even if it’s not something life changing but just slightly different. As an example, the supermarkets here roll out a new type of Kit-Kat almost every month and then get rid of it just as quickly. I have seen a yoghurt and aloe vera Kit-Kat, a corn Kit-Kat, and a cantaloupe Kit-Kat – and they sell ridiculously well. Coke seems to be doing the same kind of thing – the coke bottles here at the moment are all shaped like soccer balls (which are challenging to hold) because of the football world cup – and sales have spiked!

Today on our way to the hotel from Sapporo airport, we went past the sites of the 1972 Winter Olympics. We stopped at the ski jump track where we took the gondola to the top and got an amazing view of the city. I also got to stand on the podium and pretend to be an Olympic gold medal winner which is definitely the only time that will happen!

So far Sapporo seems like a really nice city. Because it’s the middle of summer here right now, and Sapporo is the home of Sapporo beer, there are beer gardens and markets set up all over the place. While we’re here we’re visiting a horticulture farmer, a milk production company, the Sapporo brewery, as well as Otaru City (Dunedin’s sister city) to meet with the Otaru Municipal Government.

Tim