"Entrepreneur's aspirations" to hear the background of deciding to start a business, the conflicts until the business gets on track, and the desires to realize through the business.
In our 30th installment, Mr. Jun Inoue, CEO of THIRD INC., spoke with the capitalist in charge, Tsukasa Tominaga, about his future business challenges.
【profile】
THIRD INC. CEO Jun Inoue
Joined a major IT vendor as a new graduate and started his career as a DB engineer. After that, he was in charge of financial product design and marketing at a foreign investment bank. After that, experienced the launch of a securities company under the umbrella of a foreign-affiliated PE fund. After being responsible for a consulting team for the real estate industry at a corporate revitalization/management consulting company, joined THIRD INC. and assumed the position of CEO.
[What's THIRD INC.]
We provide AI real estate management cloud system "Kanriroid" and AI construction price optimization cloud service "Kojiroid". Kanriroid, which was released in November 2019, is currently used by more than 1,500 management companies, and is the No. 1 building management cloud system share product (*). In addition to providing SaaS software, THIRD also provides management consulting and construction consulting to help real estate management companies improve their management issues beyond the framework of system provision. (As of October 2022)
*Fiscal year ending June 2022_Market research in designated areas Research agency: Japan Marketing Research Organization
Solving deep-rooted issues in the real estate management industry with IT and AI
- Mr. Inoue, you have experience in various industries, please tell us how you decided to start a business in the real estate industry.
Inoue THIRD was founded by the founding president, who was originally from a general contractor, and I took over the business as its representative. Growing up with an entrepreneur grandfather and an MBA holder father, I had always been interested in starting a business, but I never dreamed that I would end up in the real estate industry.
Thinking that IT would be essential if I wanted to start a business in the future, I chose an engineer as my first job. Next, I changed jobs to a financial company to learn about money, and entered a management consulting company because I wanted to experience a job where I could get a feel for the business.
During that time, I was looking for ideas to start a business, but I couldn't find a business that I wanted to devote my life to. In the midst of this, I was involved in the management support of a major real estate developer and experienced firsthand the issues of the real estate industry. This was a turning point.
ーWhat kind of chances did you see as business opportunities?
Inoue The essence of the Real Estate business is investment, so in order to maximize investment efficiency, priority is given to building properties efficiently. Therefore, the reality is that R&D is slow to progress and the industry itself is difficult to evolve.
In addition, operations have become a black box, and IT and data utilization are lagging behind other industries. Although it is an industry that is closely related to our daily lives and generates a tremendous GDP, there is a lot of room for improvement. I was interested in that.
At that time, I met the founding president of THIRD at work. At that time, I was mainly developing a construction management business to reduce construction costs and equipment costs, and I was always impressed by the abundant know-how of the president. After that, I was told that the president wanted me to take over the company due to his age. I became CEO because I believed that it was the time to take on the challenge of "reforming the real estate industry".
-Please tell us how THIRD, which was a technology consulting company, decided to develop the current main product "Kanriroid".
Inoue At the time, we were working on a number of projects where we dispatched our own on-site supervisors to supervise construction sites instead of hiring general contractors, as part of efforts to reduce construction costs for developers who were our customers. As a result, we had to take on the task of inspecting the hotels and buildings that we had completed, and we were required to submit a huge amount of inspection reports from real estate management companies.
The real estate management business is a typical "multiple subcontracting structure". Professionals in each field are required to maintain various facilities such as substations and air conditioning systems, so it is common to outsource the work to subcontractors and further subcontractors. As a result, the business process becomes very complicated.
Since the same system cannot be used across multiple companies, the subcontractor sends the inspection report by mail or fax to the main contractor, who checks it and reports it to the owner. In some cases, a report is about 300 pages per month per property, so for example, a prime contractor management company where 20 properties are managed per person in charge will receive 6,000 pages of reports per month.
If there is a system that can improve such cumbersome and inefficient operations, we may be able to use it ourselves first to reduce the workload and develop it as a service. From such an idea, "Kanriroid" was born to improve labor productivity in real estate management practice.
ーHow exactly will your business improve if you introduce "Kanriroid"?
Inoue Once introduced by Prime Contractor, all people involved in property management will be able to use the app, and just by registering the inspection results in the app, the data will be automatically shared with the prime contractor. In other words, the work of transcribing, printing, and mailing inspection results is completely eliminated. In addition, until now, inspection results were handwritten, but we have created a system that allows you to take a picture of the meter with your smartphone,which is analyzed by AI, and easily check the numerical value and evidence.
As a result of the introduction, there are many cases where, for example, the amount of work for meter reading has been reduced by half or one third. I hear that at the company-wide level, it leads to about 20 to 30% improvement in operations. The real estate management industry is aging, and there is a serious labor shortage. If we can let machines do the work that can be entrusted to machines, and redefine the work that only humans can do, such as analysis, as "real estate management work," I think the industry will become more attractive to young people. .
ーSince you became CEO, you have made a big shift in your main business. What was most difficult in that process?
Inoue Actually, there was a predecessor product to Kanriroid, and it was very difficult to find the first customers. I thought that in order to dominate the real estate management market, I needed to provide services to top companies in the industry. Large companies have large businesses and organizations, so it is not enough to solve a single problem. It is necessary to identify the root problem from among the chain of problems and solve it while connecting the field problem and the management problem.
In order to identify fundamental issues and develop a product that encompasses the wide-ranging real estate management operations of major companies, it is important to understand the business and practices better than our customers. Our company, which started out as a technical consultant, originally had excellent on-site supervisors who specialized in construction management, and had a wealth of on-site know-how cultivated over 40 years.
I have worked on about 50 construction management projects in the three years since our establishment, and since I became CEO, I have been providing total consulting from the building planning stage to construction cost reduction and management. We still have a specialized team that provides technical consulting to management companies. Utilizing such in-house know-how, we developed and proposed through trial and error.
As a result, we were able to make a proposal that met the needs of a major company, and we were able to sign a contract, which was a breakthrough for our own product business. I think the reason why we have been able to expand our business with major companies even after pivoting to "Kanriroid" is because we were able to capture the most important points in vertical SaaS.
Even in a difficult situation, he bet on the possibility of success
Mr. Inoue and JAFCO capitalist Tsukasa Tominaga (left)
ーIn August 2022, 2.6 billion yen was raised through Series B round with JAFCO's lead investment. Please tell us about your first encounter with JAFCO.
Tominaga In May 2020, it was just around the time the first state of emergency was declared. I contacted you and we had a Zoom interview while we were not used to online.
Inoue That's right (laughs). At that time, I was raising funds elsewhere, so I didn't really think about it, but JAFCO is a long-established VC that has led many good companies to the IPO, so I was thinking I would like them to invest in us someday.
ーAs a capitalist, what appealed to you about THIRD?
Tominaga Japan's population is declining at an accelerated pace, but labor productivity and wage levels have not risen at all. If this trend continues, all industries will shrink. Therefore, I was interested in a product that could increase productivity. Each industry has unique and deep-rooted issues, so I wanted to invest in a business that could solve the fundamental issues and open up the future of the industry.
Mr. Inoue has a solid background in foreign-affiliated IT and financial companies, but when I actually met him, his communication style was very soft, and at first, I was surprised by the gap. I was very nervous and wondered what he was really thinking (laughs). However, after listening to the industry's actual situation and business in detail, I learned about the industry's issues and Mr. Inoue's passion to face them, and I strongly felt that I would definitely consider investing in his company in the future.
ーIt took about 2 years from the initial interview to the current fundraising. Please tell us about the process leading up to the consideration and implementation of Series B.
Inoue During that period, the business was doing well and we were making profits, so I wanted to create my own growth equation, including investment strategies, and then seriously consider the next round of financing. I had been talking to Mr. Tominaga every two to three months, so when the time came to consider the matter, I consulted with him immediately.
However, the Ukraine crisis occurred while I was considering it and when I personally felt that the so-called "SaaS spring" was over, the future view of the stock market suddenly became negative for the overseas VCs I consulted as potential funding sources. It seemed that domestic VCs were also watching the trends of other companies. Among them, JAFCO gave a high evaluation of our business from start to finish. I was happy that JAFCO bet on the possibility of success after conducting various verifications in its own scenario.
Tominaga For the past two years, every time I talked to Mr. Inoue, I could feel the growth of the business. THIRD's strength is the excellent balance between the know-how of real estate sites cultivated through technical consulting and the IT and AI know-how of a team of engineers who have achieved results in global contests.
As it is difficult to expand the vertical SaaS industry, it is important to be able to delve deeply into various customer issues and solve them. In this respect, THIRD was growing its business by fully utilizing its strengths and I could see a future in which it would continue to grow and eventually become an innovator in the industry.
-Are there any initiatives that have started after the fundraising completed?
Inoue JAFCO introduced us to an executive of a real estate management company that we had been thinking of approaching for a long time, and we are now making concrete progress on the deal. In addition to strengthening the development of "Kanriroid", we are also strengthening the development of a function that AI automatically assesses appropriate construction estimates for the repair work optimization cloud system "Kojiroid", which is currently in beta version. We are in progress.
It is a premise that our business has economic rationality, and if we satisfy that, we think that we will receive strong support, so we would appreciate it if you could accompany us not only in this round but also in the long term.
Tominaga Investment is just a starting point, and the important thing is how to grow the company together after that, so I would like to support you as much as possible.
Taking on new challenges by leveraging the potential of real estate management
ーPlease tell us about your vision for the future of business improvement in the industry.
Inoue This industry has great potential. This is because real estate management information is basically a stock type. For example, as more and more maintenance and repair work histories accumulate in 'Kanriroid' and 'Kojiroid', it will be possible to rate condominiums and buildings. Since information that guarantees the asset value of real estate does not exist in the world today, we are also considering a platform business that will eventually provide credit information for second-hand real estate.
In addition, the quality of Japanese real estate management is extremely high, and there is ample possibility of exporting to the world. "Kanriroid" can read meters made overseas, so we have already begun to expand into Asia. In the future, we believe that there will be opportunities to provide our products and know-how to real estate in various countries that require world-class management (e.g., five-star hotels, etc.), so we are aiming for overseas markets after domestic.
-Finally, do you have a message for entrepreneurs?
Inoue What I always keep in mind is not to feel like I'm running the business by myself. I will continue to practice what I can contribute with gratitude to everyone, including the management board, employees, investors, and the connections I have built in the past. That deed will always come back to you.
The same goes for relationships with customers. If we continue to provide value that exceeds our customers' expectations, we will be able to work with them not just as a vendor but as a business partner.There are many scenes where we also feel that we have built a deep relationship of trust with our customers, such as when receiving a comment like "the introduction of 'Kanriroid' has not only improved labor productivity, but also changed the awareness of the staff working in the field." The number of such customers determines how the business spreads, so I think it is a very important attitude as an entrepreneur.
Person in charge: Comment from Tsukasa Tominaga
While smart buildings have been promoted in recent years, many of the real estate management worksites are still analog, and the working population is aging. In order to maintain the industry even with the declining population, it is an urgent task to review on-site operations and increase labor productivity. THIRD provides a rare product that tackles the deep-rooted issues of the industry while also pursuing the perspective of actual users to make it easy to use. This is a business that can only be realized by a team of members who have extensive knowledge of actual real estate management and IT. In addition, CEO Inoue is a manager who is good at getting people involved, and he is strongly promoting building relationships with customers and financing while demonstrating his strengths. We will do our best to support the company so that it can establish the de facto standard in the real estate management industry.
