Need an App? This Japanese Startup Has a Platform for That

(Bloomberg) -- “There’s an app for that,” so the old iPhone slogan goes.

But in a country like Japan that’s struggling to find enough engineers and programmers, locating someone who can create an app is easier said than done.

That glaring need has fueled investor expectations for local startup Yappli Inc., which designs off-the-shelf apps that clients can manage locally without needing to hire programmers. Its shares have almost doubled since its Tokyo listing at the end of December, giving it a market cap of about $750 million.

Chief Executive Officer Yasubumi Ihara and Chief Technology Officer Masafumi Sano, both Yahoo Japan alums, started the company after an arduous attempt at creating their own app just as smartphones started to boom in Japan in the aftermath of the earthquake and tsunami in 2011.

“We realized there’s a huge gap to fill,” Ihara said in an interview. “We knew everyone would be using apps in the future -- but that there would be a limit on how many people could actually make them.”

While still unprofitable, the company’s software-as-a-service business model aims for a steadily increasing revenue stream. Yappli has created Japanese language apps for international clients including Under Armour Inc. as well as domestic giants such as Toyota Motor Corp., though its bread-and-butter is small, local firms that lack in-house tech resources.

The firm creates, designs and launches customer-facing apps on Apple Inc. and Google’s stores, then hands them off to clients to run using Yappli’s content-management system. This model makes it tricky for a company to switch to a different platform.

Shares rose as much as 6.6% in Tokyo on Monday ahead of its first earnings announcement since listing. Investors are buying ahead of the announcement on hopes for growth based on the CEO’s vision for the firm, said Masayuki Otani, chief market strategist at Securities Japan Inc.

Digital Transformation

Yappli has also attracted attention as it attempts to ride on the coattails of the “digital transformation” being pushed by the administration of Prime Minister Yoshihide Suga, pressuring Japan’s aging companies to enter the modern age. The company is pushing apps to be used internally by firms to replace clunky intranets and other early digital detritus.

“It’s a firm that matches the needs of companies going through digital transformation, so one where we can anticipate growth,” said Tatsunori Kawai, a market strategist at Au Kabucom Securities Co. in Tokyo. “But investors are on the cautious side because it’s a stock that was just listed.”

Yappli’s shares have fallen about 13% from their peak on Jan. 20. Mio Kato, a LightStream Research analyst who publishes on Smartkarma, wrote in a note in Dec. that while Yappli’s model is “aptly suited to Japan’s market needs for SMEs,” its growth rate has declined over the past five years and its stock is less attractive than those of SaaS peers Money Forward Inc. and Freee K.K.

Still, there is a great need for tech know-how in Japan, whose startup scene is competing globally for programmers with Silicon Valley and China’s Greater Bay Area tech hub. While Yappli so far has focused on clients targeting the Japanese market, Ihara is eying expansion abroad in the next three to five years.

“In the near term, there’s still a whole lot to do in the domestic market and we’ll make effort to capture local market share,” he said. “But, using apps is a global thing and looking ahead, we of course want to try take our service overseas.”

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