Pacific-Link Consulting Earns 40% Revenue from Japan, Works with JETRO to Establish Japan Company

March 2011 -- Founded in April 2007, Pacific-Link Consulting (PLC) provides a comprehensive range of consulting services to clients developing medicinal products in the U.S., Japan and Europe. PLC recently established a Japan company to provide its services to the growing number of spin-outs coming from Japanese universities. PLC founder Richard Lowenthal spoke with us about establishing the company in Japan and working with JETRO to set it up.

Opportunities in Japan
While university spin-outs to form venture companies are common in the U.S., they have only begun to grow in Japan over the last 10 years, said Mr. Lowenthal. Japan's relatively young history in creating biotechnology and pharmaceutical companies from university research developments presented opportunities for PLC to provide its services. "Japan does not yet have the VC infrastructure, the experience or the expertise to put together small biotech companies in the way that it happens in the U.S.," Mr. Lowenthal said. "But it's now slowly starting to develop, so it's really almost a perfect situation for our services." PLC had been providing services from the U.S. to Japanese companies before establishing the Japan company last March, but established the company to be closer to its clients and expand business relationships.

Working with JETRO to Set Up the Company in Japan
To establish the Japan company, Mr. Lowenthal and Dr. Tanimoto, the Managing Director of Pacific-Link Corporation in Tokyo, worked with JETRO and its advisors to cover the essentials and determine the best entity for PLC's business in Japan. Through this process, Mr. Lowenthal and Dr. Tanimoto learned the rules and regulations for setting up a business in Japan, the legal and accounting ramifications of the different entity types, and were introduced to lawyers, accountants and other professionals. "JETRO gave us advice on how best to set up the company in the way that makes the most sense for what we're trying to accomplish," he said. "Their advice was very helpful, and their ability to give us legal and accounting help was really important."

With the advice they received, Mr. Lowenthal and Dr. Tanimoto established the Japan company as an independent entity and not as a branch of the U.S. company, as is commonly done. This model provides a legal and tax advantages, he said, and one entity of PLC bills the other for work done on the other's behalf.

Business in Japan
From his experience working in Japan, Mr. Lowenthal shared insights into doing business there:

• Funding is a very different concept in Japan. It seems small companies get more of their funding from the government than from venture capital organizations, whereas in the U.S. it's primarily from venture capital. I think it will change over time, but that's an obvious difference for our business.
   
• There is a much bigger emphasis in Japan on letting the client get to know us before starting work and also on personal relationships. In Japan we tend to do a lot of up front evaluations and give input for no charge because companies need to get to know you and trust you, and they want to see that you're doing something that makes sense and that they think is valuable. In the U.S., we don't typically do things for free for clients. In other words, if a client wants to hire us, we sign the confidentiality agreement and contract and start the work. It just takes a lot more time to get that relationship built in Japan.
   
• A challenge for us has been the accounting and banking systems in Japan. Moving money, for some reason, is much more difficult than in the U.S. Banks in Japan have a lot of restrictions, and it's more work to set up--even paying taxes--relative to the U.S.
   

 "JETRO gave us advice on how best to set up the company in the way that makes the most sense for what we're trying to accomplish."

Results & Outlook
Since its establishment in Japan, PLC has signed a number of agreements with Japanese companies "very quickly," said Mr. Lowenthal. "Things are progressing better than expected." Revenue from Japan currently represents approximately 40% of PLC's global revenue. For the future, PLC's main objective in Japan is to grow the office and also increase its capability to support Japanese companies who want to develop products on a global basis.

Japan Company Profile

*Note: The opinions contained in this article are based on the experiences of the interviewee. They are not representative of all experiences in Japan or working with Japanese companies, and do not reflect the opinions of JETRO.