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Marty Roberts & Elena Calderon Alaez (TOTEMO)

January 11, 2023

Marty and Elena who lead TOTEMO, a Japan-based NFT auction platform specializing in street art, talk about the process of their startup, the challenges they have faced, and the current status of Japanese startup scene.

Marty:
My name's Marty, and I am the CEO of TOTEMO. I'm American and have been living in Japan for about 15 or 16 years, half of that time in Osaka and the other half now in Tokyo.
Before coming to Japan, I was – I guess I still am - a clinical psychologist in the US. I was working in pharmaceuticals for a long time, and about eight years ago I launched a healthcare startup that provided marketing solutions for pharmaceutical companies. The company succeeded and I sold it to a listed Japanese firm. Then I came to think about launching another startup.
It was during the time of Covid with schools shut and providing distance learning, so my kids were at home all day, being homeschooled. But it was quite tough for my kids and also my wife. To help out, I started to teach the children what I loved when I was their ages such as punk rock, skateboarding, and street art.
Then I started thinking that street art could be an interesting area for a startup because you have people who are producing great art on the streets, but they don't get paid, and they take a lot of risks. And also, because it's on the street, it's ephemeral, so it will be destroyed eventually.
It's not monetizable and there's no collectors for something that's painted on a building except for the building owner if it's commissioned. It’s not a very fluid market in terms of monetary opportunities. So, around that time I was discussing this idea with Mark Bivens, a venture capitalist with whom I worked together on my previous start-up, and he told me to take a look at a soccer card trading company in Europe.
They were selling and trading soccer cards as NFTs. It was the first time that I heard about NFTs. This was probably late 2020 or so. And I just realized that this is the secret key we need to be able to take a street artwork, digitize it, make it something collectable that people can buy and put on their wall on a digital screen or trade with other people. So, I've got tons more to say, but I'll let Elena talk.

Elena:
My name is Elena, head curator of TOTEMO. I'm from Spain and I came to Tokyo three years ago. Previously, I studied conservation and restoration of cultural arts for museums and art galleries. When I was studying in Athens, Greece, I started to find out about graffiti and street art in general.I've lived in many different countries throughout Europe, and I kept researching street art. Then I moved here to Japan with the idea of doing another PhD on street art, but I haven't started it yet. Although, I kept doing research about it, and I published an article about graffiti in Japan. Then I met Marty.

Marty:
We met each other through Instagram. I think I was tracking her because I was posting hundreds of graffiti photos and just creating a profile out of it, because I was still just working on the concept in my head. And then all of Elena's stuff kept getting suggested in my feed so I began to follow her Instagram feed. I remember thinking “This is someone I need to get to know.”There's kind of a blurred line between graffiti and street art. I think the initial pieces that a lot of people would buy is more like commission type of street art with strong images & characters, like the works of Baki Baki and Kuua (both Osaka-based artists). But Elena and I believe there's room for just straight-up graffiti art too, like simple hand tags and hand styles. And having that changing around on a screen would be something I would really dig; It would be something I would collect.

Did you do any market research before you started?

Marty:
Yes and no. The NFT field was so new when we established in April 2021. I guess The NFT field was so new that there wasn't really any good data out there. There's only more recently been lots of good surveys conducted regarding the market and NFT art collectors. Of course, I was tracking things like total NFT sales, but most of NFTs in the early days were profile picture (PFP) sort of projects, rather than bespoke artworks.
But the news that Bored Ape's digital art was traded at over 4 million dollars was something so insane that we all thought the current state of the NFT market must be a bubble. So, we took our time, thinking about when to enter the market. We wanted the bubble to burst and create the room for things outside of these PFP projects. We knew that there will eventually be a space just for art.
There was a platform to help digital artists in the US for past three or four years. For digital artists, there is no physical work to buy, so selling as NFTs mades perfect sense. We thought that was really cool. And it made sense that digital artists would be the first people to gravitate towards this new world of NFTs because they're already digitally-minded and computer competent. They probably already had a crypto wallet and understood crypto and all of that.
Street art and NFTs also seemed to be a good fit because NFTs could make street art collectible. Moreover, there was underserved population, in that street artists typically do not work digitally, They work with spray cans and running away from police officers. They are very different from the typical digital artist. So, in order to bring them something of value, we decided to create our own sales platform and also bridge the real life and the online through hosting live events, such as the Baki Baki & Kuua event we recently hosted. And to see where things were going, we did some discussions with collectors in the art world.
But it wasn't until early this year that we could have more solid data to show that there was a definitely a separate market for art NFTs vs other types of NFTs. Also, we needed to discover the average price of NFTs collectors would buy, frequency of the trades, etc. So, we're still researching, working and tweaking our business plans every day.

What are the kind of successes or challenges that you have faced along the way of founding the company?

Elena:
Street artists are not like digital artists, and they have a totally different background. So, they're not used to working with digital programs. They are generally not into cryptocurrency nor have a digital wallet. So, it's quite complicated to get them into this digital world, but I think they're getting used to it. A lot of artists are getting in contact with us right now, saying they are interested in doing more exploration and trying NFTs.

 

Marty:
I think there is a barrier between street art and the market, because a lot of the artists we're working with are not doing their art legally. So, you have to be able to network and get into those circles of street artists and let them introduce you to more artists. At our events, there are photographs of our artists who are all hiding their faces with their hands. We had to literally go over barriers like fences to get to know some of these artists and gain their trust. Now we are all inside the barrier, but some competitors may not, so it can be good for us. It can protect our business.
The big challenge we have currently is educating collectors and customers, especially collectors. So, to do that, we have created few different educational channels. Through our social medias, we're always show-casing talks such as ones Elena gives at oversea academic conferences. We also have a podcast called the Street Art Collector. We are working with a great podcaster named Stephanie O’Brien. The podcast is interesting because it’s aimed Mainly at NFT art collectors. It’s for understanding the value of NFTs and the way museums might treat NFTs in the future, for example. It even goes down to the basics like how to buy or how to display your art NFTs.
We're not piggy-backing off of the large marketplaces, like Opensea for example, to host us. There’s a couple of reasons why.The main reason is that we want to take control and have total IP rights to what we create, as we are a startup and eventually aim to be acquired or go public. So, we need to own IPs. This is simply from a business model perspective. Owning our own platforms is also really important because it gives us a lot of control over the royalty system for secondary sales.
Let me explain. If I buy Shephard Fairey’s art from a gallery, normally Shephard gets half and the gallery gets half of the sale. But if I then sell that piece of art to you, I get all the money. The gallery and the artist get nothing from a secondary sale.In the world of NFTs, there's something called smart contracts. So, the NFT really is just a digital receipt that points to an image that's stored somewhere on a server or a video file. But that digital receipt can be set in a way that when you resell an art, the original seller and the artist may continue to get some percentages of the sales in perpetuity.This is a great system for artists. I mean, that's like one of the biggest draws for artists because they put their heart and soul into a work. While they may get some money when an artwork is sold for the first time, but no more. Whereas as NFTs artists are able to keep getting their share from later trades of the same work. That's really cool, and we want to have a complete control over this system. So, we spent a lot of time building out the tech.

 

What is the next step? what do you want to achieve through TOTEMO?

Elena:
I want to get more well-known artists and international artists. 

Marty:
As the beta launch is rolling out slowly soon, I have set certain KPIs to monitor conversion time, drop off rates, etc. I have lots of sales and marketing KPIs, and luckily, I have Elena to get us the best artists. And then I work with our sales and marketing specialist to try to increase the sales number.
We'll also be starting another funding round soon. I've just started discussing with some of the VCs. Before we started, we took an initial small pre-seed round of funding from VCs in order to build the platform and do some test marketing and events so as to prove this model would work.
But now we're ready to take bigger steps. Even though we're based in Japan, and we are not only looking into the Japanese market.
Our artists and collectors are coming from all over the world. When you look at the audiences of our podcasts, the largest is the US, then Japan, Australia, and Europe follow. So we need to do more marketing in Europe as well later.

What's your thoughts on Japanese startup ecosystem? 

Marty:
I think it's really improving and I'm talking from a long-term view. There was no developments coming out from Japan for a long time but from about 12 years ago, we have seen another round of successful Japanese entrepreneurs like Yo Shibata, who is one of our angel investors.
He created several companies and sold them successfully. And he is not the only one. I think it is in a good cycle because now founders are starting to become investors.
Because until recently, what I'd seen was an ecosystem being funded by VCs from banking backgrounds whose inclinations were to take no risks. So, typical Japanese VCs were not the most productive VCs to work with, but I think that's changing.
I also think that more and more successful entrepreneurs are getting involved in Japanese VC world. For example, there is another Japanese entrepreneur , Matt Romaine, who launched a successful startup called Gengo, an online translation company, exited and now works in venture capital. I think these people are building the ecosystem because they have experienced all stages of the ecosystem from launching startups, being founders, and to helping startups.
Also, I think that the government has been doing a lot more initiatives over the past 10 years, especially Shibuya ward. Now we can access to resources like those of the Japan Finance Corporation, who helped support my last startup. They ended up lending me about 20,000,000 JPY on unsecured basis, which was pretty amazing.
I couldn't imagine the government doing things like these before, but now you can see certain areas of Japan are really taking startups seriously. At the national level Japan Finance Corporation, but at local levels like Shibuya too.
But the amount of start-up funding available in Japan is still very, very limited compared to what's available in the US. So, sometimes you see some brain drain happening in Japan as founders move to the USA to seek more opportunities.
They are so promising that they go straight to Silicon Valley. I can think of great Japanese startups which have actually succeeded while based in the US and I'm really proud of them. But it's kind of sad to see that they had to go to the US because there wasn't an ecosystem mature enough yet to support them in Japan. I think this is especially true for people who try to manufacturing start-ups.

Do you think we have a good startup ecosystem in Japan?

Marty:

Yes, definitely. I think the startup ecosystem is year by year improving. For example, the ecosystem now has specialized law firms focusing on startups, such as Southgate. We are working with them, and they really know how startups work. They can help you understand what kind of legal supports you might need.
And we have startup events, which are great because entrepreneurs and other people in the startup ecosystem can meet each other socially. This has been a trend in Japan in recent years. That's really good.
We have more incubator programs that are designed to coach and train early-stage startups with mentors. So, I believe the ecosystem's growing and, in our case, the NFT ecosystem is growing too. It's really interesting because there's probably still only maybe 20 of us hyperfocused on NFTs, working together to build the Japanese NFT ecosystem.
For instance, there's frequent events such as NFT ART Tokyo at Trunk Hotel. There's a lot of initiatives going on.

Do you have any advice to those who want to start business in Japan.

Marty:
Do it! Though I guess it depends where you are in your career. If you are a junior programmer and have a great business idea, I recommend starting your own business without hesitation. If you're more senior, you might need to take some time and plan.For my first startup, it took me a year and a half of planning before I could actually quit because I was CEO of a different company, so I had to plan everything and make a smooth transition. But if you're young and you've got a great idea, just quit your job and do it.

How is your life like in Japan?

Marty:
I'm stuck here for good, and I love it. I am married, have two kids and a house. I'll probably be buried in Japan. How about you Elena?

Elena:
Yeah. I really like it here. I want to stay here for a long time. I came right before Covid, before they closed the boarder. It was tough but it was nice as well because I could explore. I could travel around the country.


Do you have any favorite words or lines in Japanese?
Marty:

Oh, because I lived in Osaka, it has to be “Nandeyanen!” Japan's has so many interesting cultural aspects that come out in language, “Ganbare,” “Otsukaresamadesu.” They are hard to translate, and you may feel weird when you hear them for the first time, but you will understand them eventually.

Elena:
I like “Tadaima” and “Okaeri.” These are words you say when you or someone come home. There's nothing like these in Spanish.

Thank you very much.

Marty and Elena:
Our pleasure!

This article belongs to JETRO.
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