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If you’ve ever booked a flight or vacation package in Japan, there’s a good chance you did it through Evolable Asia – though you may not know it. The Tokyo-based startup, founded in 2007, runs three popular online travel portals of its own. An additional 600 domestic travel sites use its in-house technology to power their own flight, hotel, and tour package searches.

The 2020 Tokyo Olympics are just around the corner, and the government is pushing for 20 million annual tourists to touch down in Japan. By then, Evolable Asia, is also gunning to become a regional facilitator of inbound tourism to Japan. It hopes to scale its Japan-specific travel search engine to partners across Asia Pacific, helping foreigners not only get to Japan, but travel domestically after they land.

With JPY 640 million (US$5.3 million) in fresh funding from Fenox Venture Capital announced last week, the startup hopes to become a force to be reckoned within the travel space. But there’s another unexpected reason why it’s raising the money.

Lessons learned while setting up an engineering team at its Vietnamese subsidiary inspired founder and CEO Hideki Yoshimura to launch a seemingly unrelated but successful offshore web and app development business in 2012. He’s now eyeing US expansion.

“If online travel companies in APAC want to create Japan-focused travel services, we can provide the search engine and the engineering team,” he tells Tech in Asia. “Our clients only need money – we create everything.”

California connections

Hideki, a Tokyo University alumnus, founded his first company when he was a third-year undergraduate. The Osaka native licensed the local pro baseball team’s logo to sell coffee. While successful, that business pales in comparison to his current venture. The 32-year-old founder is frank about his startup’s financials.

Evolable Asia CEO Hideki Yoshimura.

“From October 2014 to September 2015, our travel businesses alone earned JPY 20 billion (US$164 million) in revenue,” he says. “In just three years, our offshore development business has grown significantly. In the same period, it earned JPY 1.5 billion (US$12.2 million) in revenue.”

Hideki adds that there are over a million monthly transactions across Evolable Asia’s three in-house travel sites: Tripstar (multiple language portal site, both domestic and international flights and hotels), Soratabi (domestic flight search), and Tabiweb (overseas hotel booking).

So why would a startup that’s so flush with cash be interested in raising single-digit millions in venture capital? For Hideki, it’s all about the connections that will facilitate his startup’s global expansion.

“We want to establish an office in Silicon Valley,” he says. “We’ll use the funding and Fenox’s extensive network to open our US office and extend our offshore development pipeline to the US.”

Anis Uzzaman, general partner and CEO at Fenox Venture Capital, confers:

Fenox brings the right worldwide connections to help accelerate their grown in [Evolable Asia’s travel and offshore development] businesses. We’ll do our best to hook them up with the right global partners who can not only help them with their immediate revenue growth, but also can help them with stable growth in the long term.

Tapping into Vietnam

Japan has a lot of online travel agencies – Evolable Asia is ranked number five overall, with Rakuten Travel claiming the number one spot – but the country has a major shortage of engineering talent. A 2014 report indicates that 90 percent of Japanese companies have insufficient engineering staff. Because Japanese engineers are a rare breed – coupled with the high cost of living in Japan – they also command much higher salaries than their counterparts elsewhere in Asia.

Evolable Asia’s three Vietnamese subsidiaries – located in Hanoi, Ho Chi Minh, and Da Nang – employ more than 550 engineers. Hideki says it’s the largest pool of Vietnamese developers managed by a Japanese outsourcing company. With an estimated 100,000 Vietnamese university students expected to graduate with an engineering degree this year, he hopes to increase Evolable Asia’s offshore development team to 10,000 members by 2020.

Engineers from Evolable Asia’s Vietnamese subsidiaries.

The startup has outsourced development work for some major domestic players, including Yahoo Japan, Gree, and DeNA Travel.

“Most of our clients are Japanese, with a few in China, but our next target is of course the US,” Hideki says. “The Bay Area also has a problem with hiring engineers, and we have the knowledge and network to create strong engineering teams that are even cheaper than those in India and China. We want to give the power of Vietnam to Silicon Valley businesses.”

In another display of the startup’s strength, Evolable Asia last week announced that it had poached Google Japan industry head Toru Matsunami. He’s now the startup’s CMO.

Evolable Asia has raised an undisclosed amount of venture capital prior to the latest round, but declined to specify what series the new funding represents. Hideki did, however, say that this would be the final round of funding. The CEO says he’s gunning for an IPO “in the near future.”

This post Booming Japan tourism and cheap Vietnamese engineers made this startup a $175m success appeared first on Tech in Asia.

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