Making the whole town “stationside”! Luup, a company engaged in electric micromobility sharing, on how to design a strategic proof-of-concept experiment

2020 was a year of further progress in the internet of things (IoT) of society. Offices and production sites are being explored for IoT, and the infrastructure for using big data is steadily being developed. IoT gadgets have become widespread even in private homes, and the smart-city concept is being promoted in cities all over the country.
The Otemachi-Marunouchi-Yurakucho area (known as the “Daimaruyu” area), one of Japan’s leading office districts, has also established a smart-city concept, with the area’s landowners, businesses, and government agencies working together to evolve Marunouchi into “the city of the future.”

As part of this Smart City Model Project, a proof-of-concept experiment is being conducted to verify the safety and social acceptance of electric micromobility on public roads. Luup, Inc., a startup company engaged in electric micromobility-sharing technologies such as electrically power-assisted bicycles and electric kickboards, is conducting a government-approved public road experiment of electric kickboards in the Daimaruyu area.
Luup is currently providing a sharing service using small electrically power-assisted bicycles in several areas of Tokyo, including Shibuya, Shinjuku, and Minato wards. The bicycles can be rented from share ports set up around the city, and the first ride starts at 100 yen for 10 minutes. The number of users is steadily increasing due to the ease of boarding with just a smartphone. In the future, the company plans to introduce electric kickboards into the service.
What was the company thinking, and what did they keep in mind during this demonstration experiment? And what is the company’s vision for the future? To find answers to these questions, we interviewed Mr. Daiki Okai, Luup’s representative officer.

INDEX

・The goal is to achieve is a “brighter Japan in 30 years.” That is why we chose the transportation infrastructure business.
・Together with stakeholders, we will create mobility that can be used with peace of mind. Validation is needed for proof-of-concept experiments.
・The goal is the success of the entire industry. A change in the economic zones of a city can change the value of real estate by several hundred billion yen.
・Key points

Daiki Okai
President and CEO, Luup Co.
Graduated from the University of Tokyo, Faculty of Agriculture. Okai later worked at a strategy consulting firm, where he was mainly in charge of PMI for listed companies and business due diligence for private equity funds. Subsequently, he founded Luup Inc. In May 2019, he established the Micromobility Promotion Council, which aims to promote social implementation of new micromobility technologies, with major electric kickboard operators in Japan and later became its chairman.

The goal is to achieve a “brighter Japan in 30 years.” That is why we chose the transportation infrastructure business

Why did the company enter the electric micromobility market in the first place? In the background, there was a vision for the future of Japan.

Okai: “I believe that businesses in the world can be broadly divided into ‘entertainment’ and ‘infrastructure’. ‘Entertainment’ is something that has value for each project, such as movies and games, while ‘infrastructure’ is something that uniquely exists and needs to be developed, such as real estate and public transportation. When I thought about which one I wanted to do, I chose ‘infrastructure’.”

Mr. Okai further says, “I want to aim for a business about which I can say 30 years from now, ‘I’m glad I did that.’”
Okai: “Unfortunately, I don’t think there are many people who can imagine Japan 30 years from now and be optimistic. If you talk to the younger generation, they have many worries such as ‘Will I get my pension?’ That’s why Luup wanted to create not the social infrastructure needed now, but the infrastructure needed 30 years from now. In this context, we thought that the areas we could face were ‘nursing care and welfare’ and ‘urban development’.”

Luup is currently engaged in the electric micromobility-sharing business, but at the time of its founding, Luup was working on a web service that matched people seeking care at home with former caregivers and housewives. The company has started to develop transportation infrastructure in order to tackle “nursing care and welfare.”

In the future, Luup aims to create a transportation infrastructure that will make the entire city “stationside.” By using electric micromobility to expand the transportation network that has been covered by trains and buses, Luup aims to develop public transportation routes to every corner of the city. How will society change if the company’s vision is realized? Okai responds, “First, real estate values will change.”

Okai: “In essence, mobility is a part of the real estate business. Public transportation is a business that depends on people coming and going, and buses and trains do not make a profit from ticket prices; JR and private railways secure their sales from the accompanying urban development and real estate businesses.
In Japan’s big cities, the value of real estate is determined by the standard of ‘an XX-minute walk from the nearest train station.’ Generally speaking, the closer that station is, the more desirable the property will be, and vice versa, the further that station is. Luup hopes to expand the economically desirable zones of the city by promoting the use of new modes of mobility.”

Together with stakeholders, we will create mobility that can be used with peace of mind. Validation is needed for proof-of-concept experiments.”

Okai is enthusiastic about expanding the economic sphere of the city through the power of mobility. However, he had no knowledge of the mobility business before entering the market.

Okai: “We didn’t have the know-how, but we thought we had a good chance. This is because Luup’s business can compete on the quality of its systems.
In order to make a public transportation infrastructure work, it is necessary to have the ‘stability’ to operate on schedule and the ‘scale’ to build commercial facilities and residential businesses along people’s routes. On the other hand, stability and scale alone are not enough for a micromobility-sharing business. Hardware development is necessary in the initial stage, but in the diffusion stage, mobility management and relocation precision are required. Since we can compete not on the scale of infrastructure but on the quality of the management system, we thought it would be possible for startups to enter the market.

However, there are many barriers to entry in this area. For example, what about regulations under the Road Traffic Act? An electric micromobility vehicle runs on public roads and needs to be deregulated in order to coexist with existing vehicles.
Deregulation requires the cooperation and understanding of local governments, including the National Police Agency, which has jurisdiction over public transportation, as well as local residents. The Daimaruyu area proof-of-concept experiment, which has been underway for six months since October 2020, is one such example of efforts toward achieving this. The company has been persevering in dialogues and consultations with the relevant ministries, agencies, and local governments, and has been conducting proof-of-concept experiments in more than 30 locations across the country while coordinating with stakeholders.”

Okai: “We wondered, ‘What do customers want from electric micromobility?’ We wanted to ensure trustworthiness and safety. If someone asks, ‘Can you be responsible if an accident happens?’ We need to be able to say, ‘We have done our utmost to ensure safety.’ I believe that players in this space who sincerely verify the safety of their products will be contacted, and this will ultimately lead directly to business, so I am working with the local government and other authorities on this project.”

Other than trust and safety, what else have you been focusing on to facilitate the proof-of-concept experiment?

Okai: “We have conducted various proof-of-concept experiments, but what separates ‘good proof-of-concept experiments’ from ‘bad proof-of-concept experiments’ is the goal design and process. We think of a proof-of-concept experiment as a presentation. A typical startup prepares a demo movie to let people know about their service, but the safety and comfort of LUUP cannot be conveyed in a video. For this reason, we need as many opportunities as possible for local governments, administrators, and police to use the actual system. After that, we envisioned our demonstration target, set the environment and scale of the experiment by calculating backwards from the goal, and continued to collect quantitative data. It is easy for a proof-of-concept experiment to become a means to an end. In order to avoid this, we need to design an appropriate goal.”

In the proof-of-concept experiment, they were also careful to subdivide the process. In order to prevent any accidents from occurring, the conditions were changed step by step to ensure a safe and reliable demonstration.

Okai: “LUUP has repeatedly conducted ‘proof-of-concept experiments’ to ensure that the safety of people is not threatened during the development stage. At first, we used private land, then a part of a park surrounded by a frame, a driving school, and the grounds of a university. Even though the university is a private property, there are people and cars coming and going, so there is no place that is closer to the public road. After going through such a process, we were finally able to realize a proof-of-concept experiment on some stretches of public roads.
The demonstration on public roads will also be conducted within a limited area range at first, which will then be gradually expanded, and with people asked to wear helmets and ride in bike lanes… In addition to refining the process, we are also trying to involve stakeholders in this process.
In addition to dividing responsibilities, it is important to involve all parties involved in this process. If we don’t consult with local governments, governments, and research institutes and come up with a verification method that is acceptable to them, there is no point in conducting the demonstration.
There are many parties involved in the LUUP project, and a great deal of effort is required to involve them. There will be a lot of hard work involved, such as communicating with the relevant ministries and agencies and discussing the verification experiment process. Where does the driving force for overcoming these hard things come from?”

The goal is the success of the entire industry. A change in the economic zones of a city can change the value of real estate by several hundred billion yen.

Okai: “The promise I made to stakeholders is the driving force behind Luup. I’ve been trying to start my own business since I was in college, and at the time, my ignorance and overconfidence were what drove me. Now, it is my sense of responsibility that is the source of my energy. In the course of the project, various people from related ministries and agencies, politicians, developers, etc., have been cooperating with us. I think we have to live up to their expectations and finish the project. I think the reason why various busy key people are participating in our discussions is because they have high expectations for our infrastructure and its impact on urban development. If electric micromobility becomes widespread, it will revitalize the city. If the economy of the city’s economic zone expands and the real estate industry grows, it will create an economic effect of hundreds of billions of yen or more. So far, Luup has attracted the attention of some of Japan’s most renowned individuals. That’s why we have to realize the ‘infrastructure to make the whole city station front’.”

A proof-of-concept experiment that involves all stakeholders is an effort that does not directly lead to profit. There are many constraints for a startup with limited resources. Nevertheless, Mr. Okai believes that he must accomplish this.

Okai: “If Luup fails to get the regulations right here, it will slow down the growth of the electric micromobility industry. I think our moves will determine whether or not domestic ventures will be able to enter this area in the future. We cannot afford to fail, so we have to involve all stakeholders and our competitors to move the entire industry forward.
I consider our competitors to be partners in building our business together. The more the entire micromobility industry grows, the faster it will spread to the rest of the world. There are about eight mobility companies in America, and I would like to see all of them enter the domestic market.”

Mr. Okai aims not only for the success of his company but for the growth of the industry as a whole. Lastly, we asked him about his company’s vision: what does Luup want to achieve, and what kind of future does it want to create?

Okai: “The society we are aiming for is to make electric micromobility a public resource. If we can free our modes of movement beyond trains and buses, it will revitalize cities and broadly enhance the value of real estate.
Having seen how technology has changed the world in the last 20 years, I am convinced that all mobility will be electric. If not us, perhaps someone else will popularize electric micromobility. Of course, I would be happy if this was achieved by Luup, but regardless I believe that the steps we’ve taken will be taken by someone else, and I want that to be us.”