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Startups

In sharing economy's bad year, Japan startup goes out with a bang

Shares of office renter Space Market surge in Tokyo debut

Room for growth: Space Market matches people looking to hold a meeting with property owners that have available space. (Photo courtesy of the company)

TOKYO -- In a year that saw sharing-economy unicorns Uber Technologies, Lyft and WeWork struggle, a small Japanese startup closed 2019 with an impressive stock market debut.

Space Market, which brokers meeting venues, more than doubled its offer price in its Tokyo market debut Friday.

The success of Space Market's initial public offering shows how investors are growing selective about startups in the sharing economy, where barriers to entry are low and competition is high.

"We've entered a phase in which we can achieve self-sustaining growth while reining in sales and administrative costs," President and CEO Daisuke Shigematsu said Friday.

Space Market's platform matches users seeking locations to hold business meetings and other events with owners of available space. Space Market does not own any of the properties but charges a 5% fee to users and a 30% commission to property owners.

Roughly 12,000 spaces are registered on the platform, including residential properties. Registered users have exceeded 400,000 people.

Big corporate names have come on board as shareholders, eyeing synergies with their own operations. Leading Japanese travel agency JTB uses the service to arrange business trips. Real estate company Tokyo Tatemono lends out unused model rooms by the hour, as well as shared lounges in condominiums.

Space Market expects to report sales of about 800 million yen ($7.3 million) for the year ending Dec. 31, up nearly 40% on the year. It also expects to move into the black with a net profit of 6.65 million yen.

The company began trading Friday on the Tokyo Stock Exchange's Mothers market at 1,306 yen, more than double its 590 yen offer price, and ended at 1,600 yen.

"This is the first listing for this sector," said Tatsunori Kawai of au Kabucom Securities. "Even if rivals emerge, [Space Market] will have the first-mover advantage."

Japan's sharing economy is projected to grow to as much as 11 trillion yen in 2030, according to data from Sharing Economy Association, Japan, or nearly six times the market in 2018. The total enterprise value of companies tied to the sharing economy surged 25% over a year, according to the Next Unicorn survey published by Nikkei in November.

Parking lot operator Park24 has achieved profitability for its car-sharing service, which builds on its existing business.

The mobility segment raked in 34.8 billion yen in sales during the fiscal year ended October and enjoyed an operating profit margin of around 20%. Park24's share price has jumped about sixfold since 2008, before it entered the car-sharing business.

But matching third-party users with an on-demand service does not guarantee instant success. Barriers to entry are low, and such ventures tend to lose money, owing to hefty system development and advertising costs.

A number of sharing ventures have gone nowhere. Online flea market operator Mercari's bike-sharing arm, Merchari, struggled to make headway against a competing service from mobile carrier NTT Docomo, which has achieved nationwide reach and the top market share. E-commerce group DMM.com folded a housecleaning gig app in 2018 after less than two years in service.

Osaka-based Akippa, a money-losing app for shared parking spaces, has survived by accepting investment from insurance group Sompo Holdings. Akippa looks to streamline sales operations by making use of Sompo's network of offices and insurance information.

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