Gojo’s Series D financing, COVID-19, and the future world.

9 min readApr 18, 2020

We are pleased to announce that we closed the first round of our Series D financing. We are grateful for our shareholders who trusted us under the circumstances.

The shock came in February, and we ran as fast as we could during March, securing enough runway to sustain the business. Now the next 12 months will be like surfing.

As there are many discussions on the short term impacts of COVID-19, I am not going to talk about them. What I want to write here is about the long-term consequences of the pandemic.

Ultimately, the scale and the quality of the impact will be determined by the duration of the pandemic.

The months taken to contain the virus will be the major determinant of the state of the future. The longer the period, the bigger the change.

Now that even the UK, which initially planned to go for collective immunity, gave up the original plan, all developed nations may enter the loop as follows, unless innovative solutions are invented:

→ Short-term recovery
→ Lifting the lockdown/restriction
→ Outbreak again
→ Lockdown/restriction again

The loop ends only if:
A. The vaccine or other solution is invented or
B. The country acquires herd immunity.

Let me look at the two options more closely.

A. Vaccine or other solutions

It takes at least 18 months until the vaccine is invented and manufactured. Bill Gates is funding the new factories for vaccines to make sure that the vaccine is manufactured soon after the invention. There are many other solutions, such as combination PCR testing for all people and contact-tracing apps, etc., but it will also take time.

B. Herd immunity

The key factors are as follows:
B-1: How long can the government endure the astronomical budget deficit. I think 12 months is maximum.
B-2: How long will it take to acquire the herd immunity by avoiding medical system paralysis. It takes at least 3 years.

B-1: Lockdown necessitates massive government spending

How much does it cost to cover the GDP decline by the government spending?

GDP impact:
WSJ reckoned that the lockdown would reduce the GDP by 25%. The UK’s GDP growth could be minus 30%. If it’s 25%, then the GDP impact will be roughly $5 trillion in the US and $1.25 trillion in Japan.

How much should the government spend:
Although the propensity to consumption varies from country to country (40–60% or so), let me assume that it is 40%. Then, $1 government spending roughly generates $1.67 GDP. If it’s in Japan, the necessary expenditure would be approximately $0.8 trillion, or 3x of its annual budget, excluding repayment of government debt and social security spending. Huge amount.

Safety net alone costs astronomical money. In the US and the other developed nations, 15% could be jobless. If we pay them $2000 every month, that could be huge (in Japan, it could be roughly 2/3 of its annual spending).

Most of the governments cannot persevere the economic impact of the lockdown so long. I feel 12 months is maximum.

Medical capacity doesn’t increase that quickly, even in rich countries.

How many people should be infected to acquire herd immunity:
The basic reproduction number (R0) determines the percentage. If R0 is really 2.2, then 55% of the population needs to be infected and acquire the immunity.

If the % of the people who need hospital care is 4%, then 2.2% (=4% * 55%) of the population need to go to the hospital.

In practice, when a country is to acquire the herd immunity, it usually safeguards vulnerable people (older people and the people with serious diseases), so the % above could be a bit lower. Maybe 2% and 1.1%. Then, in Japan, the number will be roughly 1.4 million. Still a big number.

Medical Capacity:
The major bottleneck will be (1) ventilators and (2) the staff. The number of beds does not matter much, as we can increase it relatively quickly.

For instance, in Japan, which has a relatively superior medical system in the world, there are only 20,914 ventilators (incl. ECMO), and only 11,000 ventilators are available. If one patient needs a ventilator for 2 weeks, then the annual capacity is roughly 300,000 (=11,000 * 365 / 14). Then it takes 4.7 years for Japan to absorb all patients.

Major manufacturers are as follows:
・Becton (US)
・Philips (Netherland)
・Hamilton Medical (Switzerland/US)
・Fisher & Paykel Healthcare (New Zealand)
・Draeger (Germany)
・Medtronic (Ireland/US)
・GE Healthcare (US)

Given the high demand, most of the countries except for the above will face hardship in installing new machines.

Medical professionals:
Various medical professionals are tackling the situation. The seriously ill COVID-19 patients necessitate doctors, nurses, and clinical engineers.

Most of the countries are not ready to increase the number of staff. It takes years to increase the number of doctors and clinical engineers. Increasing the number of nurses might be relatively easy, but it is also challenging.

The capacity doesn’t increase that quickly in most countries. In the base case scenario in Japan, it takes 5 years until it acquires herd immunity while protecting most of the people. In the best case, 3 years.

Therefore, we will face the dilemma of economy and life.

Given the A and B above, the future scenarios will be as follows:

Best Case:
Any solution, such as a vaccine, becomes available, and the world will go back to normal in 18 months. The scenario is based on the assumption (or hope) that the virus doesn’t mutate and increases toxicity.

Second Best and the others:
If the above is impossible, then the future scenarios vary according to the combination of the three major factors — medical system paralysis, lockdown continuing, and enough compensation:

A. Life saved with a massive economic burden
- Can we stop the medical system paralysis: Yes
- Will lockdown/restriction continue: Yes
- Enough compensation for the job-loss: Yes

B. Life saved but a significant social unrest
- Can we stop the medical system paralysis: Yes
- Will lockdown/restriction continue: Yes
- Enough compensation for the job-loss: No

C. Many deaths and a significant economic burden
- Can we stop the medical system paralysis: No
- Will lockdown/restriction continue: Yes
- Enough compensation for the job-loss: Yes

D. Disastrous social unrest
- Can we stop the medical system paralysis: No
- Will lockdown/restriction continue: Yes
- Enough compensation for the job-loss: No

E. Give up. Many deaths. The economy recovers faster.
- Can we stop the medical system paralysis: No
- Will lockdown/restriction continue: No
- Enough compensation for the job-loss: No

Many people are talking about the future of the life/workstyle. However, we are not smart enough to implement it in a couple of years.

The UK tried E but quickly gave up and entered A. Many countries are more or less A or B. However, I don’t think many can continue that.

In most democratic countries, it is not easy to implement a policy that could kill many of their people. Therefore, many governments will enter the “death march” of lockdown while understanding that it is not sustainable. However, at the end of the day, most of the governments will give up and enter E. I think the government in developing nations will enter the scenario E earlier, given that they cannot enjoy the luxury of lockdown so long. I believe that developing countries will recover much earlier than rich ones.

How the world will change

It takes time until the pandemic comes to an end. I am still hoping that we will not enter the worst situation, e.g., deadly mutation of COVID-19.

I am thinking of the 3 things now.

A. What is the existing trend which will be accelerated by it
Replacement of humans with machines has been a long-term trend. As known well, Internet companies will be the winner of the event.

The proliferation of Internet-based communication, especially video conferences, will change our communication style and a presentation tactics too.

Crowding out of small businesses in rich countries also has been a long-term trend, and now it is accelerating significantly. In the end, big corporations with enough liquidity and political clout are likely to be the survivors.

B. De-globalization
It will get worse if things continue. The global supply chains might be restructured to domestic ones if it takes longer. China re-opened most of the factories, because if it doesn’t do so, it might lose the position as the world’s manufacturer.

The exit by foreign investors from developing nations is increasing, and many governments are seeking rescue from the IMF. Given the difficulty of frequent business trips, even strategic investors may stop foreign investments.

The centralized organizational structure won’t work well. The new structure needs to be more decentralized.

C. What will be the unchanging human nature
I love music and cannot live without music festivals. If they are gone, I will lose a joy in my life.

Even Black Death and Spanish Flue didn’t make us not to mingle each other (Spanish Flu promoted social distancing back then too). Were the humans back then were just not well educated, or we cannot stop gathering?

It matters a lot to my business — microfinance.

Social capital, the foundation of the existing business model, comes from face to face interactions. Social distancing would weaken the social capital. — — B

Will the social capital be replaced with the new community arising on the Internet? The bond among people in the Internet sphere has been much weaker than the physical ones, but it might change in the future. — — A

Will people still refrain from gathering, even after things are contained? Or do we back to normal? — — C

We will have to keep surfing.

In the end, let me look at what is happening by stepping back a lot.

There are millions of species (perhaps dozen millions, if we consider the number of insect species), are living on the earth. Although this planet seems to be the home to diverse lives, more than 99.9% of the species, which existed in the past, have become extinct.

There have been many extinction events in the history of the earth. In the Permian-Triassic extinction period, 90–95% of the species disappeared. In the well-known Cretaceous-Paleogene extinction period, 70% of the lives, mainly dinosaurs, were exterminated.

The extinction of species seldom happens due to being eaten by other lives or having natural disasters. It occurs mainly because of environmental changes, which suddenly makes the fittest be the misfits. The current business environment change, although it is trivial compared with the vast extinction events in history, will also cause the selection of the fittest organizations.

Those who adapt to the changes survive, be it organisms or organizations. There are two adaptation patterns: (A) style of the organizations was fit to the new environment (i.e., just being lucky) or (B) quickly and correctly change themselves according to the new environment. In the mass extinction events, only the pattern A survives, but in the situation like now, the pattern B also has good hope for survival.

To rapidly adapt to the changes, we have to observe the facts without any wishful thinking, make the critical decisions in the short term, and then keep reviewing the decisions and changing them quickly. In the last two months, Gojo has analyzed the situation well and done what we should have done. Also, we will come up with a series of the major decisions in the next three to six months.

Pandemics and plagues have killed many throughout history, but such events have been a change agent to drive our evolution. It takes a long time for DNAs to change, but organizations can change much more quickly. We will do our best such that we will be able to say that the year 2020 was the best period to form our foundation.

Last but not the least, now is the crucial time for us to provide unwavering support and proper financial access for the people. We will keep calm and carry on extending financial inclusion to everyone. I am grateful if you could give us continuous support.