Japan BrandVoice: Powered By Entrepreneurs, Japan’s Startup Ecosystem Is Poised To Take Off

As the world moves toward the post-COVID 19 era, innovation will be key in revitalizing economies. Sponsored by @JapanGov

11/20/2020 11:58:00 PM

As the world moves toward the post-COVID 19 era, innovation will be key in revitalizing economies. Sponsored by JapanGov

In Japan, startups, venture capital and universities, along with major companies, banks and other investors, are channeling more resources into innovative new drivers of the economy.

Approximately $4 billion was allocated to Japanese startups in 2019, five times the sum in 2010, according to INITIAL, a Tokyo-based startup information platform. This reflects a long-term trend in venture capital flows, which have nearly returned to the levels prior to the 2007-2008 global financial crisis as Japanese brands have channeled funds to startup companies.

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Japan has a high level of business trust that allows for real innovation, says Tim Rowe, CEO of U.S. workplace company Cambridge Innovation Center.Japan BrandVoicePolicymakers are working to strengthen this trend. Central and local governments in Japan have formulated a regional approach to building startup ecosystems. Starting with the cities of Tokyo, Nagoya, Fukuoka, and the Kansai region centering on Osaka, as well as the  ecosystem regions of Hokkaido, Sendai, Hiroshima, and Kitakyushu, public- and private-sector players are coming together to help grow and connect new businesses at the grassroots level. This approach boosts the existing strengths of each local ecosystem, for instance the Nagoya region being prolific in manufacturing while Fukuoka has been known for IT services.

A Cambridge business hub in TokyoAgainst this background, in 2020 the Tokyo Metropolitan Government established Startup Ecosystem Tokyo Consortium, an association of businesses, universities and local governments that is aimed at nurturing startups, bolstering international competitiveness and accelerating networking. Foreign investors are also joining this movement. One is leading U.S. startup workspace company Cambridge Innovation Center (CIC), which recently opened a hub in Tokyo, its first in Asia since its founding in 1999 in Cambridge, Massachusetts. Billing itself as the largest cluster of entrepreneurs in the world, CIC owns startup workspaces such as its Kendall Square space, home to about $7 billion in venture capital. It’s known for hosting many startups that went on to become major successes, including Android Inc., which built the foundation for the mobile operating system that now has billions of active users. CIC Tokyo is a place for Japanese entrepreneurs to come together, exchange ideas and grow their businesses while getting what they need to succeed, including capital and human resources. headtopics.com

“What we do is centered on next-generation technologies, and for new innovation to work, you need a high level of trust,” says Tim Rowe, cofounder and CEO of CIC. “You need to believe that your partners who are spending lots of money are telling you the truth. Real innovation requires a level of confidence that is hard to find in the world, and Japan is one of the places that has this level of business trust.”

CIC recently opened CIC Tokyo, the company's first branch in Asia.Japan BrandVoiceAnother reason Japan is an attractive environment for a startup-oriented business is that it has a long history of entrepreneurship and innovation. With less than 2% of the global population but 11% of the world’s largest companies, Japan punches above its weight class, says Rowe.

“Japan is far outperforming its population size with incredibly successful startups. We just call them companies now, like Honda Motor Company,” says Rowe. “Today, Japan is at a turning point where many younger Japanese are excited and interested to take risks and build something new. Our view is that Japan has basic trust, science and research, and that there are opportunities now for Japanese people to start their own companies and accelerate the culture of  entrepreneurship.” 

Rowe has a unique personal connection to Japan: his great-grandparents traveled to Japan about 100 years ago, and he spent time in Japan in the 1990s working as a technology analyst for Mitsubishi Research Institute and Boston Consulting Group. In cofounding CIC, he says he was inspired by Humphrey Bogart’s Rick Blaine in headtopics.com

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Casablanca, the owner of a café where people from various backgrounds can meet and overcome challenges. He believes that whetting Japanese appetite for risk involves introducing other risk-takers. That’s why about half the tenants at CIC Tokyo will be from outside Japan.

“I saw an opportunity with what we did in Cambridge to create a place where Japanese could see and learn the model for how to be an entrepreneur in the American way,” says Rowe. “Japan is close to my heart and I think the Japanese culture is one of the most powerful in the world in terms of getting almost anything done.”

Silicon Valley-style partneringCIC isn’t the only large U.S. startup-oriented company invested in Japan. Plug and Play is an innovation platform established in 2006 in Silicon Valley by serial entrepreneur and real estate investor Saeed Amidi, whose tenants have included Google, PayPal and Logitech. Plug and Play introduces startups to large corporations, and has helped raise some $7 billion by portfolio companies and accelerated thousands of startups. With over 30 locations across the Americas, Europe and Asia, Plug and Play opened its Japan operation in 2017, and now has offices in Tokyo, Osaka and Kyoto.

“Since major corporations in Japan are seeking open innovation, they’re becoming stakeholders in new companies," says Fujimoto Ayumi of Plug and Play Japan.Japan BrandVoicePlug and Play Japan has over 40 partners including major Japanese brands from manufacturing, real estate, construction, financial services, and IT. It focuses on the verticals of insurtech, fintech, mobility, brand and retail, health, and smart cities. The company has supported 400 startups since its launch, with about half from overseas. headtopics.com

“We try to maximize collaboration among companies we’re supporting,” says Fujimoto Ayumi, chief marketing officer for the company. “Since major corporations in Japan are seeking open innovation, they’re becoming stakeholders in new companies. Meanwhile, foreign startups are attracted to our Japan program because of Japanese firms’ long experience and global contacts.”

Software as a service (SaaS) has been expanding rapidly in Japan amid the spread of AI and digital transformation, and Plug and Play Japan has contributed to this trend by pairing companies interested in SaaS. Fujimoto points to Plug and Play-brokered SaaS relationships such as a pilot project undertaken by utility Electric Power Development (J-POWER) and Hmcomm, an AI voice recognition venture, for a handsfree, voice-activated maintenance app that would allow wind turbine inspectors to work more efficiently.

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Plug and Play's STAGE online pitch event attracted 15 startups in September 2020.Japan BrandVoice“Our mission really is to internationalize Japanese business and to tell the world about success stories here,” says Fujimoto. “It’s hard to come up with a clear picture of the post-COVID-19 world, but we want to keep connecting startups with major corporations through our innovation program. We want to continue working with major corporations and local municipalities to keep the fire burning for innovation.”

Note: All Japanese names in this article are given in the traditional Japanese order, with surname first. Read more: Forbes »

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