Almost 15 years to the day since she established her business, Lina Sakai is preparing for a trip she doubted might ever be possible. By the end of this year, the CEO will travel to the United States to explore opportunities for the international expansion of her Tokyo-based company, Fermenstation, which aims to support a circular economy through its original fermentation technology. The company transforms food waste into non-petroleum-derived ingredients for use in food, drinks, cosmetics, animal feed and fertilizers.
An admittedly reluctant startup founder, Sakai launched her business due to a dearth of employment opportunities in her area of interest and only began pursuing growth through investment and hiring five years ago.
Fermenstation’s early days involved exploratory visits to department stores with cosmetics she created, a time she describes as “pretty tough” because of a lack of interest in how products were made.
In recent years, though, her business has blossomed amid Japan’s burgeoning startup scene.
The government’s Startup Development Five-year Plan, launched in November 2022, aims to create an ecosystem that nurtures startups, including those that can compete in the global market. For the Japan External Trade Organization (JETRO), this ecosystem consists of entrepreneurs, opportunities, funding and the business environment.
But with interest in startups outpacing ecosystem capabilities, more entrepreneurs are looking to each other for help, so what role can peer support play in helping entrepreneurs find success?
For Sakai, support for her business has come from new government startup-related incentives as well as major Japanese venture capitalists, accelerator programs, community organizations and fellow entrepreneurs.
In May, Fermenstation won the Grand Prize, worth ¥10 million, at Sustainable High City Tech Tokyo (SusHi Tech), Asia’s largest startup conference. Organized by the Tokyo Metropolitan Government, the event was designed to increase the number of startups in the capital and showcase startups solving the world’s pressing urban challenges.
More than 500 entrants from 43 countries and regions participated in its pitch event — a level of competition that impressed Sakai.
“Winning has given us such confidence and made us feel we’ve got to really try — like we’ve made a huge promise,” she says, explaining her plan to grow her domestic and international business simultaneously over the next 12 months.
“I’ve spent 10 years making the market in Japan,” she says, noting her efforts to demonstrate the need for Fermenstation’s products from an environmental, social and governance perspective. “And the global market is already there; if you go to the States or Europe, nobody will ask you if there is enough (demand) for sustainable ingredients.”
Participation in Unreasonable Group, a Colorado-based accelerator and incubator firm that supports a fellowship for growth-stage entrepreneurs around the world, is preparing her for the task. “It’s a great network,” she says, adding that the 400 startup members are already highly successful in their fields.
“As an entrepreneur, it’s always nice to have a place to share what it’s like to be the only CEO of a company,” she says, adding that being part of startup communities is “so important to her,” in part due to the access they provide to various people including investors and mentors.
In addition to being a member of the Iwate Prefecture-based Impact Startup Association, whose 400 members aim to solve social issues while achieving economic growth, she has taken part in numerous support programs over the years including EY’s Entrepreneurial Winning Women initiative, which provides advice and resources to female founders.
Such support is instrumental for startups seeking to operate globally, according to Antti Sonninen, co-founder and CEO of Takeoff Tokyo, a two-day English-language event comprising a pitch contest and panel discussions for Japan-based startups with global aspirations.
Sonninen aims to draw on his experience working in his native Finland for Rovio, the video game developer that gained global fame for its Angry Birds franchise, to build international startup success stories from Japan.
“When you take (ambitious people) and put them together with other ambitious people, they bloom like dying plants given water,” Sonninen says of his motivation, quoting renowned entrepreneur and investor Paul Graham. His goal is to fill the gap between Japan’s startup ambitions and the on-the-ground reality in the hope that impact will be far and wide.
“If all goes well, the tide will lift all boats,” he says, noting that he wants to help “build a wave of new companies like Toyota, Sony and Nintendo.”
Takeoff Tokyo’s inaugural event in June 2023 attracted 800 participants, while this year’s event in April welcomed a crowd of 2,000. Delegates comprised representatives from startups, corporations, the public sector and venture capitalist firms — one quarter of which were from Silicon Valley, Europe and other parts of Asia — as well as freelancers, budding entrepreneurs and students.
Feedback from participants indicates strong demand for more such events.
And it is not only startups with an international outlook that are increasingly seeking professional and personal support from their peers and wider ecosystem.
Startup Guild Japan attracted 50-80 people per event during 2023, the first full year of its operations. The Osaka-based organization offers insight and guidance for people at every stage of running a business, as well as those involved in the startup industry. Events focus on speaking sessions and networking in a bid to provide attendees with greater business opportunities.
Designed as a community “by startups, for startups,” Startup Guild Japan was established ideated in 2022 because the founders “didn’t see an ecosystem” for them, says co-founder Shota Dan. He believes that although it’s becoming easier to start a business in Japan due to better access to information and initiatives by the Japanese government, current and aspiring entrepreneurs who don’t have the financial resources to tap those initiatives are missing out.
Dan also saw demand for Japanese and foreign, Japan-based entrepreneurs to get together to expand their respective networks and learn from each other.
“Japan has so much potential,” he says, adding that it has not been realized due to a business focus on the country’s large domestic market and a lack of English-language skill. However, Japanese startups can do more with greater access to the international community while foreign residents who want to do business in Japan bring different skill sets, bolstering local talent. “If we can help them start a business, it’s good for them and for Japan,” he explains.
Interest in the organization indicates Dan was right; attendees are 60% foreign and 40% Japanese, and English is their preferred language despite the intention to make events bilingual.
The success of Startup Guild Japan is a symptom of an underdeveloped startup community, according to fellow co-founder Dwayne Grech, who hopes the organization can bring community, awareness, resources, access and representation to the people who need it.
“Human expansion runs on community,” he says. “Startup owners are very lonely and not a lot of people can empathize with what we go through or help us with going through day to day.”
In Japan, the challenge of being a business owner is compounded by a “social stigma” about entrepreneurs, that they “can’t make it in the corporate world, are lazy or can’t be trusted,” he adds. “But all of Japan’s major businesses began as a startup 100 or 1,000 years ago. Somehow (Japanese) society kind of forgot what it means to start something from nothing and build something great.”
The public and private sectors’ lack of understanding about how startups are operating, tackling societal problems and facing challenges also necessitates the need for peer support, Grech explains. “Community is important because startups are the ones who are helping each other out, providing resources, insights, anecdotal experiences, tips and tricks because we’re not getting it from government or corporate partners.”
Support from people with practical experience can play a role in helping fill in information gaps and overcome perception bias, too, according to Caitlin Puzzar, co-founder and representative director/CEO of Guardian.
After relocating from Kumamoto to Kyoto to access the city’s startup visa program, she found it was geared more toward people setting up a company’s Japan office rather than someone launching a business. Navigating irrelevant queries and explaining how and why she was launching a social business soon became part of her day to day.
“The perception is that (non-Japanese) aren’t doing social businesses. But there are startups that come to fruition from someone living here and seeing a problem,” she says, adding that her startup aims to realize a society where children can live with peace of mind.
Since establishing Guardian in December 2022, Puzzar has launched “kimino micata,” an SOS communication support system for children, and attributes her progress, in part, to Phoenixi.
Opened in 2019, Phoenixi is a four-month residential incubation program designed to facilitate innovation, nurture entrepreneurial talent and help make impact-business ideas into reality. Initially, it supported intrapreneurs to unleash the talent and creativity in major Japanese corporations, according to Yutaka Iijima, the company’s executive director, but now also accepts early-stage entrepreneurs as well as faculty and students from Kyoto University.
Of the 71 fellows who have completed the program, 13% are non-Japanese, hailing from nine countries in total. In addition to business skill training and one-on-one mentoring, the fellows have constant networking opportunities with each other.
“The knowledge of people from different backgrounds was invaluable because I couldn’t get it anywhere else,” she says, noting that Kyoto-based events tend not to attract well-established startups. “Most of the people (at events) are trying to start a business, not people who can help you with your problems. That’s the gap sometimes.”
At Phoenixi, though, fellows’ insights into “real world and Japanese ways of thinking” acted as a jumping off point to find more support for her business.
The power of firsthand insights has also been recognized by Osaka Business and Investment Center (O-BIC), which utilizes local startup founders to connect with foreign entrepreneurs interested in establishing their businesses in the city. Grech is among those who hold an honorary position, providing in-person support via interviews.
“I’m asked to have an honest conversation with them, to understand what their priorities are and use my experience and local knowledge to help fill in the gaps,” he says of the role. Starting a business is “a big move,” he adds. “You have to know there is a community, a support system, some viability and visibility.”
Grech admits that his practical insights “could easily be given by a website or government office” but says O-BIC is aware that answers from a start-up founder, rather than a bureaucrat, offer greater authenticity.
It is clear, then, that peer and community support is recognized as having a role in not only decision-making but also the day-to-day life of Japanese and non-Japanese business owners. But will it always be needed?
Entrepreneurs, investors and advisors alike have lamented Japan’s imperfect nascent startup ecosystem, in part responsible for the slow development and expansion of startup communities in recent years. The future, however, is brighter, as shown by Tokyo’s rise from 15th to 10th place in Startup Genome’s Global Startup Ecosystem Report 2024, marking the most significant improvement in one year among the world’s top 10 ecosystems.
Even as the ecosystem matures, though, peer support for startups might never become redundant. An essential part of building a business is seeking advice, and entrepreneurs seem to have much to learn from each other.
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