Can Fukuoka live up to the tech startup hype?

FUKUOKA – Fukuoka sits in a pocket of land on the northern coast of Kyushu, Japan’s third-largest island. The city’s most famous landmark is Fukuoka Tower, and while it is not the prettiest of buildings, it offers sweeping views of the city to the south, east and west.

Urban sprawl? Yes, but the kind that is neatly contained by the mountains that circle the city. If Tokyo seems endless, then Fukuoka is manageable; it takes only 12 minutes to get from the city center to the airport, one of the busiest in the world.

Economically, the city is dwarfed by Tokyo, but over the past five years Fukuoka has won an envious reputation as Japan’s “startup city.” Under the leadership of Mayor Soichiro Takashima, Fukuoka has begun a transformation that has swept up many in startup mania. In March, Bloomberg credited Fukuoka as the city to which Japan’s startup founders are flocking, while the more understated CNN made the claim that Fukuoka was “poised to be the country’s Silicon Valley.” Big words for a small city.

There’s no doubt the city is booming. Fukuoka is the fastest-growing city in Japan outside of Tokyo and, in 2015, it passed Kobe to become Japan’s fifth-largest hub. Its position as the closest major city to mainland Asia (it is quicker to get to by plane from Seoul or Shanghai than Tokyo) has allowed the city to position itself as Japan’s gateway to the continent.

On the issue of startups, the city is keen to be seen to be doing all it can to promote the creation of new businesses, going so far as to introduce the “startup visa,” aimed at encouraging non-Japanese entrepreneurs to establish their businesses in Fukuoka, and recently opening Fukuoka Growth Next, a public-private startup support facility located in the city center.

Whether or not these efforts will prove effective is yet to be seen. While there are success stories, no Fukuoka tech startup has reached the holy-grail “unicorn” status (i.e., been valued over $1 billion) and, with the exception of a subsidiary of Line, many of the names commonly associated with startup culture (Facebook, Google, Apple) have yet to find a home in the city.

A question that has interested me since I arrived in Fukuoka is whether the government’s efforts are being felt by Fukuoka’s non-Japanese community. This is discussed in this article through interviews with three members of the Fukuoka startup community.

A shortage of top talent

Qurate is a tech startup that has developed an end-to-end marketing platform for social content. I met with Tom Brooke, the British founder and CEO of Qurate, in the company’s headquarters in Fukuoka.

“Setting up a company is a difficult thing, so if you’re going to do it, you might as well do it in the easiest place possible,” Brooke says. “And in Japan, Fukuoka is that place. It’s transforming into a fantastic place to do business.”

Our conversation moves quickly to the rhetoric surrounding Fukuoka as a startup hub and whether it aligned with the realities of Brooke’s experience.

“I suppose it depends on what you expect,” he says. “I wasn’t expecting any kind of support, so anything that made it even a little bit easier was a real help. If you read about Fukuoka being this city which supports startups and expect the city to do everything for you, then you might be disappointed, but the city does help create opportunities for startups to thrive.”

One event organized by the city, the Startup Global Challenge, led Qurate to a hefty cash injection from the Tokyo investment bank Daiwa Corporate Investment.

“I met an investor from the second-biggest investment bank in Japan and two weeks later he’d signed a term sheet to invest $100,000 in Qurate,” Brooke explains. “Two weeks after that we had the money in our account. If you want to succeed here, you really can. The city won’t take you by the hand, but they help create opportunities to succeed.”

In the the two years since the firm’s launch, Qurate has outgrown its HQ in Daimyo, Fukuoka’s hipster central, and now has offices in London and Tokyo. For a company of 11 full-time staff, it might seem an odd choice to spread the company so thinly so soon.

“Where Fukuoka falls short is in the availability of talent,” Brooke says. “The city is doing a good job in trying to attract workers, but there is a lack of technically skilled and English-speaking talent in the city. In time, Qurate will be able to offer packages to move people down to Fukuoka, but for now it makes more sense for us to employ extra staff in Tokyo and London.”

As you might expect from the founder of a startup, Brooke is optimistic about Fukuoka’s future.

“Three years ago we saw the start of phase one of Fukuoka as a startup city. Soon after, this was followed by the introduction of the startup visa and Startup Cafe,” he says. “The city is now moving into phase two, supporting projects like Fukuoka Growth Next. In the next five years I think we’ll really see the fruition of the early investment into startups, and Fukuoka will become this place where tech startups can start, fund-raise and scale, without ever having to leave the city.”

The lure of capital investment

My conversation with Mark Gaensicke, the German CEO and founder of Renzo, is of the Steve Jobs variety; we walk and talk between the company’s offices and Fukuoka’s largest park, Ohori Koen. The company develops applications and its main product, simply called Japanese, is a popular Japanese dictionary and study app for iOS and Android. While Renzo is located in Fukuoka, Gaensicke frequently travels to Tokyo to meet investors.

“Fukuoka is Renzo’s base, but the pressure on our company to move to Tokyo has been extreme. It’s hard to get serious VC (venture capital) funding unless you’re in Tokyo.”

We pass through the ruins of Fukuoka Castle, where a beer festival is welcoming in the start of the Golden Week holiday.

“Fukuoka has this ‘lifestyle’ attitude and often people don’t think you’re a serious company if you’re based here,” Gaensicke says. “You need to have your headquarters in Tokyo to attract serious funding.”

Gaensicke also raises the issue of networking opportunities, a factor that can often mean the difference between success or failure for a startup. It is perhaps not surprising that Tokyo, with a population 20 times that of Fukuoka, attracts large-scale tech conferences and has more frequent networking events.

“It’s much easier to build up a network in Tokyo by going to big tech events like Slush or TechInAsia,” Gaensicke says. “There’s nothing on that scale yet in Fukuoka. You also have a lot more experts in Tokyo, who provide useful advice. Fukuoka has done a good job at promoting itself as a startup city and our company has been able to get free legal advice from the Startup Cafe here, but on matters of IT there’s a lack of up-to-date expertise in Fukuoka.”

Where Fukuoka excels, in Gaensicke’s opinion, is as a testing ground for new products.

“It’s a city for people who need to develop their product. Fukuoka is a miniature model for launching a product across the rest of Japan. Because the cost of living is so cheap, you have the time to prototype and build a quality product without worrying as much about finances. But in the long run I see our company moving up to Tokyo. It’s where the network is.”

Size does matter

To the west of the city, occupying a test field in Itoshima, Fukuoka’s beach-blessed peninsula, ComQuest Ventures runs a drone consultancy and design business.

“We need to be out of the city center in order to test our drones,” explains A.J. Cruz-Ayoroa, the firm’s co-founder. “The local government gave us lots of support in finding us a place where we could test our drones legally and safely, but that meant being out of the city center. The great thing about Fukuoka is its small size. I commute daily to the city center, which only takes 30 minutes by train.”

ComQuest Ventures was founded by A.J. and Juan G. Cruz-Ayoroa, brothers who were born and raised in Puerto Rico. Before founding ComQuest Ventures, A.J. studied his doctorate in information science at Kyushu University and was on hand when the city of Fukuoka was chosen to be a local testing bed for reforms to boost economic growth.

“A couple of years ago, Fukuoka City was designated as this national strategic zone, which means special deregulations and aids have been put in place to develop Fukuoka as a startup-friendly city, with the aim of spreading the lessons learned here across the rest of Japan. These developments happened while I was studying my doctorate, and served as motivation for me to start up a tech company in Fukuoka after I graduated in early 2016.”

The pro-startup atmosphere wasn’t the only draw. The city’s close-knit community also played into the brothers’ decision to establish their company in Fukuoka.

“Being a rather small city, if you attend startup events, exhibitions, hackathons and the like, you start to see more and more familiar faces. This leads to camaraderie and collaboration between companies rather than competition, which is something I really like. I think this applies to Japanese and foreigners alike — there’s actually great integration between Japanese and foreigner tech entrepreneurs here in Fukuoka.”

Startup visa is ‘just a start’

Many of the difficulties that surround starting a new business are only compounded when that venture is started by someone who does not have citizenship. To try and make it easier for non-Japanese entrepreneurs to start their own firms in Fukuoka, Fukuoka launched it’s startup visa program in January 2016.

The startup visa has been central to the discussion about Fukuoka’s position as a startup hub, and the city is the only one outside of Tokyo to offer the visa. In essence, it allows non-Japanese to bypass the stringent regulations that apply to the business manager visa for a period of six months.

Reactions to the visa have been mixed and, while many are fans of the concept in theory, they do not believe it goes far enough in easing the burden for foreign entrepreneurs.

“Six months is a good start,” says Qurate’s Brooke, “but it really is just a start. After six months, startup visa holders have to reapply for the business manager visa, and have to have developed their business to the point where they fulfil that visa’s requirements.”

A.J. Cruz-Ayoroa is skeptical of the visa but sees it as part of Fukuoka’s broader aim to appeal to foreign entrepreneurs.

“I don’t think the visa would be a determining factor in starting a business here,” he says. “I think the main thing that would attract foreign entrepreneurs to Fukuoka (is for the city) to be seen to be creating an environment where startups can flourish. Then, promoting that image abroad — of Fukuoka as an exciting place to turn your ideas into reality, where you can make your business successful while having fun — will draw more founders to the city.”

Another drawback of the startup visa is that it is only applicable to those wishing to start their own businesses in Fukuoka. Bringing staff over from another country to support a business is not an issue that has been addressed yet, and the bureaucracy involved in hiring from abroad is still arduous and time-consuming for small organizations.

Going its own way

Fukuoka seems quite a way from reaching peak startup status, yet the scene has become established enough to start producing its own industry offshoots. FukuokaPod is one example of new media growing alongside the startup industry. The platform is run by Fukuoka resident Laurie Griffiths and features interviews with some of the members of Fukuoka’s startup community, as well as introductions to some of the city’s startup hot spots.

The mood on the ground is one of optimism, and a common theme from my discussions with members of Fukuoka’s startup community is the sense of progression — the idea that if the city continues to pursue the agenda of becoming Japan’s startup city, it will evolve ever more sophisticated support mechanisms for new businesses.

However, CNN’s proclamation that Fukuoka is poised to be Japan’s Silicon Valley seems somewhat premature, and anyway, the city may be better advised to follow a different path.

Renzo’s Gaensicke sums it up best: “Whatever the government does, it needs to match the city’s needs, not try and copy another startup model. If the city does it right, and it doesn’t make the mistake of trying too hard to replicate Silicon Valley, then Fukuoka could be a great place for startups. Fukuoka could be the go-to city in Japan for people who want to build their ideas.”

Qurate: www.qurate.com. Renzo: www.renzo.com. ComQuest Ventures: www.comquestventures.com. FukuokaPod: www.fukuokapod.com
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