Colleges now cast as economic saviors

The government is turning its eye to the nation’s universities in a bid to uncover a potential gold mine in venture business ideas and help lift the economy out of its prolonged slump.

Under the ambitious goal of creating in three years 1,000 venture businesses originating from universities, the government is boosting entrepreneurial education programs and providing venture capital funds.

The goal, set in September by the Headquarters for Industrial Structural Reform and Employment Measures, headed by Prime Minister Junichiro Koizumi, aims to use the research findings of universities and research institutions to kick start a series of venture businesses.

“We hope to facilitate venture business at a time when traditional manufacturing sectors are hit hard by the prolonged recession,” a Ministry of Economy, Trade and Industry official said. “To nurture new industries and create new jobs, it is important to turn the research outcomes at the nation’s universities into businesses.”

Beginning this fiscal year, the government-affiliated Development Bank of Japan, in partnership with venture capital firms, will allocate 5 billion yen to fund its so-called university incubation fund program.

“Investing in university-oriented venture firms is a new field,” a DBJ official said. “Normally, we invest in early-stage ventures, but this time we are taking a step forward by targeting venture business from universities.”

The DBJ is currently negotiating with venture capital firms,and the first fund is expected to be formed by around summer, the DBJ official said.

In a similar move, the government-affiliated Japan Small and Medium Enterprise Corp. formed a joint venture fund in February with JAFCO Co., a private venture capital firm.

The public institution put 1 billion yen into the funding program.

Additionally, more than 20 private-sector venture funds have been proposed or set up to invest in university-oriented venture businesses, according to METI.

But simply throwing money at would-be entrepreneurs is not enough.

The government has also set up a program to help tomorrow’s business leaders take entrepreneurial courses in the United States, where venture businesses play a more important role in the economy.

Under the program, the government will pay 100 million yen to subsidize the education of more than 20 prospective entrepreneurs, allowing them to take intensive entrepreneurship and managerial courses at the University of Southern California in Los Angeles and Northeastern University in Boston.

The ministry hopes participants in the program, which also includes internships at American firms, will benefit from their experience outside the classroom.

“We hope that a network of entrepreneurs will emerge among those who participate in the program, as well as from the exchanges with entrepreneurs in the U.S., where there are a lot of venture activities,” the METI official said.

However, pundits have expressed caution over whether such a program can be continued long enough to spawn sustainable venture businesses.

Unlike the U.S., venture firms originating at universities are rare in Japan.

Some observers say this is because professors at national universities and research institutions, which have strong science programs, are public servants and are thereby restricted from working for the private sector.

And within academic circles, there is a strong belief that professors should focus on academic research and stay away from profit-oriented businesses.

Kazuo Utsumi, research director in charge of new business at Mitsubishi Research Institute, a private think tank, points out that there is no established link between university researchers and entrepreneurs.

While there are many investors and venture capital funds looking to invest in venture businesses, there are only a few people who understand corporate demand for technology and are able to act as an intermediary, he said.

“And the worst-case scenario would be that the government terminates those measures when their budget runs out,” he added.

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