|

STARTUPS

Japan pushes new policies to reboot startup sector

by Kazuaki Nagata

Staff Writer

When asked to name globally recognized Japanese firms founded within the last decade, many people would be hard-pressed to list any.

Toyota Motor Corp., Sony Corp. and Nintendo Co. are all more than half a century old, with a lack of new firms reflecting the tough situation for startups.

Industry experts say Japan has a long way to go to increase the number of new firms and stimulate investment to ensure their growth.

However, positive factors, they say, include a new government strategy and more support from big firms.

Following are questions and answers on the situation surrounding fledging startups and related industries in Japan.

What is the new government strategy for startups?

According to an April 2014 report by a government panel looking at stimulating the growth of startup companies, few new businesses have been launched in Japan due to a lack of interest and lack of support for such firms, and thus not enough money to finance and maintain growth for new companies.

Responding to the report, the government looked to create an environment to support new industries, said Yoshiaki Ishii, director for new business policy at the industry ministry.

The government had taken steps to support new businesses since the mid-1990s, but it was now focusing on how to also support related startup industries, including venture capital.

Moreover, it aimed to change the mindset of young people who tended to avoid taking risks or challenges and instead took jobs at larger firms where they believed it was a more stable career path.

Global Entrepreneurship Monitor, an organization that studies startups, offered a breakdown of the early-stage entrepreneurial activity rate by different countries in a 2014 report.

This rate is a percentage of people aged 18 to 64 who are about to found a startup or people who already run companies under 3½ years old.

The rate in Japan stood at only 3.8 percent, compared with 10.7 percent in Britain, 13.8 percent in the United States and 15.5 percent in China.

How can venture capitalists be increased?

Ishii said cultivating human resources was essential.

For instance, the government was looking into providing entrepreneurial lessons in the education curricula at some schools.

He also said venture capital investment needed to be recognized as an option by a larger number of investors.

The government planned to work with the Japan Venture Capital Association to come up with more organized data on new industries, Ishii said.

He noted that one good trend was young venture capitalists were trying to energize startup companies.

Yoshihiko Kinoshita, who heads Tokyo-based Skyland Ventures, is one such capitalist.

Along with venture capital firm East Ventures, Kinoshita, 29, created a collaborative space called HiveShibuya, in Tokyo’s Shibuya district, in July that startups backed by the two firms can use as an office.

They also frequently host events for young entrepreneurs to network.

Kinoshita said he hoped more young people, especially those under 30 years old, join the venture capital industry, as they have more energy to accomplish their goals.

To that end, Kinoshita said venture capitals needed to make efforts to get them interested, such as by offering internships.

“I think it’s critical that we provide experiences in which young people can get to know (how venture capital works) and how significant it is,” he said.

How much money is going to startups in Japan?

According to the Entrepreneurship at a Glance 2015 report by the Organization for Economic Cooperation and Development, about $1.86 billion was poured into startups in Japan in 2013, which is the latest available data.

The U.S. figure was $49.53 billion in 2014.

As a percentage of gross domestic product, the figure in Japan is low with the amount of investment standing at about 0.04 percent of GDP. In Israel, which has the highest investment-to-GDP ratio, it is 0.38 percent. The figure is 0.28 percent in the U.S., while it is 0.06 percent in South Korea.

What about the role of big firms?

Major firms are increasingly investing in and collaborating with startups.

Ishii said the industry ministry had hosted matching events involving large firms and new firms in the past few years and pairings were increasing.

Some firms, including major mobile phone carrier KDDI Corp., started mentoring programs for startups to accelerate their growth in recent years.

Big Japanese firms traditionally tend to do everything on their own, but “I think they have realized that this policy won’t work anymore and they need ideas from outside to be innovative,” said Ishii.

What do Japanese startups need to become globally competitive?

They need to eye the global market from the beginning, experts said.

Because Japan has a relatively large domestic market, companies tend to focus on that market, said Ishii, adding there were also language barriers.

However, there are new firms that have been actively expanding overseas, such as Mercari Inc., which makes an app that enables users to sell and buy their possessions, and SmartNews Inc., an app which curates must-read news for users.