If Japan wants to spur innovation from startups, it shouldn’t try to replicate Silicon Valley.

That’s the message from James Riney — head of venture capital fund 500 Startups Japan — to companies nationwide amid the increased attention given to startups.

“I think one thing that is very different between Japan and China in terms of startups is that China looks at Silicon Valley but it still does its own thing, whereas in Japan they are so concerned with what Silicon Valley thinks,” Riney said during an interview with The Japan Times.

“I think more focus on the actual issues in the local market would be better. That would be a good first start,” the 29-year-old venture capitalist said.

As the domestic startup scene lags behind tech hubs like Silicon Valley and Beijing, Tokyo has been trying to encourage innovative new businesses to drive forward economic growth.

In a bid to produce more so-called unicorn startups — private firms valued at more than $1 billion — the economy ministry is working to launch the J-Startup initiative and strengthen support for startups with high potential. The government also plans to expand the scope of the startup visa and give aspiring founders one year, instead of the current six-month preparatory period, as a means to lure more overseas entrepreneurs to Japan to start their businesses.

A former banker at JPMorgan Chase & Co. in Tokyo, Riney said one way Japan can differentiate itself from foreign markets is through its graying population. He believes what’s usually seen as a weakness can turn into a strength as there are opportunities for startups to test technologies to solve problems that accompany an aging society.

“Japan is one of the first developed countries to face the aging crisis at scale. What’s important about this is, whatever Japan comes up with as a way to solve some of these issues can be exported to other markets because all the developed markets are going to experience the same thing,” he said.

But traditional mindsets stand in the way, noted Riney, a Japanese-English bilingual who lived here until the age of 12 and attended The American School in Japan.

Major firms have tended to gain more respect and therefore attracted more talent, whereas launching a startup has been deemed a risky career move, Riney said. He founded ResuPress Inc. in 2012, which later changed its name to Coincheck Inc.

“When I started a company and left JPMorgan, a lot of people were thinking ‘why are you leaving such a top-tier company?’ … But when I talked to my American friends, a lot of them were like ‘Oh yeah! Go become Steve Jobs. Go for it!’ So the mentality was completely different,” he said.

But recently, in a positive sign for new firms, more established companies have started to seek tie-ups with startups in search of innovation as they push to adapt to the rapid digital transformation.

“In Silicon Valley, we say it’s FOMO, or fear of missing out. There is a bit of that. They don’t want to miss the next big opportunity,” Riney said.

“In Japan, nails that stick out get hammered. But I think that recently there is a lot of top-down influence where actually hammers are clawing out the nails.”

If the mindset issue is overcome, Riney said Japan can become an ideal place for startups to do business thanks to advanced infrastructure and the ease of access to major international companies.

Asked about the prediction of the next trend in tech startup, Riney said he doesn’t care much about what would be the next big thing because, as a venture capitalist specialized in seed-stage startups, “we want to be ahead of all the investors.”

Instead, he looks for a company with unprecedented ideas that could bring about disruptive changes in society.

Japan often gives too much hype around a particular buzzword, he said.

“When you go to a bookstore in Japan and see fintech or AI or blockchain, it’s almost too late. When it’s on all the covers, that may be a bad sign,” he said.

“We are not trying to invest in a trend. We are trying to invest in a company that creates trends,” he said.

Riney also said entrepreneurs here should be more ambitious about the future of their businesses, just like those in the U.S. and China that aim to launch a unicorn startup from the beginning.

“We won’t invest in any founders that want to do a multiple billion yen exit. We are looking for home runs. We are looking for game-changing, industry-changing companies,” he said.

“Go big, and go fast. Because the time is limited. You should put your effort into something that’s going to have a real impact on this world.”

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