Japanese entrepreneurs should seek more opportunities outside their home country to unleash their potential, foreign investors and other market participants have advised.

“There’s a lot of progress being made” in Japan’s startup scene over the past few years, said Jonathan Ortmans, who founded the Global Entrepreneurship Network, a Washington D.C.-based organization that provides support programs for entrepreneurs and startups, while he was in Tokyo for a recent startup event.

 

“But I do think that one will need to have more progress. And that’s going to take, in particular, those startups to adapt more to an international culture of entrepreneurship.”

The administration of Prime Minister Fumio Kishida has been focusing more on startup policies than previous administrations.

A five-year startup policy package has been drafted that includes bumping up the amount of investment in startups by more than tenfold to ¥10 trillion ($63.9 billion) annually by fiscal 2027 and aiming to send 1,000 entrepreneurs and businesspeople overseas to expand global networks and bases for Japanese startups.

 

The Golden Gate Bridge in San Francisco, California. Japanese policymakers are well aware of the need to internationalize Japan’s startups, so they have been ramping up support to push entrepreneurs to go global. | getty images
 

Startup policies have become major economic agenda items not only for the central government but also for regional and municipal governments keen to rev up their local startup scenes.

Tokyo has said it wants to become «the most startup-friendly» city in the world and has built a new startup hub facility.

“I think a lot of governments are just realizing the tremendous growth of tech companies” over the last several decades, said Michael A. Jackson, a veteran venture capitalist who has invested in hundreds of high tech startups also in Tokyo for the event.

So-called Magnificent Seven tech firms — Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla — have been leading stock price rallies.

“If you want economic growth and you want to continue prosperity, you have to have the next wave of tech companies,” Jackson said.

For Japanese startups to be more globally successful, attracting international employees is essential, Jackson pointed out, saying that being a powerful player in the Japanese market is not enough anymore to get to the right scale.

“You can be really comfortable if you’re No. 1” in the Japanese market.

“But you’re never going to be globally dominant,” Jackson said. But he added that Japanese startups could seek advantages in robotics, hardware and other science-driven businesses that Japan has traditionally been strong in.

 

Tokyo Gov. Yuriko Koike attends a news conference where she disclosed Tokyo’s new startup policy in November 2022. | JIJI
 

In general, Japanese startups are seen as inward-looking and unwilling to take on risks to enter overseas markets — partly because the domestic market is fairly large — making globally competitive Japanese startups few and far between.

The lack of international talent is also true for Japan’s investor community, said Marc Penzel, founder of Startup Genome, a U.K. company that specializes in researching and developing startups.

Many Japanese investors help startups basically build and grow in the local market.

“But when it comes to actually going global, because they haven’t had that experience themselves, they very rarely advise them to do this,” Penzel added.

“I think it’s a shift of culture that should take place with entrepreneurs and startup talent, but also with the investor community and how they work with the companies.”

Japanese policymakers are well aware of the need to internationalize Japan’s startups, so they have been ramping up support to push entrepreneurs to go global.

The Japan External Trade Organization is hosting a program in which it supports dozens of Japanese startups in their efforts to expand, mainly into the U.S.

The program, called Beyond Japan Zero to X, is backed by the government and is scheduled to kick off its second year in August.

 

Major startup event IVS 2024 taking place in Kyoto earlier this month | JIJI
 

Participants of the Beyond Japan program will be staying in some U.S. startup hub cities — San Jose, California, Los Angeles, Denver, San Diego and Austin — depending on their areas of business. The government will be financing the visits.

During the two-to-four week stays, entrepreneurs can attend seminars and training from mentors, who will also give tips for effective promotion to local business operators or venture capital firms.

Looking back at the first year’s program in 2023, it was actually difficult to see the potential of Japanese startups at the beginning, said Kenny Lum, co-founder of Los Angeles-based LaunchStarz, which supports Japanese entrepreneurs looking to start businesses in the United States.

“We didn’t know how far the participants were willing to go out of their comfort zone,” he said.

LaunchStarz is partnering with the Japanese government to operate the program, along with Plug and Play, based in Sunnyvale, California. In last year’s program, more than 200 startups applied and about 60 participated.

Because many Japanese entrepreneurs seemed to expect that the program would actually provide meeting opportunities with investors or potential clients, they didn’t seem to be going the extra mile to make efforts by themselves at first.

But they became more eager to seek opportunities as the program progressed, according to Lum.

Lum added that a number of Japanese startups have competitive products and technologies, so it’s a matter of whether they can break cultural and language barriers.

Kosho Tsuboi, who heads Kepler, a startup located in Austin, echoed the point, adding that he learned that from the program when he participated in it last year.

Tsuboi had to completely change the way he pitches his business to investors and potential clients in the United States. Before, he was spending a sizable amount of time explaining how the technology that his firm has developed works and how competitive it is, but they were not interested in a lengthy presentation.

It had to be simple because the point was “how you can grab their attention in a moment,” Tsuboi said.

Kepler has created a display technology that can electronically control texture. Because this technology is rare, it attracted interest from investors and business people in the United States once Tsuboi got a handle on how to pitch, he said.

“Japanese startups may have top-class technology and services, but when it comes to whether they can all be successful in the U.S. market, it would be quite difficult” unless they understand its business culture and have connections, Tsuboi said.
KEYWORDS
U.S., startups, tech, investments, entrepreneurs, JAPANESE ECONOMY