In this March 25, 2016 file photo, a man is silhouetted
while watching toward high rise buildings at Shinjuku shopping and
entertainment district in in Tokyo. Japan Inc., long dominated by old-style
companies, is finally warming up to startups. But megabanks, venture
capitalists and major companies looking to invest can't find enough innovative
entrepreneurs, some in the industry say. (AP/Koji Sasahara)
Japan Inc. where companies with roots going back decades, if
not centuries, have long dominated, is finally warming up to startups.
Major banks and
venture capitalists are keen to tap into faster growth by investing in
innovative entrepreneurs, when they can find them. Money raised for ventures in
Japan reached a record 276 billion yen ($2.5 billion) last year.
Silicon Valley still raises 50 times more cash for startups
than Japan, but the number of U.S. startups chasing that cash is higher. So
there's relatively more money to go around in Japan, where young, daring risk-takers
are still relatively scarce.
That helps startups to survive, says Yusuke Asakura, who
heads a Tokyo-based angel network of entrepreneurs.
Still, he says Japan needs a change of "mindset."
"Japanese value hard work, but what creates innovation
is not keeping at the hard work but deciding it is too much work and figuring
out how not to do it," said Asakura, who led a turnaround as chief
executive at Mixi, a social networking service in Japan.
"There is potential for startups in all the
old-fashioned sectors," he said, pointing to growing use of digital tools
in education and home-remodeling. "Creating a totally new sector is one
way. But there are many old areas that need fixing."
Arata Ohwa did exactly that: Innovating in an area where
practically nothing had changed for decades.
His Tokyo-based startup Classico sells stylish lab coats and
scrub tops online to doctors and nurses around the world, especially in the
U.S. and Japan.
Classico coats cost about $200 each, about seven times more than utilitarian
conventional ones, but are more fashionable.
Classico's U Scope is made of a more pliant material than
traditional stethoscopes, whose basic design has been the same for a century.
It can be rolled up to fit into a pocket, and doctors say
it's light and easy-to-use. This year, it won Germany's iF Design Award and Red
Dot Design Award.
"In the medical industry, even if you do what's
considered normal in the internet world, everyone says it's new," said
Ohwa, 36.
Investment by financial institutions and manufacturers, some of whom are setting up corporate venture capital funds, is driving the startup boom.
Local companies that once tended to think locally without
considering overseas markets increasingly are focusing on global platforms,
said Akira Kitamura, chief executive at Japan Venture Research.
"Companies are investing in open innovation because
they don't want to end up like Sharp or Toshiba," said Kitamura, referring
to big-name companies whose fortunes have fallen in recent years.
Japan's earliest "startup" ventures were in the
1970s. The 1980s brought internet giant Softbank Corp., travel company H.I.S.
and the Culture Convenience Club, a video-rental chain. Online retailer Rakuten
and game company DeNA were born during the dot.com boom of the late 1990s-early
2000s.
Startups still face other hurdles in Japan, where initial
public offerings remain the main exit option, rather than the relatively easier
mergers and acquisitions approach typical of the U.S. and Europe.
Yusuke Umeda, 35-year-old co-chief executive of Tokyo-based
startup Uzabase, is banking on a smartphone subscription news service focused
on business and economic news.
Umeda's NewsPicks service has attracted 2 million users who
each pay 1,500 yen ($14) a month, 550,000 of them daily active users. It eked
out a profit last year on nearly 3.1 billion yen ($31 million) in sales last
year, up 63 percent from 2015.
"And so they know it's not
fake news," Umeda said.
While working for the Swiss investment bank UBS, Umeda found
Western financial data services hard to use. He launched Speeda, a
Japanese-language service designed for financial professionals in 2009, and
NewsPicks in 2013. His company has gotten 1 billion yen ($9 million) in Japanese
venture money from investors such as Globis, Monex and Itochu Technology
Ventures.
"It's unimaginable how easy it has become to get
funding from both big companies and venture capital," said Umeda.
"The culture to nurture startups and try out new businesses is also
growing. That was totally absent eight years ago. That's a big change. And I
think that is positive."
Some startups, like software distributor Sourcenext Corp.,
serve as bridges between Japan and the rest of the world.
Sourcenext helped facilitate launches of Dropbox and
Evernote in Japan. Its iOS and Android voice-recognition application, iGotcha,
transcribes voicemails into text in 11 different languages.
The app sends messages to email and Facebook Messenger
accounts by WiFi and collects and organizes voicemails from a user's mobile
phone numbers.
Noriyuki Matsuda, the company's billionaire chief executive,
founded the company in 1996 in Japan but has lived in California since 2012.
While the climate toward ventures is gradually improving in
Japan, it still hasn't caught up with more globally-minded Silicon Valley, says
Matsuda, 51.
"You can make deals there," Matsuda, who used to
work for IBM Japan, said of Silicon Valley. "There are many advanced tools
that have been developed in Silicon Valley, and we bring those products and the
culture to Japan."
