Why is Japan, despite being the third largest economy in the world and having a good collection of multinationals, not see more emerging companies that shine abroad? It is a deep-rooted disease, although there still seem to be reasons for hope.
According to the latest classification of the CB Insights study, which included about 500 “unicorns” in the world – companies that are not yet listed on the Stock Market and whose value is estimated at more than 1,000 million dollars -, only four of them they were Japanese.
However, “with respect to its GDP, Japan should have at least fifty or sixty unicorns,” said Gen Isayama, director of the World Innovation Lab, an investment company in the field of new technologies that wants to act as a bridge between Silicon Valley and the Japanese archipelago.
There are multiple reasons for this weakness. Venture capital investments, the backbone of the issue, are extremely weak in Japan relative to the United States or China, the world’s two leading technology countries.
The US venture capital market accounted for $ 137 billion in 2019, while China’s weighed $ 53 billion and Japan’s just $ 4 billion, according to various studies.
And Japan’s SoftBank Group may have become the global investment giant in new technologies, but it hardly invests in Japan anymore, as local startups are too small for it.
“In Japan, innovation efforts have always been the work of large companies” internally. And banks also tend to ignore start-ups, because they are “too tied” to those big groups, Isayama told AFP.
– “Confined” society –
In the absence of means to develop, many emerging Japanese companies quickly enter the stock market but, “if you go there too soon you will never grow,” stressed the expert.
“Many settle for that,” Takeshi Aida, founder and head of RevComm, a young Tokyo company that offers an artificial intelligence system to improve sales techniques, told AFP. He plans to launch into Southeast Asia in the coming months.
Many Japanese startups also feel “protected” in their home market, with Japan’s demographics declining; its smooth growth and administrative and cultural barriers often make its market unattractive to foreigners, according to Aida.
Brakes are also cultural. Even today, “the Japanese educational system is measured by the labor needs of the country’s large groups: having conscientious employees who follow orders,” something that once constituted the great strength of the state, Isayama stressed.
“You really have to have guts to do things differently” in Japan, he insisted.
“I was a strange student compared to others: I talked too much, I gave my opinion,” said Takeshi Aida amused.
“When I went back to high school in Japan after attending school in the United States, I realized how confined Japanese culture was,” said Takafumi Kurahashi, director of operations at SmartHR, a digital services firm that frees to the companies of the paperwork linked to the hiring.
– “Aim high” –
Despite all these obstacles, there are several indications that there remains cause for hope.
“The big Japanese manufacturing companies have realized that they could no longer innovate in the same way as before” and are now getting more involved in venture capital, Isayama said.
In addition, they are also understanding more quickly that it is better to let start-ups fly rather than want to control them through their business incubators, he said.
In addition, the pandemic ended up convincing Japanese industry and public services to go digital, which would be favorable for local startups.
The support of the State is also increasingly effective, since it has “understood that it was not only up to the bureaucrats to select” the emerging companies that it should support, and now it surrounds itself more with venture capital professionals, according to Isayama.
Some examples of success help to see the future with optimism, such as that of Mercari, a Japanese platform for the sale of used products, which quickly set out to conquer the United States and now has a market capitalization of $ 7.3 billion in Tokyo.
“Mercari has inspired us and encouraged us to follow their example […] We are even more determined to aim high, “Kurahashi launched.
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