Japan has a rapidly growing startup scene, driven by a collaboration of corporations and startups. Traditional Japanese corporations have been said to be slow-moving and risk-averse, though they are increasingly turning their attention and dollars to more nimble, faster-moving startups in order to innovate more quickly.
Major corporations in Japan are supporting the growing startup scene, with 25 of the 44 companies ranked in Forbes Top 500 engaging with startups in one way or another. This engagement is increasingly characterized by corporate venture capital invested into new enterprises.
Japanese giants, such as Toyota Motor and Panasonic, are increasing investment in startups, pouring 27 times as much money in 2017 as five years before. Venture capital investments by major Japanese corporations (specifically through corporate venture capital and corporate funds) totaled 172 deals in 2017, the highest number on record. These investments began growing in number in 2011 and reached a record 68.1 billion yen ($611 million) in 2017.
In addition to corporate venture capital, corporations are coming together to create funds that support new technologies. For example, Cyberdyne (developer of the robot suit Hal), has partnered with Daiwa House Industry, Sompo Japan Nipponkoa, Daido Life Insurance, Mizuho Bank, and its venture capital unit Mizuho Capital to create a fund to support tech-specialist startups. The fund seeks to raise 20 to 30 billion yen in total.
Japan's Innovation Ecosystem
1. Tokyo: Burgeoning Startup Ecosystem
Tokyo, one of the most populous cities in the world and the economic center of Japan, has been considered a hub for business, technology, and innovation. It is home to some of the largest forward-thinking corporations across the world, including Mitsubishi, Honda, SoftBank, Toyota, Sony, and Mizuho. Although many know that Japan has many innovation-minded corporations, some may not know that the city also houses a unique, burgeoning startup ecosystem.
Tokyo’s startup ecosystem is valued at over $14 billion, with diverse sectors represented, including software as a service, robotics, advanced manufacturing, fintech, and consumer services.Tokyo has nearly 1,200 software startups in its ecosystem, with a strong representation in advanced manufacturing and robotics. Japanese industrial robot manufacturers delivered over 50% of robots supplied in 2017. This was a 39% increase from 2016. Japan, also, ranks second highest in the world for robot installation with 297,200 working units in 2017. These advancements are building on a foundation that comprises top-known Japanese corporate names: Mitsubishi, Denso Corporation, OTC Daihen Corporation, Epson, FANUC, Kawasaki — the list goes on.
Another sector that is well-represented in Tokyo is fintech. Tokyo is considered the fifth most competitive financial center in the world.
Tokyo has been putting several initiatives forth to fortify its innovation ecosystem, while encouraging entrepreneurs and corporations to start new ventures and expand globally. For example, a primary initiative of Tokyo’s startup ecosystem is to attract new talent from other countries, made possible by a special visa for entrepreneurs. Government, corporations, and technologists are aiming to expand Tokyo’s innovation mindset by being more inclusive with cross-country and cross-cultural collaboration.
2. Osaka: Innovation Central
Though often overshadowed by Tokyo, Osaka has long been an economic hub and an important focal point in Japan’s history and economy. The next World Expo, held in 2025, sanctioned by the Bureau International des Expositions, will be held in Osaka, Japan. It will take place for six months during 2025 — this will be the second time the expo has taken place in Osaka, the first time being in 1970.
The city also has a vibrant ecosystem of entrepreneurs and startups that continues to grow, with an estimated 1,000 early-stage seed startups in Osaka. Osaka has approximately 180,000 businesses, the second-largest amount throughout Japan, all located within its city limits. This high concentration of businesses, combined with the high concentration of government offices in the city center, creates a huge influx of commuters from the surrounding suburbs and regions, resulting in a population of nearly 3.5 million during the day.
Osaka has leveraged partnerships between public and private sectors to help fuel its innovation and startup ecosystem. For example, a government program called J-Startup, sponsored by the Ministry of Economy, Trade, and Industry (METI), is selecting hundreds of startups to enable them to launch globally.
3. Fukuoka: Japan's Startup Haven
Fukuoka has become a startup hub in Japan and Asia. Situated on Kyushu island in Japan, Fukuoka has the highest population growth rate out of any of the country’s cities. The growing economy, reasonable living prices, and incentives for startups are making the city an ideal place for entrepreneurs to start a new company. Fukuoka has the highest rate of new business creation in Japan coming in at 7% compared to Tokyo's 4%. It currently hosts FGN, who successfully raised over 3 billion yen and Alterbooth, who raised over 37 million yen.
The city has significantly lowered corporate tax rates for startups, enabling founders to more easily start a new company. Fukuoka has also implemented widespread regulatory reforms, making it easier to launch a business. This is due, in part, to Mayor Soichiro Takashima's initiatives to grow Fukuoka into a hub of startups, technology, and services.
In 2014, the city was designated as a national strategic special zone in order to test how to grow the innovation ecosystem, with the goal of expanding this across the country.
Additionally, the municipal government eased visa requirements for foreign entrepreneurs in 2015, and then in 2017, introduced a system to cut the "corporate citizen tax" for startups. These changes in policy from both the public and private sectors have encouraged entrepreneurs to flock to Fukuoka.
Next Stop: Japan
Japan continues to be a hotspot for innovation as it has entrepreneurial momentum, a high quality of life, and a government that is providing support.
Could the disruptive, new technologies springing from Japan impact your organization or perhaps lead to new opportunities in your business?
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