The Start-Up Boom: How Japan’s Innovation Ecosystem Evolved Over Two Decades

Introduction

For years, Japan has been synonymous with groundbreaking technology and innovation. However, until recently, the country’s conservative business landscape was known to be rather risk-averse, favoring established players over start-ups. In the last 20 years, this has gradually changed, and a new wave of start-ups has emerged to take center stage in Japan’s innovation ecosystem. In this blog, we’ll explore the development and policies surrounding start-up companies in Japan and how they’ve been vital to the nation’s growth and innovation.

A Shift Towards Start-Up Culture

The new millennium saw a sea change in Japan’s approach to start-ups, as the government began implementing policies to encourage entrepreneurship. The turning point came in 2002 when the Ministry of Economy, Trade, and Industry (METI) launched the Industrial Cluster Policy. This initiative aimed to foster regional industry clusters by providing financial assistance and mentoring programs for start-ups.

In the years that followed, the number of start-ups in Japan increased steadily. By 2020, there were over 10,000 start-ups in the country, more than double the number in 2000. This growth was driven in part by the establishment of numerous government-backed venture capital funds and the gradual deregulation of certain sectors like financial technology.

Supportive Policies for Start-Ups

The Japanese government has played a significant role in fostering start-ups through various initiatives and policies:

1. J-Startup Program: Launched in 2018, this program supports high-potential start-ups with access to funding, overseas expansion opportunities, and regulatory support. By 2021, over 200 companies were part of the J-Startup program.
2. NEDO (New Energy and Industrial Technology Development Organization) Innovation Program: Established in 2003, NEDO supports start-ups in the fields of energy, environment, and industrial technology by offering grants, networking opportunities, and technical assistance.
3. Start-up Visa: Introduced in 2012, the start-up visa allows foreign entrepreneurs to reside in Japan for up to one year while they set up their businesses, facilitating the exchange of ideas and talent across borders.

The Role of Start-Ups in Japan’s Innovation Ecosystem

Japan’s start-up ecosystem has been vital in driving innovation and economic growth. Some of the most successful Japanese start-ups in recent years include:

1. Mercari: Founded in 2013, Mercari has become Japan’s largest peer-to-peer marketplace app. In 2018, it raised $1.2 billion in its IPO, becoming the first Japanese start-up to achieve a market capitalization of over $6 billion.
2. Preferred Networks: Established in 2014, Preferred Networks is a leading artificial intelligence (AI) start-up. In 2020, it achieved a valuation of $2 billion after partnering with major corporations like Toyota and Fanuc.
3. Sansan: Launched in 2007, Sansan provides a cloud-based contact management system. It went public in 2019, raising $360 million in its IPO and attaining a market capitalization of over $1 billion.

The success of these start-ups has not only created new markets and job opportunities but has also encouraged larger Japanese corporations to collaborate with and invest in start-ups. This synergy between established companies and start-ups has led to a more vibrant innovation ecosystem.

Conclusion

Over the last 20 years, Japan’s start-up landscape has transformed significantly, with the government playing a pivotal role in supporting entrepreneurship through various policies and programs. Start-ups have been instrumental in driving innovation, job creation, and economic growth in Japan, and their continued success will undoubtedly propel the nation’s global competitiveness in the years to come.

References

• JETRO’s report on Japan’s startup ecosystem
• Carnegie Endowment’s report on Japan’s startup ecosystem
• The Japan Times’ article on Japan’s startup ecosystem