Japan has rapidly emerged as a hub for tech startups, driven by a unique blend of traditional business practices and innovative entrepreneurial spirit. This comprehensive guide provides an in-depth look at the landscape of tech startups in Japan, covering the current conditions, emerging sectors, cultural nuances, challenges, opportunities, and practical advice for entrepreneurs looking to venture into the Japanese market.
Table of Contents
Introduction to the Japanese Startup Ecosystem
Japan, known for its technological prowess and economic stability, has become a dynamic hub for tech startups. Combining a traditional business mindset and a growing number of entrepreneurs, investors, and support organizations creates a fertile ground for innovative ventures.
Current Conditions for Tech Startups in Japan
Japan's startup ecosystem is relatively modest compared to countries like the United States or Israel. However, it has grown substantially recently, particularly in the tech sector. The Japanese government has identified startups as a critical area for economic revitalization, offering various incentives and support programs.
The funding landscape in Japan has seen significant improvements, with venture capital investment growing rapidly. According to recent data, Japanese startups raised approximately USD 6 billion in 2023, showcasing a robust environment for investment and innovation.
Despite the pandemic's effects, Japan's startup scene has thrived. With over 10,000 startups, the country has proven to be a global hub for entrepreneurs. Japan’s unique culture and innovation history attract entrepreneurs who are eager to experience living in the country. The favourable legal climate, clear business setup procedures, and government support further enhance the ecosystem.
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Government Support and Startup Visas
The J-Startup program, launched by the Ministry of Economy, Trade, and Industry (METI), aims to promote startups and new businesses. This program provides companies free workspaces, business consultation services, and support for exhibiting products at international fairs. Certain areas in Japan offer special startup visas to help foreign entrepreneurs start their companies. Cities like Tokyo have even started offering loans to provide additional support.
Emerging Tech Sectors
Japan heavily invests in environmentally friendly technologies, such as solar panels and hydrogen fuel cells. Companies like Chemican and MYMIZU are at the forefront of this sector, focusing on minimizing environmental impact and promoting sustainability.
AI technology is expanding rapidly in Japan, with applications ranging from home assistant robots to advanced media editing tools. Companies like CapCut and SoftBank Robotics are leading the way in integrating AI into everyday life.
Japan is a global leader in robotics, with innovations in healthcare, manufacturing, and service industries. SoftBank's Pepper robot and Cyberdyne's medical exoskeletons are prime examples of Japan's advancements in this field.
Substantial support is given to the life sciences sector, particularly healthcare and regenerative medicine. Kyoto University and companies like Atonarp are pioneering medical diagnostics and treatment advancements.
The fintech sector is experiencing significant growth, driven by the government's push towards a cashless society. Companies like PayPay and Kyash are revolutionizing financial transactions in Japan.
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All About Tech StartUps in Japan
SmartHR
SmartHR, a Tokyo-based human resources management tool founded in 2013, aims to combine cloud technologies with team management tools. With over 250 employees and significant funding, it has become one of Japan’s unicorns.
SmartNews
Founded in 2012, SmartNews is an AI-powered news app that delivers personalized news using AI. It has raised over $409.6 million and employs approximately 300 people.
PayPay
PayPay, a fintech startup, quickly became a leading mobile payment provider after its launch in 2018. It supports smaller startups through its acceleration program, allowing them to develop mini-apps using PayPay’s resources.
Atonarp
Based in Tokyo, Atonarp focuses on digital products for medical and pharmaceutical use. It advances medical diagnostics through digital molecular profiling.
Hidden Unicorns and Rising Stars of Japan
Despite its relatively small ecosystem compared to the United States, Japan has minted several unicorns—companies valued at over a billion dollars. As of 2022, there are ten unicorns in Japan. This number might seem modest compared to the US and China, but Japan’s market is unique, and the figures can be misleading.
Many companies in Japan aren’t technically unicorns but are just as promising. These "hidden unicorns" are highly successful but do not meet the traditional criteria for unicorn status due to technicalities. For instance, their valuation might be just below 1 billion USD or surpass 1 billion only after their IPO. In Japan, companies tend to go public earlier, preventing them from gaining "unicorn" status, even though they likely would have in other countries.
According to Coral Captial, Japan boasts over 41 hidden unicorns. It's noteworthy that Japan did not have any unicorns until 2018, highlighting its startups' rapid growth and increasing value. One prominent example is Mercari, an e-commerce company that offers a marketplace for used items. In 2018, Mercari became Japan's first unicorn startup. Following its success, Preferred Networks and Liquid Group quickly joined the list, with the number of unicorns growing to 10 in just four years.
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List of First Ten Startup Unicorns in Japan:
Japan’s startup ecosystem is producing unicorns and numerous high-potential companies on the cusp of reaching unicorn status. The Japan Business Federation announced an ambitious goal to have over 100 unicorns in Japan by 2027. Considering the progress made, this goal seems achievable, reflecting Japan's vibrant and dynamic startup landscape.
Key Cities for Tech Startups
Tokyo
Tokyo is the epicentre of Japan's startup ecosystem, hosting over 1,200 startups and numerous venture capital firms. The city's focus on smart technology and sustainability makes it an attractive destination for tech entrepreneurs.
Fukuoka
Fukuoka, known as "the startup city," offers lower tax rates and government support, making it a desirable location for new businesses. The city houses many startups in fields related to the Internet of Things (IoT), such as data, hardware, and software.
Osaka
Osaka is a hub for life sciences and healthcare startups, supported by a strong network of public and private institutions. The city’s blend of culture, tradition, and modernity creates a unique environment for innovation.
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10 Recent Start-ups in Japan
Company | Business Description | Investors | Region | Founded Year | Yearly Revenue | Funding | Employees |
Digital solutions for the construction industry | Mizuho Capital, DCM Ventures, Mitsubishi UFJ Capital, Delight Ventures | Tokyo, Japan | 2021 | $1M to $10M | $3.13M Seed | 11 to 50 | |
Web3 strategy for Japanese IP holders | MUFG Bank, Sumitomo Mitsui Trust Bank, Kodansha, Nishi-Nippon Railroad, MCP Asset Management | Fukuoka, Japan | 2021 | $10M to $50M | $45M Series A | 101 to 250 | |
AI royalty-free music generator | Ceres Mint, SMBC Venture Capital, ANOBAKA, Deepcore | Tokyo, Japan | 2020 | Less than $1M | $1.35M Series A | 1 to 10 | |
Investment real estate management | DRGinvest | Tokyo, Japan | 2020 | $1M to $10M | - | 11 to 50 | |
Software for healthcare professionals | Bank of Fukuoka, Media Contents Factory | Tokyo, Japan | 2020 | $1M to $10M | - | 11 to 50 | |
High-Intensity Focused Ultrasound treatment for cancer | SBI Investment, Mitsubishi UFJ Capital, Fast Track Initiative, Japan Science and Technology Agency, Fukuoka Financial Group | Yamanashi, Japan | 2020 | $1M to $10M | $4.83M Series A | 11 to 50 | |
Housing consultation and development platform | ANRI | Saitama, Japan | 2020 | Less than $1M | $0.31M Seed | 1 to 10 | |
Social mood-tracking journaling app | Chibagin Capital, Tokyo City Trust Bank, Kazumasa Namekata | Tokyo, Japan | 2020 | Less than $1M | $0.84M Seed | 1 to 10 | |
Annotation services platform for AI applications | Genesis Ventures | Tokyo, Japan | 2020 | $1M to $10M | - | 11 to 50 | |
DX consulting and digital product development | Genesia Ventures, Delight Ventures | Kanagawa, Japan | 2020 | $1M to $10M | $1.86M Seed | 1 to 10 |
Networking in the Japanese Tech Ecosystem
Networking is vital for success in Japan's tech startup scene. Various online platforms like Eventbrite and Meetup list numerous events catering to professionals, entrepreneurs, and investors. These platforms are essential for building connections, learning from industry experts, and staying updated on the latest trends and opportunities. Here are some of the most popular meetups and networking events in Japan:
Tokyo Tech Meetup is one of Japan's largest and most active tech meetups. It brings together tech enthusiasts, developers, entrepreneurs, and investors to share ideas, present projects, and discuss the latest technology trends. This event is an excellent opportunity to network and find potential collaborators.
Startup Lady Japan focuses on empowering female entrepreneurs and professionals in the tech industry. It provides a supportive community where women can share their experiences, learn from each other, and network with like-minded individuals. Events include workshops, panel discussions, and networking sessions.
Venture Café Tokyo is part of a global network fostering innovation and entrepreneurship. The weekly Thursday Gathering event provides a platform for startups, investors, and industry experts to connect, collaborate, and exchange ideas. It features talks, workshops, and networking opportunities.
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Fintech Meetup Tokyo is tailored for professionals in the financial technology sector. It offers a platform for fintech startups, investors, and financial institutions to discuss industry innovations, challenges, and opportunities. Regular meetups include keynote speeches, panel discussions, and networking sessions.
This meetup focuses on artificial intelligence and machine learning, attracting researchers, developers, and entrepreneurs interested in these fields. The group hosts regular events featuring presentations from leading experts, hands-on workshops, and networking opportunities.
This group hosts numerous free events throughout the year where you can learn the best practices of starting a company from people who have been there and done that. You’ll have the opportunity to meet local founders and investors, exchange ideas with experts, get feedback on your idea, participate in startup workshops, and more.
Role of Incubators and Accelerators in Japan
Incubators and accelerators are vital in supporting startups in Japan, offering resources, mentorship, funding, and networking opportunities crucial for early-stage businesses. Here are some of the most notable incubators and accelerators in Japan:
Creww provides many services, including open innovation programs and a startup studio. It connects startups with large corporations, fostering collaboration and offering access to resources, market opportunities, and mentorship from established industry leaders.
TECHFUND is known for its "technology investment" model, which focuses on early-stage tech startups. Their Hi STARTUP acceleration program boosts companies' value by leveraging technology, particularly in AI and Web 3.0.
ASAC offers co-working spaces, fundraising advice, and support programs tailored to early-stage startups. In Tokyo, ASAC provides a collaborative environment for startups to share knowledge and access valuable resources.
Plug and Play Japan is part of the global Plug and Play network, which connects startups with corporate partners, investors, and mentors. They run programs focusing on sectors such as fintech, insurtech, retail, health, and smart cities.
Founded in 2010, Onlab promotes internationally active entrepreneurs and facilitates merging major corporations' know-how with fresh startup ideas to speed up globalization. They offer a robust incubation stream and extensive support for startups.
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Samurai Incubate invests in early-stage startups, providing seed funding, office space, and mentorship. Since its founding in 2013, it has invested in over 200 startups, supporting first-time and experienced founders looking to pivot their business models.
This accelerator is part of Google's global network, offering Japanese startups access to Google's resources, mentorship, and best practices. It supports startups from seed to growth stages, fostering innovation and growth.
Reality Accelerator focuses on SaaS startups and provides industry-agnostic support, specifically focusing on developing software-as-a-service solutions. They offer a range of resources to help startups scale efficiently.
Dream Incubator focuses on "building companies and improving societies" through various business production services. It incubates startup companies in Japan and internationally, helping them navigate the complexities of early-stage growth.
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Cultural Nuances in Japanese Business
Understanding Japanese business culture is crucial for success. Key cultural aspects include:
Risk Aversion: Japanese startup culture tends to be more risk-averse and prefers stability.
Hierarchy and Structure: Businesses maintain a hierarchical structure, which can slow decision-making processes.
Emphasis on Harmony: Building and maintaining solid relationships (Kizuna) is essential.
Long-Term Perspective: Japanese startups often focus on long-term sustainability rather than rapid growth.
Innovation within Tradition: Startups blend traditional cultural elements with modern innovations.
Practical Advice for Foreign Entrepreneurs
For foreign entrepreneurs, success in Japan requires learning the language, understanding cultural nuances, navigating legal requirements, and utilizing government programs. Proficiency in Japanese is highly beneficial, and respecting Japanese business etiquette and practices is crucial. Seeking legal counsel ensures compliance with local laws, and taking advantage of programs like the J-Startup visa can provide significant support.
Japan presents a unique and promising landscape for tech startups, characterized by strong government support, a skilled workforce, and a culture of innovation. Entrepreneurs can thrive in Japan's dynamic tech ecosystem by understanding the local business culture, leveraging available resources, and focusing on long-term sustainability.
FAQ Section
What is the current state of tech startups in Japan?
The tech startup ecosystem in Japan has grown substantially in recent years, with government incentives and increased venture capital investment. As of 2023, Japanese startups raised approximately USD 6 billion, and the country is home to over 10,000 startups.
What are the key emerging tech sectors in Japan?
Japan invests heavily in key sectors, including environmentally friendly technologies, AI, robotics, life sciences, and fintech. Companies like Chemican and MYMIZU focus on sustainability, while SoftBank Robotics and CapCut lead in AI applications.
What is the J-Startup program?
The J-Startup program, launched by Japan's Ministry of Economy, Trade, and Industry (METI), supports startups with resources such as accessible workspaces, business consultations, and international fair support. It aims to promote new businesses and innovation.
What is the role of incubators and accelerators in Japan's startup ecosystem?
Incubators and accelerators in Japan, like Creww and Plug and Play Japan, provide crucial support to early-stage startups through resources, mentorship, funding, and networking opportunities, helping them scale and succeed.
What are the cultural nuances of doing business in Japan?
Japanese business culture emphasizes risk aversion, hierarchy, harmony, and long-term perspectives. Understanding these cultural aspects is essential for building strong business relationships and achieving success in the Japanese market.
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