Start-up wave chal­lenges Ja­pan’s aver­sion to risk Risk-averse Ja­pan firms, in­vestors slowly warm to start-ups

Kuwait Times - - BUSINESS -

TOKYO: A wave of start-ups is emerg­ing in fa­mously risk-averse Ja­pan as cash-rich cor­po­ra­tions in­creas­ingly del­e­gate the task of keep­ing pace with tech­nolo­gies such as ar­ti­fi­cial in­tel­li­gence and ro­bot­ics to smaller, nim­bler busi­nesses. Ja­pan has been dry ground for start-ups, given the shame that en­trepreneurs and in­vestors as­so­ciate with fail­ure, but it is on track for a record fund­ing year for un­listed start-ups, ex­ceed­ing the dot-com bub­ble of 2000, ac­cord­ing to a pri­vate re­search firm.

“The fundrais­ing en­vi­ron­ment has im­proved a lot com­pared with a few years ago,” said Ken Ta­m­a­gawa, 40-year-old CEO of So­ra­com Inc, which helps com­pa­nies set up plat­forms al­low­ing de­vices to com­mu­ni­cate with each other via the “In­ter­net of Things”.

It raised 3 bil­lion yen ($25.6 mil­lion) from Mit­sui & Co and an in­vest­ment fund in which Toy­ota Mo­tor Corp has a stake. Dozens of com­pa­nies, in­clud­ing elec­tron­ics maker Om­ron Corp and real es­tate de­vel­oper Mit­sui Fu­dosan Co, have set up ven­ture cap­i­tal funds to seek re­turns or team up with smaller com­pa­nies. “It’s be­com­ing harder to change with the times,” says Kei Saika, in­vest­ment di­rec­tor at Om­ron’s in­vest­ment arm, which was set up two years ago. “It’s more ef­fi­cient if the ven­ture firms have the tech­nolo­gies that we don’t.”

The trend comes with the sup­port of Prime Min­is­ter Shinzo Abe, who sees start-ups as a way to breathe new life into Ja­pan’s long-stag­nant econ­omy, and has spo­ken of Ja­pan learn­ing the lessons of Cal­i­for­nia’s Sil­i­con Val­ley.

“The tide is chang­ing, al­though the share of peo­ple will­ing to take the risk of launch­ing a busi­ness is still rel­a­tively small,” said Ya­suhiko Yu­ri­moto, Pres­i­dent & CEO of Global Brain Corp, a ven­ture cap­i­tal firm that in­vests in fi­nan­cial tech­nol­ogy, or “fin­tech”, ar­ti­fi­cial in­tel­li­gence and ro­bot­ics start-ups.

“More suc­cess sto­ries are needed to cre­ate a vir­tu­ous cy­cle of growth.” Start-ups raised 92.8 bil­lion yen in the first half of the year, ac­cord­ing to data from think-tank Ja­pan Ven­ture Re­search. At that pace, the amount will ex­ceed last year’s 165.8 bil­lion yen and the pre­vi­ous high of about 170 bil­lion yen set in 2000. The fund­ing is mostly homegrown; for­eign in­vestors made up just 10 per­cent. Cor­po­ra­tions and their af­fil­i­ated ven­ture cap­i­tal firms ac­counted for more than a third of in­vest­ment, while in­de­pen­dent ven­ture cap­i­tal firms made up 19 per­cent.

Way to go

Life Ro­bot­ics CEO Yoon Woo-Keun man­aged to raise 1.5 bil­lion yen this year for his com­pany, Life Ro­bot­ics, which de­vel­oped a ro­botic arm called “CORO” de­signed for use at cos­met­ics com­pa­nies, car fac­to­ries and lo­gis­tic ware­houses. CORO is now be­ing used at Toy­ota, Om­ron and the Yoshi­noya restau­rant chain, but for years he got the cold shoul­der from in­vestors in Ja­pan and had con­sid­ered de­camp­ing to the United States. Yoon still thinks Ja­pan has a long way to go. “Peo­ple talk about a ro­bot boom and startup boom in Ja­pan, but per­son­ally I don’t feel we have reached such a stage at all in terms of money,” he said. In­deed fundrais­ing in Ja­pan re­mains a frac­tion of lev­els in the United States, where start-ups raised roughly $60 bil­lion last year, and even China, where they gar­nered about $20 bil­lion, ac­cord­ing to the Ven­ture En­ter­prise Cen­ter.

Few in­no­va­tors have made it big in Ja­pan, and most of them got started soon af­ter World War Two, when Soichiro Honda be­gan mak­ing mo­tor­cy­cles and Akio Morita launched what be­came Sony Corp. Soft­bank’s Masayoshi Son is a more re­cent ex­am­ple.

But new names could soon be emerg­ing among the younger gen­er­a­tion. Classes on en­trepreneur­ship at top uni­ver­si­ties are packed, as many stu­dents turn their back on both the se­nior­ity-based life­time em­ploy­ment model that served their par­ents, and the cheap, in­se­cure contract work that is slowly re­plac­ing it. Yousuke Okada, 28, is typ­i­cal of this new breed.

He started ABEJA, which uses “deep learn­ing”, a form of ar­ti­fi­cial in­tel­li­gence that pro­cesses vast amounts of data, to an­a­lyse shop­pers’ be­hav­iour. “It tends to be time-con­sum­ing if you try to start some­thing new like ‘deep learn­ing’ at a big com­pany, so I de­cided to do it by my­self,” said Okada. Half of the 20 em­ploy­ees at Astroscale Ja­pan Inc, which de­vel­ops tech­nolo­gies to solve space de­bris prob­lems, are in their 20s, says com­pany pres­i­dent Miki Ito.

The rest are in their 60s, re­tirees from jobs at big firms, as it is hard to find mid-ca­reer ex­pe­ri­enced work­ers will­ing to jump ship. Suc­cess sto­ries from Ja­pan’s last start-up boom­let in­clude net­work­ing app com­pany Line Corp, and Mixi Inc , a so­cial net­work op­er­a­tor. — Reuters

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