Building a Startup Ecosystem in Japan

Pocket

Last week Netprice.comDigital Garage, and Kakaku.com announced the launch of their joint project: Open Network Lab, the first seed acceleration program in Japan. What makes this particular program unique from other programs is its international network of funding and mentors. With the generous help of Japanese evangelist, entrepreneur, and angel investor Joi Ito (someone I truly admire and aspire to become like one day), we were able to form an impressive network of mentors and funding resources from Japan, the United States, and Singapore. You can read Dr. Serkan Toto‘s excellent post to find out more about Open Network Lab.

I love Japan. I love the people, the food, the traditions, and the convenient stores. However the one thing that is lacking in this country, is a startup ecosystem. Japan is a hostile environment for startups. It is very difficult to get funded, it is hard to find advisors and mentors, and there is no community of startup entrepreneurs to meet and support each other.

I believe that Open Network Lab will be the key in building a startup ecosystem in Japan and I am very fortunate to be involved with the project. Here are a few ways I believe Open Network Lab can help build a startup ecosystem:

Mentorship:

Most people can’t get it right the first time. So we have assembled mentors worldwide, who are either active or accomplished entrepreneurs. The mentors will guide the first-time entrepreneurs to success by sharing their experiences and giving feedback/advice.

Multiple Exits:

We aim to produce startups that are “globally competitive.” Meaning, startups that come out of the program would create services that target international markets. Global startups have the advantage to exit in several ways. For example, they can go public in multiple countries (ie. Japan, USA, Singapore), and they can be subject to acquisition by companies from different countries.

Global Funding Network:

In Japan, it is difficult for startups to receive funding. It is especially difficult for early stage startups to get funded. Venture capitalists in Japan are extremely risk averse and there is also a lack of angel investors in Japan (I can count only a few in my head).

However, I believe the root cause of the problem is actually the lack of exit strategies for startups in Japan. If we can create multiple exit strategies for startups, and also increase their chances of an exit with proper mentorship, investing in early stage startups will become much more attractive and will naturally make early stage investing much more active.

In the meantime, Open Network Lab will make an effort to connect Japanese startups with venture capitalists and angel investors from overseas.

Building a Community:

This is probably the most important element for building a startup ecosystem. We need to build a big, strong startup community where entrepreneurs can meet and support one other. Our attempt to build a community is to host monthly events that will bring entrepreneurs together. We had our first event two days ago which brought together 200 people. In future events, we will have to prioritize educating and allowing entrepreneurs to discover each other.

The Biggest Obstacle:

Culture is going to be the biggest obstacle. The Japanese people are extremely risk averse and have the biggest fear of failure. I am probably making this up but I think the origin of the risk averse culture comes from the bushido (samurai) code where warriors perform seppuku (stomach-cutting) when shame is brought to them.

The way to overcome this is to build a strong community. Japanese people show a tendency towards herd mentality, so creating a herd of entrepreneurs will bring more of them together. Also, creating a successful startup role model will also be essential. We will have to create at least one successful startup that will make people go for the startup dream.

Some people have been telling me how it is impossible and how this is a foolish attempt. But we have to try and keep on trying because I believe building a startup-friendly environment in Japan is essential for the country’s survival.

Pocket