The Dawn of the startup era: Depth into Japanese Ecosystem
With the world’s 3rd largest GDP in a small island, size 1/25 of US or 1/61 of Europe total, Japan has been prospering in an original way. However, with the digitalization and the Pandemic being all over the world, Japan as a country is focusing more and more on expansion of the startup ecosystem. This article focuses on the market and features of Japanese ecosystem to unveil what is happening in the far east.
*About the startups in this article:
The startups were selected by the local consortium and the accelerators in charge of support programs. They are not the only ones that represent each region.
Innovation Opportunities, there is
Japanese Prime minister Kishida stated “Digitalization and focusing on startups to accelerate innovation” are the key pillars for Japanese Economic Growth strategy. This mainly comes from the impact from the Pandemic. Though Japan was a developed country with 92.73% of internet penetration (ITU, 2019), the digitalization of the systems inside the enterprise was slow. Then came the Pandemic, which forced the companies to make Digitalization a priority.
Then why startups? It is obvious for Crunchbase readers, that startups are the essential for innovation, and due to the COVID Crisis and need of Digitalization, Japanese government and the companies did so too. We can see this from the change in 2021 financing of Japanese startups.
In 2021, investors put $10.2 billion, increased by 53% YOY according to STARTUP DB. The number of funded startups was a rapid increase, but the investor segments have changed, welcoming global investors.
Bain Capital launched $950 Million fund focused on Japanese companies. The fund, which will target all small and medium-sized companies, invested in a Japanese startup hey in August 2020 and in Linc’well in December 2021. Silicon Valley Venture Capital, Light Street Capital, was a lead investor in SmarHR’s series D funding, making them join the Japanese Unicorn community.
The M&A also continues to grow, with a scenery change by global companies. Pring, specialized in money transfer, was acquired by Google for $93.4 million in July, followed by Paypal acquiring credit card free BNPL startup Paidy with approx. $2.6 billion in September. It was a crush for Japan to have 2 fintech company’s acquisition by US companies, but there are much more hidden startups in line.
The Japanese Specific
Some say, it is difficult to specify the vertical of Japanese startups. Hence, did you know that the R&D sector is super active in Japan? Patent application per population, and Research and Development, is Best in the World (The Global Competitiveness Report 2019), R&D expenditures as GDP percentage is No1 amongst G7 countries, and Number of Researchers are 2nd following Germany, with the number of 5,375 per million population. (Global Innovation Index 2021), We have grants such as “Research-based start-up support project” by NEDO, to offer Technology-based Startups that spin off from R&D in various Universities.
-A University Spinoff
From 2016 onwards, more than 200 startups are established from Universities, having 244 in 2019(Ministry of Economy; University-spinoff ventures 2019). Robot Suit Cyberdyne, established in 2004 by Dr. Yoshiyuki Sankai from University of Tsukuba, maybe the start of a university spinoff “startup,” followed by his successor Yuichi Ochiai, who established Pixie Dust Technologies, which develops and applies computational technologies to human life. University of Tsukuba is in “Startup Ecosystem Tokyo Consortium,” one of the 8 local focused regions to accelerate the ecosystem. Some of the University Spinoff startup is as follows.
– Cellfiber Co., Ltd. is a University of Tokyo Spinoff, that develops Fiber cells ”Cellfiber™” for clinical studies and research purposes, from small to manufacturing scale.
– Also, a University of Tokyo Spinoff, Pale Blue seeks to disrupt the space propulsion industry by providing a variety of water propulsion systems with high-performance, affordable price, short-lead time, and reliability.
– Kyoto Fusioneering Ltd. develops advanced technologies for commercial fusion reactors including gyrotron systems, tritium fuel cycle technologies, and breeding blankets for tritium production and power generation. They are a spinoff from Kyoto University, utilizing the technologies that was Researched and Developed in the university for over 40 years. Kyoto is again in one of the 8 local focused ecosystem developing regions, “Osaka, Kyoto, Hyogo, Kobe Consortium.”
Having all the University Spinoff research-based startups that utilize variation of papers for research, startups such as Onikle Inc. offers the preprint search platform using recommendation AI, though now only for computer science.
– Challenge the Society: Super Aging
Is super aging society, a decrease in the economy and productivity? YES for old thinkers but NO for innovators.
As said, by the year 2036, one third of the population will be over 65. We can expect to see more start-ups making headway in the challenge of supporting the dwindling workforce and physical aging. If there are any challenges to come, there is always a space for innovation to happen, and startups to monetize.
– Rutilea provides easy to deploy, plug and play, no-code based software solutions to improve labor productivity of companies, and to solve the problem of global labor shortage.
– XELA Robotics Co., Ltd. produces “uSkin,” that provides the human sense of touch to robots. This enables robots to perform tasks with their hands that only humans could do, like gently grasping objects. The company also is a University Spinoff from Waseda University in Tokyo, with a laboratory that researched robotics for more than 40 years.
– Archelis Inc. produces exoskeleton suit that helps human from the pain and injury of standing work. The idea of Alchelis came from the voice of the doctors, to reduce pain on the time of the surgery. The startup was a spinoff from a Yokohama-born manufacturing company established 54 years ago.
Concerning that 50 years ago Japanese economy thrived by the power of manufacturing companies, we could also seek the way Archelis did for other manufacturing companies all over Japan.
– Biotech < > Medical Tech
If people are aging, there is always in need for medical care.
– SONIRE Therapeutics Inc. provides High-Intensity Focused Ultrasound treatment for cancer. This company is a Spinoff from research held for more than 10 years by collaboration of Tokyo Medical University, Tokyo Women’s Medical University, and Tohoku University. Tohoku University is situated in Sendai, which is also one of the startup ecosystems developing region.
– atDose Co., Ltd. , a company that developed a new mobile-type dosing and infusion device, that will fundamentally change the conventional treatment of serious diseases such as cancer.
– More into the Future
Deeptech is also important in the Japanese ecosystem, verticals with answers to solve the worldwide problem. Startups that confront the problems on Cleantech, Spacetech, and utilization of AI and computing are popular.
– PJP Eye LTD. is an energy solution company using its plant-based carbon batteries to deliver sustainable energy solutions worldwide. Though not a University, Spinoff the company has constantly been working and doing research with Kyushu University.
– With aims to reduce greenhouse gas emissions, eliminate waste/ocean plastic, and improve recycling rates at a global scale, AC Biode develops their unique and innovative technology based on chemical recycling.
– A Kyoto University Spinoff, yodayoda Inc. makes a mapping for robots; drones, wheel chairs, autonomous vehicles, construction robots and bikes.
– Tenchijin, certified by JAXA(Japan Aerospace Exploration Agency), utilize space’s big data to optimize and support companies run their business at the best places and with right and sustainable practices, especially for agriculture, city development, disaster management..
For years, due to the fruitful economy, innovation in Japan made a humble movement, making hard to let people be the first penguin. However, interesting point is whenever someone opens the door and challenges the first step, the acceleration speed and the fitting to the new environment is in the heart of Japanese culture.
“If general perception changes from seeing the glass as ‘half-full’ to seeing it as ‘half empty,’ there are major innovative opportunities.”
In Davos Agenda, PM Kishida mentioned a theory of the “glass half empty”, quoted by the famous scholar in management, Peter F. Drucker. He also positioned “2022 as the first year for founding startups and, establishing a five-year plan, work to get startups off the ground on a large-scale.”
Japan is now beginning to see in the “half empty” positioning. You could imagine how quickly they are going to accelerate the ecosystem.