Business Insight
Digital Economy

Why Japan is rising as a hot spot for global startups? Here's the reason behind the trends [Entry into Japan 1]

Kyumin Na
February 16, 2024
"By 2030, let's put 100 trillion yen into funding, create 100,000 startups, and build 100 unicorns"

This was Prime Minister Kishida's announcement in 2023. It is a decision to infuse about 100 trillion yen in capital.

Japan and Tokyo are now issuing regional visas to attract foreign entrepreneurs, such as the Shibuya Support VISA for Startups, which allows entrepreneurs to stay in the country to prepare their business, which was not recognized in the past. The government also continues to foster new entities with incorporation subsidies of up to 5 million yen.

Shibuya Startup Support |
(Source : Shibuya Startup Support)

Why Japan is a hot spot for startups in these days

Currently, the Japanese market is undergoing a period of growth and transition in the IT sector. You can see DT/DX advertisements everywhere in Tokyo. IT recruitment platforms like Green Japan are in high demand. Even in PRTimes, there are always news from IT companies.

There are two reasons for this.

1. the demand for digital infrastructure due to the COVID-19 pandemic

2. the performance and business slump of Japanese IT giants

(Credit : Kyumin Na)

The pandemic has caused a major shift in Japanese society. Remote work has been implemented. Utilizing Zoom and other platforms has become a natural progression, and virtual meetings have even become a procedure.

Stamps and faxes are a thing of the past. Electronic contracts such as DocuSign are heavily adopted, and handwritten records have been reduced to a similar extent as in South Korea - at least among large enterprises, startups, and IT companies.

However, Japan's existing IT companies, which were previously organized around the SI market, have not yet transformed into startups. The SW in the market is dominated by foreign solutions.

Therefore, Japan is pursuing innovation, and even major corporations are realizing the limitations of their own moorings and are increasingly seeking external collaboration.

(Credit : Kyumin Na)

More and more examples of Open Innovation, where major corporations and startups work alongside each other, and projects such as the Tokyo Metropolitan Government's King Salmon project, aim to change society.

With the rise in the number of co-working offices and centers where people from different business units of major companies can come together to build new businesses through collaboration, we are seeing a shift away from competition and toward collaboration.

So why are large organizations in Japan pursuing open innovation?

Traditional big companies are losing in the IT business. Their HW skills are stronger than anyone else's, but their SW can't support it. Strong domestic demand hasn't created the demand for overseas expansion. Consequently, lagging IT SW and globalization are holding Japan back, manifested in poor business performance.

That's why the Kishida administration has announced the Startup 2030 plan to foster new businesses, nurture emerging startups, and generate jobs.

In response, Japanese startups and leading companies are cooperating to develop new businesses. Support, conferences, and centers for promoting startups are springing up. It is creating a good environment to attract foreign investors.

So what is the current status of Korean startups in these circumstances?

(Credit : Kyumin Na)

The global market is tough, especially in the US where you need to win, the competition is tough. Europe is tough because of regulations. China seems to be a no-go for C-Levels at almost every company. That leaves Japan, which I hear "but DT/DX in Japan is slow and just getting started".

That's why it's growing so much!

How foreign startups feel about Japanese market

According to an informal survey, the top 20% of South Korean startups have entered Japan, are doing it, or are trying to do it.

However, the Japanese market is challenging. This is because it has only been a short time since Korean startups began to consider or prepare for Japan, maybe a year or so.

Japanese business agencies and freelancers have increased accordingly, but most of the experts are invisible, either because they are part of a Japanese company or because they are integrated into Japanese society. So, to find the right answers, foreign companies have to learn on their own.

(Credit : Kyumin Na)

The most important aspect of doing business in Japan is to speak Japanese. You need to be linguistically flexible because subtle nuances can make the difference in business, in deals. Also, you have to blend into Japanese society and do business with Japanese people. It means you have to ask Japanese companies, meet Japanese people in particular manner.

The Japanese people I've met in the startup industry would love to work with Koreans. They're willing to help anyone at any time, and want to coexist and collaborate, not compete. Many of them expressed a desire to learn about startups in Korea, and they want more than anything to create opportunities for both countries to collaborate.

So there may be no better time to start a business in Japan. Through this series, I hope to give people a better understanding of what it's like to be a startup in Japan and create a flow of connections between the countries.

데이터라이즈, 일본 법인 설립…미국 사업 가속화 및 해외 시장 공략 본격화 – 와우테일(WOWTALE)

I also hope to share the business progress of Datarize Japan, Inc. with many of you.

What will the future bring, how will Datarize do it, and why will we do it? I would like to tell you through this series with the help of my Japanese friends.

To summarize this article in one sentence, I would say the following.

"Japanese IT has already transformed. It is changing faster than anyone else. And there are tons of opportunities for overseas startups!"

Next time, I'll be back with a special topic on Tokyo Stock Exchange IPOs with some of my friends from Mizuho MUFG.

Next Post|How the IPO structure in Japan affects the strategy of startups entering into the market in Japan [Entry into Japan 2]

Written by Kyumin Na (Link)

Original Post : About Japanese startup ecosystem and visiting the sight


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Kyumin Na
Head of Business Japan and APAC
Datarize, Corp. - Head of Business Japan and APAC