Japan Struggles to Rekindle the Necessary Ecosystem for Tech- Start-Up Growth

Alexander Martin reported last week at The Wall Street Journal Online that, “Stacks of cardboard boxes serve as makeshift partitions at Mistletoe Inc.’s new office in Tokyo’s posh Aoyama district, where startups gather to work on their latest projects.

“The do-it-yourself vibe—a far cry from the stuffiness typical of Japanese corporate offices—is something founder Taizo Son, serial entrepreneur and youngest brother of SoftBank Group Corp. founder Masayoshi Son, wants to see more of.

“‘Japan has the talent and funds but lacks the necessary ecosystem to create its own Silicon Valley, so that’s what we’re trying to provide,’ said Mr. Son, 43, who describes Mistletoe as a program to cofound new businesses.”

The Journal article pointed out that, “The nation that created the Walkman and the bullet train before China even had a tech industry now lags behind as Chinese Internet startups like Alibaba Group Holding Ltd. become global powerhouses. With its once-dominant technology industry struggling, Japan is counting on entrepreneurs to rekindle its hobbling economy.

The government is pledging to fund startups, top universities have launched incubators and venture funds to transform their wealth of knowledge into innovation and even Japan’s oldest and largest conglomerates, such as the Mitsubishi and Mitsui groups, are looking to nurture entrepreneurs.”

Mr. Martin pointed out that, “[V]enture-capital investments in Japan last year totaled just $629 million, according to AVCJ Research, compared with $59.1 billion in the U.S., according to the National Venture Capital Association.

There are still relatively few people willing to risk choosing entrepreneurship over a job at a big company. Even as the travails of giants like Toshiba Corp. and Sharp Corp. show there is no security in size, there remains a deeply ingrained reverence toward large corporations.”

However, the Journal article did note that, “The number of companies going public reached an eight-year high last year at 98, around two-thirds of which listed on the Tokyo Stock Exchange’s Mothers market for high-growth startups, according to the Japan Exchange Group.”

“‘There’s a lot of support in Japan available for launching startups, but what’s important is to establish structures for businesses to commercialize innovation,’ said Atsuko Nomura, senior researcher at the Japan Research Institute. ‘That’s where large companies could come in, but we’re not seeing enough of that.'”

Also with respect to the Asia region, recall that, “Gartner Inc. now ranks Vietnam among the top five providers of IT outsourcing services in Asia—alongside China, India, the Philippines and Sri Lanka—up from 30th place in 2010.”

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