Japan’s Coming Startup Boom

An Introduction

I’m a programmer, but no one lets me program any more.

In the more than 23 years I’ve lived in Japan, I’ve programmed professionally in more than ten different languages and founded several technology start-ups here. In fact, starting companies is the main reason no one lets me program any more.

You see, I started my first company with three friends back in 1999, and together we built a fantastic e-commerce product. The problem was we had no customers. We looked at each other and realized that someone now had to go sell it to someone. I was the one who finally said “Well, OK. I’ll give it a try.”

We were all surprised that I turned our to be pretty good at it, and I ended up spending more and more time with customers and less and less time coding. When it came time to raise money, I was the always the one talking with the investors and arguing with the lawyers.

The same pattern played out in my next two companies. I love to code, and I like to think I was pretty good at it, but within six months I would inevitably be away from the computer and talking to customers and investors about the amazing software that the other developers in the company were making.

My previous companies have all been either been successfully sold or harrowingly bankrupted, but I still only get to write code as a hobby. Years of working with start-ups both in Japan and in this US, has shown me that there has never been a better time than right now to be an entrepreneur in Japan. In fact, if you look at the matter carefully,it’s pretty clear that today’s small start-ups are going to transform Japan’s whole economy.

We are still in the early stages, but the signs are easy to see if you look.

Japan’s First Two Economic Miracles

Japan has a long history or making rapid, extensive social and economic changes once the need becomes strong enough. Japan’s industrialization during the Meji Restoration and the post-war expansion are two of the most amazing economic success stories in the history of the world, and these periods are studied be students of economics all over the planet. 

Most Japanese do not seem to fully appreciate how incredible these economic transformations were or exactly what about Japanese society made them possible in the first place. Perhaps because Japan has experienced two such economic miracles in the last 150 years, many Japanese seem to believe that such events are common in world history.

They are not. Such success stories are exceptionally rare.

In both of these economic expansions much of the success stemmed from the ability to carefully analyze and select what had worked best in the rest of the world, and then implement these ideas aggressively via central authority.

Since this strategy worked so well in the past, it is not surprising that universities and bureaucrats today are using the same techniques to try to figure out the best way to encourage entrepreneurship and innovation in Japan.

Almost every week another research panel releases their findings and presents a detailed breakdown of how Japan is different from Silicon Vally and concludes that radical changes need to be made in education, business and even people’s core attitudes.Some of these reports go as far as to conclude that the rigidity and lack of creativity in Japanese society will ultimately prevent widespread entrepreneurship from ever taking root.

This is arrant nonsense. A new entrepreneurial culture is already springing up. Life in Japan is certainly more rigid than in many Western countries, but Japan has shown herself to have an unbelievable ability to change and adapt — but only when she absolutely has to.

Japan’s Third Economic Miracle

Japanese attitudes towards entrepreneurship and risk taking are already changing. Unfortunately for Japan’s leadership, unlike economic policy or capital investment plans attitudes can not be changed by decree. People change their beliefs when they see evidence that things have changed.

If you look closely, you can see that Japanese society is already starting to change in ways that will propel Japan to her third economic miracle. Many of these changes are not yet widely appreciated. One reason these changes are overlooked is because they are happening organically and incrementally rather than as the result of large well-publicized  programs. Another reason is that many of these changes do not seem to be desirable at first.

Of course, many of these changes are being overlooked simply because those who study Japanese entrepreneurship are looking in the wrong places. The careful, detailed analysis and refinement which has proven so useful in the past, are not the skills required for the next expansion.

When we analyze the situation with traditional tools, it is easy to develop long lists of problems and to detail all the ways in which Tokyo differs from San Francisco. In fact, a seemingly endless stream of white-papers and research reports mistakenly conclude that Japanese are risk-averse, that there are few sources of venture funding, Japanese lack creative thinking, etc.

In the end, most of this analysis boils down to the fact that Japan is different from Silicon Valley. While that is undeniably true, it is not necessarily a problem. The goal has never been to remake Japan into Silicon Vally. Japan will find her own way.

Rather than focusing on all the things that are different and assuming that they must be changed, I think it is more productive to focus on the many things that are already being done right in Japan and try to do more of those things. Believe it or not, there are actually many ways in which Japan is a better place for entrepreneurs than United States.

Japan’s Coming Startup Boom

As you might have guessed, I am extremely (many say unrealistically) optimistic about Japan’s economic future. I have started three companies here over the past 20 years and the environment for entrepreneurship has never been better.

And I am not the only one who thinks so.

Every week I speak with more and more “unrealistic” Japanese optimists who are now starting new ventures. Ironically, the same academic and government researchers who gripe about the need for greater risk-taking frequently shake their heads and claim that the current generation of start-up founders are too young, too unrealistic, arrogant, over-confident, and that these youngsters have no idea how difficult running a company actually is.

The critics are right of course, and that is a wonderful thing.

The simple truth is that realistic, rational people do not start new companies. It’s the annoying, overly-optimistic, unreasonable people who start new companies. It’s also true that almost all of these new companies will fail, but government policy cannot and should not try to do anything about that.

However, since they tend to be arrogant and unrealistic, real entrepreneurs (unlike the academics who study them) are not terribly bothered by the high chance of failure.

On average, this works out well for society.  With current conditions in Japan, if only 1% of these unrealistic, overly-optimistic ventures succeed, it will be more than enough to propel Japan into her third economic miracle.

It’s already beginning. If you know where to look, you can see the very beginnings of the next expansion — the green shoots — appearing everywhere.

This article was originally published in Japanese by IT Media.