JIN-524 -- The West's New Yen For Japan

J@pan Inc Newsletter
The 'JIN' J@pan Inc Newsletter
A weekly opinion piece on social, economic and political trends in Japan.
Issue No. 524 Thursday, October 28, 2010, Tokyo

In recent weeks I have had a number of interesting conversations and experiences with Japanese professionals that have put a finer point on the current state of internationalization in Japan. Even a quick look at the English business media of the West is enough to inform you that Asia business as a whole has a renewed and energetic internationalization strategy in mind that will likely impact the entire planet.

Spurred largely by the technology sector, this new global outreach posture has stoked the interests of Western investors. In particular, Silicon Valley. The list of Asia-specific venture capital funds targeting Japan, Singapore, South Korea, Malaysia, China, and to a lesser extent Indonesia, India and Vietnam is long and filled with promise. Given the current VC interest in Asia, at this point it would not be unrealistic to forecast the next Google or Facebook story as something originating from an Asia-based startup.

Because the conversation was private, I will omit names, but a recent discussion I had with a high level Japanese analyst in Tokyo was quite revealing. A seasoned tech expert, with a decent amount of experience working abroad in the U.S., this sixty-something exec's ideas on the future of technology innovation and growth in Asia were nothing short of inspirational. That is, except in the case of Japan. Regarding his homeland, the sentiments struck a familiar refrain—Japan is not entrepreneur or startup-friendly.

So while competitors like South Korea and China pour cash into their domestic startup economies creating individual stories of entrepreneurs with hopes of capturing not just domestic, but international market share, the startup industry in Japan remains largely timid, cowering in the shadow of big domestic business. The big businesses of Japan are, in the main, steadfastly traditional, slow moving, and largely focused on the domestic market, often viewing the international market as a relative afterthought. And of the small startups that do sometimes pop up here and there, a surprising number of them are nothing more than tightly controlled front companies for larger, well known brands that attempt to keep their involvement low key, if not invisible.

Despite the fact that these tiny new brands/initiatives represent some new ideas and approaches, the top down, behind-the-scenes control exerted by the big companies backing these ventures generally dilutes any true market disruption these businesses might have. As for small startups with no big business backing in Japan, the domestic market can be a cold and lonely place in terms of support.

In the area of tech, this is where foreign VCs can actually make a big difference in a local market mired in slow-as-molasses tradition. International VCs from the U.S., UK and the Middle East are all looking to invest in Asia, and many of these potential investors don't understand the local peculiarities that separate Japan from the rest of Asia. In fact, if you are reading this, you are likely already ahead of the game in Japan and would do well to take advantage of the fact that American VCs in particular are largely in the dark in regards to where to place their investment dollars in Japan.
-Adario Strange

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