A Country Where Young People Don't Start Businesses: Can Japan Change? [Bridging Continents] ‍

‍"A country where young people don't start businesses"

This is a phrase I've often heard when seeking advice on entering the Japanese market. 

It suggests that Japan's prolonged economic stagnation has forced young people to choose safer options, reducing uncertainty. This situation exemplifies Japan's "Lost Decades" following the collapse of the bubble economy in the 1990s, marked by a falling stock market, a stagnant real estate market, and weakened corporate competitiveness.

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However, recently there are signs of change in the Japanese market.

The Japanese government is supporting startup growth through policies to revitalize the economy, and established companies are pursuing open innovation through collaborations with ventures. This indicates that Japan is finding a way to shed its reputation as a "country where young people don't start businesses" through startup support.

Can Japan truly change? What is the current state of Japan's venture ecosystem?

In this article, I will compare Japan's startup ecosystem to South Korea's ten years ago. To begin this story, we need to turn back the clock to 2014.

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'K-Startup Model' That Inspired New Graduates to Dream of Entrepreneurship

In 2014, I was very interested in social venture entrepreneurship and aspired to become an expert in the field in South Korea. My family and friends discouraged me, but I was confident in my vision. The inspiration came from attending a global startup forum in Korea around that time.

At the forum, the head of the SME Administration emphasized the K-Startup model. The presentation highlighted that benchmarking advanced models like Silicon Valley in the US, K-Startups would lead the startup ecosystem in Asia. Subsequently, “Creative Economy Innovation Centers” began to emerge regionally to promote an innovative startup ecosystem in Korea, and in 2017, the SME Administration was upgraded to the Ministry of SMEs and Startups, making government-led activities to create a K-Startup ecosystem visible.

The media's attitude towards youth entrepreneurship also changed. The Youth Entrepreneurship Academy, which was proactively operated in the public domain to nurture entrepreneurs, attracted a lot of attention and started to alter the perception of entrepreneurship. The dream of "starting a business that can change the world with innovative technology and ideas" began to grow in the hearts of young Koreans, moving away from the notion of "starting a business requires a lot of money" or "entrepreneurship entails taking on great risks."

Of course, my parents and friends' concerns were understandable. Having experienced the dot-com bubble and the IMF crisis in the 1990s, Koreans couldn't help but look at young entrepreneurs with worry. This atmosphere persisted even during the nascent stage of the K-Startup model. Despite some improvement in the public perception of entrepreneurship, those dreaming of starting a business remained a minority.

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The dream of the K-Startup model had the potential to expand from Korea to other Asian countries. In 2015, ud. introduced full-time entrepreneurship education under the brand "underdogs Startup Academy," and quickly connected with excellent public institutions and large companies, helping them become supporters of early-stage founders in Korea. 

Since 2017, we have invited stakeholders in the startup ecosystems from Vietnam, Cambodia, Myanmar, Mongolia, and other countries to introduce the K-Startup ecosystem and our entrepreneurship education methodology, marking the starting point of the Asia Tomorrow Network. (Unfortunately, the spread of COVID-19 in 2020 put the dream of the K-Startup model on hold.)

From 2022, underdogs has been rebuilding relationships with partners in Asia and planning for global expansion again, believing it was time to challenge the potential of the K-Startup model. An online platform (asiatomorrow.com) was launched for information sharing among entrepreneurs, investors, and experts in various fields within the Asian startup ecosystem. 

In 2024, the main goal of global cooperation is to enter the Japanese market.

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Japan's Current Status: Seeking Rebound Through Venture Investment

For ud., Japan's startup ecosystem seemed like a "land of opportunity."

We paid close attention to the local news about the Japanese government's startup support policies and the massive digital transformation taking place. The vision of the K-Startup model, which emphasized the promotion of the Korean startup ecosystem ten years ago, came to mind again. We concluded that it was crucial to understand Japan's current state, given the conservative social atmosphere towards youth entrepreneurship.

(Refer to : Time to Change? Director of the most vibrant startup community in Japan reveals signs of Japanese venture trends) 

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In November 2022, the Japanese government announced a "five-year plan for startup growth". They proposed increasing the scale of startup investment from 877.4 billion yen (approximately 7.75 trillion won) by more than ten times to 10 trillion yen (approximately 88.4 trillion won) to foster 100,000 startups. 

Additionally, policy measures like tax benefits for large companies investing in startups and entrepreneurs selling their shares were introduced. Local governments, corporations, and universities nationwide began reviewing policies (startup visas), infrastructure (establishment of startup centers), and programs (entrepreneurship training) to nurture entrepreneurs.

Despite these efforts, starting a business remains a novel concept in Japan.

Before visiting Japan, the most common advice we received from partner organizations was that "Japanese youth don't start businesses". The perception is that Japan's startup ecosystem is just beginning, with a high proportion of young people choosing ‘normal’ employment over entrepreneurship, and the belief that startups and innovative technologies are more the domain of established companies rather than students or young people.

This led us to investigate how underdogs could contribute to revitalizing Japan's innovation startup ecosystem. We started with a few hypotheses. The first hypothesis and strategy was to approach ud. not as a "startup education company" but as a "comprehensive solution provider based on entrepreneur data, SaaS (Software as a Solution)" in Japan. This was based on the judgment that the startup education market in Japan was still in its early stages. 

Additionally, attending the "Sushi Tech Tokyo" expo, the largest startup expo in Japan, helped us form more hypotheses.

1. What is the exact meaning or data behind the statement "Japanese youth don't start businesses"?
2. What stage is Japan's startup ecosystem currently at, and who are the key players starting the ecosystem?
3. Which companies and institutions need ud.'s technology and services, and who can be potential partners?

(Refer to : 3 Key Trends Shaping Japan's Startup Future: Insights from SusHi Tech Tokyo 2024) 

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How Can We  Foster Change in a Country Where Young People Don't Start Businesses

During our visit to Japan in May for the event, we experienced some differences in business culture between South Korea and Japan. While Korea focuses on achieving rapid and visible results through the most efficient processes, Japan's business communication, in a relatively conservative environment, values trust and relationships.

Thus, the most important aspects of entering Japan's startup ecosystem are: 1) understanding Japan's detailed business culture, 2) fitting into their ecosystem structure and relationships, and 3) identifying clear value propositions where underdogs' strengths can contribute to nurturing Japanese entrepreneurs.

To this end, building relationships with trustworthy partners through small-scale collaborations is a top priority. In Japan, demonstrating the essence and effectiveness of ud.'s philosophy and vision in entrepreneurship education planning and operation should be emphasized. Expanding on the learnings from the two-day visit and starting from meeting the needs of newly established relationships is the next step.

Understanding Japan's changes while embracing its unique culture is crucial for discovering new opportunities. Over the past nine years, working with numerous partners in nurturing entrepreneurs across Korea and various regions in Asia has taught me that understanding the unique culture and context of each place is the first step in business.

(Refer to : 3 Powerful Lessons from Mongolia's Rapidly Growing Startup Ecosystem [Bridging Continents])

In Japan, which is on the cusp of significant change, underdogs aims to connect its know-how to the entrepreneurs and pacemakers (supporters) striving to make their mark. We hope that Underdogs can become a catalyst for revitalizing Japan's startup ecosystem, which is both completely different yet very close.

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Written by Park Dae-eun, Partner at underdogs (Global TF)

※[Insight Column] The views expressed by the author are independent of this publication's stance.‍