It is common knowledge that Japan is a hotbed for tech and innovation, being home to many legacy brands that dominate globally in the hardware and robotics space. With the advent of tech becoming increasingly democratised, tech solutions have sprouted not only within large enterprises but also in young and exciting startups. Today, the country boasts a slew of unicorns under its belt, proving that Japan’s vibrant startup ecosystem is equally formidable.
In order to shed light on the country’s strong support for the startup ecosystem, e27 recently hosted a webinar titled “Market Access Japan: Why and how you should expand your business to Japan ”. Moderated by Dennis Poh, Founder and CEO of Legatcy, the programme was designed to help global startups understand the challenges and benefits of expanding to Japan, as well as the kinds of support that the country is able to offer.
Economic resilience
Hari Sivan, CEO and Co-Founder of Singapore headquartered SOCASH, explained that some of the qualities that make Japan an attractive destination for the digital cash displacement platform is its large B2B market. Moreover, the country offers one of the most valuable SaaS business markets and boasts a significant amount of banking activity — which is an expensive operation.
“As with any tech startup, you’re looking at large markets, scale-out markets. So Japan is one option,” expressed Sivan. “Around 2019, we decided we needed to focus on Japan. We had started that process during late 2019, then COVID-19 happen. We felt that among all the countries, Japan still presents the most attractive economy,” he added.
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According to a 2021 report launched by the Organisation for Economic Co-operation and Development (OECD), the Japanese economy is projected to grow by 1.8% by the end of 2021, 3.4% in 2022, and 1.1% in 2023 — optimistic numbers despite the continued presence of COVID-19.
When it comes to scaling, Sivan explained that market-entry is extremely tough and is akin to starting from zero all over again. For SOCASH, the company simply looked at which countries had the best chances of success in a two to three-year horizon, and Japan basically checked out in all the variables that the company was looking for.
Opportunities that await startups in Japan
According to Masahiko Honma, Co-Founder and General Partner at Incubate Fund, Japan mainly has two central business opportunities for global startups: B2B SaaS market and deep tech.
The country currently holds the record for the second largest B2B SaaS market in the world, next to the United States. On the other hand, Masahiko elaborated that the Japanese market is keen on supporting deep tech startups offering innovations in healthcare, robotics, AI, and other cutting-edge technologies.
In terms of fundraising, Japan has a very mature VC and private equity fund industry. With the right strategic priorities, it is perfectly feasible for new startups to rouse interest among Japanese investors. Such is the case for SOCASH which was able to land investments from Japan even before their entry into the country which was largely due to their performance and success in Southeast Asia.
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Another indicator of the country’s strong investment culture is the fact that a lot of investments in the general Asian ecosystem come from Japan, even among companies that operate elsewhere. This shows that Japanese investors are very open to supporting innovations as long as they are backed with a strong business model and a promising idea.
To illustrate, Incubate Fund itself has over 250 startups in its portfolio, making it one of the largest seed stage investors in the country. The Japan headquartered VC firm also holds operations in Singapore, India, and the United States which goes to show that they mean business when it comes to supporting global ideas.
Challenges and support for global startups
Of course, when it comes to businesses expanding in any country, it is important that they have access to support and assistance from local ecosystem players. In Japan, one institution leading the charge is the Japan External Trade Organization (JETRO). JETRO is a Japanese governmental non-profit organization that supports not only Japanese startups seeking to scale outside Japan, but also global startups exploring opportunities in Japan.
The key thing for such expansions is always going to be localisation and adapting to unique cultures and common practices. For SOCASH, being able to navigate through complex ecosystems is invaluable especially for a young startup. “In Japan, each prefecture probably has its own innovation ecosystem,” Sivan explained. As such, JETRO’s ability to connect global startups to local ecosystems allow these startups to explore strong partnerships, B2B networks, and accomplish so much more without expending too much time and effort.
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How the Japan government operates is by offering a full-range of services designed to support startups often depending on the maturity level of the companies. According to Kiewai Khoo, JETRO’s Director for Business Development and PR, the organisation provides global startups with local market information as well as connecting them to figures, potential partners, and institutions that they should be working with. “We are the first window they could approach to understand how they should enter the market,” said Khoo.
To gain access to more insights on the Japan market and how your startup can expand in the country, you can view the full webinar below.
Also, if you are looking for a more personalised discussion about your specific startup’s plan to expand to Japan, we invite you to sign up for a chance to have an exclusive 1-to-1 consultation with JETRO. You can sign up here.
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This article is produced by the e27 team, sponsored by JETRO
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