Growing the Japanese Startup Ecosystem

CEO & Founder Casey Wahl

The Japanese align themselves to a “sticking to what works” mentality. So, how does Japan adapt to startup culture?

Japan is a preventative-action country. The Japanese population generally values traditions and security. You might notice the rigid systems set in place in everyday life here, from proper escalator etiquette (no standing on the right side) to puzzled faces of waitresses when you request sunny-side up eggs, not scrambled (as shown on the breakfast set menu).

Wahl & Case CEO and Founder, Casey Wahl, shares in an interview with Hiroshima University what working in a startup means and the unique challenges the startup ecosystem faces here in Japan. What it boils down to is a collision of cultural values. Startup culture flips that "security-oriented" Japanese mindset upside down and instead operates in the midst of uncertainty. Working in a startup environment requires innovation, speed and a love for risk-taking. Casey provides insightful and honest advice about how Japan can start to rethink some of their social status quos in order for the startup ecosystem to thrive in Japan.

What does it mean to work for a startup?

A startup is just a series of problems that come over and over and over again. My personal philosophy is money doesn’t solve problems, if a startup doesn’t have that mentality, they won’t succeed as a startup or a business and aren’t going to get funded. 

Do the same laws and regulations apply to CVC when it comes to bankruptcy?

Japan is number one or two in the world for recovering assets during bankruptcy. If a company goes bankrupt, 92% of what’s loaned is recovered. This is horrible for that risk-centric entrepreneur.

The biggest risk that restricts people from becoming entrepreneurs is the social risk. Failure is quite hard to shake off socially in Japan. More than legal restrictions, the social change needs to happen so that failure can be embraced better. 

We see a lot of working spaces that collaborate around the world, do you think this could fit into Japanese culture?

When a fast moving SF startup comes to Japan, it almost fails at a rate higher than 50%. Big companies don’t move at the speed of startups. The speed is so much slower. How much process is involved, paperwork, and even how small decisions are made does not match startup culture at all. There needs to be more catalysts to speed up the effectiveness.

The Japanese government is trying to do good things and intentions are good. But the top-down approach means that there are limitations. Only 10% of startups or less actually exist five years later. If you look past World War II, Japan had lots of entrepreneurs. It’s not a deeply embedded Japanese DNA thing, it’s a cultural thing. If the top-down can change that culture, then that would go a long way to changing the startups and growing the ecosystem. 

In regards to filling the gap between entrepreneurs and startup creation, what is your advice?

Right now, there’s tons of money but what all those VC and investors struggle with is that there’s not enough people taking that step to create those companies. Japan needs role models. They need someone to do it first and then people will start to copy.

Universities in Japan do not prepare students for what’s out there in the marketplace. A startup is problem-solving and speed. How fast the world is moving on a technological basis, nobody can keep up. Universities typically don’t teach speed. The best role universities can play is to give students some exposure (to startups). That will influence them to make that first step into entrepreneurship. Universities have a lot of credibility and a lot of status. They can lend that to startups by leading more discussions.

So, what now?

I attended a “Startup vs Large Corporation” panel discussion featuring James Riney (26), Head of 500 Startups Japan and 2016 Forbes 30 under 30 Asia: Finance and Venture Capital and Mitsuki Matsuda (25), founder of GX Incubate, a subsidiary of Gaiax Group, a startup studio in Japan. The startup culture seeds are indeed beginning to sprout in Japan. Riney describes the startup spirit akin to Wahl’s insights. To work in a startup means enjoying the “thrill of risk-taking” and this, of course, draws ambitious people. James also advises us to "learn the skill of learning". If your favorite mentors aren't physically available to mentor you, read their blogs, read their books!

Mitsuki Matsuda is a pioneer for young Japanese. GX Incubate aims to develop new industries such as sharing economy as well as developing startups and venture companies. Matsuda’s first leap into the startup scene has been influential to his career and is an inspiration to aspiring entrepreneurs in Japan. His advice? “Learn often, learn fast” in this uncertain climate and “always question the status quo”.

Can young entrepreneurs like Matsuda be Japan’s catalysts?