The Journal The Authority on Global Business in Japan

Silicon Valley is renowned for innovative start-ups. In Japan, this industry is still in its youth, and many aspiring Japanese businesspeople are turning to Silicon Valley for inspiration and partnership.

On March 23, at a special breakfast at Tokyo American Club hosted by the American Chamber of Commerce in Japan’s Alternative Investments Subcommittee, Richard Dasher, director of the US–Asia Technology Management Center at Stanford University, mediated a conversation between two world-class entrepreneurs—Mitsuru Izumo of Euglena Co., Ltd. and Toshihiko Honkura of Quantum Biosystems—both of whom are president, CEO and co-founder of their start-ups.

While the emergence of the start-up industry in Japan is exciting, Dasher pointed out that “it has also been a difficult process. Any time a major new transformation happens, it’s not going to happen easily.” The transformation is, however, picking up speed.

INNOVATION
Izumo and Honkura spoke about their routes to success, challenges, and the details of their innovative businesses.
As Izumo explained, Euglena researches, develops, produces, and markets microalgae, focusing on a type known as euglena. With 59 nutrients, there are clear health benefits to algae, a point used to market food products—including yogurt and cookies—that can be found at various supermarkets and convenience stores in Japan.

Microalgae can also be turned into crude oil to make biofuel for jets, but the process is complex.

“It’s extremely difficult to cultivate euglena, [and to] prevent biological contamination,” he said. But this problem was cleared after the foundation of the company when, in 2005, his team created a new liquid for use in the cultivation process that staves off contamination.

Honkura’s business, Quantum Biosystems, revolves around life science and uses quantum mechanics to develop single-molecule DNA sequencers. “To [sequence] the human genome, we need just $100 and one hour,” he explained.

This advancement can be used to answer fundamental questions about human biology, and can be applied to diagnostics, clinical pharmacy, agriculture, and even national security.

TRIAL AND ERROR
Without a track record, it can be difficult starting a business in Japan—a notoriously risk-averse society.

To secure financing, “I visited over 500 companies to promote the Euglena product, but everyone declined our proposal,” Izumo laughed. “The reason why is because we are too innovative; we have no experience or evidence for the marketing.”

Both showed persistence and resilience, traits that Honkura believes Japanese entrepreneurs can learn from their Silicon Valley counterparts.

“In Silicon Valley, everybody expects challenges,” he said, “everybody accepts failures.”

You must also find the right team, he said. For this, embracing diversity and understanding people is crucial.

“People make innovation, and if we don’t have a talented team we cannot make it.” In Japan, he said, the problem is finding and attracting people to the business, as many are conscious of the risks of joining an unestablished company.

“There are so many great engineers in Japan, but those people prefer to work for big, established Japanese companies,” he explained. “Working for a start-up, there is risk; and people need to understand that risk.”

Izumo added that, while Japan has the intellectual prowess, space and facilities could become a problem. “We have the technology, but we don’t have the opportunity to expand our factory in Japan. Business is limited in Japan in terms of land and human resources.”

Japan still has much to learn from the veteran entrepreneurs of Silicon Valley, but Izumo and Honkura have shown that it can be done, and there are markets in Japan ripe with opportunity.

Maxine Cheyney is a staff writer at The Journal.