Losing the Lag

Rob Claar’s quest to bring lifesaving innovations to Japan

Rob Claar became interested in healthcare at an early age. Watching his father work on the government-program side of insurance and talking to him about the industry, Claar came to understand some of the issues surrounding public and private systems. But as he entered Yale University to study art history, he did not envision a career helping healthcare innovators from the United States and elsewhere bring their lifesaving drugs and devices to Japan. A twist of fate, however, led Claar to become a champion of Japanese doctors, working to connect them with international peers and innovation.

Ahead of his presentation at a March 13 luncheon hosted by the American Chamber of Commerce in Japan Independent Business and Healthcare Committees, the HekaBio K.K. founder shares his journey from childhood in Detroit to Tokyo, where he helps companies gain regulatory approval for healthcare innovations.

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An extended version of this interview is available on The ACCJ Journal Podcast or by streaming from the audio player above.

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How did you get involved in healthcare innovation in Japan?

Claar: I came to Japan basically out of cultural interest. This was in 1987. I was 23, had just graduated from college, and decided that I wanted to see Asia. I was interested in the culture, art, and language, particularly of Japan.

I forced myself not to come to Tokyo to begin with. I thought Tokyo would be an easier place to survive with English, and I wanted to push myself to learn Japanese as quickly as possible. So, I landed in Nagoya and immersed myself in studying the language. I thought I was going to be good enough at Japanese after one year to move on to my next destination and call my Japan experience a success. That didn’t happen.

I was studying Japanese at the YWCA in Nagoya, and it was going very well. But, as you know, it takes a lot of time. After one year, I was still not where I wanted to be. I gave myself another half a year, and I started really enjoying being in Japan and speaking Japanese.

Then I got a job as a Japanese-to-English translator for Brother Industries and moved into their dormitory in Nagoya. They were setting up manufacturing operations in Malaysia and elsewhere, and I was translating manufacturing and line instructions. That was interesting and a good experience but, once I got good enough at Japanese, I decided it was time to either go home to America and start the rest of my academic career or go up to Tokyo and see what I could do. I decided to move to Tokyo and was lucky enough to get hired by a think tank called Sanwa Soken.

They were essentially a research arm for the government. The day after I joined, a huge project came in from the Ministry of Health. I was put on that project and got to learn all about the healthcare system. I traveled around Japan, met doctors, and began to understand how serious they are about patient care. I really started to fall in love with the idea of the Japanese healthcare system [and] how a national single-payer system can work wonderfully.

What did you discover that led you to want to help innovators?

Claar: As I met doctors, I began to understand their struggles. They wanted to be considered among their international peers as studying, researching, and being able to speak in an international forum on the greatest innovations worldwide. But their frustration was that their research was one generation too late in many areas. I became aware of the innovation lag and wanted to see what I could do to make an impact.

I realized that Japanese doctors struggle to get their hands on up-to-date innovations from around the world. There’s a lot of talk about drug lag and loss, and the same thing is happening on the device side, where innovations that are getting approved in the United States and Europe are not making it to Japan.

There are a few reasons for this, but I thought that if I could focus on how to help these very sincere, wonderful doctors in Japan, then that was going to be a way for me to potentially make a career here and have an impact on society.

So, I left Sanwa Soken to start my own company, Junicon. We would go around and interview doctors, and we found a way to sell those results to large pharmaceutical and medical device companies in Japan, Europe, and the United States.

I also started spending my spare time helping doctors translate their papers from Japanese into English so that they were better able to speak at international conferences. It was a minor thing, but being helpful to Japanese doctors is a way that I got into things and maintained those relationships.

What’s stopping overseas companies from entering the Japanese market?

Claar: Small companies are doing more and more of the true innovation around the world, and they have no bandwidth to start thinking about Japan. So, how do we get more innovative companies to think about Japan? That’s what we’re really focused on at HekaBio, and that’s my personal interest.

Japan is far away, and these companies don’t really know what goes on here. They have this outdated image that Japan is very hard to get into and the regulatory process is super opaque. They’re never going to get regulatory approval on their own, or they’re never going to form the right commercial relationship. I think this is a really outdated image of Japan that many companies have. We’re trying to help solve that. Our doctors and their patients are waiting for these innovations. We want to see if we can bring them in and arrange the capital.

The Japanese government is doing a great job right now with new programs that they’re introducing. They’re making clinical trials easier to get started and operate in Japan, both on the drug and the device sides. They’re welcoming first-in-human studies to be done in Japan, which has not been the case until recently. They’ve eliminated the requirement to have a Japanese principal investigator on international studies. And they’re also offering pricing incentives for programs that get submitted in Japan within a certain number of days or months of the submission in the United States. In some cases, we’ve had an approval in Japan before the United States, even though we started at the same time.

How many companies have you helped get regulatory approvals in Japan?

Claar: More than 50, including at our former subsidiary unit, which was a clinical research organization called Vorpal Technologies. We’re very proud to have been involved in getting those launched and into the market.

What is that process like?

Claar: At the beginning, we do market research. We want to confirm that the doctors who we want to be behind the program are really behind it. We’ll find out who has done the presentations and who has published how many papers in that area. Who’s in the medical society? Who’s on the board? All these different things. The worst thing we could do is partner with an overseas company that doesn’t have the health economics and an appreciation for the Japan system in mind.

Once we do that, and we understand the strength of the clinical data that the company has produced overseas—and whether the Pharmaceuticals and Medical Devices Agency (PMDA) will accept it as valid in Japan—then we start talking with the PMDA to understand the regulatory process [for the specific innovation]. Once we get buy-in from the regulators, then we go forward with the clinical trial. If no in-Japan clinical trial is required, which is often the case for devices, then we can just go forward to the submission and review period, which typically takes 12 months.

Sounds straightforward. Is there something else holding back innovation from overseas?

Claar: What remains is the question of reimbursement price. If companies have no idea until the very end what the reimbursement price is going to be, then it becomes difficult for them to want to invest the time and money. So, that’s part of the upfront market research that we do. What does a comparative product look like in terms of reimbursement? What can you expect, based on your experience in overseas markets, in terms of the ability for the Japanese health insurance system to pay?

If there’s no comparative product, if it’s a new category, then you submit your cost accounting information. The PMDA really wants to see everything in a very transparent way.

What we would like to see in Japan is more clarity. New categories, where nobody knows what the pricing is going to be, is a situation in the market that most people have to deal with. I think that if the government were able to give better guidelines up front, in a consultative process, and you could go to the Ministry of Health, Labour and Welfare and tell them what you are thinking about, more of the issues around the drug and device lag and loss could be solved. But they won’t give you anything in terms of a response with any responsibility associated with it. They’ll listen and tell you yes or no, but their answer is not a promise.

Japan’s healthcare system is the best in the world. I fully believe that. And we all have the responsibility to make sure that Japan’s great healthcare system can survive. We know that the government is fearful of healthcare costs growing. They’re looking for ways to cut the costs of [things such as] long-selling drugs, devices, and in vitro diagnostic tests. But we would like to encourage them to think more long term about some of the things that can be done in terms of digital health solutions for early diagnosis of particular conditions.

What opportunities do you see for ACCJ member companies? Can they replicate the success you’ve had?

Claar: Absolutely. And I hope so. I think we’ve come up with a great business model, and we’re happy for anyone to copy it, because we think it really works for bringing innovations into Japan.

HekaBio is focused, for the most part, on pharmaceutical and device interventions for acute illnesses, hospital treatments, and serious diseases. What we’re not working on are things such as chronic diseases, which are a huge burden on the healthcare system. [Monitoring] chronic diseases with at-home digital health [tech] would also work in our business model.

If somebody wanted to exactly copy our model and go right into exactly what HekaBio is doing in serious acute disease identification and treatment drugs and devices, then be my guest. We’ll be happy to have them [replicate] our business model with no worry.

But there are so many opportunities. For example, if they want to do something different, there are many new molecular entities, particularly for rare diseases. The PMDA has a list showing the status of those that are [only] available elsewhere. So, there’s no development risk, really, because you know that it works. It’s been approved in either the European Union or the United States, but it’s not available in Japan yet. Take one of those for a rare disease, buy the rights for Japan, and get it developed. You wouldn’t even have to build a big organization with your own infrastructure here. You could be a one-person company, get the rights, and then have a contract research organization do the clinical trial and be the in-country clinical caretaker on your behalf. Get it all through and then sell it to a pharmaceutical company once it’s done. That’s another business that could be not only very lucrative, but interesting and of societal benefit for Japan.

Innovation Engine

CIC co-founder Tim Rowe shares his entrepreneurial journey and vision for collaboration in Japan.

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Like so many new graduates, Tim Rowe and his friends from the Massachusetts Institute of Technology (MIT) left their Cambridge campus with diploma in hand and took “ordinary” jobs. A few years later, in 1999, they quit those jobs to build
start-ups.

But they needed offices—not the easiest thing for young entrepreneurs to pay for in a town that’s home to two of the world’s most prestigious universities. So they decided to share a space near MIT and Harvard to lighten the financial load. At least one of their companies would make it, they thought.

The shared space led them down an unexpected path, however, as more companies moved in and they went from five to 10 to 50 to 100. The Cambridge Innovation Center (CIC) was born.

Fast forward two decades and CIC opened its first Asia facility in Tokyo, in the Toranomon Hills Business Tower. The ACCJ Journal sat down with Rowe in the bustling networking hub to learn more about how he went from sharing a space with friends to leading a community for entrepreneurs that includes more than 1,000 companies at centers in eight cities around the world.

How did CIC expand?

For the first 13 years or so, we just grew right there in Cambridge. I had little kids at the time and didn’t really want to travel as much. And Cambridge is an amazing place for start-ups. So, we just kept taking more space and filling it. It was really kind of a surprise to us. We didn’t set out to build a shared space for start-ups as a business. We were actually just
using it for ourselves.

My mother had been the ombudsman at MIT, and one of her friends who had been the provost of MIT, Mark Wrighton, had become the chancellor of Washington University in St. Louis, one of the top medical schools in the United States. She said, “Mark called and wants you to come to St. Louis.” I was about to give all the reasons why I didn’t know if I could do that, but then she was like, you gotta go. Okay, Mom. So, I flew to St. Louis and met with Mark Wrighton. He said, “Look, we want you here, and we’re going to help you figure it out.”

One thing led to another and we opened in St. Louis. A few years later, the federal government was looking for a home for the National Geospatial-Intelligence Agency, and they toured St. Louis. They came to our center and said this is the kind of vibe they were looking for. They actually testified before Congress that they selected St. Louis because of their experience at our center. It was a $2 billion investment, a big deal for the local economy. After that, as other people came and knocked on the door, we said, “Sure, let’s look into it.”

How has the view of start-ups changed?

If you survey new college graduates, they often say the number one thing they want to do is go create a start-up. I think it’s good for the world, because what we’ve learned is that innovation has the power to make the world better in so many ways. But what we’re finding is that innovation gets into the world, is adopted and spreads much more quickly, through new enterprises rather than existing ones.

When we’re part of a larger organization, we want to respect all the rules that exist in that organization. Doing new things becomes rather hard. We hear things such as, “We tried that once and it didn’t work,” or “That sounds interesting, but that’s 1/1,000 of the revenue of this company, so we can’t prioritize it.” That’s normal, and it’s been well studied. But the bottom line is that existing enterprises find it very difficult to introduce true innovation.

“They understand that it’s not about them so, when there’s something really new and interesting that they have in their company, they push it out. It’s like asking your teenager to move out of your house. It’s time now, it’s time to go off.”

I think the smarter of the big organizations understand this. They understand that it’s not about them, so, when there’s something really new and interesting that they have in their company, they push it out. It’s like asking your teenager to move out of your house. It’s time now, it’s time to go off. They do the same thing and take those teams and move them out of headquarters.

Why did CIC choose Japan?

There’s a personal reason and there are professional reasons. The personal reason is that, in my youth, my dad said that if I studied Japanese for a while he would help me get an internship here. And my grandmother spent about 10 years in Asia in her youth, in the 1920s—mostly in China but some in Japan—and she taught me kanji when I was a kid. That all got me interested in Japan, and I was fortunate to do an internship here during high school.

Professionally, if you look at the most successful companies in the world—and you can use any measure, but one would be the Russell 2000 Index—all those companies were at one point start-ups. So, another way to look at that list is that it is a list of the 2,000 most successful start-ups ever. When you break them down by country, you find that the United States and Japan tie for the number of companies on the list adjusted by population. So, historically, Japan ties for number one as a place to build start-ups. That’s a reason to be here.

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Photos: ©CIC Tokyo

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Is the Japanese government doing enough to support start-ups?

Building a start-up ecosystem is a decade-long process. A piece can come from a supportive government, and it’s really terrific that the Japanese government is leaning in. Other governments that have leaned in, such as Israel, have done really well. It’s clear that a national policy that pushes in this direction can pay big dividends.

But it’s not the only thing that needs to happen. You also need the entrepreneurs themselves. And I think the Japanese innovation ecosystem is responding. These days, if you talk to young Japanese people—and this is a change, perhaps just like what started to happen a decade ago in the United States—you see many more who say they want to build a start-up.

I see Japanese universities leaning into this, which is important. They’re doing entrepreneur programs like those US universities started a decade or more ago. I see a growing awareness of, and interest in, what we call innovation infrastructure. This is things such as shared wet laboratories, the physical infra-structure that allows for new start-ups in, let’s say, the biotech field.

We’ve built shared workspaces focused on a number of industries. The largest so far is the wet lab for life sciences. We collaborated with others to found a nonprofit doing that in Cambridge. It’s called LabCentral and is, as far as we are aware, the largest shared wet lab on the planet. It’s over 20,000 square meters and has every possible piece of equipment you would need in life sciences. Then we figured out how to make that commercially viable and built a similar facility, a commercial one, called CIC Labs in Philadelphia. It’s the largest commercial shared wetland facility in the world, to our knowledge.

How can Japan and the United States work together?

The good news is that the interests are very aligned for Japan, for the United States, for Japanese companies, and for US companies in Japan. Everyone in this circle benefits when they figure out how to get these collaborations to work well, and set a different way.

If you aren’t out there working with new technologies, which are often coming from start-ups, then you’re at risk that you’ll be Airbnb’d or Uber’d. You’re in the hotel business and someone figures out another way to have lodging. You’re in the taxi business and someone figures out another way to get people around the city.

“If you aren’t out there working with new technologies, which are often coming from start-ups, then you’re at risk that you’ll be Airbnb’d or Uber’d.”

This is core to the ACCJ itself. Really, what you’re talking about is brokering conversations. You’re getting people to know each other and to talk about what they’re doing, and how they might help each other.

When I was a young person at the Mitsubishi Research Institute in the early 1990s, I was a member of the ACCJ, because I saw—and I convinced my bosses—that the connections that could be made were meaningful and important. I think it’s no less relevant today. And I think that, as many of these companies have evolved, one of the things they’ve come to realize is that, while the connections between larger organizations are important, the connections between larger organizations and smaller fledgling ones are also important. The challenge is figuring out how to find those little companies and how to know which ones to work with.

What’s next for CIC in Japan?

We were approached by Nishitetsu, the major private railway company in Kyushu. They said, we like what we see at CIC Tokyo and we’d like to work with you to build another one in Fukuoka. We have announced that we’re in a formal collaboration and will soon finish all the due diligence to make sure this will really work. Then we can announce if, in fact, we’re moving ahead with construction, but it’s looking very good and we’re excited to be headed to the second site.

We’re also in several conversations about building some of those shared wet laboratories, robotics laboratories, and other kinds of deep tech shared spaces here in Japan.

We’d love to hear from Journal readers on this; if they have ideas, they should let us know. We think there’s a lot of demand for this kind of innovation infrastructure. Not only does it propel start-ups, but it also creates an environment much like CIC Tokyo does, where larger companies can interact with, and find interesting, smaller companies. Those are our two main areas in the future: more in deep tech and more locations around Japan.

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Setting the Stage for Green Transformation

Japan gathers leaders and experts for key conference on decarbonization

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Presented in partnership with the Ministry of Economy, Trade and Industry

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If renewable energy production is not doubled by 2030, power outages and energy system disruptions could become everyday affairs. The World Meteorological Organization’s State of Climate Services annual report, released on October 11, has found that nations around the world are far off the 7.1-terawatt target needed to keep global temperatures from rising 1.5 degrees Celsius above pre-industrial levels.

Setting 2050 net-zero goals is well and good, but it is clear even more immediate action is needed.

To help the international community rise to what may be this generation’s greatest challenge, and to showcase some of the technology that will assist the world in meeting it, the Ministry of Economy, Trade and Industry (METI) organized Tokyo GX (Green Transformation) Week. The 10-day event, which ran from September 26 to October 7, was a series of 10 international conferences focused on the many aspects of GX. The conferences covered everything from clean energy sources to carbon capture, highlighted some of the latest technological developments in a wide variety of fields, and explored joint policy frameworks in Asia.

Tokyo GX Week wrapped up a month ahead of the 2022 United Nations Climate Change Conference (COP27), which was held November 6–20 in Sharm El Sheikh, Egypt. The GX Week conferences looked ahead to the issues that this key global gathering would address. Japan will also host the G7 meeting next year, and world leaders can build on the groundwork established during Tokyo GX Week to reach ambitious and sustainable strategies that will influence the future of our planet.

Inaugural Meeting

More than 140 countries aim to be carbon neutral by 2050, but achieving this goal is no simple matter. GX offers a way forward. The strategy is a bold one, and seeks to bring about a change in economic, social, and industrial structures, so that they are driven by clean energy and spur economic growth and development through emissions mitigation.

To drive this strategy, METI hosted the inaugural Global Green Transformation Conference (GGX) on October 7, the final day of Tokyo GX Week. GGX was the first time that leaders and industry experts gathered to begin charting a path towards global GX.

The GGX addressed everything from how to incentivize the public and companies to turn to green products and services to introducing a new way to evaluate the reduction in CO2 emissions by using these products and services. It also tackled the tough questions related to establishing a more workable framework for decarbonization and rule-making that will help the whole world thrive.

Drawing the World

The conference was held in a hybrid format and more than 1,300 people attended online and in person. Given the significance of the event, it drew an impressive selection of participants. Speakers and panelists included representatives from five G7 countries, two international organizations, and 12 universities as well as research institutes and private companies.

Keynote speeches were delivered by prominent speakers from around the world:

• Shinichi Nakatani, state minister of METI
• John Kerry, special presidential envoy for climate from the United States
• Peter Bakker, president and chief executive officer of the World Business Council for Sustainable Development (WBCSD)
• Frans Timmermans, executive vice president of the European Commission
• Mathias Cormann, secretary-general of the Organisation for Economic Co-operation and Development
• The Right Honorable Lord Callanan, parliamentary under secretary of state (minister for business, energy, and corporate responsibility) of the United Kingdom
• Fatih Birol, executive director of the International Energy Agency

In his keynote address, Nakatani pointed out that the time for the world to act is now and highlighted some of the ways in which Japan has set a rigorous path for itself.

“First, by the end of the year, we will formulate a 10-year roadmap for GX investment, which aims to realize ¥1.1 trillion in investment through public–private sector cooperation over the next 10 years,” he explained. “Second, we will establish the GX League, a voluntary emissions trading framework for companies with ambitious reduction targets, which will be fully operational by 2023. And third, we will promote transition finance in the industrial sector, particularly high emissions industries.”

State Minister Shinichi Nakatani delivers his keynote address.

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Nakatani also introduced the key topic of “mitigation contribution”—a means of evaluating the positive effects of a company’s influence on decarbonization that may lie outside its supply chain or national boundaries. The topic was subsequently referred to as “avoided emissions” at COP27. He explored this by presenting the example of a company selling heat pumps. If inefficient gas heating systems are replaced by efficient heat pumps the company produces, this may lead to a reduction in total global emissions. However, the company’s own emissions may rise due to the increased production of the heat pumps. While such a company is positively contributing to global emission reduction, it may be criticized for increasing emissions. This does not undermine the crucial importance of emission reduction from the company, but clearly indicates the need to recognize a new perspective.

Currently, mainstream frameworks focus on the reduction of greenhouse gas (GHG) emissions of a specific organization or entity, and it is key to continue to support the efforts based on these frameworks. But if a mechanism can be created to appropriately value avoided emissions, and resources such as finance can be directed to entities that are promoting these efforts, it will encourage the diffusion of green products and services and promote the achievement of net-zero emissions through economic growth.

Avoided emissions are being explored in the private sector through international partnerships, but if governments begin to support the concept and encourage more companies to incorporate it in their decarbonization efforts, it can lead to greater innovation across a wide swath of industries.

Looking ahead to the G7 in Hiroshima next year, Nakatani was optimistic.

“While each country has its own position, Japan will support the world’s GX while furthering international goals so that developing and developed countries will work in unison to promote initiatives that transcend barriers,” he said.

The G7 and other international forums will also offer the Japanese government opportunities to further discuss and refine the avoided emissions concept.

In his initial remarks, Peter Bakker put the task of the conference in stark relief, given the need to develop a strategy to combat climate change.

“We need full-fledged system transformation … We need to change everything,” he said. “The energy we use, the food we eat, the transport solutions that we look for. Therefore, being here at the Global Green Transformation Conference is a unique opportunity to engage with all of you about what needs to happen.”

First Movers

GGX was also groundbreaking because it marked the first event in Asia for the First Movers Coalition (FMC) of the World Economic Forum (WEF). The coalition was launched in November 2021, following COP26, with a distinct aim to decarbonize key economic sectors—such as materials and long-range transportation—which are critical to organizations around the world, but which generate 30 percent of annual GHG emissions.

More than 50 companies are members of the FMC and, as Nancy Gillis, program head for Climate Action and the FMC with the WEF, explained, their participation sends a message.

“When a company joins the First Movers Coalition, what they are doing is signing a demand commitment,” she explained. “That means that they are making a commitment to buy products and services [as] they do now. But instead of buying the products and services that they’ve bought historically, they choose those with more GHG emissions consequences.”

Gillis said the FMC is a natural fit for Japan, given the country’s dedication to innovative, green technologies. She added that transportation company Mitsui O.S.K. Lines, Ltd. made an ideal member of the FMC, and its commitment to decarbonization can drive innovation in many fields. Toshiaki Tanaka, the company’s representative director and executive vice president, explained that the time was right to join the coalition: “What we need now is to take concrete actions to reduce our value chain emissions. But at the same time, we are going beyond the value chain and taking urgent action to mitigate emissions outside of our value chain by supporting emerging [carbon dioxide removal] technologies. Therefore, we decided to take part in the First Movers Coalition, a platform where we can leverage our collective purchasing power to develop and scale zero carbon technologies.”

From left: Nancy Gillis, Shinichi Nakatani, Acting Deputy Chief of Mission for the US Embassy in Japan Philip Roskamp, and Toshiaki Tanaka at the FMC in Japan panel discussion.

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Towards a Greener Society

Other panel discussions during GGX tackled the ways in which GX can be implemented in markets, the setting of standards, and international cooperation. “Designing a Green Market” explored methods for reducing emissions from the perspectives of supply and demand. Panelists agreed that there is no single policy that will lead to net-zero GHG emissions, but that it is necessary to create an environment which leads to the greater diffusion of green products.

The topic of avoided emissions was a recurring theme during the conference, and in the panel discussion “Standards and Evaluations Promoting Green Products/Services,” participants explored it in detail. They concurred that it is important to expand evaluation frameworks beyond the reduction of supply chain emissions to consider how countries and companies are helping cut GHG emissions through indirect means.

One key point that needs to be addressed when it comes to avoided emissions is to which products and sectors efforts can be applied. Participants in the discussion brought up the idea that it is important to establish clear differences between avoided emissions and existing GHG protocols and nationally determined contributions (NDCs), because the concept’s importance lies in additionally evaluating the contribution to global emission reduction, rather than undermining the efforts of a company to reduce its own emissions.

Panelists also pointed out that it is necessary to establish a strict method for evaluating avoided emissions. For example, subtracting avoided emissions from NDCs and Scope 1–3—that is, a company’s direct and indirect emissions—would be a form of greenwashing, and should be avoided when establishing these guidelines.

Finally, in the panel discussion “International Cooperation for Developing a Green Society,” participants delved into the thorny topic of working across borders to develop decarbonization strategies. The participants pointed out the importance of recognizing each country’s circumstances in setting cross-border policies. Considering the increasing dichotomy between the positions of developed and developing countries, the importance of developing a society which realizes both economic growth and emission reduction was also raised as an important topic. Business is an important enabler for these societies, and frameworks such as the Joint Crediting Mechanism—a system by which developed nations collaborate with developing nations to reduce greenhouse gas emissions—and business in adaptation could offer win–win actions for both developed and developing countries.

Following on the insightful conversations at GGX, METI hosted an event at COP27 about avoided emissions. During the session, the WBCSD—which founded the Scope 1–3 standards—gave an overview of their developing guidance for the concept. METI has also included countries such as the United Arab Emirates, host of COP28, and the United States, as well as representatives of the financial sector, including members of the Glasgow Financial Alliance for Net Zero, in the discussion.

Conversations that began at GGX are expanding to a wider group of stakeholders, and next year, when Japan hosts the G7 meeting, METI will escalate the dialogue on these key issues that will help future generations live on a greener Earth.

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Home-Grown Unicorns

Japanese startup investment poised to accelerate

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Presented in partnership with the Ministry of Economy, Trade and Industry

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Japanese Prime Minister Fumio Kishida (center) alongside award-winning startup founders.

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There are 488 unicorns in the United States and 170 in China. Japan is home to just 11. The Ministry of Economy, Trade and Industry (METI) is on a mission to narrow this gap.

The first step is identifying the barriers to global success for Japanese startups.

A combination of factors is hindering the development of Japan’s startup ecosystem, explained Shinpei Ago, deputy director-general for startup policy in the agency’s Minister’s Secretariat. Firstly, the entrepreneur population is relatively small. Rather than starting or joining startups, a lot of Japan’s top talent is being scooped up straight from university by big companies. Secondly, venture capital (VC) funds operating in Japan are small compared with those in many countries. And Japanese startups are often too focused on the domestic market and lack a global mindset.

Shinpei Ago, deputy director-general for startup policy in the Minister’s Secretariat of METI shares the latest on the startup environment in Japan.

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All these issues are intertwined, so a piecemeal approach that tackles each one by one will not be effective. Instead, Ago concludes, a cross-ministry initiative featuring a comprehensive set of policy measures addressing all the challenges at once is needed.

In June, Japan’s Cabinet Office approved the Grand Design and Action Plan for a New Form of Capitalism: Investing in People, Technology, and Startups. The plan includes the formulation of a five-year roadmap for nurturing Japan’s startup ecosystem.

Agencies will also explore how to free up entrepreneurs from systems which discourage them from taking risks—specifically, the practice of requiring entrepreneurs to extend personal guarantees for loans from financial institutions, thus making them liable to repay debt. While the government-backed Japan Finance Corporation already provides loans to some startups without personal guarantees, this type of financing is set to be expanded.

To grow the talent pool for startups, METI is considering expanding its Exploratory IT Human Resources Project, also known as the MITOU Program, which aims to discover and nurture top IT talent. More than 2,000 people have completed the program since its launch in FY2000, and more than 300 have successfully started a business or brought a product to market. Well-known alumni include Miku Hirano, chief executive officer and founder of Cinnamon Inc., an artificial intelligence development company, and Ken Suzuki, chairman and CEO of Smart News Inc., developer of Japan’s leading news curation app.

The government’s new approach to working with international VC funds is sure to draw attention. Beyond capital, VC funds also bring valuable expertise on how to grow businesses, manage talent, and build rich networks. Partnering with international VC funds helps Japan expand opportunities to nurture fledgling domestic startups.

Japan has experienced a quiet renaissance as startup investments increased nine-fold between 2013 and 2021. That trend may be set to continue with the emergence of even more globally minded entrepreneurs.

One Japanese startup looking beyond Japan is Astroscale.

CEO Nobu Okada (third from left) and the management of Astroscale pose with a satellite designed to test core technologies necessary for cleaning up space debris. Photo: Astroscale

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In the nine years since its founding, the on-orbit servicing company has leveraged its prowess in the deep tech sector to global acclaim. Time magazine named Astroscale to its TIME100 Most Influential Companies list in 2022.

Space debris is a truly global issue. More than 35,000 objects orbit Earth, including defunct satellites and upper bodies of rockets. A collision with these objects traveling at eight kilometers per second could greatly damage working satellites, potentially affecting national security, telecommunications, television broadcasts, and much more. Major disruptions could put us back 70 years.

The secret to Astroscale’s success lies in founder and CEO Nobu Okada’s pioneering of a completely new market—so new that some said it didn’t exist even on a global stage. From the start, he had a firm commitment to global business development. While many startups launch in Japan and aim to go global after achieving domestic success, working globally from the start primes a business for success and helps it avoid competing over the smaller domestic pool of funding, Okada said.

METI hopes that the success of new homegrown ventures such as Astroscale, combined with greater government support, will inspire and encourage more entrepreneurs to be bold enough to shoot for the stars.

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The Case of the Missing Startups

Why biotechs find it hard to get going in Japan

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University and government venture funds play a much larger role in Japan than they do in Western countries. Yet we see fewer biotechnology startups here compared with, say, the United States, which is home to eight of the top 10 highest-funded ventures. Why?

I explored this with Dr. Hiroaki Suga, co-founder of biotech company PeptiDream Inc., in a recent episode of my podcast Disrupting Japan. A professor at the University of Tokyo, Suga did his post-doctoral study under Nobel Prize-winning biologist Jack Szostak at Harvard Medical School. As an academic and a researcher, Suga knows well the dynamics at play in biotech development and application in Japan.

With PeptiDream, which has created a platform for the discovery of highly diverse, non-standard peptide libraries that can be developed into peptide-based therapeutics, Suga has taken a different approach to funding. And it has paid off.

Founded in 2006, PeptiDream is now worth more than $3 billion and collaborates with many of the world’s largest pharmaceutical companies, including American Chamber of Commerce in Japan (ACCJ) members Eli Lilly Japan K.K., Bayer Yakuhin, Ltd., AstraZeneca K.K., and Novartis.

Less is More

What I learned from our discussion is that, in this situation, smaller investments may lead to better results.

“If you have $10 million, you will just burn through it,” Suga said, adding that less capital will keep you focused and get results that can lead to bigger things.

In PeptiDream’s seed round, it received $1 million from The University of Tokyo Edge Capital Partners Co., Ltd., a Japan-based seed- and early-stage deep-tech venture capital firm.

With limited funds, “You need to really develop technology that will allow you to collaborate with big pharmaceutical companies,” Suga explained. These companies set criteria, and don’t give you money immediately. “Once you reach [one set of] criteria, you can get money. Then you get to another stage and you get more money,” he said.

This approach carries less risk for pharmaceutical companies, and Suga sees little risk for PeptiDream, because he is confident that they can meet the criteria.

Obstacles

This unusual approach has worked well for PeptiDream, so why don’t we see more biotech startups succeeding this way in Japan?

Suga said there are several reasons.

“Venture capitalists are not investing in risky companies, and biopharmaceutical companies are high risk,” he explained. “If you are developing business software, after six months, you know if it isn’t working. But drug development is a long-term commitment.”

“The first is that venture capitalists are not investing in risky companies, and biopharmaceutical companies are high risk,” he explained. “If you are developing business software, after six months, you know if it isn’t working. But drug development is a long-term commitment. Venture capitalists have to wait, and they may not be able to do so. They may need to wait 10 years to realize the potential, but they are looking for five.”

“The second reason is that Japanese society prefers to go with what’s known,” he continued. In this case, it means that talent heads for the largest pharmaceutical companies, which are seen as stronger and a safe harbor. “For example, all my students go to big pharma. They don’t go to PeptiDream.”

But this isn’t so much a case of risk aversion—often cited as an obstacle to success in Japan—as one of familiarity. Their parents know the names of the big players, but not of small ones such as PeptiDream.

Large Japanese companies tend to have little interest in helping smaller ones. This chasm is one that the ACCJ is attempting to bridge with its Healthcare x Digital initiative, which completed its second annual competition in November.

Spin-off vs. Startup

The third obstacle that Suga cited is the fact that many startups in Japan are research units that have been spun off from large companies that chose to leave Japan. “They had a very good team here, so they decided to spin off. They already have a background from big pharma and continue doing [what they were doing],” he explained. “That means that they aren’t hugely different from the big companies.”

In the end, Suga said that the biggest change that needs to take place for Japan to become more fertile ground for biotech startups must be made at the university level.

“Professors really need to work hard to get technology to be very practical, to be very robust. You really have to put forth effort to get to the end,” he said. “Then, the Japanese government needs to support this type of research. That’s very critical.”

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Start It Up!

Advice on turning your big idea into a successful business as an expat

Starting a business anywhere is a demanding endeavor, but doing so in Japan presents its own particular set of hurdles and idiosyncrasies. For those who can navigate the process, however, there are many rewards to be had.

Although the dynamics can vary widely depending on the industry, the top challenges facing startups in Japan include simply breaking into the market, language and cultural differences, the time it takes to build a customer base, bureaucratic requirements, and difficulties raising money. It’s also hard to find staff suited to the brisk-paced, rough-and-tumble, uncertain world of startups. That is according to 10 entrepreneurs and venture capital (VC) investors interviewed for this story.

“This is definitely playing with the difficulty level turned up,” said Jim Weisser, co-founder and chief executive officer of e-signature service provider SignTime KK. Weisser has launched five companies in Japan, some of which have succeeded and one that he says was a “complete flop.”

Yet, Japan also offers many positives and rewards for entrepreneurs—from the loyalty of customers and employees to the high quality of infrastructure and a society that is much less litigious than the United States.

Michael Alfant, founder and CEO of software solutions provider Fusion Systems Group—one of about 25 companies he has started here as well as in mainland China, Hong Kong, Australia, and the United States—said that Japan is one of the most challenging markets to crack, but not that much harder than elsewhere. One big advantage is that Tokyo by itself is the most “target-rich environment” in the world, he told The ACCJ Journal.

“People sometimes lose sight of the density of economic activity in Tokyo, which is the highest anywhere. You’ve got the third-largest [gross domestic product] in the world, and 35 percent of that is accessible to us via the subway,” Alfant said. “In Tokyo, I can easily do four or five meetings a day with clients. If I wanted to do that in Los Angeles, I’d better have a helicopter.”

Sophie Meralli of Eight Roads, a VC fund backed by Fidelity Investment, pointed out that Japan shows strong potential for new businesses in part because it is still in the early stages of digital transformation. “Japan’s economy provides entrepreneurs with numerous opportunities to launch new businesses,” she said. “Due to their position in the adoption cycle of new technologies, entrepreneurs can continuously innovate by transforming the way services can be deployed in Japan.”

It’s a Marathon

Nearly all those interviewed—representing a collective 180 years living in this country—agreed that two key qualities needed for an entrepreneur to succeed in Japan are patience and perseverance. That’s true of any startup, but the more traditional nature of Japanese society and business, which deeply values relationships and trust built over time, requires extra stamina, they said.

“I can guarantee there will always be hard times,” said Terrie Lloyd, who has lived in Japan for 38 years and is the founder and CEO of full-service travel services provider Japan Travel K.K. “If you’re not prepared for those hard times, then maybe you’re not cut out to be an entrepreneur.”

Alfant noted that starting and running a business in Japan is like running a marathon, whereas in other markets where he’s done business—especially New York and Shanghai—it’s like being in a boxing match. “When the bell rings, you have to be on your toes, totally engaged from the first nanosecond, or somebody is going to knock your block off. It’s intense for a shorter period, and then you get a break.”

But in Japan, “you put your head down and you keep putting one foot in front of the other—and you don’t look up for the finish line,” because it’s still a long way off. When you get to the very end, “and you hear the crowd yelling, [then you say] ‘Okay, now I can see the finish line.’”

Start with a Hunch (and Test It)

So how do you start that marathon here? What are the first steps? What lessons can be learned from entrepreneurs who have succeeded and failed in Japan?

“Entrepreneurship is not one size fits all,” Alfant explained. “In fact, it’s the bespoke aspect of entrepreneurship that tends to create value for, and appeal to, a certain kind of person. So, it doesn’t surprise me that you get different answers from different people.”

Lloyd, who teaches classes for would-be entrepreneurs, said that often the kernel of a business idea is simply a hunch. Three of his companies began that way, and all three have done well; two he sold and the third is Japan Travel.

The quality of the hunch is, of course, what makes the difference, according to Lloyd. So, to test out your idea, he recommends finding a mentor, someone who already has entrepreneurial experience and can help you “sort of BS-check your idea.”

Steve Bleistein, founder and CEO of consultancy Relansa, Inc., recommends doing something similar—talking about your idea with a lot of people who might become customers to validate whether it is a credible concept. Some entrepreneurs develop a business idea without really checking to see if there’s an interest in it. That, Bleistein said, is a big mistake. It is through those conversations that you gain valuable information about what exactly your potential customers want.

“This is a way you can mitigate risk,” he continued. “If you’re talking to 12 people who you think are likely buyers of your product, you understand exactly what it is that’s valuable to them. You find out that some of your assumptions were wrong, but some were right. Then you start to discover opportunities that you hadn’t realized existed.”

Some entrepreneurs worry that sharing too much information—even with a mentor—might lead to their idea getting stolen. If that’s the case, then ask them to sign a non-disclosure agreement (NDA), said Lloyd. He has signed NDAs with numerous people who have showed him business plans.

Already having business experience in Japan—and a deep knowledge of the target market—obviously helps with getting a hunch right. Seth Sulkin, who operates hotels and shopping malls and has lived in Japan for 27 years, came up with the idea for Food-e, the upscale food delivery service he started last year, as he was exchanging information about business conditions with struggling restaurant owners early in the pandemic.

But the idea didn’t come out of nowhere. He noticed a trend at his favorite restaurants during the pandemic: none of them delivered. When he began to ask about this, he found that higher-quality restaurants couldn’t rely on mass delivery services because the food couldn’t be reliably transported on time or without being shaken up.

“After talking with 20 restaurant owners, I could see there was a clear opportunity. And it wasn’t something I needed to test,” Sulkin said.

Compelling Idea vs. Fierce Execution

Lloyd explained that once you’ve tested and refined your idea, and it’s becoming a more realistic business concept, you need to ask yourself some key questions:

• How powerful is this idea?
• Does it engross you?
• Do you dream about it?
• Do you wake up thinking about it?

If not, maybe it’s not strong enough, he cautions.

“In years two and three, when things are getting tough, people give up. In fact, most new companies fail within the first three years,” Lloyd said. “But if you have something that’s akin to religion—and you can hold onto that dream—the idea will sustain you through the hard times.”

Alfant has a slightly different approach to this initial “hook,” as he calls it—an information advantage in the market segment he’s targeting. “That doesn’t mean inside information. It means I have access to knowledge and information that gives me an advantage over other entrants into the space.”

And while businesses do need a compelling concept, “ideas are a dime a dozen. Execution is what matters,” he added. “If the idea is so shallow that someone else can go and replicate it or beat me to the punch, God bless them. I view execution as the differentiating factor.”

This is a familiar debate in the world of startups, Weisser said. Some believe that the right idea can rule the world. Others hold the view that an idea doesn’t win without excellent execution, but execution can often lead to success even if the idea is not so good. “I’m firmly in the second camp,” he said, noting that this has been borne out in the US tech industry where “not-as-good” ideas executed fiercely and quickly usually beat out better ideas that take more time to take shape.

Timing Matters (But So Does Planning)

Sometimes, the biggest factor determining a business’s success is timing—particularly in something as fast evolving as technology, Weisser noted. In his case with SignTime, he had discussed the idea of creating a digital signature business for Japan a few years ago, believing that, at some point, Japan would give up its reliance on hanko (personal seals) and faxes. But he wasn’t convinced the timing was right. “A lot of companies have great ideas, but if it’s too early, they go bankrupt.”

When Covid-19 struck, and people were forced to work from home, he knew the moment had arrived. “We’d already laid the groundwork for the company, so getting it up and going, and doing some of our first pitches, was doable,” Weisser said.

The best time to start a business is at the bottom of the market, said Lloyd, who launched Japan Travel shortly after the Great East Japan Earthquake and Tsunami of March 11, 2011, and subsequent nuclear disaster, when foreigners left the country by the tens of thousands. “Thinking about how tourism was devastated after the disasters, I thought, well it’s a great industry to get into.”

Timing may be important, but not at the expense of careful planning, said Andrew Dunbar, who founded his wine importing business Iconic Wine Japan, Inc. about 10 years ago. He cautions against launching too quickly and without investing time in a well-thought-out, five-year business plan. He said having that gave him confidence when things got tough and helped him see the big picture.

“A lot of times, people jump into things quickly, thinking it’s going to work out. But it’s so much better if you have a full written plan and projections for how you’re going to build the business for the first five years,” he explained. “Make a good plan and be able to finance that plan in a credible way.”

Red Tape, No Tape

Once you’re ready to launch the business, the formality of incorporating the company with authorities is relatively easy. The task can be outsourced to a lawyer who can file the necessary papers for you, the entrepreneurs said. Getting approval takes anywhere from several days to three weeks, depending on the circumstances.

The two main options are registering as a kabushiki kaisha (KK), a stockholding company, or godo kaisha (GK), a limited liability company. Essentially, if you’re planning to bring in outside investors, you need to be a KK. If you don’t need a lot of money, you may want to be a GK. Most entrepreneurs in this story registered as the former.

For some businesses, such as consultancies, that’s all you need. But many other kinds of companies require various licenses and approvals specific to the products or services they aim to provide. Acquiring those can take a lot more time.

Anything to do with food and beverages, for example, tends to be heavily regulated in Japan. Having run hotels and shopping malls, Sulkin was familiar with the regulations, but he was still surprised by the amount of red tape he encountered in setting up Food-e.

Since he was using cars and motorcycles, not bicycles, he discovered that if his company wanted to hire drivers directly he needed a difficult-to-obtain license that required him to have his own garage and maintenance staff. So instead, he outsourced the actual delivery part to another company, which required a different license.

Then he was told that alcohol served as part of a delivery service was taxed at a different rate than when served in a restaurant. Initially, authorities said this meant restaurants needed to purchase and store the alcohol for delivery separately. Untangling all this involved several trips to the tax office with lawyers.

“There were just insane layers of regulation,” he said. Before starting a business, “I would highly recommend getting help from lawyers to investigate whether there’s any aspect that is regulated.”

In Dunbar’s case, he had to get a liquor license to import wine, which took about three months, though now it can take up to six months, he said. And he found that waiting times for such licenses can vary by location. Getting permission in Kanagawa Prefecture, where he was initially based, took less time than in Tokyo, which has a reputation for being stricter.

Once Dunbar had the license, the regulatory side of his business was pretty straightforward. It was easier than in the United States, where alcohol regulations are more complex, differing by state and requiring some wineries to hire entire regulatory teams to handle the paperwork, he said. Dunbar has no such headaches here and hired a customs broker to handle his incoming shipment paperwork.

Other businesses—many providing services—are much less regulated. Consulting, for example, has little regulation and is easier to get into because it requires little upfront investment—not even an office. “You need a phone, a laptop … and that’s about it,” said Bleistein.

Given that ease of entry, first-time entrepreneurs should try independent consulting for starters, advised Jeff Crawford, founder and CEO of Zo Digital Japan, which provides digital marketing services-related advice to foreign companies entering the market. “Put together a nice website that basically advertises your services and demonstrates that you’re an expert in some field,” he said. “That’s what I did.”

The finances at a consultancy are also simpler. Once you provide the services, the client pays you. You don’t have to worry about suppliers, delivery costs, or other middlemen as you do in a product business, which tends to be much more capital-intensive and requires owners to handle inventory, production, safety, and delivery. “If you’re looking to start a business in Japan, look really hard at services,” Bleistein added.

On the flip side, that also means there are few barriers preventing competitors from jumping into the same market, Lloyd pointed out. “There is no safety in having a low hurdle to entry. Yes, products are harder and riskier, but if you get it right you have a much longer run before the competition shows up.”

Breaking In

Perhaps the most difficult step in starting a business is finding customers, most of the experts agreed. Clearing this wall is do-or-die for a startup, and it can be particularly hard in Japan, where business is driven so much by long-term relationships. So how do you break in?

Here is where a mentor or consultant with an established network can be a big help by introducing you to potential clients. When Dunbar started his wine importing business, he hired a Japanese consultant who knew the alcohol industry and introduced him to people in the business. “That was a very important step for me, because I was new to the industry.”

That was a start, but Dunbar still needed to make hundreds of cold calls and visit a slew of wholesalers and other related companies to drum up business. While at times the rejections got discouraging, he knew that, to survive, he had to get out there and make connections. And he enjoyed sales, so that wasn’t a problem. He later discovered that he had started his business during a seasonal year-end ebb.

“The sales portion was not something that was scary to me. I’d much rather go and visit customers than almost anything else,” he said. “And in this particular business, it’s all about meeting people. We have to go out and visit our customers—they don’t come to us.”

Similarly, after he set up his consultancy website, Crawford started “pressing the flesh”—going to meetups where he thought he might connect with potential clients. He also attended other relevant events, such as those presented by the American Chamber of Commerce in Japan (ACCJ). “I’m a big fan of going to meetups, introducing myself, and handing out a ton of business cards,” he said.

Crawford, who worked at Microsoft Japan Co., Ltd. and Adobe KK in Japan after having worked in Silicon Valley, also started hanging out at online sites where digital marketers and search engine optimization experts would gather. He would field any questions about Japan to establish his expertise in his niche, and started blogging and creating podcasts. He tried to snag public speaking opportunities and was thrilled to be invited to do so at the ACCJ. Writing and blogging also helped him become more widely known within that business circle and paved the way for better initial conversations with people, he explained.

“If people see you on stage talking about a topic, they view you as an expert,” he said. “It’s great when people come up to you afterwards and say, ‘Hey, we read your content. You sound like you know what you’re doing.’ They already assume you’re competent. They don’t ask questions like, ‘Tell me about your clients.’ They just jump right into their issues. It’s like a level of trust is already there.”

In Bleistein’s radically stripped-down view of starting a business, there really is only one step: finding a customer. Everything else is secondary. Many entrepreneurs mistakenly think they need to have all sorts of systems in place before they launch, he said, but that’s not true.

“At the start, you’re going to be serving one customer—that’s how you get started, that’s how you learn. Everything else will fall into place,” explained Bleistein, who is author of the book Rapid Organizational Change. “There is no capability more important than client acquisition. I don’t care what people say about delivery, expertise, or product ratings. You have to have the ability to acquire customers.”

Branding Yourself

Fariza Abidova said that a key step to gaining clients at her first company, SOPHYS Corporation, a human resources and training business, was to attend events that catered almost entirely to Japanese. This, of course, required language ability. “I was just showing up and talking to people and sharing what I do and my passion.”

Abidova also paid close attention to how she branded herself, stressing and repeating key words and phrases that she wanted people to remember and spread among their networks. For SOPHYS, that was “cross-cultural communication.” For her second company, Trusted Corporation, which was founded in 2016 and helps clients with technological innovation, she stressed the key words “global open innovation.”

One way to divide Japan’s business world is to split it into a business-to-customer (B2C) market and a business-to-business (B2B) market, said Lloyd. The first functions pretty much as it does elsewhere, so is easier to enter, although you need to understand the Japanese consumer psyche, he said. The B2B market is much more political and based on long-term relationships and brand loyalty, making it much harder to break into.

“If you’re a new entrepreneur, my recommendation is to go B2C,” Lloyd said. “But if your expertise is in B2B, then secure your first project before you launch, because it’s going to be a long, hard haul.”

Still, these days, one good way to get business if you’re a tech entrepreneur is to contact Japan’s big, established companies. They are struggling to digitally transform their business, have money to spend, and are looking for people to help them make that transition, according to Annie Chang, founder and president of IT recruiting company AC Global Solutions Ltd.

“The hottest market is now IT, so there are lots of opportunities there,” she noted. “And I think foreign entrepreneurs have an advantage because they generally have more skills and can move more quickly in the market.”

When starting a business, it’s also important not to be too narrowly fixated on your niche or specific business solution, because there simply may not be enough interest in that, Chang said. When she started her company 32 years ago, she needed to be more of a nandemo-monoya, or a shop that sells anything, and be willing to accept a wider range of projects just to get cash flow, she explained.

“Later, when you’re in a better position financially, you can focus more narrowly.”

Language can also be a barrier for doing business in Japan. For Dunbar, being able to speak Japanese was absolutely critical to selling wine. “You need to get in front of your target audience and get them interested in your product. If you have difficulty communicating, that’s going to be a major hurdle to success.”

But in other businesses, particularly IT, language is less of a problem. Early on, Abidova used Japanese to engage potential clients, but these days she communicates in English with most of her customers at Trusted.

Raising Money

In addition to acquiring customers, the other big hurdle is funding your business. If a startup can break even after two years, it’s doing very well—unless you’re a tiny consultancy with very few expenses. During that time, you need to keep spending money.

Nearly all startups are initially self-financed by the entrepreneur’s savings, with additional help from family and friends as the case may be, experts interviewed for this story said. Some service businesses may be able to survive on that plus income generated from the new business—especially if the founder has received a large severance package from their previous job and wants to stay small.

But most product businesses or companies that plan to grow even modestly will need financing help from investors or banks once they get up and running. “If your company is growing at a fairly high pace, you’re going to need more capital,” said Dunbar. “That was especially true for me in a physical goods business.”

Most of the experts said they didn’t borrow from the bank, partly because they found that banks in Japan generally won’t lend to startups, particularly in IT or services. “The bank is the worst place to start unless you have a lot of assets and you want to do a collateralized loan,” said Bleistein. “Banks do not make money on business plans. That’s not their model.”

But there can be benefits to pursuing that route. Dunbar said he obtained bank loans and worked to cultivate relationships with banks as much as possible, and that the Japan Finance Corporation (JFC) is a good place to begin if you are looking for debt financing. Once you establish some payment history with the JFC, it is easier to work with commercial or trust banks.

“I found that even if you don’t need money, if the bank offers it, you should take it,” he said. “This allows you to develop a payment history with them. When it comes time for you to ask for bigger loans, it’s a much easier conversation than if you don’t have a relationship.”

More entrepreneurs said they relied on VC funding, but even that was often hard to obtain. “I think the biggest challenge in growing a business is raising money,” said Sulkin, who first raised money from outside investors 10 months after founding Food-e.

In his experience, Sulkin found that venture capitalists in Japan—despite their name—are very risk averse. “If you’re an unknown entrepreneur, even with the greatest idea ever, you’re still going to have a lot of trouble raising money. And that’s a problem for Japan.”

Fledgling Market

Japan’s VC industry is still small and young compared with that in the United States, but it has grown rapidly over the past 10 years. While it cooled off last year amid the pandemic, funding has bounced back so far this year.

The total number of startups that received funding in Japan peaked at 2,619 in 2018 before falling to 2,055 last year, according to Initial Inc., which tracks new deals. Total deal value slipped from $5.06 billion in 2019 to $4.89 billion last year, but it’s on track to reach a record $6 billion this year. That’s up sharply from the $660 million raised by 1,161 startups in 2012.

Since mergers and acquisitions are not common in Japan, 67 percent of startups exit through an initial public offering (IPO), Eight Roads’ Meralli said. But in recent years, there have been only 50–70 IPOs in Japan. In the United States, there were 407 last year alone.

There are very few second-time Japanese entrepreneurs who have successfully led their first startup to an IPO, Meralli noted. “The industry is quite young, and there is a need to take a bit more risk. When we get more of these, the ecosystem will become much stronger.”

Meralli sees recent growth particularly among the early-stage funds, especially seed and Series A rounds. But she sees a gap in the subsequent “growth stage” funds—Series B, C, D, and so on.

She explained that, while the Japanese government has tried to support the startup market through its growth fund, JIC Venture Growth Investments Co., Ltd., at an early stage, Japan also needs more accelerators—organizations that help startups define and build their products by offering mentoring, connections to investors, and sometimes capital.

Eight Roads Ventures is a global growth stage fund with more than $6 billion in assets under management that invests in technology and healthcare companies. Meralli, who is also an advisor to Tokyo’s Shibuya Ward in its efforts to bring in more startups, said that among foreign entrepreneurs in Japan, she looks for individuals or teams who have experience in their field, demonstrate cultural flexibility, are coachable, and are self-aware.

She said there are always questions such as:

• Why you?
• Why now?
• How big is the market?
• How defensible is your business?

“A lot of foreign businesses see things from their own country’s perspective,” Meralli added. “But do they have a really strong understanding of the Japanese players and market, and why their solution will be better?”

She and her colleagues look very closely at the founding management team when considering investment. One suggestion she offered is to bring on board one or two experienced people who have a local track record and can help refine the startup’s business.

Sulkin agrees. “If you really want to speed up your fundraising process, probably the best thing you could do is get someone who has worked for a famous startup company and borrow their credibility,” he said. “Get them on your board and call them a co-founder. That will jump-start your fundraising.”

Agile Mind

Another big challenge for startups is hiring good staff. This can be particularly hard in Japan, where the pool of talented candidates is smaller because many people work for one company their entire lives. Switching jobs is somewhat unusual, although it is becoming more common.

It’s also difficult to find people who may have experience in your niche, and startups generally aren’t able to use headhunters, because they cost so much.

Sulkin, who has eight employees at Food-e, said he relied on a variety of online recruiting services, some of which worked better than others. Rather than searching only for people with experience in food delivery, he looked for those with consumer-related online experience.

Key qualities he wants in individuals are flexibility and fast thinking—an agile mind. “Someone who can quickly adapt from whatever they were doing before to whatever I’m doing now,” Sulkin said.

Weisser said that, in a startup, you’re typically hiring “for potential more than for the past,” and are looking for someone “who can deal with change every quarter. That’s hard.”

Lloyd said it’s important to appeal to something bigger than simply the chance to make money in an exciting new venture. At Japan Travel, he stressed how the business would help Japan recover after the devastation of March 11.

“I was appealing up Maslow’s hierarchy of needs to self-esteem. That is way above the base level of physiological needs, which I equate with money. The weakest form of loyalty in an employee is how much you’re paying them,” he said.

“For fresh startups, you need an idea that’s so powerful that when people come to work for you, or when people do business with you, they’re thinking about the idea not the underlying economics,” Lloyd added. “They’re there because they believe in that vision.”

Lessons Learned

Entrepreneurship necessarily involves some failures and mishaps—and lessons to learn from them. For Fusion Systems’ Alfant, the biggest mistakes have related to choosing business partners who didn’t share his values. This created friction.

“That doesn’t mean they were bad people, but there was not a consistency of values, ethics, and approach to business and life,” explained Alfant. He added that, as a result of those experiences, at this point in his career, he won’t go into business with people he doesn’t already know and trust, and with whom he shares common values.

Another trap that entrepreneurs can fall into is getting distracted by “shiny new objects,” he continued. Entrepreneurs tend to see opportunities everywhere, so you must train yourself to stay focused. He likened the temptation to a crow building a nest and seeing a sparkling object on the road. When he flies down to pick it up, he gets hit by a car. “In the end, that sparkling thing wasn’t going to help with the nest, but it looked really appealing.”

Alfant has also seen business founders attack minor problems with their most valuable resources. “Intelligent people like to solve problems. But if you’re the captain of the ship sailing through dangerous waters and a small hole appears in the hull, the last thing you need is for your chief engineer and your guy who is the lookout to run down there and try to fix it.”

Crawford said one reason for the failure of a previous consulting business he started—that was designed to provide web advice to US dance and music schools—is his personal lack of interest in what they did. “I had no musical or dance talent. I was sort of in love with the solution and not really in love with the customer,” he explained.

At Zo Digital, he’s more interested “not just in the customer but in the kind of problems they face”—breaking into the Japanese market.

Lloyd likens running a company to flying a plane. You need to pay attention to multiple dimensions. Focusing too much on one will result in a crash. Just as a compass has four points, business founders need to attend to four key stakeholders: customers, suppliers, investors, and staff.

“Most people, when they start their company, worry about the money. So, they go after the shareholders. But after that’s done, they forget about them,” he said. That’s a big mistake, because those shareholders can make introductions, give endorsements, and provide more financing.

Similarly, many people get a deal from a supplier and then leave it at that, Lloyd said. “They don’t keep pushing the supplier to innovate, reduce prices, and provide alternatives.”

Listen … and Exercise!

Listening to your customers—and thinking about their customers—is vital to success, several experts said. Many entrepreneurs are eager to talk and sell their ideas to people, but that often means they can’t hear what potential clients want or see how they can adjust their businesses to meet those needs.

“Instead of spending 80 percent of the time talking and explaining my idea, I try to spend 80 percent of the time listening to what my clients or potential clients want,” said Alfant. “That’s extraordinarily valuable.”

It’s active listening that matters, he said. “I’m not thinking about what I’m going to say next. I’m trying to open up my mind and allow everything my counterparty is saying to come in before I formulate my next statement.” As a president emeritus of the ACCJ, Alfant stressed the many valuable and tireless contributions that entrepreneurs had made over the years. “They are the engines for a lot of the chamber’s activities.”

A final tip from Alfant is about health: the need for exercise. Being an entrepreneur requires physical and mental stamina. Keeping physically fit is an important part of that.

“We tend to lose sight of the fact that it’s not easy to work 60- and 70-hour weeks for years on end,” he said. “You’re setting the tone in your organization. You are the leader. You need to have stamina, be in good physical condition, and have good mental acuity and balance to do that. It’s important for young entrepreneurs to understand this, and allocate time so they can have a balanced lifestyle.”

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Entrepreneurship in Japan and Beyond

Oak Lawn Marketing co-founder Robert Roche shares his personal journey

When entrepreneurs consider entering the Japanese market, often they eye the nation’s capital as their starting point. The allure of Greater Tokyo, with its population of more than 35 million, is strong. But ask American Chamber of Commerce in Japan (ACCJ) Vice President-Chubu Robert Roche where you should start and he’ll invite you west, to the city of Nagoya.

It was there that the entrepreneur, investor, civic leader, and philanthropist got his start building businesses, and he believes that the capital of Aichi Prefecture, in the central Japan region of Chubu, remains one of the best places in the country for entrepreneurs.

He expanded on this while also sharing his personal business journey on September 3, during an event hosted by the ACCJ-Chubu Programs Committee. The virtual session was a one-on-one discussion between Roche and his longtime friend and ACCJ-Chubu External Affairs Committee Co-chair Michel Weenick. Together, in 1990, they helped found the American Business Community Nagoya (ABCN), a hub for the US and greater international business communities in Nagoya. The ABCN became the Chubu chapter of the ACCJ in 2000.

The Magic of Nagoya

Roche joined the session from China, where he currently invests and does business in addition to his US and Japanese endeavors. But he remains very involved in Nagoya. In 2018, he returned to Oak Lawn Marketing, Inc., the company he co-founded with Tadashi Nakamura almost 30 years ago, as executive chairman and president.

Although Oak Lawn Marketing, and its Shop Japan e-commerce brand, are well known today, their start is sure to inspire burgeoning entrepreneurs. Roche shared the story.

Recalling those early years after university, when he had recently married, he explained: “My wife’s family is from Nagoya, and they didn’t want me to be anywhere else. So, I had this constraint of needing to figure out something to do. I didn’t know what to do, but [whatever it was] I needed to do it in Nagoya.”

He soon met Harry Hill, a current ACCJ governor who has long been a leader in the Chubu community as well.

“Harry and I became partners pretty much the second day after we met, in 1990. He had his own business, and I had my ‘business’ that really wasn’t a business—it was just me kind of doing stuff,” he shared. “Then he and I formed H&R Consultants together, and that was really the beginning of a successful creation of a business. We are very complementary. He’s very good at stuff that I’m not very good at, and I’m very good at stuff that he’s less good at.”

Roche said that’s how he got started on the entrepreneurial front. At first, they made just enough money to survive. But after expanding H&R and earning a bit more, he got into the import–export business.

On Air

Initially, Roche was importing Tiffany products and L.L. Bean bags. His partner, Nakamura, being a local with lots of connections in Nagoya, was able to set up some meetings with a local TV shopping company.

“In the early 1990s, there was this show called Waku Waku Terebi Shoppingu. They would tape a one-hour program once a month and run it over and over on 25–30 stations. We were lucky enough to secure a four-minute spot for Tiffany,” Roche recalled.

Soon he found himself selling Tiffany items on television in Japanese—a stint that his mother-in-law enjoyed critiquing—and the seeds for Oak Lawn Marketing and Shop Japan were planted.

As a result of these appearances, Roche gained a reputation for having access to the country’s TV shopping market. One day, in 1992, he received a call from a company in Canada that was selling all sorts of products on CNN. Viewers around the world could call a local number in their country and order items such as the now-famous Didi Seven stain remover. But not in Japan.

The company saw Roche as their path into the market. They told him that he needed to have a call center, a fulfillment center, and all sort of other things.

“I didn’t have a call center. I didn’t have logistics ready. I didn’t have anything,” Roche recalled. “I said, ‘Sure we got it, we’re gonna go, you just let us know.’ And then they said that we had to make a minimum order. I asked how much, and we just scrambled to get the money together. And we ordered all this stuff.”

At the start, Roche and Nakamura just ran calls through their tiny 100-square-meter office. They stored products there as well. The calls started rolling in, and the business grew. Doing fulfillment from the office wasn’t easy. “One of the products was a stepper machine, and some days we’d send out 100. We were landlocked, trapped in the office until the Sagawa guy came and took the boxes away,” he remembered.

“If I was a better planner, I would have had all that stuff in place before the first call came. But we just had to adapt. And that was good, because we learned every key part of the business. The very beginning, that was fantastic.”

Accelerated Growth

The business grew incrementally until they were bringing in about ¥1.5 billion per year. At that point, something different was needed to take the next step.

“As entrepreneurs, we love chaos. We love to be the hero. We love for there to be a problem and then come in and solve that problem,” Roche said. “H&R Consultants kind of went through this. Harry and I ran it, and then we brought in John Coomes to run it, and then Scott Reid, and then Harry went back to the States and did a big development. When he came back in 2004, there really wasn’t a spot for either of us at H&R anymore.”

So, Hill joined Oak Lawn Marketing and this, Roche said, is when things really began to take off.

“The company didn’t need a firefighter anymore; it was getting pretty standard. We had a nice foundation, but what really moved it [to the next level] was that Harry just took over and he banged it out,” he explained. “I think that, from an entrepreneur’s perspective, there is always that time when, as a founder, you have to hand off.”

Fast-forward to 2017 and Hill handed back the baton. “But he gave me a much bigger platform than I gave him,” Roche said.

Making Connections

For the success they have had, Roche credits the environment of Nagoya and the easier access to top executives compared with Tokyo.

One of the things he said was most important to him about being a young entrepreneur in Nagoya was the access to people whom he never would have met in Tokyo.

“There were all these real leaders of Japanese industry who we had access to. We never did business with those guys ever, but we learned from their demeanor, and they told us little things like, ‘Don’t say it that way.’ You would say something [in Japanese] and they would kind of twist their head and you would think, ‘Oh, that’s not the way to say that,’” he recalled. “It was this almost subliminal teaching from true leaders [that helped], and we never would have gotten access to that caliber of leader in Tokyo. The big business guys of the ACCJ in Tokyo do, and now we do. But then? No way.”

To make the most of such opportunities, Roche advises entrepreneurs to learn Japanese.

“If you think you can do this without speaking Japanese, you can—you can be that unicorn—but I’ll tell you right now, it’s better to speak Japanese,” he said.

That’s because it’s the unplanned conversations you end up having with people whom you didn’t plan to meet that can make a difference and lead you down unexpected—and fruitful—paths.

“Learn Japanese if you’re going to do business in Japan, because there are all these seasoned guys like Nakamura, who could not have communicated with me in English. And I learned from that guy. That’s what really made a difference.”

More Advice

“Hire planners.” That was Roche’s tip when Weenick asked if he is a better planner today than he was 30 years ago, when he dove right into the pool of TV shopping. Often, entrepreneurs feel as if they can do it all. But to really succeed requires surrounding yourself with those who are more skilled in areas where you are weak, just as Hill and Roche complement each other in their business endeavors.

“My plan, basically, is to hire people to run the business who are better planners than me,” he said. “I hire people who can plan and not react—because I’ll react for them.”

Then Roche gave his biggest recommendation: Don’t take no for an answer. “I was told no every day, 10 times a day. You can’t do that. You can’t do that.” It’s one of the realities of Japan’s very orderly society—with its resistance to deviating from exactly what has been laid out—that can be discouraging to those wanting to explore new ideas.

But he encouraged people not to let the little things that sometimes frustrate expats get to them. “There is a tendency to get a little bit negative on Japan,” he noted. “We’ve all sat through those complaint sessions. Why do they do this? Why is it that way? Why are a bunch of things out of our control? But, really, it’s the positive nature of this that we should focus on. Japan is a very, very good market, because things don’t change much. And the reality is that most people in Japan want to see foreigners succeed.”

To sum it all up, Roche looked back at how, perhaps by lucky chance, he was accepted into the local business community, the mura (village), as he called it, and why it’s important to become part of the group.

“If you hang out in the village long enough, you understand the rules and you just get incrementally bigger and bigger and bigger. And then you can diversify. I do a lot of business in China, and I do a lot of business in the States, but Japan is a really, really nice base, if you can keep it going.”

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Nagoya Means Business

Reflecting on the region’s supportive business climate

Now more than ever, Nagoya means business. The Chubu region, and specifically the city of Nagoya, has attracted many large tech companies and manufacturers—from automotive to aerospace—because it offers a skilled and talented workforce, affordable land, and a competitive cost of living. With a dedicated focus on creating an innovation ecosystem, Japan’s fourth-largest city has become an attractive location for small business owners and entrepreneurs.

Nagoya has traditionally been a center for manufacturing and industry, but as home to an innovative tech scene it is also fertile ground for startups. As an expat and a serial entrepreneur, I launched several businesses in the early 1990s, of which two are well-known today: Oak Lawn Marketing, Inc. and H&R Consultants K.K.

Oak Lawn Marketing was incorporated in Nagoya in 1993. Now, more than 30 years later, that small startup is a direct-marketing giant with more than 1,000 brick-and-mortar Shop Japan stores selling some 3,500 products in locations across the country.

Over the past three decades, I’ve managed, invested in, or founded more than 50 companies around the world. I chose Nagoya as the location for Oak Lawn Marketing because it’s where I lived when I first came to Japan. As an undergraduate and law student in the United States, I participated in study abroad programs at Nanzan University, where I met my wife.

Starting a business in a foreign country—in my second language—was challenging to say the least. Today it is much easier, and there are so many solid business reasons to choose the supportive environment of Nagoya.

Big Market for Small Business

With so many people from abroad now doing business in Japan, the business community in Nagoya has become much more accustomed to working with non-Japanese. It is also very open to entrepreneurs. While Nagoya is one of Japan’s largest cities, it is somewhat off the beaten track. Yet, with 2.3 million residents, it offers a market that is large enough to develop critical mass. In addition, the cost of living is a fraction of what it is in Tokyo.

Government support for small businesses and entrepreneurship has increased incrementally over the past 20–30 years, and these enhancements all add up to creating a solid environment for foreign entrepreneurs to do business in Japan.

In addition, the government fosters entrepreneurial collaboration through communal spaces, education, and networking opportunities. These include the Nagoya Innovator’s Garage, created by the Central Japan Economic Federation and Nagoya City, as well as Nagoya Connéct, powered by Venture Café Tokyo.

Local universities also provide educational and networking opportunities, while organizations—such as the American Chamber of Commerce in Japan’s Chubu chapter—offer outstanding opportunities for networking and mentorship.

Startup Ecosystem

Recently, I participated in a government task force on startups which brought local business leaders together to enhance regional entrepreneurship and innovation by combining different fields and creating new industries. The goal is for central Japan to expand beyond manufacturing into other industries.

I learned that, in 2019, startups in Aichi Prefecture raised the third-largest amount of funds in Japan. The abundance of ideas, technologies, and support services necessary for startups to grow is providing a tailwind for new businesses. Large companies based in Nagoya are instrumental in supporting the startup ecosystem, and smart human resources are further driving the local economy and actively engaging in innovation activities.

In 2020, Aichi–Nagoya was named a “startup ecosystem global hub city” by the Cabinet Office. This ecosystem aims to realize growth that drives the Japanese economy, and the creation of startups and new industries continues to promote innovation in this central region of Japan.

Government and local business leaders, as well as universities, are working together to form a globally cohesive innovation and startup ecosystem by utilizing the deep tech and manufacturing knowledge that is the strength of the region.

As a lifelong entrepreneur, I’m excited about the opportunities offered to a new generation of dreamers and doers. There has never been a better time to start a business, nor a better place to do it than Nagoya!

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Nagoya Resources for Entrepreneurs

Startup Guide Nagoya
Developed by the Nagoya Innovator’s Garage and Nagoya City, this guide—available in digital and print formats—shares practical information about startups, coworking spaces, business programs, schools, and investors.

Nagoya Innovator’s Garage
Created by the Central Japan Economic Federation and Nagoya City, this coworking space furthers entrepreneurial collaboration through social nights, innovation events, and more.

Nagono Campus
Located in Nagoya City, this renovated elementary school offers three types of offices and serves as an incubation space in which to encounter and blend with people to create new values and form new businesses.

Nagoya Connéct
Powered by Venture Café Tokyo, this innovation promotion and exchange program holds a free event on the fourth Friday of each month that includes panel sessions, workshops, and networking opportunities.

National Innovation Complex
Part of Nagoya University, the National Innovation Complex is home to the Promotion Office for Open Innovation, which aims to establish a structure that enables companies and university researchers to promote and manage large-scale joint research projects.

The Tongali Project
Offered by five universities in the Tokai region, this multifaceted program supports the next generation of entrepreneurs.

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Make Japan a Startup Nation

How can government best encourage economic growth?

If you had two minutes with the new prime minister, to give your best-shot advice on how to create a better economic future for Japan, what would you say?

From a macro perspective, by far the best answer is: Do whatever you can to make Japan a startup nation.

But where does economic growth come from? Not from the stuff politicians and technocrats talk about most of the time—e.g., monetary, fiscal, or trade policy. And importantly, it doesn’t come from population growth. It comes from entrepreneurs.

Clear-Cut Correlation

History has confirmed again and again that we only get sustained economic growth when human ingenuity and ambition are allowed and encouraged, and people are empowered to start an enterprise and build their own business.

China long had one of the world’s highest rates of population growth, but it only started becoming an economic miracle when the Communist Party encouraged entrepreneurship and private business in the early 1980s.

More generally, the numbers speak for themselves. When you analyze the world’s 40 leading economies over the past 30 years, you find a clear-cut correlation between the percentage of entrepreneurs in the adult population and the sustainable growth of the country’s gross domestic product (GDP). More entrepreneurs create higher sustainable growth. In fact, if you raise the number of entrepreneurs in the population by one percentage point, your potential GDP goes up by about half a percent.

In even simpler terms, employment data confirms the positive power of entrepreneurship: startups have created 60–70 percent of new jobs in G7 countries over the past 20 years. Specifically, here in Japan, new companies set up after 2010 have provided about 2.3 million jobs over the past decade. In contrast, companies older than 20 years actually destroyed some 800,000 jobs over the same period.

So, dear prime minister, make no mistake—startups and entrepreneurship are a nation’s single most important source of growth and prosperity.

Finding Founders

The need for entrepreneurs is clear, but where do they come from?

Unfortunately, there is no magic bullet, no one simple policy tool that can be turned on to deliver entrepreneurs and create Startup Nation Japan. However, the key ingredients are all in place and, in my personal view, I firmly believe Japan stands at the brink of a golden age of entrepreneurs and startups.

Why? It’s a combination of cyclical and structural forces. Cyclically, the Covid-19 crisis has not only freed up resources but, more importantly, has become a catalyst for many people to rethink their career and life priorities. No matter how small, a startup can finally hire people and build teams, investing in what always yields the highest returns for any new venture: human capital. One of the biggest obstacles for growth and expansion has finally disappeared.

Even the most techy of tech companies, such as Google or Amazon, did not grow by the force of their superior algorithms, business models, or charismatic leadership vision. Instead, they grew as a result of the sweat equity and animal spirits of their team leaders, sales managers, and back-office clerks who pulled all-nighters. Elon Musk’s biggest problem is not tech, engineering, or digital transformation; it is his teams, the people who actually get stuff done.

In Japan, the bar for startups to attract talent has always been especially high because top graduates strongly prefer established companies. Bigger is supposedly safer. Here again, the current recession may well mark an important turning point. Not a week goes by that we don’t read about establishment companies announcing a restructuring plan. All of a sudden, big-company job security is not what it used to be. This is great news for entrepreneurs.

To be specific, I have the good fortune of working as an adviser and angel investor for a couple of Japanese venture capital funds. Over the past six months, all the startups with which we deal have grown their staff and partners. Several have more than doubled the size of their teams. Most importantly, the quality of potential candidates has grown enormously.

One young woman from a top establishment company, who has had no overseas or global experience, told me: “Working at my current employer has been great, but now that I know how good I am, and what I want, staying there puts me at risk. I don’t want to be reassigned to some random project by some random salaryman superior. I want to create my own destiny. Your startup is the best place to do that.”

To be sure, this young woman almost certainly is exceptional, and it may very well be wrong to present her as anything like the new norm for Japanese employees. However, unlike five or 10 years ago, candidates such as her do exist, and it would be wrong to underestimate the powerful ambitions—and awareness of opportunities—that Japan’s young talents and employees are prepared to explore.

Taking the leap from exploring to actually quitting one’s job and beginning a new career at a startup venture is likely to become easier. There’s no doubt that opportunities will increase, large established companies will continue to stagnate, and more young startups will demonstrate high, sustainable growth. Opportunities worth watching include:

• Healthcare and biotech
• Professional services and process automation
• Education and deep tech-based materials
• Anything serving wealthy Japanese retirees

Some will make a fortune building the Louis Vuitton retirement communities of Japan.

Learning from the Masters

On the structural side, Japan has developed a true and sustainable ecosystem of support for startups and aspiring entrepreneurs. Not a day goes by that the major newspapers don’t advertise a startup competition or venture capital symposium. Even Keidanren—the Japan Business Federation, which is the proud sanctuary of Japan’s corporate culture—now fully embraces innovation and entrepreneurship in its strategic vision. Japan’s elite establishment now knows that BAU—business as usual—is no longer an option.

Most importantly, Japan has a new generation of successful entrepreneurs, people who have built true going concerns, who commercialized and monetized an original idea, who overcame many obstacles and difficulties to build their dream. Sure, they have money to invest; but more fundamentally, many of these new successful entrepreneurs are focused on creating a positive legacy by giving back, mentoring, and advising the next generation.

Hidden from view by media obsession with Silicon Valley superstars, Tokyo, Osaka, and Fukuoka have become hotbeds of private initiatives to grow and develop a startup culture. These include mentorship programs, incubators, accelerators, venture capital funds, and daily discussions on the drop-in audio chat app Clubhouse. This private-sector ecosystem of open discussion, sharing, and networking is vital because a sustainable startup culture can only develop if success is celebrated and, more importantly, if failure is peer-encouraged to become a catalyst for another try.

As Japan’s most successful entrepreneur, Yanai Tadashi, founder of FastRetailing, which owns Uniqlo, supposedly once said, “I failed about 25 times before I finally succeeded.”

All said, the new Japanese golden age for entrepreneurs is very exciting. If I am right, we will have to become more optimistic about the overall outlook for Japan. Because one thing is certain: private entrepreneurship—not government handouts—will build future prosperity.

Dear prime minister, I trust you understand.

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