The startup scene in Asia is increasing

Startups in Japan: Exit from the shadow of Nintendo and Sony

Austria and Japan have a great commonality that has now been rediscovered: the love for high-quality products that bring the Republic and the Empire closer together economically and give local companies new opportunities to gain a foothold in Asia.

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Japan is seen as a country that oscillates back and forth between tradition and high technology. Order and penitence are the maxims that have made the island state the third largest economy in the world. Actually not ideal conditions for ideals such as disruption and shaking up the market, which often represent the corporate soul of startups. It surpasses the desire for the security of a corporate post or a job in the public sector. But times are changing - and so are the perceptions and attitudes towards the startup scene in Japan. The land of the rising sun seems to be awakening despite demographic crises.

the incubator as part of the Austrian business delegation

The brutkasten was able to get an idea of ​​this fact on site. Together with an Austrian business delegation - including Mariana Kühnel, Deputy General Secretary at the WKÖ and Michael Otter, Head of Foreign Trade Austria and a proven Japan expert, who organized the trip, accompanied by Carina Magreiter, Head of Global Incubator Network Austria, Georg Kopetz , CEO TTTech, Peter Mittelbauer, CEO Miba, and Michael Zettel, CEO Accenture DACH. There, observers encountered economic difficulties, which, however, can offer new opportunities for startups.

Aging population

The problem case: One of the most significant trends that will hit Japan in all areas over the coming decades is the rapid aging of the population in combination with a massive population decline over the next few decades. Two figures are remarkable: The proportion of senior citizens (over 65 years of age) will increase to 38.8 percent by 2030. At the same time, the projected proportion of the labor force is to decrease to 51.5 percent by 2050.

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One effect of this demographic upheaval is the rapid increase in social expenditures such as pension payments, health and care expenditures. More than a third of the Japanese budget is already being used for this. Since this is still not enough, poverty in old age is becoming an ever greater problem for the local society.

Market adapts to the age problem

As a result, the economy is also changing in various areas. Rapid aging is leading to changes in the demand for many, even trivial, goods. Glasses, reading and hearing aids and medical devices in general are booming.

Medical research is moving even more towards the early detection and control of cancer; Research projects against diseases in children and adolescents are neglected. House furnishings that enable barrier-free access and senior-friendly living are included in new buildings from the outset.

Automation and women

The creeping shortage of labor is also becoming a problem. Attempts to counteract this with more automation and increased use of women in the workplace (Japan has one of the lowest employment rates for women in the OECD) seem to be only able to counteract this for a limited period of time, as, among other things, a report by Aussenwirtschaft Austria called from a report by Michael Otter "Japan - redefinition of a global economic power - opportunities for Austria's companies" emerges. As an example: in middle management only around 11.9 percent and on executive boards 1.1 percent of employees are female.

In short: The persistent problems of the Japanese local economy can be traced back to a variety of factors, including the decline of local industries, the rural exodus of young people (urbanization), demographic change and the financial situation of municipal budgets.

40 million fewer Japanese in just under 40 years

If this trend continues, experts fear the disappearance of around half of Japan's 1,800 communities in the next few decades. The total population has also been falling for years: 2018 saw the eighth and strongest decline in a row (by 448,000 people) since the census began, as the Guardian reported.

The "Japanese National Institute for Population and Social Security Research" had already warned in 2013 and forecast a decline of 40 million Japanese by 2060.

JEFTA and its 600 million

In addition to what they already have in common, the JEFTA free trade agreement between the EU and Japan, which entered into force on February 1, 2019, has strengthened the economic and political ties between these two important trading areas.

The aim is to abolish the vast majority of the tariffs that cost one billion euros to European companies exporting to Japan each year. With this agreement, the third largest free trade area in the world with over 600 million inhabitants was created on the global map.

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Technologically leading

Despite all the demographic and economic problems, it should not be overlooked that not everything is bad in Japan. Especially in the technology segment, the country is one of the leading nations in the world.

Some planned projects in the near and distant future underscore this claim. Including the construction of a high-speed railway between Tokyo and Nagoya, with a later connection to Osaka (implementation timeframe: 2027). The island state is also planning a solar power plant in orbit around the earth and a self-sufficient underwater city called "Ocean Spiral" with up to 5,000 residents by 2030.

Games and Smart City

In addition, Japan is considered a game developer Mecca. Gaming companies such as Sony, Nintendo and Bandai-Namco take care of that. They serve the roughly 68 million players that make the Japanese gaming market the third largest in the world.

Smart city issues and urban mobility are also on the rise. Panasonic, for example, is testing smart living to the south of Tokyo and has built a 500 million euro super city with the Fujisawa SST (Sustainable Smart Town).

Robots against nursing care

Another economic driving force in Japan is the field of robotics. Companies such as Fanuc, Yaskawa Motoman, Denso Robotics, Kawasaki Robotics and Kawada Robotics have made the country one of the leaders in this industry.

In the service sector alone, according to the “New Energy and Industrial Technology Development Organization”, a state-supported think tank, the robotics market should grow to 44 billion euros in 2020 (2015 comparison: 3.1 billion euros). A necessity, because according to the latest estimates by the government, Japan will have a long-term care shortage of around 370,000 workers by 2025.

Startups: out of the shadows

All these developments and crises may be the reason why the startup scene there sees its chance to grow out of the shadow of the established corporations. A development that Austrian startups should also look at with hawk eyes.

James Riney, Managing Director of 500 Startups Japan, said in an interview with CNBC last year that for a long time the Japanese saw starting a business as just a kind of “plan B”. Finding startup talent would have been difficult, as Japan's workforce has long had an aversion to risk. But the new generation is noticing the successes of the digital big players and adopting them as idols.

The creation of mentors and investors

Companies such as Mercari, Rakuten, DeNA, GREE and Mixi are considered role models among young people and have created mentors and investors who invest in early-stage startups. “And those success stories are moving more and more into focus in the media. They are drawing more and more young people into the startup world, ”said Tetsu Nakajima, CIO of Mistletoe, at CNBC.

The stigma of failure is slowly disappearing and many top university graduates start internships at startups. Japanese workers nowadays would grow up in a world in which innovation comes from companies like Facebook, Uber or Airbnb, says Riney: “Unlike the generation of their parents, they have never seen a world in which the prosperity and renewal of Sony, Nintendo or similar traditional companies are driven ”.

One robot to take care of them all ...

With the growing development of the startup scene, however, you also have to recognize that established companies have recognized the ravages of time and are relying on future technologies. The car company Honda, for example, created a small robot with Asimo, which was the star of the presentation for the Austrian delegation.

Asimo was created in two decades of work and can walk and run on both ground and uneven surfaces. Climbing stairs is also part of the robot's repertoire. He listens to voice commands and can recognize faces. In addition, Asimo maps its surroundings and avoids obstacles. Honda clearly shows that traditional players have also recognized the need for digital adaptation.

HealthTech as a focus topic

A development that does not continue even with the framework conditions for startups. In April 2018, for example, the Shonan Health Innovation Park was founded, with which a “co-location ecosystem” is being created that brings together scientists, industry experts, entrepreneurs and the public sector.

The Japanese health innovation is to receive new momentum on 330,000 square meters including accelerator, incubator and venture capital. The park is currently home to around 50 startups and is also open to international influx.

Clinical studies possible for health startups in Japan

In addition, there are great opportunities for domestic health start-ups to get hold of very expensive clinical studies at Nagoya University Hospital at low prices, as Ingomar Lochschmit, Austrian economic delegate of the WKO in Tokyo, explains: “Our agreement with one of the leading university hospitals in Japan was a important step for Austrian pharmaceutical research, especially outside the large corporations represented in our country. In May 2018, we signed an agreement 'For a Strategic Partnership for the Cooperation in Innovative Drug Development' with Nagoya University Hospital, formalizing a collaboration that had already started, ”he says.

Specifically, this means that the University Clinic's Foreign Trade Center Tokyo can name new Austrian drug developments that are then assessed by the University Clinic's scientists.

"As a result, we have already succeeded in enabling two Austrian companies to conduct clinical studies there, with the support of Japan, which means that they are practically free of charge for Austrian companies," said Lochschmitt. Interested parties can get more information from the WKO.

Memorandum of Understanding

Not least because of this, Austria would like to establish itself as a reliable partner. A “Memorandum of Understanding” was signed in Tokyo as early as 2018, thereby strengthening the innovation exchange between Austria and Japan.

With the conclusion of the cooperation agreement with EDGEof (a game changers studio specializing in joint ventures, led by Alex Odajima), GIN Austria (Global Incubator Network) would like to intensify the cooperation. The aim of the cooperation is to make it easier for young Austrian companies to access the Japanese market.

From the archive: Mariana Kühnel, General Secretary-Deputy Chamber of Commerce Austria and Michael Otter, Head of Foreign Trade Austria of the WKÖ, on the innovative corporate scene in Japan

GIN for domestic startups as a partner in Japan

“Japan is an underrated country,” says Carina Margreiter from GIN Austria, “and has a huge market. However, it is particularly difficult for startups to enter the market on their own. The language is a great inhibition threshold. You need someone who can help and make the right contacts. That's why we're happy to be there for Austrian startups. "

Eleven Austrian startups in Tokyo so far

So far, eleven startups have been to Tokyo as part of the GIN goAsia program. “In addition to general workshops - Startup Ecosystem Japan, Cultural Differences, Legal & Tax, How to do business in Japan - the focus of the program is on individual B2B meetings for the participating startups with corporates, investors or cooperation partners. Each participating startup receives its tailor-made program and was accompanied to the individual B2B meetings by colleagues from AC Tokyo, ”explains Magreiter.

Magreiter talks about previous Austrian success stories about an e-learning platform for music students that is planning to enter the Tokyo market and is currently in talks with GIN's accelerator partners.

In addition, three AI startups were able to travel to TechBIZKON II in November 2018 as part of goTokyo - Individual, as the brutkasten reported. Another startup in the AR sector has already implemented several projects with museums and galleries in Tokyo.

Call for Tokyo

For the next and, for the time being, last Call for goTokyo 2019, “late stage” startups are still being sought until mid-September.

This 2-week accelerator program gives startups the opportunity to advance their internationalization in Asia. Startups from the fields of HealthTech, MedTech, Life Science, BioTech, Fitness & Lifestyle can register.

GIN Austria

GIN Austria is financed by the Austrian National Foundation for Research, Technology and Development under the direction of Austria Wirtschaftsservice (aws) and the Austrian Research Promotion Agency (FFG).

The aim of the initiative is to network the three target groups startups, incubators and investors in the target areas Israel, Hong Kong, Singapore, South Korea, China and Japan in order to promote Austria's innovation potential.

goAustria & goAsia

Startups are supported in their internationalization with programs (goAustria for international startups, goAsia for Austrian startups). For investors, the GIN Austria program offers both co-investment opportunities as well as pitching and matchmaking events in Austria and Asia. In addition, GIN Austria networks Austrian startups individually with investors and companies in the GIN target countries.

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3.1 billion trade volume with Japan

Especially with regard to Japan, this initiative is of enormous importance for Austria. With an annual trade volume of just under four billion euros, Japan is Austria's second most important economic partner in Asia. In the hit parade of the Austrian export markets outside Europe, only the USA and China are ahead of Japan.

According to Aussenwirtschaft Austria, exports to the Land of the Rising Sun increased by around eleven percent to 1.5 billion euros in 2018. At the same time, imports from Japan rose by 8.9 percent to 2.2 billion euros. Almost 80 Austrian companies have their own branches in Japan, mainly for sales and maintenance of their products.

20, 30, 40 to 2020

"By 2020, the year of the Summer Olympics in Tokyo, we want to motivate 20 percent more Austrian companies to export to Japan, initiate 30 percent more Japanese investments in Austria and support 40 percent more Austrian companies in the technology sector," writes the Foreign Trade Center Tokyo in one broadcast.

The above-mentioned strategy paper lists 14 measures with which these goals are to be achieved. Including, for example, the expansion of cooperations in the area of ​​open innovation, trend and technology scouting, business missions (B2B discussions) and showcase events.

Boost for young entrepreneurs

Aws managing director Bernhard Sagmeister emphasizes the positive effect of the new cooperation: “The cooperation between Asia and Austria makes a significant contribution to strengthening Austria as a business location. Japan is a lucrative market for startups, not least because of the numerous large corporations, which is particularly impressive in the high-tech industry ”.

FFG managing director Henrietta Egerth also sees the intensification of the cooperation as a boost for the local scene: “The programs of the Global Incubator Network (GIN) provide targeted support for young entrepreneurs to exchange their ideas and innovations beyond national borders and to expand their network. "

From the archive: Michael Otter, CEO of AUSSENWIRTSCHAFT AUSTRIA, and Rafael Rasinger, Head of Startups / New Corporates, in a live conversation about the current focus, the competitive location and Austrian clout on the global economic scene.

⇒ EdgeOf

⇒ GIN Austria

⇒ Foreign trade JAP

⇒ To register for goTokyo 2019