TOKYO — Entrepreneurs everywhere face challenges, like persuading investors to believe in them enough to give them a pile of cash, or working out the practical steps of turning their great idea into reality.
But in Japan, budding entrepreneurs face two additional challenges, known here as “wife block” and “parent block.”
The idea of being an entrepreneur is completely at odds with the “Japanese dream” of the security and benefits of lifelong employment at a big company. So if you suggest starting out on your own to pursue some great idea it is likely to be blocked by either your wife (given that budding entrepreneurs in Japan are overwhelmingly male) or your parents.
“In the United States, children make lemonade and earn money, so they experience entrepreneurship at an early age,” said Yoshiaki Ishii, the bureaucrat at the ministry of economy, trade and industry who is in charge of encouraging entrepreneurship.
“But in Japan, we don’t have start-up role models or a good understanding about what a start-up is, so people don’t have much confidence about starting their own business,” he said.
There’s no Japanese Silicon Valley, no Japanese Mark Zuckerberg. Almost all Japanese innovation — from the Walkman to the Game Boy — has happened inside the safe cocoon of corporate behemoths such as Sony and Nintendo.
But slowly, very slowly, the environment for entrepreneurs here is improving.
“It’s slow, but the culture is definitely changing, for sure,” said Allan Watanabe, who has started Fileable, a data-storage system that can read patents and other legal documents and then offer feedback.
That is good news for the Japanese economy, which has been stagnating for more than two decades. Prime Minister Shinzo Abe’s efforts to pull Japan out of this malaise have so far amounted to little. Growth is still anemic, inflation is almost nonexistent, and consumers remain wary of spending.
Fostering entrepreneurship is a key part of the “Abenomics” plan to change that. The government is promoting venture capital and start-up accelerators as part of its “third arrow” of structural reform.
For now, though, Japan remains at the wrong end of all the tables when it comes to business start-ups.
The Global Entrepreneurship Monitor, a survey by a group of universities, has found persistently low levels of entrepreneurial activity in Japan since it began collecting data here in 1999. On its most recent measure of early-stage entrepreneurial activity, Japan scored second lowest, beating only the tiny South American country of Suriname.
There are a number of factors holding back entrepreneurialism.
One: culture, as exemplified by “wife block” and “parent block.”
Two: a lack of role models. There are people like Hiroshi Mikitani, the founder of Rakuten, a huge online retailer, and Masayoshi Son, who started SoftBank, the telecom giant that recently bought Sprint. But the entrepreneurial tale that sticks in many people’s minds is that of Takafumi Horie, who founded the Livedoor Internet portal but crashed to earth in 2006 when he was convicted of securities fraud.
Three: risk aversion. The concept of venture capitalism or angel investors is still in its infancy here, with potential backers wanting to find surefire winners. And Japanese banks want a proven history of business success before lending.
That is even without mentioning Japan’s notorious bureaucracy. Registering a new company still involves multiple visits, in person and with a mountain of papers, to various government offices.
But there is growing acceptance that Japan needs fresh ideas, whether it be in the form of new companies or innovation at old companies.
“Japan was a country of entrepreneurs. Now, big companies believe that they aren’t able to survive without innovation,” said Shigeo Kagami, who runs the “entrepreneurship dojo” at Tokyo University.
“In the last couple of years, the change has been quite dramatic,” Kagami said. “Big corporations are now really serious about doing their own innovation. They’re wanting to get edgy products from start-ups and universities.”
Budding and established entrepreneurs say that they’re gradually encountering less resistance.
“Now we have a better start-up ecosystem in Japan,” said Tomohiro Hagiwara, founder of Aquabit Spirals, a company focused on technology that enables services without pressing a single button on your phone. Want to call a taxi? Just wave the phone over a scanner and it is on its way.
“The environment is changing day by day — we now have many doors to knock on for investment, and entrepreneurship is becoming more popular,” he said.
When a group of Keio University graduates started promoting their idea to make spider fiber, “people just laughed at us and said ‘who are these kids?’ ” said Kenji Higashi, the 34-year-old executive officer at Spiber.
“In Silicon Valley, there are systems and lots of people who are willing to aggressively invest in new things,” said Higashi, who gave up his job at Accenture, the consulting company, to join his classmates in the venture. Here, not so much.
But those “kids” sequenced the DNA of spider silk and figured out how to produce a synthetic version. The fiber can be used for clothing, auto parts and medical devices.
It has raised $130 million and now has 150 employees, all working out of a new building in Yamagata prefecture on Japan’s northwest coast. It has a deal with North Face and will start producing spider-fiber jackets later this year.
Reluctant though they have been, large banks are gradually becoming more willing to back fledgling companies, and even a few angel investors have appeared. But the financial environment is still far from ideal.
Not only are potential investors more risk averse and more demanding — it is not unusual to be asked for long financial statements and five-year plans, young entrepreneurs say — but they are also greedier. Some ask for a 20 or 30 percent stake in a company in return for giving it as little as $10,000. In Silicon Valley, investors routinely give exponentially more for single-digit stakes.
But the biggest issue is the lack of support for people starting out.
“In Silicon Valley, there’s someone working on their start-up in every cafe and there are lots of networking events,” said Watanabe, who is 40 and has continued running a business called Pipeline helping foreign companies get a foothold in the Japanese market, his way of mitigating the risk of starting his own company.
“But here, you have to figure out what to do and where to go on your own. There are incubators, but they’re more closed and more formal,” he said.
Even though Hagiwara is 47 and had worked in desktop and then digital publishing as a contractor, when he was starting Aquabit Spirals he soon discovered he needed help. Through training programs, Hagiwara has learned how to make a short and punchy pitch (his previous version took an hour).
So they have learned to support themselves. Watanabe started a Facebook group for budding entrepreneurs, a less formal way of brainstorming ideas and swapping tales of rejection.
The more established entrepreneurs are conscious of the need to give others a helping hand.
“We would like to become the role models,” said Higashi of Spiber. “I think it’s a great thing to be able to take risks and try new things to advance technology. There’s a lot more that can take place in Japan. If we could become an example to encourage other people, that would be amazing.”