I’m not fully happy with my previous post. I did the research and found some of what I was looking for and thought I’d do a post on that and then do a follow-up when I’d read the book. But I need to put more time into my posts. The last one was far too long for the information it contained. I think it holds the standard of something I would turn in at school, but there only one person is going to read it and that person is paid to read it. Now I want lots of people to read it and they have no incentive at all to do so.

Anyways, I think I failed at really getting to the heart of the matter and touching what really matters to me.

The question still remains of why one would start a business in Japan as opposed to the U.S. The U.S. has better opportunities, that is why I constantly compare the situation to them. So why not just set up a business there to start with?

I want to get to know more about what Japan can offer an entrepreneur that other countries can’t. It’s a different market, they have different values and different problems. It might be easier to make an impact in Japan? I don’t really know. There might be advantages of lower competitiveness since entrepreneurship isn’t as widespread.

What I do know is that Japan has a huge mobile market. So maybe the best location to set up shop is based on your idea?

I will try to refine my writing and thinking in the continued chase of answering these questions.

Since I’m going to Japan for a year I’ve decided to study up a bit on my all-time favorite hobby and hopefully future career; entrepreneurship, specifically how entrepreneurship is viewed and how it is done in Japan.

I’ve already ordered the book “Comparative Entrepreneurship: The UK, Japan, and the Shadow of Silicon Valley” by D. Hugh Whittaker but in waiting for that book I’ve started to try to gather up some information on the internet. The biggest problem I’ve had though is that most articles I can find online are quite dated, 5+ years old. I’ll try to summarize what I’ve found so far though.

The popular opinion of entrepreneurship in Japan is that it is hard, getting funding and finding venture capital seems to be have been hard in the past and incubators seem rare. When discussing the problem it is generally put into three categories; political, cultural and the Japanese perception on entrepreneurship. What I’ve found when reading is however that the future seems extremely bright. Japan has had enormous success in the past taking western concepts to adapt and improve them.

Cultural problems

To understand why the Japanese entrepreneurial market looks like it does I think you need to understand the Japanese working-culture. Until very recently, life-time employment was the norm at Japanese companies, meaning that once you got out of school and started working you kept that job until you retired^[1]. This system has been given up more and more during the recession of the 90′s and have been moving more toward a more dynamic workforce. Japanese companies have a strictly seniority-based wage system, so entry-level workers will all make the same amount of money regardless of competence or productivity. It is argued^[1] that this will prevent Japanese people from taking the risks of entrepreneurship when they can get a good salary and guaranteed increase in pay with time.

But I don’t see how this would really prevent people from starting companies. For me, entrepreneurship has never been a way to earn more money, I’ve always seen it as a sure way to make less money and work much longer hours, but with the possibility of changing something; peoples way of life, solving a common problem or revolutionizing the world!

A cultural and workplace related problem is however that if a Japanese person fails with his startup it is hard to get hired into the normal workforce^[1]. This is completely in line with the “The protruding nail gets hammered” mentality, you’re not supposed to do things differently. In different words, failure is more serious than it is in the west.

None of these cultural problems should make it difficult for a foreigner to try and create something in Japan though.

Political outlook

Japan has a history of most kinds of startups, from starting to-be industry giants in the 50′s to the equivalent of Microsoft^[2] in the 70′s. Everyone knows that after World War II, Japan had tremendous success starting up companies that liberally borrowed technology and concepts from the Unites States and made them even more successful. Until the 90′s this worked perfectly, but it seems as though they caught up at that point and was forced to start creating by themselves; something they were not set up to do.

During the 90′s government regulations were definitely stifling entrepreneurial activity, but they quickly realized that to be able to get out of the recession and continue their economic growth they needed entrepreneurs in all fields. “The government is beginning to recognize their importance and is easing regulations to give the ventures more room to maneuver.”^[3] A quote from BusinessWeek in 2000, so 10 years ago they already started making it easier for new companies.

Japan Venture Capital Association was started in 2003 with the purpose of getting better data on the venture capital market as well as help to develop and improve investment firms^[4]. This is something that has existed in the U.S. since 1973 and has been long needed. No doubt will it help change the Japanese VC market.

Similarly in an article describing the 2003 Venture Fair in Tokyo it said that “To start with, I counted no less than 14 different government-affiliated new business support organizations in the first row of booths inside the exhibit hall. [...] I confirmed that yes, they lend money to any qualified corporation in Japan, regardless of the nationality of the founder.”^[5] So it seems there are big changes taking place and it paints a picture that it is no harder for a foreigner than a native to start a business in Japan.

Japanese perception of entrepreneurship

I think the biggest cause for Japanese people to not start companies is not because of the workplace culture or because of the political troubles they would have to go through. I think it is because of the view Japanese people have of the entrepreneur. It seems that much of the entrepreneurial view is still based in starting a convenience store or restaurant. Which is not what I would call entrepreneurial at all. Japanese citizens still seem very cautious and don’t seem to be wanting to take risks.

The American view of an entrepreneur in my opinion is that of a pair of founders doing what they love to improve the world; it is almost a romantic thing. The Japanese view of an entrepreneur seems to be of someone who either wants to be free of the normal Japanese lifestyle or someone who wants to compete with the existing behemoth companies, the innovative part of entrepreneurship doesn’t take as big a role as it does in the west.

Investment and exits

“Although the country is the world’s second-largest economy, it has generated only $3 billion a year, on average, in venture funding, for about 3,000 investment deals annually. [...] In the U.S., by comparison, startups get funding to the tune of $30 billion a year over deal volume of about 4,000 investments. Silicon Valley’s venture funds and their compatriots enjoy returns three to four times higher than Japanese funds.”^[6] The lack of investment is seen as a problem, but according to Michael Korver^[7] there is money to be spent and the interest to spend money is getting larger.

Angel investing is really starting to take hold^[8], but Japanese companies for some reason do not produce as high return on investment as western companies, something that’s been holding the investment market back. Other problems that almost fall into the political category are problems such as going public with your company. “Onerous listing criteria also make it extremely difficult for young companies to go public. It takes twice as long as in the U.S. — so investors have a longer wait to recoup their money.”^[8]

With an aging population unsure about their future and the future of the social security and pension system, the Japanese people are the richest people in the world. “After all, the average Japanese household sits on the world’s largest pool of savings — $116,000 per family at last count — yet interest rates are near zero, and real estate and stock prices are still 65% below their peaks of 10 years ago.”^[8] The unwillingness of Japanese people to spend and invest is a large socioeconomic problem in Japan, one that impacts the startup funding market as well.

There are essentially two exit strategies for companies, i.e. to sell the company and cash out. One way is private equity transaction, where another company or group of people buys the company. The other way is to do an initial public offering (IPO) on the stock-market; in other words to “go public”.

“The problem is that the market for private equity transactions in Japan is small. In other words, companies here simply don’t acquire each other as frequently or readily as they do in the United States, for example. [...] While it’s true the market for private acquisitions here in Japan is small, that’s primarily because the supply side is limited.”^[7] I already mentioned the difficulty of going public with your company, so if you’re looking to be a serial entrepreneur; making an exit through private equity seems to be your best bet. The reason why Japanese entrepreneurial activity is low is probably because of the mindset that you start a company and then run that company in hopes of being able to let your children inherit it. That is simply not how things are done in the west, while serial entrepreneurship is not by any means the standard in the west either, we don’t really start companies in order to be able to give our children a company when we retire.

The future

If anything, the future of the Japanese entrepreneurial venture is bright. There’s starting to pop up entrepreneurial events such as startup week^[9] and other networking meetings of that kind.

In connection with Waseda university, a kind of incubator that helps you with Japanese market feasibility studies and writing your business plan was started in 2002. “The Waseda Business Excelerator (WBX) was launched in 2002 to help non-Japanese high-growth ventures develop successful businesses in Japan, thus promoting global, technology-based entrepreneurship.”^[10] Here you get to stay for 6 months to a year and get help from MBA’s and the university.

I think this is exactly what is needed to improve the future of the Japanese startup. A mix between incubators and angel funds like the fantastic American company Y-Combinator.

I think there is a lot of talent in the Japanese people for creating new things, innovating and solving real problems. But I think the biggest problem is that the view of entrepreneurship is so different there from the U.S. This does however create a bright future for a westerner looking to start something new in Japan. I think that a foreigner looking to innovate and give the Japanese economy a boost can be welcomed with open arms.

In short, the feeling I get from U.S. venture capitalists and incubators is that they invest in people. Ideas are dime a dozen and the important thing is the entrepreneur, the entrepreneur is the one who has the ambition and the drive to make the idea a success.
In the U.S. there is a sentiment that I agree with very well that there are people who just are entrepreneurs, they are the happiest when they get to solve problems and try to change the way we think and live, the ideas are just what the entrepreneurs get to work with.

In Japan I get the reverse feeling, that ideas are worth more than people. It is shown in the way they think that entrepreneurship is a way to become free of the drudgery of normal salaried life-time employment. It is also the way Japanese companies currently work. People are considered plentiful and they don’t seem to spend much time trying to really find the most creative and productive worker, they blindly trust that the best schools will churn out the best employees; which in my opinion is seldom the case.

I am positive about the Japanese entrepreneurial atmosphere because it seems to be on the verge of changing and is certainly developing more to the American way of thinking. Much of this development might already have happened, since I can’t seem to find that much new information. The book I’ve ordered is written in 2009 so hopefully that will shed some light on recent changes.

Sources

[1] http://www.atimes.com/japan-econ/DF21Dh01.html
[2] http://www.wired.com/wired/archive/1.05/jsoft.html
[3] http://www.businessweek.com/2000/00_10/b3671011.htm
[4] http://www.japanentrepreneur.com/200303.html#2
[5] http://www.japanentrepreneur.com/200301.html#1
[6] http://www.forbes.com/2009/05/29/japan-entrepreneur-conference-markets-rebuilding-global-markets-venture.html
[7] http://www.japanentrepreneur.com/200303.html#1
[8] http://www.businessweek.com/bwdaily/dnflash/may2001/nf20010511_940.htm
[9] http://fumijp.blogspot.com/2009/12/entrepreneurship-in-japan-and-startup.html
[10] http://www.janbo.gr.jp/eng/2002/waseda.html

I just finished the book “Japan in the 21st century” by P. P. Karan and boy let me tell you, it’s is a good read; but shit was it a heavy read :P. The book is 385 pages long, but it’s double-columned almost A4 sized pages in a pretty small font. It took me on average an hour to read 10 pages, so I’ve probably spent around 40 hours on this book. It was definitely worth it though! It is jam-packed with information, it contains everything about Japan from 10 000 BC to 2004. History, geography, agriculture, economy, demography – you name it. It is in fact so heavy on information that it is used as course-material for this one-semester university course called “Introduction to Japanese culture” and that’s just the first one I found when Googling the book.

I want to pick out some funny things about the book, some very interesting things and then I want to finish off by saying what I want to know more about.

Funny & randomly interesting things

About the cleanliness of the Japanese people.

Compared to some parts of America, Japan certainly seems immaculate. However, the concept of “inside” is significant here. “Inside” refers to your family and your house or business or, if you are employed by a company, to the company and its grounds. Any place that is not part of anyone’s “inside” is neglected. Many public areas are filled with trash unless a government agency has money to pay to clean them up. The slopes of Mount Fuji in August appear to be one huge litter area.

Everywhere I’ve been in Japan has always been completely spotless, but I can actually image that this “inside”-stuff is very accurate.

Japan’s utility lines are highly visible, and their pattern is extraordinarily complex. They certainly are not buried underground.
[...]
The complexity of the pattern, moreover, is compounded by having lines at many levels and by lines that branch out at many angles from transmission poles along a single street.
[...]
Two main reasons for the profusion have been propounded. One pertains to Japan’s legendary frugality, the other to the nation’s “inside” cultural perspective. After all, the system of aerial lines never was organized; it just grew.

I’ve heard (maybe from Maho) that the reason lines aren’t buried is because they would break easier during earth-quakes and be harder to fix, but reading the book I think this “they just add on another line when they need one”-theory makes more sense.

The building of Western-style houses has resulted in a startling spread of what look like upscale American suburbs in the Japanese landscape. Nowhere is that more striking than in Sweden Hills of Hokkaido, where the driveways are packed with Porsches, BMWs, and Jeeps.

Outside the cities, the sprawling Japanese fantasylands include full-scale replicas of a Dutch village, Denmark’s Tivoli Gardens, a Spanish hacienda, a reconstructed medieval German town in Obihiro an Anne of Green Gables theme park on the northern island of Hokkaido, and a whole coastline of indoor beaches pounded by manmade waves.

That’s just crazy :P! I’ve been to Denmark’s Tivoli many times and I’d love to see how well-made their replica is :P

The average age at which Japanese marry for the first time has been rising for both men and women; in 1999 it was 28.7 and 26.8, respectively. Only in Sweden do people marry later, but unlike Sweden and other places, Japan is a country where unmarried couples almost never live together.

Yay Sweden, we never marry :P
Seriously though, later marriages and the aging population is probably one of Japans biggest challenges and has been for the last decade.

In the snowcapped rugged mountain regions of northern Japan, rural, rice-growing town are shrinking as young men and women abandon the rigors of farm life for the anonymous freedom of Japan’s giant cities.
Japanese custom affords no such freedom to the family’s oldest son, however. According to rural tradition, the eldest male must stay to care for his aging parents and inherit the family land. The situation has led to a shortage of eligible women in rural villages.
[...]
[About fixing the problem] So Shirataka and dozens of other rural settlements throughout Yamagata Prefecture have encouraged families to spend more than $25,000 each to import brides from China, Sourth Korea, Thailand and the Philippines.

Paid by the government to buy brides! That’s something…

The struggle for education is a grim one in Japan.
[...]
The reason for the intesity of the struggle is that where one receives one’s education, along with family status, means literally everything in job determination.
[...]
Failing the entrance examination is a common cause of suicide. Such intense striving for education is responsible for the 98 percent literacy rate in Japan – the highest in the world.

In Japan the pressure to excel starts with the exam to enter first grade in one of the most competitive elementary schools. Students enter cram schools to prepare for entrance exams. Cram schools have been a hotly debated facet of Japanese education for years, and the burden is spreading to younger and younger children in order to gain an edge in an increasingly competitive society. At about age three, children in some families begin a string of cram schools and exams that will play a crucial role in determining whether they retire from first-rate jobs sixty years later.

Cram schools at 3, that’s a bit excessive to me :S

Coca-cola, which has an estimated 60 percent of the carbonated beverage market, does not use artificial coloring in its products, because the company found that the Japanese prefer all-natural ingredients.

So thaaat’s why Coke tastes weird in Japan!!

Stuff I want to know more about

So obviously as you can see from the excerpts above the book contains a whole lot of knowledge in a wide array of subjects. But the biggest problem for me right now is that it ends in 2004. I want to know what has happened between 2004 and 2010. What legislature has been brought to alleviate the aging community problem and the lack of creative entrepreneurs?

Basically, this is what I want to know more about:

1. Japanese Economy 2004 – 2010
   1. Has it gone up/down?
   2. What has happened to all the bad loans of the 90′s?
   3. Has there been a proper focus on IT-revolution?
2. Politics 2004 – 2010
   1. What political reforms has been brought since ’04?
   2. Has there been any reforms of the lower house to correctly adjust the seating distribution?
   3. Has there been any policies introduced to heighten the birth-rate?
3. Entrepreneurship in Japan: Is it possible? How is the start-up culture compared to, say, America?
4. Japan had huge struggles with environmental problems from the 50′s all the way up to the 90′s. In the 90′s Japan was still one of the worlds largest pollutants of a toxin called Dioxin, a highly poisonous gas released when burning plastics (garbage). Dioxin is deadly for humans and several reports of serious damage to human life has been reported around furnaces in Japan. At the end of the 90′s Japan released 40% of the worlds amount of Dioxin and the country had ~1200 garbage furnaces while USA has around 250. What has happened with this in the last 10 years?
5. The Sanrizuka Farmers Movement again the Expansion of Narita Airport. Apparently 7 farmers were until ’03 holding up development of a second runway at Narita Airport, one of the busiest airports in the world. Has Narita gotten it’s second runway by now?

The last two points I want to know more about need a little more space. The first:

The Movement to Protect the Ikego Forest, Zushi City
In an area of rampant urbanization south of Tokyo, the last significant green open space is the magnificent Ikego Forest in the city of Zushi. Its rolling hills nad lush woodlands are home to a rare diversity of wildlife, including many endangered species. The Ikego hills are covered with thick forests of broad-leaved laurel, chestnut, maple and oak trees, as well as wild cherry trees and wild camellias. Ikego is also home to more than 107 species of birds.
[...]
A joint project of the Unites States and Japan will cut the trees and raze the hills to build a massive U.S. military housing facility. The construction plan calls for 854 housing units and other facilities typical of an American suburb.

Please, please, please tell me this beautiful forest with it’s endangered species didn’t get mowed down to build an American suburb for the military. Please!

The last thing, but not least, is how Japan has dealt with the IT-revolution of the 21st century. Throughout the book the Japanese are described as lagging behind the western world in terms of IT development. But when I’ve been there I’ve always felt they are ahead us in IT development. The book finishes off by saying that the Japanese government has recognized the importance of IT and that they had a consensus on that IT should play a big role in the development of Japan in the 21st century. I obviously think it has succeeded with taking IT and computer technology to heart, but how and what are the plans for the future?

So I’ve decided to go to Japan. Now what?

First off I can just let everyone know that I’m going to be leaving Sweden at the start of July, so I will still be here for almost a half year more. There are some paperwork to be done but the institute through which I’m taking this education makes things quite a lot easier so it’s not that bad.

I said in my previous post that the whole thing was kind of scary; it is! I find that whenever I am moving forward and big changes are happening I’m a little scared. But it’s a good kind of scared. If you’re doing things right in life you should always have a small, small sensation in the back of your head that you might have taken on too much, that you’re changing too quickly, that kind of feeling. Progress is a little scary but you shouldn’t live without progress. Scary is good.

I will be leaving Sweden entirely for a year, the visa won’t allow me to leave Japan without going through a bunch of paperwork to get back in. This of course means that I’ll leave friends and family behind entirely, and I’m sure I’ll miss them. There’s not much to do about it though and it’s something that just has to be dealt with when the time comes.

Before I leave there are some things I want to get done, which leaves me unable to just completely phase out and dream about Tokyo for 5 months until the time comes; I suppose that might be a good thing. Stuff I want to do is get my motorcycle drivers license, I’ve been wanting this for over a year but last year it was hindered by Japan and work. My good friend Jonas has been living in the US for a year come summer and he’s planning a cross-country road-trip over this summer which I’d really like to join in on for a week or two. The plans will be released on his blog this Friday (the 12th) so we’ll see if there are any suitable points for me to get on and off the trip that would have me being there for the right amount of time in the beginning of June. Other than that, I obviously have 4 months of school left, and I’ll have to add some Japanese studies to my ordinary curriculum to be able to have a foundation to stand on when I get there.

All in all, I’ll be going to Japan, but there’s still a lot of stuff to do and to think about before I get there. It seems like a journey in itself.

Sometimes life takes an unexpected turn. This is one of those times.

A short while ago Emma told me she was going to Japan for a year to study Japanese. About four or five years earlier I took a short class in Japanese and ever since, I have wanted to go to Japan to study Japanese. As you may know I have been in Japan on two occasions and before both those occasions one alternative was to go there to study over the summer. That alternative was on both occasions dismissed because of various reasons, mostly economic ones.

After (the Swedish equivalent of) High School I took a year off from school. Something I had planned on doing pretty much since the start of High School, but taking two years off was never an alternative in my mind. Going to Japan a year to study was therefore never an alternative even though it was something I really wanted to do.

Since the very moment I decided to go to University it has been my mantra and the code by which I live to put school first, to keep my head down and power through when required and to finish everything as fast as possible. I have in my mind “always” said: “I will finish school in 5 years. Get done as soon as possible and then start my ‘real life’.”

Not once have I ever thought about the possibility to take time off school to pursue any other interests. A big reason for this is of course that I actually kind of like school. I find the majority of the things I study extremely interesting. I like the challenge that school brings and I love to learn new things every day.

Since taking a year off school was never really in my play-book, I always imagined I would go to Japan to study Japanese for a year (or more) after I was done with school. Things never really turn out the way we expect them to though, and this is a good thing. If everything in life was expected and could be planned for; it would be boring.

When Emma told me she was going to Japan, I immediately felt that this is an opportunity of a life-time, this was not going to happen again and was what I had always wanted. I asked Emma if I could join and she shared my opinion that a shared experience is a greater one. There was still the matter of taking a year off school though which was somehow wrong in my mind.

Since I don’t get a bachelor degree at my school we don’t really follow any strict programs or such, we just sign up for courses as they come along and if we wish to take time off we just don’t sign up for any courses at all. It is for everything practical a non-issue. There are no physical restraints on taking a year off school, no disadvantage at all.

The reason I wanted to power through school in one go was because I wanted to start my “real life” as soon as possible. I wanted to have Japan part of the “real life” and not of my school life. I have realized that this imagined sectioning of my life is really only rhetorical, it is not actually how I feel, but how I state the reason for not taking time off school. There is really no difference between doing 3 years science, 1 year Japanese and 2 years science instead of 5 years science and 1 year Japanese.

The only real disadvantage is that I might loose focus on school, might loose the edge-knowledge of how to solve partial differential equations and calculate the wave-functions of electrons in a solid-state crystal of Aluminum-Arsenic. This is actually a real issue, one that I can’t say is utterly meaningless in all senses. This will happen, and it is a sacrifice I have to make. Now I can lessen this disadvantage by bringing some books and reading a little in them once-in-a-while, but ultimately it is a sacrifice. The question here is if it is worth this sacrifice to spend a truly fantastic year with my best friend and gain experiences and moments in life that could not possibly be attained in any other way. The anwer is simple.

There is also the risk of me not returning to school, but becoming caught up in another life entirely and simply quit. I almost forgot to write about this because the risk doesn’t exist in my mind. As I said, I love learning, I love what I study. In my mind there is no way I can exist in my future life without having a masters degree. No, quitting school just isn’t an alternative. No force however strong could ever convince me that taking those two last years would be unnecessary or boring.

It has been hard to overcome my mental image of how life was supposed to be and to accept that taking a year off school will not be a bad thing. Having done it now however, having accepted that it really isn’t a bad thing; I feel like I’m about to live a dream and am on the cusp of something truly amazing, which actually scares me just a little bit.

I am going to live in Tokyo for a year. Can you believe that?