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Starting or Expanding Your Business to Japan? Things You Must Know about the Economy

The Japanese economy situation was getting worse since 2008 global financial economy shock. 114 companies had IPO at Tokyo Stock Exchange market in 2006, but only 23 companies managed to have IPO in 2009. ZERO foreign company had IPO at Tokyo Stoc

k Exchange market since 2008. New generated funds are decreasing since 2008. Most Japanese traditional large companies couldn”t keep their own headcount and froze hiring. On the other side, lots of internet startups were born in these couple of years because the economy situation freed the business space for startups.

Since 2011 many seed accelerator companies and shared offices are present in Tokyo. They are providing pitch events, demonstration events, hackathon events and/or entrepreneurship schools for young entrepreneurs. It is easy to discover good entrepreneurs and startups for them as well. We, EverConnect Corporation, also had possibilities for pitches at events. We grasped this opportunity and became winners of 2011 Red Herring Asia 100 Award last September, and met up with Kiyoshi Nishikawa who is our corporate advisor and CEO ofNetAge (Japanese seed accelerator company, also our investor). We won the 2nd prize at Innovation Weekend Grande Finale 2011 and met up with VOYAGE VENTURES, succeeding to raise our fund by them. They invested in my idea and product concept of everconnect.me without product even being launched!

MOVIDA JAPAN is a management school for selected pre-entrepreneurs. They teach about entrepreneurship, business planning, finance, project management, law, along with presenting case studies of succeessful entrepreneurs. That is a very valuable school, where entrepreneurs can meet and exchange ideas, with all school programs being FREE!

Startup Dating is an online media community which organizes weekly startup event “Salon”. Salon is a matching event with entrepreneurs, geeks and media writers and bloggers. Few startups unveil their products pitching to the attendees, and they take opportunity to find team members. They can also be interviewed by online media writers and bloggers. Salon could be one of the best events to unveil your product for Japanese market when you intend to expand your target market to Japan.

After 2011, an excellent environment is developing in Tokyo quickly.

You can save your office costs by joining an incubation office or shared office in Tokyo, which is also good for hiring after you registered your startup. EverConnect is working at Tokyo based incubation office “BOAT“, which is managed by one of our investors, VOYAGE GROUP. 12 startups are currently working at BOAT. VOYAGE GROUP is providing weekly mentoring meeting, monthly meetup party and we can use the event space, free drinks (alchohol too!!). All provided services are for FREE! Thanks, VOYAGE!!

Japanese startup environment is improving with high speed in the last 2 years. But Silicon Valley still remains best place for startups in the world. Main startup city in APAC is changing to Singapore, Shanghai or Beijing instead of Tokyo. Tokyo has a lot of potential, but Japan is still a very closed country for foreign people and hard to stay for non-Japanese speakers, which is only one of the reasons.

The Tokyo Stock Exchange is a good market for startups because it is easier to IPO than NASDAQ, and it is possible to raise larger fund than Singapore Catalist.

Tokyo”s environment is getting better for startups who want to get around USD 60K by angel or seed money, but there are few VCs who want to invest less than USD 1M range in 2nd or 3rd round. Many seed accelerators started investing past 2 years, but most of Japanese VCs have conservative mind because they rely on traditional banks, security, insurance companies and they don”t have experiences with such investments. 80% of fund investors are finance organizations. Japanese VC usually tend to invest after round B phase of IPO model startups instead of M&A model startups, because there is no M&A cultures in Japan. Very small numbers and amounts of funds are structuring since 2008.

These big issues for Japanese startups should be solved soon, but it will take a few more years.

On the other side, Silicon Valley has the largest eco-system in the world based the 20 years of experience. Many genius young individuals are moving to Silicon Valley to study at Stanford University, to work at exellent startups, and investors as well. There is a specific great eco-system in Silicon Valley, and startups based there can get large amounts of money with high valuation, which would enable them to drive their own business quickly, and this environment helps to be acquired by big players. Japan is trying to catch up with Silicon Valley but most of Japanese investors don”t want to invest in M&A target model, because there the M&A cases are very rare in Japan. IPO target model with equity finance based fundraise or stable business model without invested money is the best to go for entrepreneurs who want to start business in Japan.

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