Startups from Overseas Help Japan’s Regions Deal with Urgent Social Issues
Wanted: Overseas startups with brilliant ideas to solve pressing social issues in Japan’s regional communities. That was how the Japan External Trade Organization (JETRO) might have summed up its call for business pitches to the Japan Challenge for Society 5.0 contest in mid-2021. The contest offered something that any startup would have a hard time passing up: a shortcut to breaking into the world’s third-largest economy.
For JETRO––the Japanese government agency charged with drumming up trade and investments from abroad––hosting the contest wasn’t about discovering a blockbuster product. It was a chance to shepherd new, disruptive ideas into Japan in three key areas: eco-friendly solutions; resilient communities through digitalization; and labor shortages and productivity gains. Just like the other countries in the world, there is an urgent need to solve social issues in Japan, especially in regional areas that are not large cities such as Tokyo and Osaka. JETRO is encouraging global companies’ challenges toward such issue resolutions.
Thousands of kilometers (miles) away, in Lisbon, Amir Bozorgzadeh, co-founder and CEO of Lisbon-based Virtuleap, was finding out what it meant to make use of JETRO’s resources. His company was eager to venture into new markets where its virtual-reality system, Enhance VR, might prove useful.
Virtuleap’s technology resembles a video game console, with users wearing a VR headset and gripping a controller in each hand. But it’s not for entertainment. Each of Enhance VR’s three-minute games were designed by neuroscientists and based on well-established methods for measuring cognitive decline. While players memorize cards, fill pizza orders, shoot a slingshot at targets, and listen to conversations in a crowded room, Enhance VR gauges their mental acuity––analyzing and training memory, attention span, motor control, spatial orientation, problem solving and information processing. “I call it a game-ified neuro-psychological assessment and training tool,” said Bozorgzadeh.
Bozorgzadeh had no idea what to expect when he signed up for JETRO Business Connect, an online matchmaking event. By connecting overseas companies with Japanese businesses, universities, research labs and municipal governments in the country’s prefectures and cities, JETRO is lowering entry barriers into Japan for overseas companies while boosting the country’s regions by linking innovative technologies and know-how abroad to the region’s resources.
Virtuleap’s usual target audience is young, healthy adults. The company had previously conducted experimental trials in the US. Japan’s super-aging society––where seniors (65 years and older) are almost 29 per cent of the population, and growing––offered Bozorgzadeh a very different kind of testing ground. It was a chance to test Enhance VR in a market with a shrinking workforce and expanding elderly population, a trend that many countries are likely to face in the future. The company’s entry coincided with Japan’s efforts to upgrade its economy by digitalizing everything from healthcare to mobility.
Not long after the JETRO conference, Virtuleap modified Enhance VR to use in Japan, translating game instructions and hiring local voice actors to read the parts. Within months, JETRO had arranged for Bozorgzadeh to explore projects with pharmaceutical maker Astra-Zeneca’s Tokyo team, railway operator East Japan Railway in Tokyo and VR researchers at Tohoku University in Sendai. Ultimately, Kyoto city—located on the west side of Honshu with a population of approximately 1.4 million, about one-tenth of the population of Tokyo--helped Virtuleap land its first project with J.S.B. Co., Ltd. (JSB), an operator of student housing and full-service facilities for seniors.
In October 2022, JSB launched a small-scale, two-month pilot study using Virtuleap’s Enhance VR system at an elderly care home in Kyoto. The goal was to evaluate the effects of Virtuleap’s brain-stimulating games on seven patients’ quality of life. Eventually, Bozorgzadeh is hoping that more trials in Japan will deploy Virtuleap’s technology to screen dementia patients, give seniors brain-stimulating workouts and validate it for medical use.
Bozorgzadeh had no experience with Japan’s business culture or language. From afar, the prospect of entering Japan, without knowing much about its VR technology market, and figuring out its rules and regulations was daunting. As eager as he was for a trial project, he was loath to take the risks. Besides, his investors would likely oppose it. JETRO’s vetting, through its London office, gave Virtuleap instant credibility in Japan, where trust is a key element of business. That shortened the time that Bozorgzadeh’s team spent building relationships with Kyoto city officials and JSB and moving forward with a pilot study that would give Virtuleap a peek into Japan’s healthcare sector. “I’ve worked in Dubai, Europe. I was raised in Canada. I’m from Iran originally. I’ve worked with businesses in South Korea. But JETRO is something to behold, in terms of its organization and seriousness. That’s one thing that kept us from ever despairing,” Bozorgzadeh said.
Even with JETRO’s support, Bozorgzadeh had to be patient. Often, it took longer to hear back from Virtuleap’s partners in Japan than what he was accustomed to. “We go through many meetings. This is really not a criticism. I have accepted this. We just know that there are certain cultures that are operating under different rules of conduct and protocol,” he said. Another minor inconvenience: when his team’s counterparts transferred to other divisions, a common practice in Japan known as jinji-idō that exposes employees to different business areas or parts of an organization every couple of years.”
Overall, these cultural differences mattered little. The fact that Virtuleap’s inaugural pilot study was in Kyoto––a smaller, less competitive market with its own ecosystem of educational institutions and healthcare facilities––worked in the company’s favor, said Bozorgzadeh. “That made it more of a safe entry. More like a beachhead,” he said. “It gave us more breathing room to experiment and develop the relationship and not be distracted. We could be more focused on getting things right, and then later go towards the more concentrated, major markets,” he said.
In the past, overseas business mostly flowed into Tokyo, Osaka and other big cities in Japan. Now, regional governments are courting overseas companies by offering support services and matchmaking with local businesses, universities, and other institutions. In the northeastern prefecture of Miyagi, Tohoku University is building one of the country’s largest scientific research complexes to foster greater collaboration between its researchers and overseas businesses. The central prefecture of Mie has subsidies to lure overseas companies specializing in green energy, digitization, food, and life science to set up a local base. And up north, Hokkaido prefecture is exploring ways of attracting ski resort investors and food producers to invest in the region’s powdery slopes and abundant farms. 22 municipalities around Japan now offer startup visas to entrepreneurs from abroad who want to launch a local business. The shift has backing at the highest levels of Japan’s government and reflects an aggressive push to revitalize regional communities with fresh talent, technologies, and ideas.
Recently, Virtuleap and JSB have been discussing a timeline for moving ahead with a proof-of-concept pilot study. “If that were to result in a licensing agreement, Virtuleap’s next step would be to set up an office in Japan,” said Bozorgzadeh.
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