Interview
Kobe’s Ecosystem Supports Growth of Japanese and International Startups
-The port city creates innovations capitalizing on its diversity-

During the official visit of Mayor [Kizo] Hisamoto to the US in 2015, he met with the then CEO of 500. At the meeting, 500 expressed an interest in opening up its business in Japan. The mayor immediately offered to cooperate and the possibility of co-hosting an acceleration program in Kobe was discussed. Following that meeting, the mayor lost no time in putting together the necessary resources required for creating a program execution team, including outside talent. The 500 accelerator program jointly held with a local government was the first of its kind in the world and drew much attention.

In the past four years, 71 companies have participated and a total fund of more than USD 110 million has been raised. Last year’s accelerator program was held on the theme of Health Tech. Consequently, two of the participating companies began working with the Kobe Biomedical Innovation Cluster. Four more companies, including overseas startups, have decided to locate in Kobe as a result of the program.

Thus, global recognition is gradually increasing. In November 2020, the United Nations Office for Project Services (UNOPS) will open its third Global Innovation Center (GIC) in Kobe.(Note2) An incubation program is in the pipeline, with climate change as the main theme, thereby enabling Kobe City to contribute to the resolution of global issues.

We have tied up with JETRO, which has become a PR partner starting this year. We received 237 applications this year, the tied highest record, perhaps because the program is being held online. The number of applicants from overseas startups is a record 162, with the international applicants increasing in terms of countries and regions. Of the total applicants, 17 companies have been selected (6 from Japan and 11 overseas), and mentors will coach them until the end of October. In terms of business category, Health Tech accounts for approximately half, followed by E-commerce and Social Tech (See Figure).

When asked, many of the participants of the past 500 Kobe Accelerator responded that they liked the program particularly because they were able to interact with talent from diverse industrial sectors and nationalities, which helped them broaden their perspective. Diversity is the source of strength of the Silicon Valley ecosystem and is the concept that we value highly in organizing our program. This year's event is being held online. We are not able to welcome guests in person. For this reason, we have organized “KOBE Week,” a new side event. Dr. Masayo Takahashi, President of Vision Care Inc. and the world's first medical doctor to transplant human retinal cells regenerated by iPS cells, will be delivering a talk. We are planning this and other special contents online to convey the attractiveness of Kobe.

We are promoting the Urban Innovation KOBE initiative to solve administrative issues with the help of startups. This initiative is to find a startup that can offer solutions for such issues in a government organization that is confronted with this problem. The two parties carry out a joint pilot study under the initiative. Past examples include efficiency improvement in increasing the turnout to public program events for child-rearing citizens and digitization of application procedures for land development permits. The initiative was launched in 2018. Kobe City was the first municipality in Japan to start such an issue-solving project. About 15 cases are adopted every year. The startups can enjoy the benefit of working with the government, and thus, can build social trust. The government can benefit from the prompt and pertinent responses of startups and from the opportunity to address administrative challenges at costs lower than those when employing the services of big corporations.

The construction of such a platform for "startups x municipality" will not only provide a solution to the problem that the local government faces but also offer a significant potential of being transplanted to other local governments confronting similar challenges. Recently, Urban Innovation JAPAN has been formed and joined by the cities of Nagoya, Kumamoto, and Fujieda. By establishing such a platform, we can create a knowledge base of success stories of resolving an administrative issue as well as the reasons for failure. I hope, in this way, the accumulated know-how will be shared with fellow municipal governments throughout the country.

Kobe has a long history of fostering diversity since the port was opened in 1868. Our city has several places of worship that serve different religions and many international schools with diverse backgrounds. Foreign pharmaceutical manufacturers such as Eli Lilly and Bayer have long-established bases here. When a local government plans to set up an ecosystem, the main question is whether it is possible to identify the strength of the local area. You should be able to say “This is what makes my city so special.” A well-thought-out differentiation is a key strategy, I think. From the standpoint of local government, a good design on the direction that the innovation creation should pursue is necessary. Besides the direction, the types of industries and jobs targeted and other support measures must befit the characteristics of the locality.

In addition, it is important to accept an agile approach (a development process of repeating implementations and tests in a short period) when working with startups. Startup success rates are very low, and local governments must design their programs in such a way to make failure tolerable. Further, the mindset of officials needs to be changed. Inclusion of third-party talent, such as outside experts and institutions, to ensure diversity in the team is also an essential element for the success of the program.

Kobe City has already been working on the ecosystem for more than five years, but I feel we are only halfway through. What is good about the partnership with 500 is that it offers support to startups in the seed phase or early phase to take off. Going forward, we would like to expand the scope of our efforts, for example, by assisting entrepreneurs to launch startups originating from Kobe and helping growth-phase startups expand faster. We would like to create a framework whereby all types of startups turn to Kobe as a springboard to soar over the world, and Japanese companies count on Kobe as a place to get connected to the world.