JETRO Global Connection -Accelerate Innovation with Japan-

Report
Creating an Innovation Ecosystem in Japan
-Interview with Mr. Takaaki Umezawa, President of CIC Japan-

(JAPAN)
October 28, 2020

Creating innovation and fostering startups are important issues for revitalizing Japan's economy. It is an urgent task for Japan to create an environment to meet these challenges, namely, the creation of the so-called “innovation ecosystem.” Cambridge Innovation Center (CIC), which plays a central role in the ecosystem of Boston in the USA, opened its first Asian base CIC Tokyo in Toranomon, Tokyo, Japan, on October 1st. (See “Biznews” in Japanese dated September 23, 2020.)

CIC supports startups by creating a community of entrepreneurs, investors, big corporations, government, and academia. How does CIC see Japan? I asked Mr. Takaaki Umezawa, Chairman of CIC Japan, about his intentions on choosing Tokyo (Toranomon) as the base for such community, the challenges of creating an ecosystem in Japan, and the expectations CIC holds of Japanese entrepreneurs and big corporations (interviewed on September 17, 2020).

Mr. Takaaki Umezawa, Chairman of CIC Japan, at the event space in CIC Tokyo (photo by CIC Japan)

Easy access to government offices and big corporations

  • Q.

    Why did you choose Tokyo, particularly the area of Toranomon?

    A.

    Tokyo has been the first choice of Tim Rowe, the Founder of CIC. In his mind, the place to plant the first flag in Asia must be the city with the highest potential of stimulating innovations with startups at the core. In Japan, that is Tokyo, naturally. Then, why Toranomon? Well, there are two reasons: First, Toranomon is a very good location for a variety of stakeholders, including startups, big corporations, academia, and government, to get together. We believe that we must be at the heart of innovation in this age of the fourth industrial revolution. The stage we act on would not make sense if the players were just startups and venture capital (VC) investors. Working with the government to obtain necessary deregulations for the implementation of new solutions is important. In that sense, Toranomon, which is located close to government offices, is the best location. The role of big corporations is also significant. Toranomon is conveniently located near Marunouchi, Otemachi, and other areas of Tokyo where many big corporations are headquartered.

    The second reason for choosing Toranomon lies in the question: "With whom we will be building the community?” CIC Tokyo is located in an area where Mori Building Co., Ltd., is the leader of urban development. Mori Building is a Japanese developer that understands innovation and has an abundance of experience in building an international community. We chose Toranomon because we wanted to create a community in tandem with Mori Building.

I want to increase the number and diversity of startups

  • Q.

    Is it possible to create an ecosystem like Boston in Japan? What is needed to make it happen?

    A.

    The first thing to do is to increase the number of entrepreneurs. To that end, I am convinced that creating a place, like CIC has been doing, where people interested in entrepreneurship can meet with their fellow entrepreneurs and the people who want to support them is a valuable endeavor.

    Then, the next important thing is the quality of startups. I would like to see a large number of startups based on deep tech (Note 1). I also want to increase the number of female entrepreneurs. We also want to see more startups in which foreigners are involved. If I may say so, I would also like to attract foreign startups to Japan. In other words, broadening the lineup of the startups is important. The traditional Japanese startup communities mostly consist of BtoC web or mobile service providers; in addition, video games have been the cash cow. The typical success story has been that such a company gets listed and enjoys a big market capitalization. I want to add new patterns to be included in the success story. I would like to give special encouragement to new types of startups so that the Japanese innovation engine will grow bigger. The startup community in Shibuya has a rather strong hue of having been formed by companies successful in mobile games and advertising. In contrast, Toranomon has no hues yet, in a way. For this reason, I would like to attract a diverse group of startups to come to Toranomon.

Fund providers need to evolve, too

  • Q.

    What do you think is needed for the growth of deep tech startups?

    A.

    For the growth of deep tech startups, VC and other fund providers need to take a different investment approach, involving a longer range, higher risk, and larger sum of money per case. The environment is gradually improving. VCs, which have traditionally invested primarily in startups of BtoC services, as well as corporate venture capitals (CVCs), which have recently increased in number, now both appear willing to invest in deep tech startups. For a Japanese startup to expand its business worldwide, the BtoC service based on a successful model transplanted from abroad has its own limits. Equipping such startups with Japan-initiated deep technologies is very important. To help make it happen, CIC Japan would like to create an environment to foster deep tech startups.

Healthcare and robotics: two major domains to compete on world stage

  • Q.

    What are the chances that a Japanese startup based on a deep tech can successfully compete overseas?

    A.

    The chances are good. In particular, we believe healthcare and biotechnology, in a broad sense, and robotics involving mechatronics have very good chances. I believe that these two are the most important domains for Japan to compete in the world, and if I can add one more, lifestyle and culture will be a field where Japan can perform well. Startups equipped with the cultural aspects of Japan will also be strong enough.

  • Q.

    What are the challenges Japanese startups will face for successful business development overseas?

    A.

    There are two major challenges for startups from Japan. First, the number of Japanese startups that envision the global market from the start is very few. Most startups regard success in the Japanese market as the milestone. Second, I know of many cases where the startup has very limited knowledge or network about overseas business development. They are at a loss as to how to fight in which market or how to build business channels. In this sense, a startup with a multinational management team from the beginning has good knowledge and network access. Things will go fast when the time comes for such a startup to go overseas. For this reason, I would like to support and increase the number of startups that have foreigners in the team.

I treasure face-to-face meetings despite COVID-19

  • Q.

    Although it is important for people to gather and create a community, the current pandemic gives rise to fear and risks in such effort. How will CIC address these concerns?

    A.

    We are promoting the “touchless” campaign, that is, to keep physical contacts to the minimum. In the CIC in Boston, we are conducting various experiments to promote “touchless” at a low cost, and we would like to make use of the results in Tokyo as well. Of course, we follow the government guidelines and make sure to implement proper temperature check, disinfection, and room capacity regulations. Having said that, I am worried that the Japanese society today tends to be rather overly shriveled up. While minimizing risks of infection, we want to pursue the kind of serendipity (see Note 2), which would never be encountered in a remote online environment, and the emergent evolutions coming out of it. It is so important for people to come together in person, so we will plan our events in a hybrid form of real and online participation. New ideas and new projects are born when people of various attributes, such as startups, researchers, investors, big corporations, and government, meet in many ways. CIC's mission is to create such a community.

To produce encounters, we must pull people out of the compartments

  • Q.

    What are the strengths of CIC over other providers of coworking spacesand shared offices?

    A.

    The number of shared offices that physically comprise offices is indeed on the rise in Japan. However, how people act there is important. Even if a lot of people are housed, a poorly managed shared office is nothing more than a place to which people commute to stay in their own compartments. There is no meaning in getting together. To produce encounters for creative innovations, we must pull people out of the compartments. CIC has put in many ideas and designs for that purpose. For example, we organize numerous events by inviting outside entrepreneurs and researchers and stimulating mutual encounters among the residents. In addition, the cafe, relaxation area, and other public spaces are designed to facilitate exchange and interaction among people of different zones.

Big corporations should make resources available to startups

  • Q.

    What do you expect from big corporations and universities?

    A.

    A major difference between the Boston ecosystem and the one to be created in Tokyo is that big corporations have larger roles to play in Tokyo. One of the expectations we have of them is the large number of dormant and unused technologies that they own. If the company has no plan of using the technology, they should encourage employees to first become “intrapreneurs” and eventually spin out. We believe that Japan has a great potential for producing many startups out of intrapreneurs. In addition to the technology, I would like to ask the big corporations to make available startup funds, sales channels, and other resources, including, in certain cases, the brands. I think this will significantly accelerate the growth of startups in Japan. The big corporations have been promoting open innovation in recent years, but many are trying to take in the technology and ideas they want from startups to use in their own businesses. My strong hope is the other way round. I would like the big corporations to free up the resources that startups need.

    I have big expectations about academia, too. The number of university-spinout-startups is increasing, but there remains room for more. I think it is alright if the researcher becomes the entrepreneur himself/herself or if he/she partners with someone who is experienced in starting a business. When more researchers become successful entrepreneurs and role models for students, more students will become interested in starting business themselves.

  • Q.

    Can Japanese big corporations play the role of US angel investor?

    A.

    I would like to see big corporations invest more in startups, and I think they have enough internal funds. However, the problem is that the larger the company is, the more complex its decision-making process is. Deciding on a billion-yen investment promptly, for example, is very difficult. The strength of US angel investors is that 1 billion yen or even more can be invested on the spot only if one person says "Go." I’m afraid that big Japanese companies will find it hard to play the same role. At this point in time, we would rather hope that big Japanese corporations will increase intrapreneurs from within and also hire more outside people having entrepreneurial experiences to have them join their open innovation teams. If they can do these two things, big corporations will change a lot. I think one prerequisite for successful development of ecosystems in Japan is enhancement of human mobility between big corporations and the startup community. This is a challenge that the national government should be involved in.

Please take the first step forward by all means

  • Q.

    The 202What do you expect from Japanese startups and those interested in starting a business?

    A.

    Please take the first step forward by all means. I know there are many people out there who have very good ideas but have been wondering for years what to do with them. It is very important to get started, anyway. I am hoping that these people will come to CIC Tokyo to take the first step forward here and meet interesting variety of people to exchange new ideas. If they can team up, a startup is born. CIC will be providing the best environment to back up healthy growth of the newborn startup.

Report by:
FUJII Mari, Director, Americas Division of Overseas Research Department, JETRO

Note 1: Refers to cutting-edge research results and technologies generated by universities and research institutes. Also, the term means the business models that are based on them.
Note 2: A good fortune or a useful discovery caused by unexpected happening.

* The original article in Japanese

Inquiry regarding our contents

Innovation Promotion Division