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Why should we support foreign entrepreneurs to start business?
Startup Capital Kyoto: Becoming a Global City for Startups (1)

March 15, 2022

*This article was originally published in Japanese. All information in this article is as of November 11, 2021.

Google, Zoom, Uber, Tesla, Pfizer, Moderna — They come from various fields of business; some of the technology companies dominating the world and some of the pharmaceutical ones developing novel coronavirus vaccines, but they have a point of common that they were founded in the United States by foreign nationals or immigrants. Even now, people not only in the United States but all throughout the world fear that foreign nationals or immigrants are taking away their jobs. However, it is the fact that many of the technologies and services that form the backbone of our world were actually newly created by such “outsiders”.

In this situation, as of September 2021, 17 municipalities in Japan have implemented the Startup Visa to increase the acceptance of foreign entrepreneurs that would help enhance the competitiveness of the nation’s industries. In Kyoto, it has been implemented since April 2020. The Startup Visa is a system that grants temporary residency status to foreign nationals who plan to start a business in Japan. The introduction of Startup Visa has also been promoted in various countries recently.

Why in the first place do we need to help foreign nationals launch a new business? And what kinds of support are now provided, both in and outside of Japan? What types of benefits could they take from such programs, and what types of issues happen from them? Here, we will consider how to manage it in Japan and in Kyoto from now on, taking a look at case examples in Kyoto.

This report runs a serial in five parts. It consists of following contents: (1) the first one will make a comparison between Japan and Silicon Valley in U.S. and clarify the significances of supporting foreign nationals to launch startups. (2) the second one will give a general explanation of the Startup Visa programs that are being implemented throughout the world. (3) the third one will explain both the key features of the Startup Visa in Japan and its issues. Based on these discussions, (4) and (5) will describe the startup support that has been provided to foreign entrepreneurs in Kyoto, and will examine the outcomes as well as the issues resulting from them.

Ecosystem of Silicon Valley where diversity serves as the source of innovation

Silicon Valley in the United States is well known as having the most advanced startup ecosystem in the world. One of its features is new businesses being launched by foreign nationals and immigrants. At Silicon Valley, people whose origins are from outside of the United States account for 39% of its population, which is significantly higher than the 14% for the entire country.*1 Furthermore, according to a survey conducted by the National Foundation for American Policy (NFAP), more than half of the unicorn companies originating from the United States has at least one immigrant founder.*2

Noriko Taji of Hosei University who has been researching the ecosystem of Silicon Valley says, “Entrepreneurial activities in the United States have been supported by people who came from outside the country. In particular, foreign entrepreneurs from India and China have worked arduously under the determination of not returning easily to their own country.” According to a survey of web business entrepreneurs in Silicon Valley and Tokyo that was conducted in 2012 by Dr. Taji, about half of those in Silicon Valley did not have U.S. citizenship. This shows that they went to the United States as students and stayed there to launch their business, or had acquired residency status to start their business.*3

Why is it so important to have diversity created by such foreign nationals and immigrants? Jun Suto of Singularity University and XPRIZE Foundation, who serves as a solution curator that brings together the various issues faced by companies and society, says, “When people from different backgrounds work together, they will have new ideas and various opinions, which makes it easier to attract capital and managerial resources and also makes it possible to create solutions that would make a huge impact on the world.” He says that Silicon Valley has developed a culture of listening if someone has an outstanding idea, even if that person’s English is not perfect. Mr. Suto points out that they could propose an adventurous idea in such an environment.

Sushi Suzuki who formerly worked on academic-industrial partnerships at Stanford University and is currently working on such partnerships at Kyoto Institute of Technology notes that one of the reasons why great and diverse ecosystem has been formed in Silicon Valley is because the language used is English, and the other one is because foreign students gather there from all over the world. Silicon Valley which has a thriving IT industry need programmers and engineers. And foreign talents, especially from Asia, gather to Silicon Valley believing that they will never struggle to make a living if they specialize their studies in Information Technology where a high level of expertise is required. As a result, it is no surprise that Silicon Valley today has a wide diversity of people from different nationalities.

At an online event called Kyoto Innovation Night Ver. 2.0External site: a new window will open *4, they discussed why “outsiders” are needed. From top right going clockwise: Jun Suto, Sushi Suzuki, Noriko Taji, Ichiro Sone (Executive Vice President of JETRO). Mr. Suto appeared from Los Angeles, the United States wearing an outlandish outfit, as if to demonstrate the level of tolerance shown in the United States (photo taken by Venture Café Tokyo)

Why is diversity necessary for Japan?

Recently, more people of foreign origins in Japan are involved in the management of companies. The number of people holding a residency status of Business Management has almost doubled within five years from 2015 in which business management was introduced to 2020. *5 However, we must note that this qualification of Business Management includes not only entrepreneurs, but also the class of those who are engaged in management so called executives and people in a managerial positions such as general managers, factory managers and branch office managers, etc.

Even in such a situation, we won’t necessarily seek diversity or closer relations with overseas in Japan currently. Dr. Taji says, “Although Japan is the world’s third-largest economy, few people want to master the English language.” In Sweden, which Dr. Taji visited for her research abroad, people need to master English because they should inevitably look toward overseas markets as the size of their own domestic market is small. Meanwhile, not many situations in Japan require the use of English. Moreover, some people in Japan are cautious about having foreign workers, thinking that they threaten existing job opportunities.

Why is it necessary to have foreign entrepreneurs in Japan? In addition to creating the innovations like Silicon Valley where diversity contributes to innovations, experts bring out two points: promoting global expansion and revitalizing entrepreneurship.*6

Mr. Sone, Executive Vice President of JETRO, indicates the importance of diversity from the perspective of global business expansion by Japanese startups. Many Japanese startups consisting of only Japanese people develop products and services for the domestic market. Because of this, such startups are unable to take high evaluation from outside of Japan and they often face difficulties even if they try to develop their business overseas. Meanwhile, the startups founded by foreign entrepreneurs who bring global perspectives develop products and services taking into account the needs from outside of Japan, which enables them to enter into a broader market and attract highly talented human resources and larger funds. It is expected to expand export of Japanese-made items by making use of their strong connections to other countries.

On the other hand, Mr. Suto who focuses on revitalizing startups points out that Japan has few talents with vitality and the entrepreneur spirit because Japanese technologies are extremely mature and high level. He says that when he started activities of Singularity University in Kyoto, it was very difficult for him to find such talents compared to other countries. Since there is low demand for entrepreneur education among local companies and public institutions in Japan, it took long time to have him fix his activities.

It is said that the entrepreneur spirit in Japan is very low comparing to other countries. According to a survey conducted by the Global Entrepreneurship Monitor targeted at 50 countries in the world, Japan ranked at the bottom in the following indexes: “Startup activities prevalence index” that shows the level of pervasiveness by startup activities to society; “business opportunity awareness index” that shows the level of awareness of having promising business opportunities, which is the prerequisite for attracting management resources such as talents and funds; and the “knowledge, capabilities, and experience index” that indicates the level of knowledge, capabilities, and experience required to procure management resources and to manage the business operation.*7 The scores for these indexes for Japan are significantly less than those for the other countries. Mr. Sushi expresses his expectations as follows: “Among current college students in Japan including students from abroad, an extremely few number of them consider the option of starting their own business. If these students think of starting their own business as one of their career options after graduation, and if just 1% of these graduates actually start a business, it would bring about a great change.”

Should Japan aim to become a society filled with diversity like Silicon Valley? Experts all say, “There is no need to create the same type of society as Silicon Valley, as Japan has a different history and culture.” Silicon Valley has an exceptionally large number of people from other countries, even when compared to the rest of the United States which has a vibrant history of immigrants. Moreover, companies in Silicon Valley change rapidly and the competition there is extremely fierce. Some also criticize that venture capitals in Silicon Valley are dominated by Caucasian men who graduated from certain elite universities, and that ample investments are not being made toward people of color or to women.*8 Taking this into consideration, it is a key to develop a society that accepts foreign entrepreneurs in a way that is suitable for Japan and local regions.

*1 Joint Venture Silicon Valley, 2021 Silicon Valley Index, 2021, p. 19.

*2 National Foundation for American Policy, “Immigrants and Billion-Dollar Companies”, NFAP Policy Brief, 2018.

*3 “Immigrant Serial Entrepreneurs of IT Business in Silicon Valley in the US(<SPECIAL REPORTS>ECOSYSTEMS IN ADVANCED INNOVATIVE REGIONS IN THE U.K. AND THE U.S)”, Noriko Taji and Yu Niiya, The Journal of Science Policy and Research Management Vol. 30 No. 4 (2016), p. 316 - 317.

*4 On March 18, 2021, JETRO Kyoto, Kyoto Prefectural Government, Kyoto City, and Venture Cafe Tokyo hosted the Kyoto Innovation Night Ver. 2.0 that focused on launching businesses and building communities by foreign nationals. The presentation can be viewed on Venture Cafe Tokyo YouTube channelExternal site: a new window will open .

*5 “Statistics on foreign residents in Japan (formerly registered alien statistics) - statistics table”, Ministry of Justice The qualification of Business Manager was changed from the former Investment & Management qualification by the legal change made in 2014. By this change, foreign nationals who had only been allowed to manage the businesses of foreign companies are now able to conduct business management activities for Japanese companies.

*6 “Inbound strategy to promote startups: measures to promote acceptance of foreign entrepreneurs and suggestions for Japan”, Atsuko Nomura, JRI Research Focus, 2015, No. 2015-010PDF file (External site: a new window will open) (519.15KB), as reference for explaining the benefits that can be expected by having foreign nationals launch businesses in Japan. * in Japanese only

*7 “Survey commissioned by METI: FY2019 Survey report related to the entrepreneurship spirit in the project to strengthen partnerships for the global startup ecosystemPDF file (External site: a new window will open)(2.97 MB) ”, 2020, Mizuho Information & Research Institute. * in Japanese only

*8 “The Future of Diversity and Inclusion in TecExternal site: a new window will open ”, TechCrunch, June 25, 2020.

Startup Capital Kyoto: Becoming a Global City for Startups

  1. Why should we support foreign entrepreneurs to start business?
  2. What is the Startup Visa for foreign nationals who are planning to launch their own business?
  3. What is the Startup Visa in Japan?
  4. Examples of support provided by the Startup Visa in Kyoto and how companies are using them
  5. Issues for the Startup Visa in Kyoto
Report by:
OI Hiroki, JETRO Kyoto

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