Updated: Dec 25, 2019
Start-ups might be a recent emergence in Japan, but they’re already making a significant impact on Japan’s traditional work system. From challenging long-held beliefs such as wearing identical black suits to work, to causing a wave of investment money coming in to various industries, we’ll take a look at what start-ups are, what changes are happening, and why they might be a good work opportunity for you. #jportlibrary
When you think of start-ups, you might associate them with companies fresh out of Silicon Valley, with vibrant office designs and flexible work cultures—something that seems like the exact opposite of what work in Japan is like.
In Japan, the start-up scene is still in its infancy stage, in fact, during a March 2019 survey held by Creww, more than half the Japanese people surveyed said they weren’t aware of the existence of start-ups.
But start-ups have a lot of potential, something the government realized in recent years. In 2018, The Ministry of Economy, Trade and Industry (METI) of Japan started an initiative called the J-Startup Program, where they provide support to the growth of selected start-ups in Japan. And according to the Japan Startup Finance Report, in recent years, the trend in investment money coming into start-ups in Japan has also been steadily increasing.
With the government officially expressing their desire to help start-ups and with the increasing trend in the past few years, it might be worth taking a closer look at Japan’s growing start-up industry.
What is the definition of a start-up company?
Although the range is broad, the definition of a start-up is the same all over the world. At its core, a start-up is defined as a “company in the first stage of its operations.” It starts from finding a niche or pain where they see demand for a certain product or service, and building a company that can provide that.
There are several financial stages of being a start-up company: pre-seed funding, seed funding, pre-series A, series A, series B (and onwards), and finally, pre-IPO (or Initial Public Offering), and although that seems like a lot of business jargon, they can be broken down into easy-to-understand terms.
Pre-seed funding is the beginning of a start-up. Also known as “bootstrapping”, it involves figuring out if the product they want to launch will work, and how it will appeal to potential customers. They use their own money to build the company, with some help from other start-up owners or friends and family.
Next is seed funding, where they start recruiting members for their team and where they start fundraising for the company from venture capitalists. Company at this stage starts developing the prototype for their product.
Then comes the Pre-Series A stage, although sometimes there is no clear line between pre-seed/seed stage, this is basically the stage immediately before the product is released. From the prototype, they make an improved version—called an alpha (α) or a beta (β) version—that can be tested before release in Japan.
Series A is when the start-up officially releases their product, and they now have a working business model. After release, the company also makes further developments to their product or service, and they can also start thinking about growing their company.
Series B is when start-ups aim to outlive their competitors through expansion—through building new products and reaching new markets. Different companies at this stage can go beyond Series B to Series C, D, E and onwards, just with small variations based on how they expand.
Lastly, the pre-IPO stage is when the start-up prepares to become a public company—this means that they go public by selling stocks through the stock market. Everyone can buy stocks of the company at this point, so this also means that their financial performance and records will also be public. Once they go from being a start-up to a public company, it will be much easier to recruit better talent to join their team.
The other exit option that start-ups have is M&A (or Mergers & Acquisitions). M&A is a general term used when two or more companies are joined together. In the case of start-ups, they can be approached by larger enterprises for an M&A offer. This can happen at any stage and some start-ups can decide to agree and become a part of a larger enterprise. Start-ups who have chosen this path, of course, will no longer exist as an independent company but as a department or a group company of another enterprise.
The Emergence of “Unicorns”
A “Unicorn” is a type of startup that is privately-owned with a valuation, or worth, exceeding $1 billion (¥100 billion yen). A lot of unicorns are platformers that lets buyers (demand-side) connect with sellers (supply-side).
Airbnb, for example, may be the most famous platform among these tech companies who were “unicorns” before their IPO. The buyer in this case are the tourists or visitors looking to rent a short-term place to stay, and the sellers are the owners renting out their properties on the site. In Japan, the first unicorn start-up in the recent era is Mercari, a mobile platform connecting buyers and sellers to transact used goods and products.
What types of startups are getting attention in Japan?
A start-up can be in any industry, and in Japan, the top industries that are most successful with start-ups are Fintech, HRTech, and HealthTech.
The graph below illustrates the top 5 industries with the highest estimated value in start-up companies in Japan based on Nikkei’s Next Unicorn data. This excludes AI, Software Development and High-tech Materials, as these industries are too broad and have too much overlap within other industries.
Fintech, or “financial technology” uses tech solutions for anything finance-related. You might not have heard of the word before, however, you’ll likely have heard of Paypal—the online payment service—as an example of fintech. It can cover things from mobile banking to online payroll and pretty much anything in between.
When talking about the fintech sector, one success story that should be mentioned is that of Origami, a Japanese fintech company with a cashless payment system visible in around 20,000 shops all over Japan. In 2018, they raised up to 6.6 billion yen in funds, making them one of the best-funded fintech start-ups in Japan.
HR Tech makes use of technology in company HR systems. In a country like Japan that’s notorious for offices with mountains of paperwork, HR Tech start-ups aim to make this aspect of business more efficient. Popular examples of HR Tech start-up companies in Japan are SmartHR for less paperwork when it comes to employee management, and freee for digitized payroll and expenses management.
Lastly, healthtech is a lot more straightforward—startups in this industry provide technological solutions through healthcare products or services. One example that seems almost straight out of a sci-fi movie is that of the Japanese healthtech startup, Cyberdyne. Founded in 2004, they came up with HAL: a wearable cyborg that helps patients who have been paralyzed regain their ability to move by using their brainwaves.
In addition, SaaS (Software as a Service) products are becoming more popular in recent years, to the extent that some professionals claim that the year 2018 is the “genesis of SaaS in Japan.”
SaaS is basically a cloud software you pay for via a subscription service to gain access. One of the most famous example of SaaS service worldwide is Dropbox. In Japan, investment to various SaaS start-ups is increasing rapidly over the recent years due to numerous inefficiencies that exist in many Japanese industries.
Although it seems that a lot of them are in the tech industry, start-ups aren’t limited to any one industry, as long as there is a demand for their product or their service, they can provide a solution anywhere.
What is it like working for a start-up in Japan?
The start-up work culture in Japan can be seen as something that breaks the norms of Japan’s typical work culture, where there are companies known for excessively strict practices. From unnecessary bureaucracy to power hierarchies and lack of transparency, these companies and practices are seen as something that “will not succeed in the modern world.”
So how does Japan's start-ups break these less-than-ideal traditions?
For example, at Mercari, Japan’s first unicorn start-up company, they emphasize that they “don’t get caught up in tradition and old rules”. With benefits for their employees such as a flextime schedule, language learning support, and paid honeymoon leave even for same-sex couples—things that traditional Japanese companies don’t typically consider for their employees—it’s already easy to understand why working at a start-up could be a good option for job-hunting students. Mercari has many global fresh grads coming into their office in recent years.
On the other hand, a quick look at the careers page for another company mentioned earlier, Origami, shows employees wearing casual clothes to work. Despite Japan’s traditional system that enforces uniformed black suits even during job-hunting, plenty of start-ups in Japan choose to go with more casual clothing in the workplace, which just goes to show how they break the mold of Japan’s traditions in more aspects than one.
How can I work for a start-up in Japan?
If you’re considering working for a start-up in Japan, a good place to start is Wantedly (yet another start-up), where various start-up companies post job listings from internships to full-time positions. You can learn about companies not just by reading about them, but also by seeing photos within the company and of their team.
Another option is to do research on names of start-ups in Japan—by going through websites such as TechCrunch Japan, where they publish news about start-ups all over Japan, or by looking through participating companies at Slush Tokyo, an event where start-ups in various industries gather—and because plenty of start-ups do recruiting through their own websites, you can apply for job openings this way, since start-ups are generally more welcoming of direct applications.
At the end of the day, the choice of where you’ll work is entirely up to you, however, start-ups can be great if you want to go beyond the traditional black business suit. You won’t just broaden your job options, but you can broaden your horizons as well.