A Comprehensive Guide to Japan Startup Cities

In recent years, Japan has experienced a notable rise in entrepreneurial activity, driven by the emergence of thriving startup cities across the span of Japan. These dynamic Japanese startup cities have become vibrant hubs of innovation, attracting ambitious entrepreneurs, investors, and support networks. With their distinctive characteristics and pivotal role in fostering innovation, these cities have significantly contributed to Japan’s economic growth.

In the following sections, we will examine the defining characteristics of Japanese startup cities, and explore notable examples such as Tokyo, Aichi, Nagoya and more to examine the initiatives and programs that have propelled their growth and also discuss the challenges faced by startups in these cities and the opportunities that lie ahead.

How have Japan startup cities immersed themselves in the entrepreneurial culture?

Japan, renowned for its technological advancements and rich cultural heritage, has traditionally been associated with large corporations and established industries. However, there has been a remarkable shift towards creating a more entrepreneurial and innovative environment in recent years. Recognizing the importance of startups in driving economic growth and employment opportunities, the Japanese government has implemented various initiatives and policies to support and nurture the startup ecosystem.

While the state of startups in Japan in 2023 is one of progressive growth across the country, it is within the startup cities of Japan that the entrepreneurial spirit within these cities has emerged as thriving centres of innovation, collaboration, and investment. They provide an environment that is conducive to the growth of startups, facilitating connections with like-minded individuals, access to essential resources, and increased visibility in the competitive market.

The significance of startups in Japan cannot be overstated. They serve as catalysts for innovation, not only by fostering the growth of startups but also by attracting top talent, investors, and industry experts. These cities act as vibrant hubs where ideas are exchanged, partnerships are formed, and groundbreaking technologies are developed. They not only contribute to the local economy but also enhance Japan’s competitiveness on the global stage.

Characteristics of Japan Startup Cities

Japan’s startup cities are characterized by a significant concentration of entrepreneurial activity. These urban areas have become the epicentres for innovation and business start-ups, attracting a diverse array of entrepreneurs from various industries. The strategic clustering of startups within these cities has created a dynamic environment that promotes collaboration, encourages healthy competition, and facilitates knowledge sharing – all crucial elements for fostering a thriving entrepreneurial ecosystem.

Similarities of Japan’s startup cities:

•  Concentration of entrepreneurial activity and innovation.
•  Attract entrepreneurs from various industries.
•  Promote collaboration, competition, and knowledge sharing.

Supportive infrastructure and resources in startup cities:

• Co-working spaces, business incubators, accelerators, and innovation labs.
• Government and private organizations provide funding, mentorship, and business advice.

Culture of collaboration and networking:

• Regular industry events, meetups, and conferences.
• Opportunities to connect with investors, experts, and thought leaders.
• Platform for strategic partnerships.

Availability of skilled workforce:

• Renowned universities and research institutions as talent pipelines.
• Supply of human resources for innovation and scaling.
• Presence of venture capitalists and investors for funding startups.

Japan’s startup cities are renowned for their culture of collaboration and networking. Regular industry events, meetups, and conferences provide invaluable opportunities for entrepreneurs, investors, industry experts, and thought leaders to connect and exchange ideas. These gatherings not only cultivate a sense of community but also provide a platform for startups to forge strategic partnerships, which can significantly accelerate their growth and success for how to start a company in Japan.

The availability of a skilled and talented workforce is another defining characteristic of Japan’s startup cities as renowned universities and research institutions within these cities act as talent pipelines, supplying startups with the human resources they need to drive innovation and scale their operations. Equally important is the presence of venture capitalists and investors who are drawn to these cities by the promising prospects of high-growth startups. Their investments provide the much-needed capital that startups require to expand their operations and bring their innovative ideas to market.

Shibuya: The Leading Startup City in Japan’s Startup Cities

Tokyo, Japan’s capital and one of the world’s most populous metropolises, hosts a vibrant and bustling startup ecosystem. Tokyo’s startup ecosystem is a vibrant and thriving environment, marked by a high density of startups, a diverse range of sectors, strong investment support, and a rich talent pool. This ecosystem is characterized by a high density of startups in Shibuya, which has earned a reputation as Tokyo’s startup hub.

Here, entrepreneurs, innovators, and creators congregate, giving rise to a dynamic and diverse mix of startup companies. Tokyo’s ecosystem is extremely diverse, with startups spanning various sectors such as technology, e-commerce, fintech, healthcare, and AI. Each of these sectors is supported by a vast array of networks, events, and co-working spaces, all designed to foster collaboration and innovation.

Top 10 startups from Tokyo’s thriving startup ecosystem

1. Preferred Networks: This Tokyo-based startup specializes in applying the latest artificial intelligence technologies to emerging problems in the Internet of Things (IoT). It has collaborated with major companies like Toyota and NVIDIA, and it was valued at over $2 billion in 2019.
2. Paidy: Paidy is a fintech startup that offers instant, monthly consolidated credit to consumers throughout Japan. It allows shoppers to make purchases online and then pay for them each month in a consolidated bill.
3. SmartHR: SmartHR is a cloud-based HR software provider that automates the complex and cumbersome paperwork associated with human resources. It’s become a popular tool for Japanese businesses looking to streamline their HR processes.
4. Money Forward: Money Forward provides online personal accounting for individuals, allowing them to easily manage their daily expenses by integrating with their bank accounts and credit cards. They’ve also expanded to offer cloud-based software for small businesses.
5. Spiber: Spiber is a biotech startup that’s developing synthetic spider silk, a lightweight and highly resilient material that has potential applications in industries from fashion to medicine.
6. Soracom: Soracom offers a cloud-native platform for the Internet of Things (IoT) that provides connectivity and data management solutions. It aims to democratize IoT by making it accessible and scalable for companies of all sizes.
7. BASE: BASE is a platform that allows individuals and businesses to open online stores for free. It’s become an essential tool for small businesses and entrepreneurs in Japan looking to start selling online.
8. Shiftall: This is a tech startup that specializes in AI and IoT devices. Their most famous product is the Charpy series of robots, designed to improve the quality of life for users.
9. Raksul: Raksul operates an online printing service that outsources printing orders to partner factories to provide lower prices. It was incubated in Tokyo and has become a well-known name in the industry.
10. Abeja: Abeja is a startup that uses AI and deep learning to provide business intelligence solutions. They are particularly known for their platform “Abeja Platform” which helps various industries to implement AI technologies more efficiently.

The city also boasts a strong presence of venture capital in Japan for firms and investors who seek support for startups. This has been bolstered by the government’s proactive stance towards innovation, with several initiatives in place to attract and nurture startups. Tokyo’s status as a global city means that startups based here have access to both domestic and international markets, further aiding their growth and development.

Furthermore, Tokyo’s startup ecosystem benefits from the presence of numerous world-leading universities and research institutions, which provide a steady stream of skilled talent. These institutions often collaborate with startups, providing them with the latest research and developments.

Top 5 initiatives and programs support startups in Tokyo, providing the resources and mentorship needed to grow and succeed:

1. Tokyo Metropolitan Government’s Support Programs: The Tokyo Metropolitan Government has launched several initiatives to support startups. For instance, the “Startup Tokyo” initiative aims to provide comprehensive support to entrepreneurs, from business planning to funding. Moreover, the “Tokyo Financial Award” recognizes fintech companies that contribute to Tokyo’s financial ecosystem.
2. J-Startup Program: The Japanese government’s J-Startup Program aims to promote startups with high growth potential. The program provides support in areas like business development, funding, regulatory reforms, and overseas expansion.
3. Startup Hub Tokyo (HUB Tokyo): An initiative by the Tokyo Metropolitan Government, HUB Tokyo serves as a base for startup support, providing consultation services, seminars, networking events, and a co-working space for entrepreneurs.
4. Plug and Play Japan: As part of a global innovation platform, Plug and Play Japan runs accelerator programs for startups in various sectors, providing them with opportunities for business development, networking, and pitching to investors.
5. Venture Café Tokyo: Venture Café Tokyo hosts weekly events where entrepreneurs, investors, and innovators can network and collaborate. They also run programs and workshops on entrepreneurship and innovation.

Nagoya: A Rising Startup Destination City in Japan’s Startup Cities

Nagoya, Japan’s fourth largest city, is making a name for itself as a burgeoning startup hub. The city is known for its strong manufacturing and industrial base, hosting global companies like Toyota, but in recent years, it has also been nurturing a vibrant startup ecosystem. Nagoya’s historic strengths in manufacturing, automotive, and aerospace industries provide a fertile ground for startups in these sectors. Many startups in Aichi and Nagoya leverage this industrial base, focusing on innovations in advanced manufacturing, robotics, and automotive technologies.

Nagoya is home to prestigious universities and research institutions, such as Nagoya University and Nagoya Institute of Technology. These institutions play a crucial role in nurturing talent and fostering research collaborations, and they often serve as a launching pad for tech startups. The local government has been proactive in promoting entrepreneurship. For instance, Aichi Prefecture’s startup support initiative offers various forms of assistance, including business plan competitions, funding opportunities, and business support centres.

Nagoya hosts several incubators and accelerators such as the Nagoya Startup Garage, which provide mentoring, funding, and networking opportunities for startups. Although still growing, the investment scene in Nagoya is showing potential. Local and regional venture capital firms, as well as angel investors, are increasingly investing in Nagoya-based startups. There are numerous networking events and communities for startups in Nagoya, such as the Monthly Pitch Event by Startup Cafe Nagoya and the Nagoya Startup Meetup. These events offer platforms for entrepreneurs to connect, share ideas, and collaborate.

5 initiatives and policies the government in Nagoya, including the Aichi Prefectural Government and Nagoya City Government, has implemented to promote entrepreneurship and support the growth of startups:

1. Aichi Startup Support Program: The Aichi Prefectural Government offers a comprehensive startup support program that includes business plan competitions, seminars, and networking events. The program also provides funding opportunities and business support centers to help startups succeed.
2. Nagoya Startup Garage and Nagoya Innovation Hub: Nagoya Startup Garage is a government-backed incubation program that provides startups with coworking spaces, mentoring services, and opportunities to pitch to investors. The program is designed to help startups refine their business models and accelerate their growth and the platform is created by the city government to connect entrepreneurs, investors, and innovators. It hosts events, provides information on funding opportunities, and offers support for startups seeking to commercialize their technologies.
3. Startup Visa Program: To attract international entrepreneurs, the Nagoya City Government provides a startup visa, which allows foreign entrepreneurs to reside in Japan while they establish their businesses. This program is part of a broader national initiative to foster entrepreneurship and innovation.
4. Startup Subsidies in Japan : The government offers various subsidy programs for startups, especially for those in designated industries such as advanced manufacturing, robotics, and ICT. These subsidies can cover expenses related to business establishment, R&D, and equipment acquisition.
5. Station AI: Expected to be the largest incubation facility in Japan, it will help in accelerating the ecosystem of investments and partners that are crucial for startup success. Nearby universities in organization will also benefit from the new facility as they will have the platform to research and develop their ideas into businesses.

Fukuoka, Kobe and Sapporo: The next generation of Japan’s Startup Cities

As Japan continues to foster entrepreneurship and innovation, several cities outside of Tokyo, including Fukuoka, Kobe, and Sapporo, are emerging as vibrant startup ecosystems. Here’s a brief overview of each:

Fukuoka

Fukuoka is often referred to as Japan’s fastest-growing startup city. The Fukuoka city government has been particularly proactive in supporting startups, offering a variety of initiatives such as The Startup City Fukuoka initiative, which provides support in areas like funding, business establishment, and networking. The establishment of Fukuoka Growth Next, a startup support facility offering coworking spaces, event spaces, and business support services and the implementation of a startup visa system to attract foreign entrepreneurs.

Kobe

Kobe, a port city with a history of international trade, has leveraged its geographical advantage and diverse culture to foster dynamic startups in Kobe. The Kobe Startup Office provides free office space for startups, networking opportunities, and startup events. Kobe Biomedical Innovation Cluster, an advanced medical research hub that hosts over 300 companies and the city also collaborates with local universities and research institutions to promote entrepreneurship and innovation.

Sapporo

Sapporo, the largest city on the northern island of Hokkaido, is known for its tech startups, particularly in the fields of IT and software development. Startups in Sapporo are characterized by the Sapporo Startup Hub, which provides support for entrepreneurs, including coworking spaces, mentoring, and networking events. The city’s strong ties with local universities help to foster a culture of entrepreneurship and provide a steady stream of talent and the annual Sapporo Venture Festival hosted by the Sapporo Startup Hub attracts startups, investors, and entrepreneurs from across Japan for networking and business pitch sessions.

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Factors contribute to the growth and vibrancy of the startup ecosystems in Fukuoka, Kobe, and Sapporo, making them attractive destinations for entrepreneurs and startups. Despite their geographic and cultural differences, Fukuoka, Kobe, and Sapporo share several common traits that contribute to their thriving startup ecosystems:

• Government Support: All three cities have proactive city governments that have implemented policies and initiatives to support startups and foster innovation.
• Startup Hubs and Facilities: Each city has established dedicated startup support facilities that offer services like coworking spaces, networking events, and business support services
• Collaboration with Local Universities: All three cities have strong ties with local universities and research institutions, fostering a culture of innovation and providing a steady stream of talent.
• Focus on Specific Industries: Each city tends to focus on specific industries based on their strengths and resources. For instance, Kobe has a strong focus on biomedicine, while Sapporo is known for its IT and software development startups.
• Startup Visa Programs: Fukuoka and Kobe have implemented startup visa programs to attract foreign entrepreneurs, demonstrating an openness to international talent and ideas.

3 startups that showcase regional success:

Fukuoka: Note, Inc

Note, Inc. is a social networking platform that allows users to publish and share their notes with others. The platform is designed to provide a space for people to express their creativity and share their thoughts and ideas. Note was recognized as one of the “Next Unicorn Companies” by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange in 2020.

Kobe: Whill, Inc.

Whill, Inc. is a personal mobility startup that designs and produces personal EVs (electric vehicles) for those with difficulty walking. Whill’s mobility devices are sleek, sophisticated, and maneuverable, transforming how people with mobility issues navigate the world. The company has won multiple awards, including the CES 2018 Best of Innovation Award.

Sapporo: Cluster

Cluster is a virtual reality (VR) startup that allows users to host and attend events in a virtual space. Users can customize their avatars, explore different spaces, and interact with other users in real-time. The company aims to redefine how people socialize and connect online.

These startups showcase the diversity and innovation present in the startup ecosystems of Fukuoka, Kobe, and Sapporo, spanning industries such as social networking, personal mobility, and cloud technology.

Challenges and Opportunities in Japan Startup Cities

Japanese startups face unique challenges that stem from cultural, linguistic, and regulatory aspects. The traditional preference for stable, long-term employment manifests in a risk-averse culture that can hinder the spirit of entrepreneurship and innovation. This cultural challenge is compounded by limited access to funding, particularly for early-stage startups, as Japan’s startup ecosystem in 2023 lags behind other major economies.

Challenges faced by Japanese startups:

• Cultural challenge: Preference for stable employment and risk-averse culture hinder entrepreneurship and innovation, giving rise to the adoption of influencer marketing in Japan.
• Limited access to funding, especially for early-stage startups.
• Language barrier: English is not widely spoken, causing communication difficulties.
• Complex regulatory environment: Time-consuming procedures and unfamiliarity for foreign entrepreneurs.

Government initiatives to support startups:

• Regulatory reforms to facilitate business operations, such as eased regulations on IPOs in Japan.
• Establishment of government-backed venture funds and tax incentives for investments in startups.
• Programs promoting entrepreneurship among the younger generation.
• Introduction of the “Startup Visa” program to attract foreign entrepreneurs.
• Local governments offer English language services for international entrepreneurs.

Opportunities in the Japanese startup landscape:

• Strong legacy in technological innovation and R&D capabilities.
• Potential in sectors like robotics, AI, electronics, and biotech.
• Aging society presents opportunities for healthtech and fintech startups.
• Growth and expansion of the startup ecosystem beyond Tokyo to other cities like Fukuoka, Osaka, Nagoya, Kobe, and Sapporo.
• Increasing globalization with foreign startups entering Japan and Japanese startups expanding worldwide.
• Emphasis on sustainable development creates avenues for cleantech, renewable energy, and sustainable mobility startups.

The startup ecosystem, under the government’s active support, is evolving and expanding, creating opportunities for startups across a wide range of sectors. This growth is not confined to Tokyo, the traditional epicenter of the startup scene, but is also noticeable in emerging startup hubs like Fukuoka, Osaka, Nagoya, Kobe, and Sapporo. 

Alongside, there’s a growing trend of globalization with Japanese startups looking to expand worldwide and foreign startups entering the Japanese market, leading to a rich exchange of ideas and technologies. Japan’s emphasis on sustainable development also opens avenues for SDG’s in Japan and startups in cleantech, renewable energy, and sustainable mobility.

Final Thoughts

Startup cities are pivotal for Japan’s innovation and economic development. While Tokyo has been a traditional hub, cities like Fukuoka, Osaka, Nagoya, Kobe, and Sapporo have emerged as vibrant entrepreneurial centers, cultivating innovative ideas and businesses. The government’s support in easing regulations, providing funding, and promoting entrepreneurship, coupled with increased globalization and internationalization of the startup ecosystem, is attracting foreign startups and investors. This not only enhances regional economic development but also bolsters Japan’s global startup standing.

Despite challenges, the future of Japan’s startup ecosystem is promising. The government’s commitment to improving the business environment, the country’s robust technological capabilities, and societal challenges driving innovation bode well for the ecosystem. The emergence of startup cities across the country, not just confined to Tokyo, suggests a decentralized growth model that could lead to a more diverse and resilient startup ecosystem. As these cities continue to evolve, they could become innovation hotbeds, nurturing startups that could be the game-changers of tomorrow, further fortifying Japan’s position in the global startup landscape.

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