Entrepreneurship is now ‘becoming cool in Japan,’ says 500 Startups’ James Riney

James Riney, 500 Startups’ Japan boss, spoke this morning at Tech in Asia Tokyo 2016 about how the country’s startups scene is reshaping technology. Photo credit: Tech in Asia / Michael Holmes.

Only US$1.2 billion was invested into tech startups in Japan last year compared to US$72 billion in the US, observes James Riney, a partner with 500 Startups in Tokyo. Judging by the relative size of the economies, Japan should be seeing over US$10 billion in startup funding each year.

That’s part of why he refers to Japan’s startup industry as a “black box” – many outsiders don’t understand what’s going on inside. The issue is complicated by its small size and a lack of new startup giants making a name for themselves overseas – like Uber from Silicon Valley, Xiaomi from China, or Flipkart from India.

But all that will change soon as the tide turns.

“Entrepreneurship is becoming cool in Japan,” James said today speaking onstage at Tech in Asia Tokyo 2016.

That means the old corporate mentality is fading away. “Before, smart people didn’t really do startups. Smart people would join Sony. They would join Mitsubishi. They played safe. Well, that’s changed.”

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The evidence of this change can be seen at two of Japan’s top universities, where the number of startups created on campus each year has doubled.

“If you look at Google search trends for kigyou shitai – literally ‘I want to start a company’ – from 2011 to 2014, it’s been fairly flat. Then look what happened in 2015 – and what happened in 2016,” James said, pointing to a projected slide during his 10-minute keynote session. “Clearly, we’re seeing a change in mindset. We’re witnessing a movement. So much is changing.”

Pictured earlier today, a woman tests out a VR game made by a Japanese startup at Tech in Asia Tokyo 2016. Photo credit: Author / Tech in Asia.

The turning tide is also seen among the Japanese startups that are finally emerging. They’re not doing what young companies did years before, rushing to an early IPO and then dulling their innovation and growth as they appease the short-term interests of shareholders, James says. Now they’re seeking to remain independent by raising funding from investors.

But that transition is still at an early stage. About 80 percent of company “exits” happen through an IPO in Japan, in contrast to 80 percent through a merger or acquisition in the US, James pointed out during his keynote.

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He’s one of the investors changing how young tech companies operate in Japan. He’s the Japan boss for 500 Startups.