Peter Thiel’s Asia fund to Japanese startups: Stop thinking local

Jeff Lonsdale, managing director, Asia, Founders Fund / Photo credit: Tech in Asia / Michael Holmes

SoftBank Group, one of the world’s biggest tech investors, may be based in Japan. But its home country’s startup scene has been relatively muted compared to neighboring China and Southeast Asia.

This can be partly explained by how the Japanese hold large, established corporations in such high regard. But this traditional perspective needs to change, according to two prominent investors speaking onstage at Tech in Asia Tokyo 2018.

Respect the old

When James Riney, managing director of 500 Startups Japan, quit his job at JPMorgan Chase in 2012, he recalls that his Japanese friends were “very worried” for him. In contrast, his American friends rallied behind his decision and told him to “go become Steve Jobs.”

“In American culture, specifically in Silicon Valley, there’s this underlying energy and encouragement for the underdog. Whereas in Japan, you have some of the world’s oldest companies because [people] want to preserve them instead of breaking them down and starting from zero,” explained Riney.

James Riney, managing director of 500 Startups Japan / Photo credit: Tech in Asia / Michael Holmes

But in recent years, Japan has become more open to entrepreneurship, observed Jeff Lonsdale, managing director of Asia at Founders Fund, the venture capital firm that Peter Thiel set up with some of his PayPal co-founders and other well-known tech entrepreneurs.

Still, Japan has its work cut out if it wants to catch up with places like Silicon Valley and China, where startups have been booming for the last decade. And the key to the country’s growth is to look beyond its own borders.

Stop hyperlocalizing

It may be easy for Japanese startups to fixate on their home market as there is much to capitalize on in the world’s third-largest economy.

“Japan is a a US$5 trillion market. It’s significant, and [companies] could have a very good result if they dominate part of that market. But being able to go into other markets to show that they are thinking more globally from the start would be a way to avoid getting locked in pattern that only focuses on Japan,” suggested Lonsdale.

There are reasons to take his advice – if Japan wants to continue growing, that is. Tech giants in China, which overtook Japan as the world’s second-largest economy in 2011, have been marching aggressively into foreign territories including Japan. Among them are ride-hailing firm Didi Chuxing and fintech titan Ant Financial.

Before going overseas, Japanese founders could look at what their unfair advantage is and build on it. The secret, according to Lonsdale, may lie in the dilemma that the country faces: an aging population and a shrinking labor force.

“People in Japan are really pro labor-saving technology,” said Lonsdale. “In other parts of the world, there’s a fallacy where people don’t understand that there will be jobs in the future. They worry about jobs running out. Whereas Japan is aging, so people really want labor-saving technology.”