Japanese-American entrepreneur William Saito: I only bet on those who have failed

At Creative Lounge Mov, a popular co-working space in Tokyo’s trendy Shibuya district, a chorus of keyboard strokes fill the air as mostly 20-something programmers and designers attempt to build the next big thing. Despite less than flattering accounts of Japan’s startup culture (or, rather, lack thereof), young entrepreneurs have flocked to Mov. Monthly memberships – which range from about US$200 for an unreserved lounge seat to over US$1,200 for a private booth – are sold out.

Japan is sometimes criticized for not having a home-grown Google or Facebook, but if the country ever does produce something of that scale, it will probably come from someone like the T-shirt and jeans-clad creatives who occupy Mov. Surely serial entrepreneur William Hiroyuki Saito hopes so – Mov is just one of more than 25 companies the Japanese-American computer whiz started, invested in, or helped in some direct capacity since launching his first computer software business at the age of 14.

Saito, a California native whose parents were born in Japan, spent his summers interning with some of Japan’s biggest tech firms during the glamor-and-glitz of the 1980s bubble era. Through those early connections, he was able to land contracts with the likes of Fujitsu, NEC, Sony, and Toshiba. After some youthful failures, Saito found his true calling in biometric security. He was named Ernst and Young’s Entrepreneur of the Year in 1998.

After selling his company to Microsoft in 2004, he relocated to Japan with the goal of giving back to the next generation and reawakening Japan’s entrepreneurial spirit. He founded InTecur, a venture capital and technology consultancy firm, the following year. Since then, Saito has collected superlatives, university teaching posts, and seats on the boards of numerous foreign companies trying to establish themselves in the Japanese market and domestic companies hoping to expand globally. He was appointed as a special adviser to Prime Minister Abe’s cabinet in 2013 – a move that made him the country’s de facto “cyber czar,” among other things, as well as the English-speaking face of Abenomics.

Tech in Asia recently spoke with Mr. Saito about the state of Japan’s startup ecosystem, what’s holding it back, and how it can eventually thrive.

Are more young people in Japan passing on the big names and joining startups?

Saito: Well, it depends on where you look. The Mov co-working space is sold out and can’t take any new memberships, so that shows you the amount of interest and hunger for a place like that. Our foundation, IMPACT Japan Foundation (IJF), is also working with Tokyu Group to build the next generation building across the street, which will have four times as much space. IJF is also building our own building to support entrepreneurs in the Tohoku area in Sendai right now, to be completed by December.

In places that have had disasters, for example, people are more amenable to starting ventures. Historically, Japan has been that way. [Disaster] has been a catalyst for a lot of companies. If you look at Sony or Honda, these were postwar. Rakuten was after the Kobe earthquake. My bet here, for building this in the Tohoku area, is because there is a sense that things can’t fail any worse, that naturally you’d expect to see a lot of entrepreneurs coming from there.

Some of Japan’s biggest tech firms took a gamble on you when you were a teenager. I don’t see anything like that happening today. Why not?

Saito: I think corporations are more averse to failure now than during the bubble years. You have these salarymen that just go up the escalator with no real leadership experience, so they don’t want to go out on a limb necessarily – everyone was cost cutting – especially in a deflationary climate.

I really believe that there’s a one-for-one connection with the amount of drinking money a company spends and its stock price, because one of the last few venues where Japanese could truly communicate was [at the bar] after five o’clock, with beers. When you cut that budget, more people don’t communicate with each other, hence you see large companies having limited communication, becoming conservative and inward looking.

The ability to take risks and weather a few losses before you pick a winner has also greatly diminished. There’s something wrong when, since 1971, 11 industries in Japan have had no change in leadership. That could either be to the credit of strong Japanese companies or having no real competition – I think it’s the latter. You don’t see a replenishment of large companies by smaller companies, therefore these big companies just tend to degenerate over time.

You mentioned Japan’s negative attitude toward failure. Why is that mindset so prevalent here?

Saito: People are so adverse to failure that they tell you you’d be crazy to start a company because if you fail you could lose your house and screw up your family – it’s pretty risky here.

What tech-related sectors are you watching and investing in and why?

You were raised bilingual. How important is being able to speak English for a Japanese entrepreneur?

You’re involved with the Code.org foundation. How has it been received in Japan?

A lot of your own work has been with biometrics. We’ve even got fingerprint scanners built into our phones now. Are we on the cusp of a biometrics boom?

Will there ever be a “Silicon Valley of Asia” and can Japan create it?

If diversity is the US’ greatest strength, what is Japan’s?

You had a lot of success in the US. Why didn’t you stay in California?