Translated by Google, shamelessly adjusted and boldly commented by Adrien [AB] Disclaimer: Important Remark before reading: The LinkedIn Word editor has limitations, and I found…
Translated by Google, shamelessly adjusted and boldly commented by Adrien
[AB] Disclaimer:
Important Remark before reading:
The LinkedIn Word editor has limitations, and I found this document would be better used if shared in editable format. So here is the link to the google document. And here is the original in Japanese that I restructured word-editor-wise to make it easier to read.
You are welcome to comment on it. It could be a way to give feedback officially if many of us have something of value to share.
Or, you can most likely duplicate it and clean it up yourself with your own commenting style. I tried my best to make it usable.
Or you can just read the article in here but be aware that it's a 13,000 words document. Google will be better to give you a comfortable reading experience.
Although I tried to throw some comments over, I still have a lot to say about this 5-year plan, but things can change, and the government can too. Maybe very soon. So what will be put into practice, really? I wonder. But there is still certainty that tackling all the issues mentioned in the plan and building a digital, investment-friendly environment is a matter of national security, and this will happen one way or another.
I know my work is far from perfect, and I hope you got the essentials of it in terms of Japan strategy and tactics from what I write on my own and that I detail in my articles such as this one.
I have a couple of disagreements with this plan:
There is a white paper mentioned somewhere that we could also read and detail. But that will take way more time.
Don't forget to follow the links to different references, such as government bodies, agencies, and newslets.
You can also spend time researching, binging, and safariing for some of the organizations mentioned but not linked to.
In all fairness, I thought that "package" was really interesting, had a lot of potential for change, and was probably widely anticipated. Thus, "Hurrah!" But putting all of this into practice while coordinating practices and specific policies among the various ministries involved will either make this an actionable, a procedural, or a negotiation nightmare.
The Hojokin consulting industry won't be as necessary if procedures are sped up, made easier, and widely publicized. But I have my doubts.
In conclusion, all is well. Now let's not get ahead of ourselves and get overexcited, as I happen to be, and wait and see how it unfolds, but be prepared.
That's all for today 🙂.
[AB]:It's intriguing to focus on the EU and the US, and it's perfectly understandable and warranted from a geopolitical standpoint. However, having lived in France, Canada, and China, as well as seeing the phenomenal growth of everything IT and startups in India, I would encourage us to monitor and assess digital ecosystem-related policies in Eastern, Southern, and even Southeastern Asia. Just to observe how these lesser-known ecosystems are dealing with digital transformation. There's a lot going on over there.
However, the US startup scene motivated us all in the early days. That is a fact as well as a starting point for new ecosystems in the making. But a starting point nonetheless.
[AB] For those still wondering about open innovation: When a business actively seeks out feedback, suggestions, and ideas from consumers, suppliers, and other outside parties, it is engaging in open innovation. This strategy for innovation is distinct from the more common practice of keeping new ideas and technology within the company.
Crowdsourcing, licensing, and collaboration with other businesses are all examples of open innovation. Companies can use open innovation to get access to cutting-edge ideas and technology, reach new markets and customer bases, and form profitable business partnerships and alliances.
In today's ever-changing business climate, open innovation may be a useful tool, but it must be carefully managed to ensure it supports the company's overall strategy and objectives.
[AB] Here are five possible benefits of open innovation for small and medium-sized businesses (SMEs):
It's a little theoretical, but you get the idea.
I mentioned SMEs for a very opinionated reason: DX will happen and thrive by, with, and through them.
5. Against this background, this year will be designated as the first year for the creation of startups, and a second startup boom following the post-war founding period will be realized. To that end, we will create an ecosystem that fosters startups in Japan by accelerating the launch of startups and promoting open innovation by existing large companies.
[AB]: This sounds like a formal declaration of support for entrepreneurship-related national transformation. Resembling a startup manifesto, which is encouraging to all of us, entrepreneurs of any company size.
6. In creating the startup ecosystem, we will not fall into the Galapagos way of thinking, but will have the perspective of creating startups that boldly challenge the global market.
[AB] This strange expression (Galapagos way of thinking) refers to the Galapagos Syndrome which you might want to know more about. To put it simply, the Galapagos syndrome, often referred to as the "Japan syndrome," is the phenomenon in which businesses or goods become isolating and inward-looking in the home market, which ultimately results in a lack of competitiveness in the international market. This is a word that is frequently used to describe items or firms that are popular in Japan but have a difficult time gaining momentum in other nations.
The Galapagos Islands are where the phrase "Galapagos syndrome" originated. These islands are famous for their one-of-a-kind and remote habitat. The comparison shows that, like the unique and different animals that can only be found on the Galapagos Islands, businesses or products that are made in isolation may find it hard to adapt to the many settings and market conditions that exist outside of their local market.
Galapagos syndrome is a term that is commonly used in reference to Japan. In this context, it refers to businesses that have a significant presence on the domestic market but are unable to replicate their success in other countries due to their concentration on the unique requirements and preferences of the Japanese market. This could lead to the production of goods or the delivery of services that are inappropriate for international trade, which would reduce competitiveness and make it challenging to enter new markets.
What does it mean for all strong-minded, able, and willing foreign entrepreneurs? Massive opportunities for bringing ideas and cultural context to Web and mobile applications and SaaS; countless industry areas where our arts can be performed; and a greater, wider, and deeper level of involvement in the future of Japanese society and ours.
This is a very special time for bright foreign individuals willing to make it happen here.
7. So far, we have established a minister in charge of startups, clarified the unified control tower function for implementation, and have set a record-largest ¥1 trillion budget for comprehensive economic measures and a supplementary budget to overcome high prices and realize economic revitalization this fiscal year. A Cabinet decision has just been made on budgetary measures aimed at nurturing startups, and while making use of this, the perspectives of building human resources and networks, providing funds for business growth, diversifying exit strategies, and promoting open innovation are being considered. Therefore, in order to fully mobilize policy resources over many years, we will compile an overall picture of Japan's startup development measures by the public and private sectors as a five-year plan.
[AB]: 1 trillion equals today's [Dec. 18, 2022] USD 7.3 billion (very roughly).
So who is the Japan minister "in charge of startups"?. Here is the answer detailed in Japan News, Japan Times. It's already old news, but this set of measures might be made contingent on Economic Revitalization Minister Daishiro Yamagiwa's freedom of action.
JDSupra has a piece here. [I can't really recommend this site just yet, but the essay is worth reading for two reasons:
Reason 1: It provides a closer look at a (surprising to me) emphasis on NFTs, which I encourage to view as potentially limiting because it means freezing a unique (before AI comes up hustling and disrupting the disruptor) work of art, for example, on the blockchain while forgetting that AI is changing everything in the creation process making. This specific NFT being endlessly customizable, it develops then an unlimited degree of alternatives rendering unique ownership on the blockchain already outdated as a process and artist for example absolutely hopeless in preserving their art inclusion in fresh and endless "item production".
If I place NFTs in the perspective of AI generated images, I would say that the focus on it is a bit late, since the way we can develop art inspired by great painters using AI tools will most likely make NFTs obsolete.
However, if I think in terms on online gaming, virtual real estate, and "physical" art, there are potential industries in the making.
Reason number two is the long-awaited support for Web3, blockchain, crypto, and DAO-friendly rules. This is something I'm going to have to keep an eye on. Not just in terms of analyzing good-hearted policy suggestions but also in terms of actual actions on the ground: subsidies [Hojokin], tax breaks, loans and guarantees, ecosystem support, and so on.
It has the potential to be a game changer in terms of attracting not only Japanese investors but also protecting local entrepreneurs' freedom to build and experiment in blockchain/crypto-related fields without the constant hanging Damocles sword controlled by finance and tax regulators' suspicious attitudes of any crypto-related new businesses.
Let's take a closer look at the measures outlined in this point 7 and in more detail below.
[AB] Although I may be stepping outside of my "attributed" zone, I believe it might be time for us to work together to support, suggest, comment on, and even alarm the "startup officials" about specific non relevant measures. We can accomplish this by getting together, sharing our personal building experiences, and providing them with useful feedback so they can take appropriate corrective action if they see fit.
It must be done politely, and our counsel must be delivered in a way that demonstrates deference and consideration.
2. Regarding goals, it is important to focus not only on the “number” of startups (the number of businesses opened), but also on the growth of the startups that have been established, that is, on the “expansion of scale.” Therefore, we focus on the amount of investment in startups as an indicator that includes the absolute number of startups and the expansion of the size of the startups that have been founded.
[AB]: All this seems appropriate and obvious. However, as one set of KPIs applies to a specific startup or industry, another set of KPIs should apply to the authorities' way of witnessing and addressing progress, imagining improvements, and reducing or changing what does not work for startup and scaleup progress.
The effectiveness of a startup development strategy and how well it promotes digital transformation and entrepreneurship in a nation can depend on a variety of factors. Ten potential areas of focus for a government in such a plan are listed below:
Okay, I get it; "These are too obvious too." So let's try to delve a little deeper and list 20 more potential KPIs that are unique to Japan in its quest to escape the "galapagos syndrome," which has prevented the nation from regaining its former international brilliance for too long [beware, it could be viewed as too "foreigner" centric, sort of].
3. Five years: 360 billion yen (2017) → 820 billion yen (2021). By doing so, we will set a major goal of increasing the scale by 10 times (to 10 trillion yen) in 2027, five years from now, and we will promote joint efforts by the public and private sectors.
[AB] So we are talking about USD 73 billion through 2027. Naturally, more details on repartition would be beneficial.
4. Furthermore, in the future, by creating 100 unicorns and 100,000 startups, we aim to make Japan the largest startup hub in Asia and one of the world's leading clusters of startups.
[AB] That's great news; that's huge; and it's a terrific purpose, but getting there will be a lot of work, and we are contemplating a very long journey ahead of us to reach those goals, or I haven't a clue what I'm talking about.
To me, it still seems like a 15-year game, no less, to deal with.
And even after 15 years, there is still no assurance whatsoever. But it is undoubtedly the sort of higher purpose that I enjoy assisting with in my modest ways. But we shouldn't think that the goal of getting 100 unicorns in a short amount of time is possible unless it's a "Ganbatte" slogan. 2027 is tomorrow already.
I have some reservations even about the 100-unicorn target's viability altogether and am not a big fan of the unicorn craze. Though it may not be possible in the long run given that we live in a world that is perpetually disrupted, I would prefer to see goals like creating 100,000 profitable and sustainable small startups (or, better yet, digitally transformed, or peacefully acquired and then digitally transferred) businesses.
Here's a Statista infographic to help us "pour a little water in our wine," as the French that I am would say.
Another map here, and another India perspective here.
Does that render the objective pointless? The Marshall Plan-style action plan with Japan's digital education, digital entrepreneurship dissemination, and ecosystem development and deployment training and support would require 5 to 10 times the amount suggested to invest at the national level, but if you were in charge of making it happen, it would give you some perspective between facts and fiction. I may be mistaken, my attempts to interpret may be excessive, and my ability to see things from various angles is undoubtedly constrained. So please accept my apologies if my conclusions are too limited. In any case, this 5 year plan is more than exciting in terms of perspective.
Even more controversially, unless you agree with me that omicron now resembles the flu, I'd try to compare something that is obviously difficult to do: USD 73 billion for a 5 year "sort of Marshall" plan to a USD 317 billion budget for Covid.
Before you go ballistic on me, but maybe I deserve it, I understand the sensitivity of the topic, and I know that all of this enormous budget is not only affected to new shots and other directly related health initiatives and expenses. Still, it's huge and demonstrates that going Marshall is possible and really necessary for the digital world in an SME context since they are more or less the only ones that can recruit enough.
However, because there are so many societal, social, economic, and health (aside from Covid) problems, and because the government's coffers aren't inexhaustibly deep, I'll say that the efforts are already fantastic and I won't complain in any way. You can definitely relax.
Okay, not much more can be said at this point. It suggests a different kind of KPI that will probably be talked about in more detail below.
2. is only 5.1%, compared to UK2 the rate of business exits is also 3.3%, compared to 8.5% in the US and 10.5% in the UK3.
3. First of all, in Japan as well, we will foster a large number of people who will lead startups and accelerate their start-ups. Therefore, in order to discover and nurture young human resources with excellent ideas and technologies, we will work to develop practical entrepreneurs by utilizing not only domestic but also overseas mentors and educational institutions. In addition, we will develop human resources who will be responsible for starting up startups in Japan, such as sending young human resources to countries around the world for training, and build a global network of such human resources.
[AB] Most likely, the incubators, accelerators, venture studios, angel associations, and VC organizations could get some help from the government at some point, either in the form of direct investment or help with running the programs. Let's read on.
4. the 1980s, but4(2019)5 startups trending ($30 billion in 2008 → $60 billion in 2015)6. In other words, support for promising companies is increasing, playing a major role in nurturing startups.
5. Therefore, in Japan as well, we will work to expand the supply of funds, including public capital, in conjunction with securing the leaders of startups. For this reason, in addition to fostering domestic venture capital, efforts will be made to attract overseas investors and venture capital. In addition, from the perspective of diversifying the business development and exit strategies of startups, centering on deep-tech startups that take time to grow, the government will promote the development of an environment related to stock options and the expansion of public procurement for startups.
[AB]: Undoubtedly, it will help. Let's read some more.
6. From the perspective of open innovation, the amount of investment in start-ups by business companies in Japan is extremely low compared to the United States, China, and Europe (US$ 40.2 billion, China US$ 11.5 billion, Europe US$ 9.0 billion). US$, Japan US$ 1.5 billion (2020))7. Also, the number of M&A deals with startups in Japan is extremely low compared to Europe and the United States ( 1,473 in the US, 244 in the UK, 60 in France, 49 in Germany, and 15 in Japan (2020))8.
7. When considering startup exits, focusing on the ratio of M&A and IPO, M&A accounts for 90% in the United States, while IPO accounts for 80% in Japan, indicating an overwhelmingly high ratio of IPO9. It is required to increase the ratio of M&A.
8. In this way, acquiring startups is important both as an exit strategy for startups and as a measure to promote open innovation by existing large companies. It is important to promote the development of an environment to promote innovation.
9. Based on the above, in this five-year startup development plan, we will promote the following three major initiatives as an integrated effort.
-(1) Building human resources and networks for creating startups
-(2) Strengthening funding for startups and diversifying exit strategies
-(3) Promoting open innovation
[AB]: great. Not much of a comment, I know.
10. In addition, the fact that public support has been provided is certification for startups that have received support. It is said that it will play a role of effect (approval) and stimulate further private investment. The Cabinet has already approved the largest ever budgetary measure (approximately 1 trillion yen) for the development of startups as part of the recent comprehensive economic measures. The government will continue to mobilize all policy resources and make efforts to realize a major direction in the public and private sectors while conducting follow-up.
11. Regarding deep tech, which is a new industrial field that can become the core of the next-generation industry, we will clarify the priority fields. In addition, the government will strengthen initiatives related to entrepreneur education and startup creation support that specialize in individual deep tech fields such as agriculture and medicine.
12. Tax measures will be considered in the future tax reform process.
[AB]: We are totally aligned on this. Next, it must be structured. Probably later on, since I haven't found it in this document.
[AB]: It's exactly what we have been advocating in "Project 15: 3-Generations." There is a lot to say about this, but in another article. However, I've witnessed many private initiatives for kids' CS learning, and youth app development learning programs. All of this is being built as independent franchises rather than global and transferable initiatives. There is maybe something we can do to harmonize this for local economic development areas' direct implementation.
4. In addition, the government will improve the framework for providing support to those who are actually trying to start a business so that they can effectively connect their technology and knowledge to business.
[AB]: not sure what it means concretely. But we'll probably know this later on.
5. As an organization to support startups, “incubators” that lend facilities and equipment to startups are gradually being established in Japan. It is becoming clear that it is essential for people with entrepreneurial experience to act as “mentors” (advisors) and provide detailed advice.
6. receiving support from “accelerators” that provide mentoring can succeed (acquire or exit) earlier than startups that do not receive support12 startups.
7. These suggest that accelerator mentors are able to provide useful information to startups support from mentors in Japan is still limited, so it is necessary to secure such opportunities.
8. For this reason, we will promote the following specific efforts to build human resources and networks for the creation of startups.
[AB]: to better understand this part, I'll need to delve into the IPA website and try to understand which is the demographics they are referring to. 500 people a year seem really low except if we refer to educators that will be in charge of disseminating digital education. I'm not sure I got this right.
[AB]: well… ok.
[AB]: I don't really get the interest in a world where so many drop out can become successful entrepreneurs. They understand how direct experience is far more beneficial than extremely expensive degrees. But it's maybe another type of program I don't know about. I have an MBA; I understand its purpose, curriculum, and limitations, and I seriously doubt it can help aspiring entrepreneurs. However, it may be useful for those looking for theoretical knowledge.
[AB]: That is the kind of project that makes me excited because there are treasures to be found here.
[AB]: These are really great points for bringing digital entrepreneurship and support to students via universities.
6. In addition, for elementary, junior high and high school students, we will establish a new support program for entrepreneurship education by inviting entrepreneurs as lecturers, and expand the implementation of entrepreneurship education for elementary, junior high and high school students that utilizes class hours such as comprehensive studies.
[AB]: count me in.
7. schools and technical colleges that systematically engage in entrepreneurial education, and for elementary, junior high and high school students with high abilities in the STEM field, .we will strengthen support for educational opportunities for high
8. Currently, 16,000 university and graduate students and 1,400 high school students are supported to study abroad annually. In addition to the fact that there are more people in Japan, it is meaningful to have junior and senior high school students also study abroad and gain learning experiences overseas, etc., in order to spread the entrepreneurial spirit in Japan. For this reason, we aim to expand support over the medium to long term.
[AB]: It looks to me that those measures and many others are blurring lines between ministries' areas of responsibilities. Those last measures would probably come more from the education ministry unless the "startup" ministry is cross-ministry. It is important to follow up on this since there will be opportunities to participate in the global effort.
[AB]: probably a translation issue, but I'm not sure what it really means.
[AB]: All this looks nice. I don't have much to say.
[AB]: This is very exciting news.
[AB]: ok, does not look groundbreaking, unless I'm mistaken.
[AB]: Everything that was mentioned is what we were hoping would occur. Great news.
[AB]: This is a valid point. In most cases, failure is expected in the startup world. It won't seem to make us outcasts anymore.
[AB]: Please refer to the article's notes at the bottom. Sorry again for the poor translation.
[AB]: All good points. Let's see below where we are getting at.
[AB]: That are tremendous news. Potentially game changer for those of us obsessed in supporting young structure undercaptalized.
[AB]: Great news.
[AB]: Great potential support to help in developing a real VC culture. I'm not sure, however, how incubators, accelerators, and other startup support organizations will understand how to navigate easily through all these structures and probably programs. Consulting will be necessary.
[AB]: it concerns the medical-related industries.
[AB]: not much to say. Great measures to support investment, and potentially very interesting support to startup intermediary organizations. To be followed.
▪ Promote the unification of documents, which differ among local governments, and online procedures.
▪ Encourage a cross-sectional review of procurement participation requirements that differ for each local government, and promote procurement by local governments and private businesses through visualization of the state of public procurement by the government.
▪ Take measures such as giving additional points to procurement from startups at the time of adoption screening for digital garden city national concept subsidies to promote local digital implementation.
▪ We will catalog the specifications of services provided by IT companies, including startups, and aim for early introduction by demonstrating a digital marketplace that makes it easier for the government to procure products that meet the requirements by the end of FY2023.
[AB]: To be perfectly honest, I'm a little lost here, but I get the impression that this is a crucial set of affirmations, for lack of a better word. We must definitely get back to this and make some more inquiries to understand concrete policy leverage for startups.
[AB]: That is fantastic news for our entrepreneurs. Guarantee concerns serve as a strong deterrent.
[AB]: SPAC vehicles are really interesting way to finance projects. But they have proved to be highly risky not to mention a disaster. I'd like to get more about this from experts. Copying everything US shall not be a general policy, Again, I maybe mistaken.
[AB]: Very much appreciated.
[AB]: That's great news.
[AB]: interesting, but promises only for now. To be followed.
[AB]: Good.
[AB]: not sure about this. We need an expert.
[AB]: Again, good news and potential leverage.
[AB]: It's big for social impact oriented startups (like us).
[AB]: That's a big but important challenge to surmount.
[AB]: Although it is a little technical, this will increase investors' propensity, and willingness to invest and maybe set up branches locally. As it may facilitate new investment opportunities, attract foreign investors, and introduce new financial instruments in Japan, we must pay attention to this.
[AB]: This looks like a major push to build and disseminate digital ecosystems.
A private finance initiative (PFI) is a way for public projects to be paid for with money from the private sector. PFIs relieve the government and taxpayers of the immediate burden of raising funds for these projects.
Here is a detailed document on PFI if you need to know more about it.
[AB]: nothing smart to say here.
[AB]: That is an important point. I tried to address this in part here.
[AB]: https://www.j-startup.go.jp/en/ https://www.joic.jp/index.html
Remember to get there so you want feel frustrated into reading all this in detail in this article and you will be able to use the google document and add comments so we could build a "compounded brain".
The Japanese original text here.
