Unveiling the Future: what Deep Tech Forum 2024 in Kyoto help me realize (and what I found out about startups in Japan after a 5 year hiatus!)
The Future of Robotics, AI & Automation in Manufacturing event series in our hometown Kyoto
Arriving in Japan in early March to help prepare the details for our global event in Kyoto, I didn’t know exactly how these discussions had been going on while I was gone for about 5 years, since I had moved overseas in 2019! This was also my first long business trip in Japan after the pandemic, so I did my best to try get my Japanese listening in a better shape to hear what most local ecosystem partners were talking about — and failed badly due to my limited language understanding! But one thing is clear: the connected Deep Tech ecosystem is getting ready for the future in its own ways, even when different perspectives are on the horizon!
With innovation in mind while in the most traditional city of Japan, our team gathered in Kyoto to prepare the stage for the global Deep Tech Forum 2024, a pilot event connecting the world’s leading Japanese manufacturing companies with global leaders in deep tech startup space. Ecosystem partners and corporations in manufacturing industries joined us to discuss what the forefront of the industry looks like, with a special emphasis on robotics, automation, autonomous technologies, and AI.
The event brought together Japanese startup ecosystem partners, including investors, accelerators, government officers and local businesses eager to forge domestic connections as well as future International partners. Japanese corporates that have been engaged in open innovation efforts had the chance to learn and consider collaborations with North America startup hubs.
The Corporate Day (3/7), mainly in Japanese, was kicked off by an inspiring opening session by Narimasa Makino, CEO of Monozukuri Ventures, setting the tone for a day of insightful discussions. Fujishima Masaori, Growth Support Department Office Leasing Business Division, Sumitomo Realty & Development introduced the new Kyoto Kawaramachi Garden Shijo, a brand new space targeting growth startups of the region.
Panels delve into the Kyoto ecosystem and the overall deep tech landscape, featuring prominent figures from academia, investment, and venture capital:
- Ko Kusumi, President and CEO, Kyoto University Innovation Capital
- Hyoma Seki, Managing Partner, Seiho Investment Works
- Keiji Niizu, Investment Group, Global Brain
- Shingo Kono, Venture Investment Department, Kyoto Capital Partners
- Akihiko Nagata, Chairman, Real Tech Holdings
- Ken Nishimura, Partner, Coral Capital
- Hana Jin, General Manager, HAX Tokyo
- Tomoya Yamashiki, Venture Partner, Monozukuri Ventures
- Masahiko Niwa, Industry X, Accenture
The day culminated in a vibrant reception party with local Kyoto sake, offering a platform for networking and relationship-building (a.k.a nomikai, the art of getting connecting with Japanese folks).
The second day was the International Startup Day (3/8) with a special keynote by Kirk Botula, Chief Strategy Operations Officer at Innovation Works, heralding a day dedicated to international minded startups.
From North America, we also had Benjamin Charley, CEO & Founder of Rapid TPC, a Pittsburgh-based deep tech startup, joined by representatives from Canada — JETRO Toronto and the Embassy of Canada in Japan.
Corporate reverse pitches by industry giants such as Sony Semiconductor and Exedy Corporation paved the way for the 8th Monozukuri Hardware Cup, a pitch competition showcasing promising hardware startups from Japan. The networking sessions aimed to kick off conversations on strategic alliances between startups and corporations in the room.
The 1st prize winner was Medlarks, a startup working on a device to prevent urinary tract infections that can be connected to existing urinary catheters. It provides a low risk of developing drug-resistant bacteria, and was praised for its contribution to the prevention of this type of global problem — more than 10 million cases yearly.
From VCs to industry leaders, we had different perspectives and invaluable insights into the future of deep tech but limited amount of founders in the room, due to the challenges in building an entrepreneur-driven ecosystem.
Why Does Deep Tech Matter So Much?
Deep tech investments involve funding technology startups that have significant scientific or engineering challenges, such as those in biotech, robotics, artificial intelligence, and advanced materials.
Japan and North America both participate actively in the deep tech space, but they face distinct challenges and operate within different ecosystems, starting from maturity, quantity and quality of startups.
Data used by Boston Consulting Group and published in Nov/2023 shows that among the OCDE countries, Japan is the country that has invested the lowest proportional amount in Deep Tech, behind South Korea.
Countries’ Support of Deep Tech: The US and China lead the world in absolute share of deep tech funding provided, with more than 60% and 12%, respectively. Europe collectively has 14%.
Challenges for Deep Tech Investment in Japan
- Risk Aversion: Traditionally, Japanese investors and corporations have been more risk-averse compared to North American counterparts. This can lead to a reluctance to invest in the early stages of deep tech startups, which are by definition a high risk and long-term ROI.
- Funding Availability: in 2024 there might be significant more funds available in Japan, but the distribution can be uneven, especially favouring later-stage investments or incremental technologies over new disruptive solutions. Early-stage deep tech startups may struggle to find the substantial initial investments they require to develop their technologies.
- Talent Mobility: In Japan, there is often less mobility of talent between academia, industry, and startups compared to North America. This can limit the flow of ideas and innovation. Additionally, the cultural emphasis on job security can deter top talent from joining risky startup ventures. This has been slowly changing with new Japanese role models but definitely not at a pace needed to change the ecosystem.
- Global Outreach: Japanese deep tech startups tend to focus primarily on domestic markets and may lack the global perspective necessary to scale their technologies worldwide. Lack of business skills and English fluency also limit Japanese founder's ability to pitch and engage with investors and potential global customers more closely. Many 'Lost in Translations' moments even I had myself, with basic knowledge of Japanese, so it's not surprising to see huge gaps when watching conversations between startups and International investors. One simple example is negotiating valuations, when I noticed that a Foreign investor misunderstood the Japanese founder's expected number by a few digits.
- Lack of Serial Entrepreneurs: similar to other emerging hubs, most of the local initiatives in Japan that are aimed to help startups succeed are run by either government, academia or corporate employees who have zero to limited experience on how to operate a startup. Mentors are corporations or technical experts with no track record of commercializing deep tech spinoff research from university labs.
The Secret Sauce to Most Key Hubs in America
- Investment Culture: North American investors, particularly in the U.S., have a stronger culture of risk-taking, especially in Silicon Valley and other strong tech hubs. There is a greater willingness to fund groundbreaking but uncertain technological advancements.
- Ecosystem and Infrastructure: America has a well-established ecosystem supporting startups, including accelerators, incubators, venture capitalists, and angel investors who specialize in deep tech. Experienced serial entrepreneurs engaged in such organizations have helped mitigating some of the intrinsic risks associated with early stage deep tech ventures.
- Talent Pool: North America benefits from a highly dynamic labor market with substantial academic and industrial cross-pollination, driven by a strong entrepreneurial spirit and supported by world-leading universities and research institutions. Immigration waves have been part of the historical diversity of such hubs and adds flavors to the melting pot.
- Market Size and Access: America offers access to a large and unified market with a consistent regulatory and business environment. This is particularly beneficial for scaling new technologies, whereas Japan often serves as a gateway to varied Asian markets, each with distinct regulatory and business challenges.
Strategies to Overcome Challenges in Japan
According to Viva Technology website, on why Japan has been chosen ‘Country of The Year’ due to its disruptive innovations and leadership in the global tech scene:
The Japanese government has allocated ¥10 trillion ($72.4 billion), with ¥100 billion ($734 million) designated for supporting Deep Tech-related startups and ¥300 billion ($2.2 billion) earmarked for drug discovery-related startups.
Unfortunately, in deep tech, allocation of money doesn’t necessarily result in innovation or successful business developments!
Japan has strong potential in deep tech due to its advanced technological base and high-quality research outputs. By addressing specific domestic challenges and learning from North American approaches, Japan could enhance its competitive edge in the global deep tech landscape.
- Building Ecosystems: continue to develop and integrate its innovation ecosystems, linking universities, research institutions, startups, and large corporations more effectively. Recycling startup founders and teams who have failed in order to keep them reengaged in the ecosystem, regardless of common and constant startup failures.
- Encouraging Risk-Taking: Culturally and institutionally, encouraging more risk-taking in investments and career choices could lead to greater innovation. Starting from investors, who should be more supportive of founders who fail fast and move forward.
- Global Perspective: Encouraging startups to adopt a global market perspective from the outset can widen their potential customer base and improve the viability of their innovations.
- Diversity: One of the weak points of the Japanese ecosystem is the lack of diversity of thoughts, background, mindsets and experiences. It might take too long to get results from educational programs, but engaging International students and also Female Founders and Investors in the Deep Tech Community might be a good start. Back in 2016–2018, when we used to host in Japan a series of Monozukuri Hub Meetups in English, there used to be a more diverse audience in terms of age, gender, role and goals for the ecosystem.
Beyond Deep Tech Forum 2024: meet us in Santa Clara, CA for the RoboBusiness (Oct 16–17th 2024)!
Beyond Kyoto, the Deep Tech Forum 2024 that has been kicked off in three North American cities, will be extended to Sillicon Valley, where most of the embodying inspiration came for our global initiative to propel deep tech innovation forward. With cutting-edge technologies and deep tech experts, this forum promises to be a beacon of collaboration, driving transformative change on a global scale.
As the countdown to RoboBusiness Santa Clara, CA (Oct 16–17th) begins, we're working on building partnerships for the convergence of visionaries, innovators, and disruptors at the heart of Bay Area.
Join us towards a future defined by boundless possibilities and unprecedented advancements in deep tech: https://deeptechforum.us/
