The Japanese startup field is filled with many unicorn listings, large-scale fundraising, an end-of-year IPO rush, and several other interesting topics for discussion. What was 2019 like for ecosystem builders within the startup ecosystem? We asked Tomy Kamada of TomyK Ltd., which provides venture support to tech startups and angel investment, about his expectations for 2020.
Mr. Kamada has been involved in the management of listed companies for 10 years since the company he founded was listed. He began supporting and investing in startups in 2012. The company currently has a base in “Inspired.Lab,” and is jointly operated by Mitsubishi Estate and SAP. It supports tech startups in the robotics and medical fields. Mr. Kamada described 2019 as the “pre-dawn” of Japan regaining its competitive strength in the world, and said that the presence of major companies is essential for further leaps forward. Where do the true motivations lie?
・The main battlefield for business is the shift from “digital” to “digital x real.”
・Do major companies need a second email address? How do we deal with startups that should be major companies?
・If we overcome super-aging, Japan will become a world leader.
Tomy Kamada is the CEO of TomyK Ltd. He holds a PhD in Information Science from the Faculty of Science at The University of Tokyo. He is the co-Founder of ACCESS Co., Ltd., a software venture company that he established together with Toru Arakawa in 1984, when he was still at university. Mr. Kamada developed both an embedded TCP/IP communication software and the world’s first web browser for mobile phones. He led technological innovation for mobile Internet use, including proposing the “Compact HTML,” a compact HTML specific for mobile phones, to the W3C. Mr. Kamada was listed on TSE Mothers in 2001, and expanded his work globally. He retired in 2011 and founded TomyK to support startups. He has launched several technology startups covering robotics, AI, IoT, human augmentation, space, genomics, and medicine among others. He also provided support for the robotics venture SCHAFT (which was later acquired by Google). He authored the book “Technology Startups Create the Future – Aiming for Tech Entrepreneurs,” which was published by the University of Tokyo Press.
The main battlefield for business has shifted from “digital” to “digital x real.”
“It was in 2019 that technology startups stepped up social implementation in various fields,” said Mr. Kamata. Although electric wheelchairs, flying cars, and security robots have not been put into practical use, proofs of concept were conducted in various places, and examples were created in every industry in 2019.
Mr. Kamada said, “The products and services of technology startups are several steps away from practical implementation.” Security robots created by SEQSENSE patrol the Otemachi building in which Inspired.Lab is located. The first regulatory approval was received for an AI startup in the medical field. He also stated that 2019 marked the year when leading Japanese companies began to engage actively in the startup space. One area of engagement was the establishment of partnerships between technology startups and major companies. Electric wheelchair company WHILL and Elephantech, a company that prints flexible substrates using inkjet printers have formed capital and business partnerships with Tokio Marine Holdings. Investments and the establishment of new businesses within major companies are also being activated. He sees this as a sign of major change. He noted that the prevailing major trend in business is the shift from digital-only to business combining both the digital and the real, and mentioned that this change had the potential to present Japan, which is strong in manufacturing, with a “winning opportunity.”
Mr. Kamada said, “Going forward, while businesses be conducted solely using digital media, ‘Digital x Real’ businesses such as IoT, robotics, self-driving vehicles etc., will become mainstream.” Businesses involving such hardware require everything from hardware to software, and there are considerably more things that must be considered for online businesses such as safety, security, and regulations. For this reason, this is a winning opportunity for Japan, which can work with great perseverance and strength in manufacturing and precision.
Software and online businesses are able to grow rapidly by gathering large sums of money, acquiring users, and expanding their market share. Japan has not been able to catch up with the instantaneous power of Silicon Valley in the United States, which sits within the anglosphere and enjoys liquidity both in personnel and money. However, both the real industry and medical business are severe worlds involving safety and human life. If Japan can address these themes in earnest, there is ample potential for innovation in the world.
When asked about the kind of human resources that will be necessary for this shift from online business to “Digital x Real,” Mr. Kamada said, “Personnel that can think not only with respect to a single field of specialization, but rather comprehensively across fields.”
Mr. Kamada said, “The more specialized the domain, the narrower the scope of thought and the more certain the rules and principles, the more AI will be able to demonstrate its strengths in calculation and processing power and quantity of data. It is difficult for people to demonstrate their strengths. What is required at the time, are personnel who can consider the whole and who can work toward adopting a broad perspective including philosophy, ethics, and social science. For example, let us say that we have a self-driving car that can run over three elderly people if it turns to the right and one child if it turns to the left. In this situation, the decision on the direction in which it should turn cannot be left to AI. For medical services, a single decision can directly impact life altogether. Business in the future must think about what is right and how the services it creates can affect society. At the very least, it will not be an era in which it will be possible to eat through technology. For this reason, future business will require people who can think in a balanced and comprehensive manner.”
Do major companies need a second email address? How do we deal with startups that should be major companies?
Mr. Kamada stated that Japan has ample opportunities in the coming years and added that there are hurdles to overcome such as providing greater funding to tech startups.
Mr. Kamada said, “Technology startups require more money to grow than do software startups. In addition to acquiring users, there are many things that need to be prepared earlier than in online ventures, such as product prototypes and proofs of concept, and a production line for mass production. While considering large-scale financing, values of over 10 billion yen are not uncommon in Silicon Valley, but in Japan, the size of VC funds themselves are often less than 10 billion yen, and thus large-scale financing involves a high degree of difficulty. Some of Japan’s major companies are said to hold more than 400 trillion yen in internal reserves. They have plenty of room to invest. If major companies start investing in startups in earnest, the potential for Japan to innovate globally will gain more strength. It is for this reason that I want large companies to understand the characteristics of startups and how they are different from large companies.”
“Startups and new business are challenges, and thus, there will also be failures. Large companies have large businesses. Thus, the impact of a single failure is great, and there is a culture that does not tolerate failure. This is obvious when we consider the growth of existing businesses, but 80% of startups and new businesses fail. I would be glad if the people in large companies investing in startups strive to understand this difference and are willing to invest actively.” He talks not only of success rates, but also of how to deal with startups. The time axis differs between large companies and startups, and if a startup makes a proposition to a large company that replies saying, “We will consider your proposal,” and then waits for half a year to get back, the startup will collapse. As a startup, you must get large companies to align with your time axis or work together with a company that understands. For large companies to match startup timings, it is better to adapt to each environment. If you rent a seat at a location in which startups are situated, like Inspired.Lab, that culture will permeate. It is also desirable to set email addresses and security levels that are distinct from those of the main business. Attachments cannot be sent, the Cloud is inaccessible, chat tools cannot be installed, and approval takes time following the filing of an application. You cannot keep pace with startups in such a state. It is important for the senior management of large companies to understand this.
Mr. Kamada: “If the senior management of large companies understands how to deal with startups, it becomes easier to move in their own situation. Startups prioritize speed and introduce new tools rapidly. If large companies encounter legal challenges in order to do so, they will not be able to keep up. As startups have a high likelihood of failure, it is important to create a system in which large companies can keep pace with startups without incurring excessive costs.”
Mr. Kamada stated that the mindset is also important. A startup mindset that can initiate new projects without actually starting a business will be necessary in the future. As top positions of large companies, universities, and government agencies are already occupied, young people are at the back of the queue for such positions and expectations that they can succeed are low. If organizations merge as the Japanese population continues to decline, these positions will only decrease further. If this is the case, you have to create a position or a job for yourself. If you leave it to a company to do this for you, then that is a startup; if you do it within a company, then it is a new line of business. That is why even the personnel in large companies need a startup mindset. It provides the impetus they need to get involved in their surroundings.
Mr. Kamada said, “As new businesses at large companies must break through internal walls, this is more difficult than creating a startup, but it also has a greater impact on society. It must be created by a person who is supported by at least one member of the senior management in order for this to progress well within the company. What makes this possible is the power of the mission and vision. Mission and vision statements serve as the power that helps bring in colleagues and attract big money. It is becoming progressively important to understand how to change society using technology, to envision the kind of world we want to achieve, and to hone the ability to evoke empathy.”
If we overcome super-aging, Japan will become a world leader.
When asked to highlight areas of particular interest for 2020, Mr. Kamada said it would be “medical and healthcare.”
Mr. Kamada said, “The median age in Japan, which is said to be the world’s most aged society, is currently 48.4 years (2019 UN population estimate). The US is 10 years younger than Japan and India is 10 years younger still. By 2060, Japan’s median age is predicted to reach 55 years, when it will be a super-aging society. It is not hard to imagine that medical costs, already in excess of 40 trillion yen, will increase further. There are great business opportunities here.”
Mr. Kamada stated that Japan must take that reality seriously and create medical and healthcare services. If it is able to create a new, prosperous, and long-living society, then it will be able to lead the world when the rest of the world faces the same challenges. There are some companies that are simplistically shifting to countries with growing populations, but it is evident that the populations of these countries will also eventually decrease. Thus, it is important not to run away from Japan’s issues today, but to face them head on. It may be likely that in a future where we can solve these issues, there will be no need to work more than we do now.
Mr. Kamada said, “As the use of robots and automation progresses, a society that functions despite a population decline will be created. We will arrive at an era in which it will not be necessary to work every day. If we do not need to work every day, what will people do in their lives and what value will they discover? At minimum, things will no longer be sold, and value may instead be found in new experiences like space travel. Japan is heading toward a new era of this sort, and 2020 may mark the beginning. It is said that the darkest hour is just before dawn, but looking at the trends in 2019, dawn may have already begun. In 2020, it will become more important for startups and large companies to take the initiative toward the ‘dawn’ and to facilitate the ‘leap’ that will ensure that Japan will regain its competitive strength in the world and pursue this vision.”
・2019 marked the year in which tech startups in various fields took active steps toward implementation in society, and major Japanese companies have begun to play an active role in the startup space.
・Going forward, rather than digital-only businesses, “digital x real” businesses such as IoT, robotics, self-driving vehicles etc., will become the mainstream.
・If harsh issues can be confronted sincerely, there is a good chance that Japan can innovate globally.
・When “digital x real” becomes mainstream, human resources will have to think comprehensively across disciplines.
・For large companies to keep up with startups, it is desirable for them to understand their sense of speed and the probability of success, and adapt to each environment.
・It is necessary for the personnel of large companies to have both a mission and vision, and the ability to get involved.
・If Japan is able to create a new, prosperous, and long-living society, it will be able to lead the world when the rest of the world faces the challenges it is currently facing.