My name is Takaaki Umada, and I am a startup consultant at the University of Tokyo. I usually provide advice to startups at the University of Tokyo’s FoundX facility and provide knowledge about startups on the web in the form of slides. I also maintain a website about startup know-how called “FoundX Review.”
This will be the start of a series of articles on startups. I will be writing about trends related to startups and things that might be useful in starting a startup, following the themes of the articles before and after.
Reid Hoffman, co-founder of LinkedIn, pointed out that one of the requirements to be a good entrepreneur is to choose where to start your business, that is, how to choose a location.
Every business has its own so-called “sector,” and in many cases, certain industries tend to cluster in certain areas. For example, in Japan, internet companies tend to cluster in Shibuya, and precision machinery companies tend to cluster in Nagano Prefecture. There are a number of advantages to launching a startup in a place where companies in a particular industry sector are concentrated. First, you need people. For example, if you start a business in Silicon Valley, you will be surrounded by people who have experience in IT startups. Some of these people will have experience in startups that have grown rapidly in just a few years. On the other hand, if you want to start a business in media, New York may be a good place for you. There are many financial and media companies in New York, as well as numerous people who have worked in these industries and have relevant know-how. If you can get such people to join your company, your startup may be able to grow quickly.
This also applies to how you “live.” The way you notice issues depends on the city you live in. If you are launching a startup related to fishing, it is better to start it by the sea than by the mountains. There are so many SaaS startups in Silicon Valley because there are so many users in Silicon Valley who would use SaaS.
Of course, location does not determine success or failure. You do not have to be located in a certain place to be successful. However, things are likely to be more difficult. So choosing the right location for your business domain is itself one of the prerequisites for a successful entrepreneur.
So, if you want to start a business in the IT sector, is it best to live in Silicon Valley, or in Japan—Tokyo, Shibuya, in particular? If you only look at the status quo, yes, it might be. However, it is said that startups should target rapidly growing markets. If that could be applied to where we live, we might say, “Go to the cities that are up and coming, the startup hubs of the future.”
If you go to those cities, you may find yourself at the center of the networks that are emerging there. There will be good opportunities. Even if you fail, there will be many people who resonate with your struggle as an entrepreneur and will help you out.
News media have been reporting for some time that many companies and people are beginning to leave California’s Bay Area, where numerous startups are clustered, due to the rising cost of living and the ongoing recent COVID-19 pandemic situation. Oft-cited destinations include Austin, Texas; Denver, Colorado; and Nashville, Tennessee. I believe that entrepreneurs and backers who have long been active in these areas are taking advantage of this trend to form new startup hubs.
Paul Graham, one of the co-founders of Y Combinator, looks at the evolution of Pittsburgh and identifies the characteristics of a city that could become a startup hub. The characteristics are as follows:
• An influx of young people
• Bicycle- and pedestrian-friendly
• Affordability and livability
• Close proximity to universities with strong research capabilities that attract talented people
• Tolerance and pragmatism
• Availability of investors
Which Japanese cities meet these criteria? If you are considering moving, please ask the people who live there about these criteria. If there is a fit, it may be a city that becomes a startup hub of the future.
In his essay “Cities and Ambition,” Paul Graham describes the influence of cities on creators and entrepreneurs, using the example of Silicon Valley today and Florence during the Renaissance, when famous painters were coming up in droves. As he writes, “No matter how determined you are, it’s hard to be unaffected by the people around you,” and similarly, Kenichi Ohmae said, “The first step is to change your time allocation; the second is to change where you live; and the third is to change the people you associate with.” These are the only three elements that can change a person. The most pointless thing you can do is to “renew your resolve.” And for me personally, I believe that changing where you live is the best way to change yourself. If you change where you live, your time allocation and the company you keep will also change.
We are influenced by our environment more than we think we are. We can see it as the weakness of our will. On the other hand, that weakness can also be a strength. If we surround ourselves with strong-willed people, we can become whom we aspire to be.
Although we are in the midst of a global pandemic, spring is coming again, and a new school year will begin in April. If any of you are looking for a new place to live at this time, you may want to think about what kind of person you want to be in the future and choose a place where many such people live.
When you live in a city, you become a part of it, and you do not just let the city influence you; you become an influence on the city. Please try to find a city that makes you want to have a positive influence on it.
[ Takaaki Umada: Director, Hongo Tech Garage / FoundX, University of Tokyo]