I don't interpret this information as "defying the odds". I read this as "Japanese entrepreneurs continue to struggle under their oppressive conditions, see little hope for improving investment climate or exit options."
Unless these companies can successfully exit (after all, that's what startups are built for, right?), I would consider them to have *succumbed to the odds".
edit: If the author were actually plugged into the Japanese startup scene, they should have mentioned the recent acquisition of Crosos (a social media marketing startup) by Yahoo! Japan[1].
edit2: I just scanned through recent articles by the author, and it looks like she's not a tech beat writer but just a generalist[2]
For me, the most interesting bit concerns how these newer Japanese start-ups are filled with ex-employees of major corporations. Leaving a major corporation was completely unheard of when I left Japan in early 2006. Yet today, it seems to be happening.
Do you have any insight into what's driving this new class of Japanese entrepreneur to leave the comfort and safety of Big Corp.? If so, could you guess how widespread such attitudes might be among young workers in corporate Japan?
For one, the younger employees of such megacorps are no longer guaranteed to receive the kind of promotions, raises, benefits, and retirement packages of their predecessors. The more attuned you are to the global tech development at large and the macroeconomic environment, the more you realize that these "stable" companies aren't what they used to be 30 years ago. These companies aren't supposed to have layoffs, yet you see companies from NEC to Sharp cutting workers in the thousands now. The lifetime earnings of a bigcorp guy was said to be $3MM before; now, it's estimated as $2MM for the younger guys.
Second, I think that "high tech startups" have gained significant popular acceptance in Japanese society, which has allowed them to exit bigcorps without being socially stigmatized. (Before, I think it would have hard to even find someone to marry as a startup dude. My friend makes as much money from his website via affiliate ads as he does from his bigcorp job, yet he can't leave the bigcorp since he needs it as a shield against society judging him negatively).
That being said, leaving a big corp is still an outlier. Since a startup exit is so difficult in Japan right now, the "wise" move still may be to stick with the bigcorp job, especially if you're at one of the globally competitive places like the big auto companies or materials suppliers like Shinetsu[1]. It's just that the factors against leaving a bigcorp have become slightly attenuated.
If I can oversimplify a bit, as Murakami-san say: You used to put up with the b.s. that went with working a lifetime in a large, bureaucratic organization. Now that the security & benefits are no longer assured, you see more mid- to upper-mid level workers willing to take more chances and start their own companies.
By no means should you confuse this as being any sort of sea change - the first post is still completely accurate for the majority of young workers, especially - but I think more people are starting to recognize "freelancer" & "self-employed" as something different from "freeter" - a Japanese term that ostensibly means "free + worker" but is really seen as just some young bum who bounces from one part-time job to another.
I am not sure if it is appreciated but I'll try to be bold and add some personal experience. I have been based in Tokyo for three years now and I'll try to fill in a bit on the cultural components affecting the start-up scene here along with how foreigners fit into the whole picture. The Times hint towards this but it isn't the main focus of the article. At the core of it all is the phrase "There is one, and only one, correct way of doing everything".
As mentioned in the article, Japanese society favours stability and predictability, life-time employment is something that has been the standard for a long time and your elders and society at large simply won't accept you if you don't have permanent full-time employment. This means a harder time to get everything from an apartment to a credit card. You have deviated from the true path, which is to secure employment in the "job hunting" period, which lasts for about two years leading up to your graduation as a bachelor or a master student (Ph.D. is generally a different story, so let's save that for a different time).
This job hunting involves an initial one year of "getting to know" (the companies do take attendance) each company at seminars and events. You register at their websites and attend in your own spare time. Schools try their best to respect this and are not as hard on the students during these years. Hordes of students dressed in suits (mind you, there is one kind of correct suit for this, well, one, depending on your gender) try their best to learn about the company and their goals, because this step is the preparation for the second stage. The second stage is filing applications, we are now somewhere between 1 1/2 and 1 year prior to graduation. A student can apply for as many as 75 companies, the reason for this will soon become clear, the failure rate is high and so are the stakes. At this stage the student has some idea of what he or she wants to do, but they will apply for anything they can consider okay. Each company has a different time when they accept applications and then go through three, four, maybe even nine steps of tests, interviews, group interviews and procedures (public sector jobs usually has an exam with questions from history and English to IQ-testing, you need to pass to get to the next stage). Once a student gets past these steps, they get an offer and are faced with the choice of accepting it or maybe to wait since their dream job may not even have started accepting applications yet. Once you enter the company you may very well receive training that is very different from your educational background, you are now "one of the family", for life, but that is a different story, let's get back to the start-ups.
Now, how does all this play into the start-up scene? Well, the one correct way to go through job hunting is when you are about to graduate. Some students fail to get a job, if you are a bachelor (this I am told holds especially true in science and engineering), you beg to your parents to fund you through your master and you then try again once you are done with your master (if they are rich enough, it isn't cheap and same thing goes for Ph.D.;s). Being outside the system for a year without a very good reason, such as interning abroad, will label you as an outcast, making it difficult to reenter the system. The same, of course, holds for those that try and fail to take part in a start-up. This creates an enormous disincentive to take risks and I think plays a major role in why the only successful Japanese start-up that I can think of that has gone big in the last 20 years or so is Rakuten. I can't blame students for simply asking, "Why should I take the risk? Why should I build the companies of the future?".
This is turning into a speech (maybe I am entitled?), but the way foreigners fit into this whole mess is that we, to a large extent, are exempted from this honour system. We are not expected to "understand" the correct way and can more easily jump between companies and most of the smaller start-up;ish companies I know in Tokyo are at least 50% foreigners (I think I may be a bit biased here). What I suspect is the attraction for foreigners is the culture and the challenge, maybe also the good (and diligent) labour. I think it was Bertrand Russel that said that Japan doesn't move ahead at a continuous pace but rather by skipping ahead after a major collapse of the foundations of its society. The Meiji Restoration and the end of WWII springs to mind. Only then has it been demonstrated that the old ways have failed and there is a climate where innovation can take place on a grand scale and companies and society can be resown. On a personal note, I hope that it won't have to be quite so dramatic, but the whole situation surely is problematic although getting better and better over the short amount of time I have been here.
If you got all the way to the end, thanks for staying with me. Having been in Japan for a few years now I tend to reflect upon these things. The above opinions are of course biased by my own limited understanding of things, I am an amateur at best, but maybe they can prove useful.
Overall I agree with your assessment. Some points that I'm taking the liberty of clarifying or adding some information:
>A student can apply for as many as 75 companies
This is the case for students majoring in the humanities. Engineers typically tend to apply to fewer (15 or so). Some of them rely on corporate connection between the lab/school and a company to get a leg-in on the process.
>you beg to your parents to fund you through your master and you then try again once you are done with your master (if they are rich enough, it isn't cheap and same thing goes for Ph.D.;s)
It should be noted that PhD candidates must pay tuition, much like a Master's student. A PhD also makes it more difficult to find a job.
>the only successful Japanese start-up that I can think of that has gone big in the last 20 years or so is Rakuten
GREE and DeNA (social gaming companies) are the other big ones. I'm kind of impressed with kakaku.com too (a price-comparison site for retail goods).
>but the way foreigners fit into this whole mess is that we, to a large extent, are exempted from this honour system.
I think that one of the main reasons why the status quo is so impenetrable is precisely because of the racial and cultural homogeneity of the country. I presume you are in Tokyo, where the culture is at least somewhat mitigated by the presence of foreign nationals and their foreign employees, but as I'm sure you know, things get pretty monotonic when you step out into the other major cities.
> A PhD also makes it more difficult to find a job.
I am not sure if this is true or not. But what little I can draw upon, lacking a source for statistics, is only from a major school with a famous engineering and science department. So I am pretty sure what I have observed won't hold on a national level.
> I think that one of the main reasons why the status quo is so impenetrable is precisely because of the racial and cultural homogeneity of the country. I presume you are in Tokyo, where the culture is at least somewhat mitigated by the presence of foreign nationals and their foreign employees, but as I'm sure you know, things get pretty monotonic when you step out into the other major cities.
I whole-heartedly agree, I usually refer to the "acceptance" of foreigner behaviour as a double-edged sword. It allows us to violate the rules to make a point, but it also allows for the "natives" to dismiss our actions as those of someone much like a child.
How hard is it for foreigners (American, in my case) who aren't already in Japan to get into the Tokyo startup scene? I'm guessing you'd need a work visa, something startups would have a tough time providing.
I've studied Japanese and studied abroad in Japan, so I'd definitely like to return, but it seems to me that the easiest way to do that would be by getting a job at a big company like Rakuten.
If you have a university degree, it is actually pretty easy to get a visa here. While you might have trouble getting a job at a 3-person startup, something a bit more established shouldn't be an issue (as the article mentions, Gengo recruits non-Japanese, and they'll even hire people who aren't already in Japan).
The easiest way to get a job here is the same as anywhere else: be exceptional at something that is in demand.
I was going to ask the same question (even though I won't have visa problem because I am married to a Japanese). Also, is it necessary to speak Japanese to work in a start-up owned by foreigners? And how about the paperwork to create a company there?
It depends on the startup, but there are opportunities at Japanese and non-Japanese owned startups alike, for people without Japanese skills.
If you have someone who can help you through the paperwork, creating a company isn't so hard. It took us about 60,000 yen and one month to create at Godo-Gaisha (similar to a LLC).
Do you have any more info on the paperwork part? I've been putting it off for a few months now and considering just registering in the US first to make things easier with US-based clients.
We haven't had issues when dealing with US-based clients (granted previous to this we didn't have any clients, so I don't have much to compare it to).
I didn't actually do the paperwork, so I don't actually know how complicated it was. We're actually incorporated in Chiba, and at that time (Nov 2008), the government office responsible for the paperwork wasn't very busy, so they were happy to help out.
Unless you are fluent in Japanese, you probably will need help from someone else. If you don't have a Japanese cofounder / spouse, probably the best thing is to pay someone to help with it.
A PhD makes it more difficult to find a job because bigcorps (1) want to indoctrinate and mold you based on company doctrine and culture, and (2) pay based on age.
(1) Japanese bigcorps have extensive on the job training programs which bring relatively specialized new grads up to speed. In fact I think it does a great job at getting nearly all new hires up to median performance within the company. Think of it as relying on mass producing "good employees", rather than focusing on finding "great employees".
(2) Japanese bigcorps are organized such that promotions and pay increases happen based on seniority. This is especially the case at the lower ranks, where everything is very methodical and planned out. Promotion cycles tend to happen every 3 years, with boolean results. Raises happen methodically every year according to HR's tables (though these get phased out when you get more senior -- part of the cost cutting efforts in the last 20 years).
Combine these two factors and companies want young, cheap "good enough" talent to join their company, after which they will train them according to their corporate flavor. Hiring a PhD means that you have to pay them higher than the undergrad, even though you're going to put them both through the same training cycles. Unless there's a really good fit between the doctorate candidate's research and what a team wants (or lab-corporate connections), companies will shy away from hiring PhDs.
What about for jobs where research skills are specifically necessary, like in corporate science and technology labs? Do the bigcorps find more value in hiring an undergrad and providing them training on how to do research?
For such jobs, big corps do hire PhDs. These jobs are almost always in a research department (i.e. they won't hire a PhD to code). But these jobs are maybe 1% of all jobs in big corps.
Nowhere near 1% in my experience. Also, even in research arms, many masters level students are accepted (though it really depends on how low level the research activity is at that particular company, so this is going to vary wildly among different companies)
Anecdotally, how would you characterize the distribution of risk aversion of the younger folks? (ie, engineers vs hard sciences vs social sciences vs business, humanities etc.)
Or rather, is it evenly distributed across the culture?
I am going on a ledge here, but I would say as with most societies I know, getting a science and/or engineering degree is a safer bet at a job. It also has the benefit that there is less of a chance of major retraining if you join a more "modern" company. As @hkmurakami pointed out, those with an engineering or science degree tend to have to apply for more companies and getting internships is according to my own experience much easier.
My apologies for not being able to differentiate clearly between social sciences, business and the humanities. I am just too deep into the whole science game at this point.
> the value of investments by its 50 or so venture capital fund members increased to 24.6 billion yen ($316 million) in 2011, 35 percent higher than the previous year. But that was a small fraction of the $12.6 billion in venture funding raised by Silicon Valley companies that year, according to Ernst & Young.
We often see articles critical of VC on HN, and to some extent that criticism is a healthy thing. But in my experience the relative lack of VC investment is one of the bottlenecks of the Japanese startup scene.
Startups obviously cannot offer the same degree of stability as a large company, but if they keep offering the same (or lower) salaries and no stock options, I don't know how they can expect to hire good people.
Unless these companies can successfully exit (after all, that's what startups are built for, right?), I would consider them to have *succumbed to the odds".
edit: If the author were actually plugged into the Japanese startup scene, they should have mentioned the recent acquisition of Crosos (a social media marketing startup) by Yahoo! Japan[1].
edit2: I just scanned through recent articles by the author, and it looks like she's not a tech beat writer but just a generalist[2]
[1] http://pr.yahoo.co.jp/release/2012/0810a.html
[2] http://topics.nytimes.com/top/reference/timestopics/people/t...