Japan, the Land of the Rising Sun … And technology?

Japan, the land of the rising sun .. and tech?

by Chris Wade, Co -Founder and   Partner of Isomer Capital

It’s a scorching 35 degrees out here. I’m suited up, tie tightly fastened, ready to kickstart my day at the ungodly hour of 08:00. My body clock, however, still insists it’s midnight as it’s still running on British Standard Time, leaving me feeling like a bleary-eyed nocturnal creature.

To make matters more challenging, I’m armed with a stack of printed sheets, adorned with maps where X marks the spot for my first appointment. As I step into the foreign land of Tokyo, a translator warmly greets me, and thus begins the arduous task of trying to communicate with a potential customer and technology partner.

My initial visit to Tokyo 23 years ago left me with a muddled impression. There were plenty of smiles and nods, but the results remained unclear, unclear whether YES or NO, unclear what is the next step. However, when I inquired about our product – mobile phone location technology – the response I received after numerous pregnant pauses and discussions with my Japanese counterparts could be summarized in one word: “unclear.”

As the Co-founder and CEO of CPS, my primary objective for this Japanese expedition was to meet with NTT DoCoMo. Back in 1999, when the world was laughing at our belief that mobile phone become a dynamic locating map. Docomo was the only exception who had the same vision.  They had unleashed imode, the world’s first mobile internet, catering to the 14 million daily train commuters in Tokyo. Imode revolutionized mobile devices, opening them up to internet search, maps, and content. NTT DoCoMo’s forward-thinking team, situated on the 37th floor of the Sanno Park Tower, envisioned a future where phones boasted large displays, powerful application processors, and top-notch maps. They foresaw a world where your device’s location was as crucial as its battery life.  It was the moment I was fascinated by Japan as an insightful visionary.

After several grueling trips to Tokyo, we finally managed to secure a proof of concept agreement with NTT DoCoMo, and likewise with Vodafone KK (the predecessor to Softbank Japan’s mobile network). These trips not only forged business relationships but also transformed them into friendships, though we always maintained the formalities of surnames and honorifics like “san” (Mr. or Mrs.).

In 2015, we began pitching Isomer Capital to corporate Japan. To my astonishment, the combination of our 15-year-old relationships and Isomer’s innovative concept of a single fund encompassing all digital technology startups in Europe struck a chord. In our Fund I, we managed to onboard three Tier 1 Corporates. They also started investing in some of our VC portfolio companies.

The 2019 Rugby World Cup, hosted by Japan, sparked a significant shift in the country’s global outlook. Taxis equipped with GPS map systems became commonplace, and the magnificent Tokyo metro embraced English signage. What was once a daunting maze to navigate became a breeze. Metro stations, exit numbers, and meeting locations rarely required the assistance of translators. This newfound openness in Japan continued to flourish during the 2020 (actually 2021) Olympics, where the world fell head over heels for Japanese humility and their unwavering commitment to cleanliness.

Today, we have forged relationships with over 10 Tier 1 Japanese corporates, and the interest in European ventures continues to surge. Company investments are on the rise, and we are witnessing the dawn of M&A transactions.

Honestly, I can’t say I fully comprehend the underlying reasons for this shift, but here are a few thoughts:

• Japan boasts the world’s third-largest economy, with a population of 125 million, yet it currently only harbours six unicorn start-ups.
• Cash-rich Japanese corporations are eager to expand their product lines within Japan, realizing that internal innovation alone is no longer the ultimate solution.
• As China turns its focus inward, Japanese corporations are reclaiming their spot on the global stage. They are investing in European start-ups, seeking to build new ventures outside the borders of Japan.
• Some Japanese corporates have long been investing in US venture capital. However, there’s anecdotal evidence that their access to the most successful American companies has been somewhat limited. As a result, they are now exploring the European market, which may prove more receptive to external investors.
• Lastly, the business cultures of Europe and Japan share similarities. For instance, both regions rely on lawyers to confirm agreements and rarely employ them as predatory weapons, as is often the case in other parts of the world.

In conclusion, Japan has set its sights on Europe and is welcoming opportunities with open arms. From my personal experience, operating in Japan has become infinitely more accessible compared to when I first embarked on this journey. Just recently, Japan hosted the G7 conference in Hiroshima, and it became the stage for several key announcements that are undeniably relevant to our endeavours:

• $95Bn to be invested in VC and start-up innovation over the next ten years
• Creation of Silicon Island  ( investment in Semiconductor Manufacturing and Design
• Liberal IP laws on AI and specifically AI data

Finally, there is some evidence that I am not alone in predicting the growth of the land of the rising sun as follows.

Stock Market Performance YTD in 2023