Disrupting Japan is six years old and ready to party!

Unfortunately, we can’t. Like so much else in 2020, this year’s big, live show has been canceled, but I hope you’ll make it next year.

It’s not all bad news, of course. There are a lot of great things happening for both Disrupting Japan and for Japanese startups. So looking back on these six years, I’d like to share some of the most important changes that are happening in Japan.

Please enjoy.

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Transcript

Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me.

This is our sixth-anniversary episode. Over the past six years, it’s been a Disrupting Japan tradition to have our big Disrupting Japan Live and Unleashed show on our anniversary. We get three of Japan’s startup thought-leaders on stage and invite a few hundred of our closest friends over for an evening of drinks, conversation, and just hanging out with a lot of cool people.

Unfortunately, this year the coronavirus makes this impossible. So we’ll pick up that tradition again next year.  What I had planned for this year’s anniversary episode was to tell you a special story about innovation at it’s best in Japan. The real story behind a video you’ve seen a dozen times on the internet and Western news media.

But before that, I wanted to talk briefly about three critical things that have changed for startups in Japan and as those introductory notes became longer and more interesting, I realized I was going to have to split the show, so I’ll tell you all about that video in a future episode.

Today, there is something else you should know.

But before we get to that, I want to thank you.  When I started Disrupting Japan six years ago, I really could not have imagined what it would become. At first, Disrupting Japan was just me sitting down and talking with my founder friends, and I guess in all the important ways, it still is just me sitting down with my friends.

But Disrupting Japan has grown with Japan’s startup community. We now have around 10,000 listeners all over the world, and we’ve ranked as Japan’s #1 entrepreneurship podcast and occasionally break into the top five Japanese business podcasts as well.

So after six years, I want to thank all the amazing founders who have come on the show to tell us their stories so honestly, the fans who have spread the word about the podcast in a way that online marketing never could, and to thank you, for listening. I appreciate you choosing to spend your time with me, and I work incredibly hard to make sure this show is worth your time.

Looking back on six years, I want to share with you the three most important ways that Disrupting Japan has changed, and what that tells us about how things are changing for Japanese startups.

Now, these aren’t the big data-driven headline numbers that you already know about. These trends are more personal, more human, and maybe in a way, more important.

1) Origin Stories

During the first two years of Disrupting Japan, I would almost always ask founders about how they started their startup. Many had pretty dramatic stories. Many telling of how their wife or parents were opposed and tried to talk them out of it or force them out of it, or how they had to give up their apartment to save money meet payroll.

Many founders had a family role model. A non-conformist relative who was maybe an entrepreneur themselves, or perhaps an artist or musician. Someone who believed in them when everyone else doubted.

One of our founders even sold his wife’s jewelry to make payroll.  Although his parting advice to me on that matter was “Tim, your startup is very important, but there are some things you should just never do.”

But as long-time listeners have probably noticed, we don’t hear those kinds of origin stories anymore. When I bother to ask the question these days, the most common reply is something like “Well, I really wanted to do it, and my friends and family thought it was a good idea, so we pitched some VCs and got funding.”

Which is awesome! But it does not exactly make for compelling storytelling.  But that’s great, it shows the ecosystem is working, both socially and financially things are getting easier for Japanese founders.

And hey, I don’t mind skipping that question. As any founder will tell you, all the real drama comes after you’ve raised the money.

But over the past six years, the social shift has been more sweeping and important than the financial changes. Not only do we see more and more students from Japan’s top universities, Today, Keio, Waseda, founding startups, but we also see university professors starting startups, something that 20 years ago was basically forbidden for a professor to even work as an advisor to a startup.

Headlines tend to focus on investment numbers, because, well, investment is important and because huge amounts of money in headlines make us pay attention. But money doesn’t create innovation. Innovators do. And the fact that more and more Japanese are willing to challenge the status quo and that more and more people are cheering them on is perhaps the most encouraging development over the past six years.

You can always find the money somewhere, but true innovative spirit? That’s almost magical.

2) Female Founders

Women founders make up around 9% of founders in Japan, but a much higher percentage of Disrupting Japan guests. I don’t know exactly why that is. My circle of friends and acquaintances is pretty wide, and our guests come from all over Japan, so it’s not obvious selection bias. People have suggested that maybe, on average, women founders speak better English or are more willing to take a chance and be interviewed in English. Maybe? But I haven’t noticed that to be the case, and I’ve certainly not seen any data that would back it up.

In any event, women founders are still relatively rare in Japan, even by Asian standards, and we’ve had the pleasure of sitting down with quite a few of them. I get asked about what it’s like for female founders in Japan a lot, both when I speak in Japan and overseas.  It’s a hard question to address and one, that as a white American man, is kind of strange to be answering.

Actually, I hate the question “What’s it like to be a women founder in Japan?” and I never ask it. It’s a lazy question and one that’s almost impossible to answer.

Look, it’s like I am asked all the time, “What’s it like to be a foreign entrepreneur in Japan? What’s was it like being a foreigner working at TEPCO?”  The first problem is that it’s too big a question. There is far too much surface area for me to get my arms comfortably around a question like that. Where do I start?

But more importantly, how would I know?  Yes, it’s true, I have founded startups as a foreigner in Japan, and I have worked at large Japanese companies as a gaijin, but I’ve never done any of those things as a Japanese person. What I am supposed to be comparing my experience to?

And of course, my experience as a foreign founder has been very different from that of other foreign founders.  And as a fan of Disrupting Japan, you know that the women founders who have come on the show have had very, very different experiences.

Trying to answer A “what’s it like” question directly requires that we assume a huge number of stereotypes and facts not in evidence. So I put aside the lazy questions, so we can get to the interesting stuff.

Because it is only when we talk with dozens of women founders and compare their lived experiences do we see commonalities emerge. We start to see patterns that we can explore, and that’s what we’ve been doing for the past six years on Disrupting Japan.

When I’m asked about “Japanese female founders” I try to answer with specific things women founders have told me, with actual data, or with trends I’ve noticed in talking to a lot of women founders. But if you really want to know what it’s “like”, then you really need to go listen to the interviews and hear these women explain it in their own words. It’s pretty amazing.

But one interesting thing I have noticed over the past six years is that early on I was interviewing a lot of single women who had started companies, a number of divorced women, and a lot of incredibly driven and focused single moms. But it was pretty rare to find a happily married women founder with a supportive husband.

That seems to be changing. I don’t think there is any hard data available on this, but from talking to literally hundreds of people about this topic over the years, it seems that the idea of someone being a wife, a mom, and a founder is becoming more and more acceptable in Japan.

Now, I don’t mean to imply that it’s easy. Many of these women are making sacrifices similar to those we talked about during the early origin stories. It’s not that it’s become easy, but it’s become … possible.  Accepted. Respected.

And watching how attitudes have changed this much over the past six years has been astounding, and incredibly encouraging. Both for women in Japan in general, and startups in Japan in general. But for women starting startups in Japan, in particular.

3) The Overseas Perspective

Maybe this is the simplest change to explain, but in a way, it’s the most significant one; at least in terms of how Japan is viewed internationally. And it shows that both Japanese startups and Disrupting Japan are succeeding.

In the early days of Disrupting Japan, by far the most frequent question I would get about the show was “How do you find enough founders to interview? Startups are really rare in Japan, right?”

This question drove me nuts, and I got it from everyone. Foreigners living overseas, foreigners living in Japan, and even from Japanese people here in Japan.  And the answer was, is, and always has been “No! It’s not hard at all. There are a lot of interesting startup founders in Japan. I could easily do three shows a week if I had the time.”

People tended to be genuinely and pleasantly surprised to learn this. Most people around the world, and in Japan, simply didn’t think of Japan as a place that created a lot of startups.

But people don’t ask me that question much anymore. People are starting to see Japan as a startup nation.

I like to think Disrupting Japan has played some role in this global attitude shift, and clearly so have the startup programs run by METI and JETRO, but of course, all the real heavy lifting has been done by the founders themselves.

The biggest reason that people have changed their perception of startups in Japan is that things have changed in Japan.

People like to attribute this to a change in culture, but it’s not. It’s caused by something simpler and more important. The balance of risk and rewards have changed in Japan, and starting a startup is now a perfectly rational thing to do.

Let me explain. In aggregate, people don’t start startups in America because of some kind of “culture of innovation”, although we Americans often enjoy telling ourselves that.

It’s that in America, the risk-reward calculation heavily favors starting a startup. The risk is minimal. You don’t have to put up your own money, you can draw a salary while you’re running your startup, and if you fail, it’s not that big a deal. In fact, even a series of failures won’t end your career. You won’t be able to raise money as a CEO, but your experience will still make you a sought-after team member.

There is no real downside risk to founding a startup in America, but the rewards are huge. If you do well, you (and perhaps your children and grandchildren) will never have to work another day in your life. With minimal risk and huge rewards, many Americans make the perfectly rational choice to start a startup.

What about Japan?

Thirty years ago the risk-reward trade-off was simple. If you joined a big company, or better still, the government, you’d have a job for life with generous perks and bonuses. If you did well, you would receive steady, large promotions, and if you did poorly, you would receive steady small promotions. Back then, joining a big company was all reward and no risk.

On the other hand, starting your own company back then was all risk and very little reward. Startups were financed by personally-guaranteed loans, and the strict bankruptcy laws meant that if you failed, you might end up paying off those loans for the rest of your life. Furthermore, you would have little chance of employment elsewhere since big companies only hired new graduates. The whole idea of hiring someone who had failed in business to help you run your business would have been considered absurd.

Even in the best case, when a founder IPOed, the financial and social rewards were usually about the same as becoming senior executives at a large corporation.

So, since founding a startup was very high risk with very little reward, most people made the perfectly rational choice to join a large company.

So what’s changed?

Quite a bit. Companies no longer offer lifetime employment or guaranteed promotions. Today’s new hires know that they could be let go after 20 years of service with no skills useful outside that company. The rewards of joining a big company have come down and the risk has gone up.

For startups, however, the opposite has happened, risks have come down and the rewards have gone up. Today most startup capital comes from equity rather than personal loans, and not only startups, but Japanese enterprise is more and more willing to hire early and mid-career staff, even if they’ve been part of a failed startup.

On the rewards side, M&A is becoming more common and more lucrative and IPOs have become larger and easier. After a successful exit, a Japanese founder can end up with millions of dollars. That’s much less than their counterparts in America, but it’s far more than they could save in a lifetime working at a large company. And that’s more than enough to tip the risk and reward balance over towards action.

Since starting a startup is both less risky and more rewarding than it used to be, of course, a lot of Japanese are now making the perfectly rational choice to start a company.

So does that mean Japanese “culture” has changed?

You can say that if you like.  But “culture” is such a vague, fuzzy thing. The simple truth is that Japan’s startup boom is being driven by powerful, long-term economic and social trends that will continue to make starting a startup more rewarding and less risky.

And that is far more important and encouraging than anything as wooly as “culture.”  Culture is real, of course, but if you want to change the culture, all you need to do is change the risks and the rewards.

Outrro

Well guys, before I let you go, I just want to tell you that it’s been an amazing six years. Amazing for startups, and Disrupting Japan, and for me, both personally and professionally. And it’s been awesome having you along for the ride as I’ve talked with founders, started and failed at my own startups, and as I’ve come to grips with the strange personal and performative mix that is podcasting.

So what’s coming in the next six years of Disrupting Japan? Well, I promise that just like the last six years, it will be the same, but different. I hope by our 7th Anniversary, the world will have returned to the way it was in the before times and we can all get together for some drinks and conversation.

Until then, I’d love to hear your thoughts about the show or about startups in general, so please drop by disruptingjapan.com/show171, and let’s talk.

But most of all, thanks for listening, and thank you for letting people interested in Japanese startups and innovation know about the show.

I’m Tim Romero, and thanks for listening to Disrupting Japan.