Techstars Bullish on Japan as an Investment Destination

Maëlle Gavet
CEO
Techstars

March 2024

Techstars is one of the world's largest pre-seed investors with a stake in over four thousand startups globally.* Competition among budding entrepreneurs to get into a Techstars accelerator program is fierce, reflecting the proven value of the mentoring on offer, direct funding from Techstars as well as fundraising opportunities and hands-on support from a network of corporate partners, investors and alumni, and the experience of interacting with peers on the program.*As of February, 2024

In 2024, Techstars will run its first accelerator in Tokyo in partnership with the Japan External Trade Organization (JETRO), Mitsui Fudosan, Tokyo Metropolitan Government, the Ministry of Economy, Trade and Industry (METI) and the Cabinet Office. We spoke with Techstars' CEO Maëlle Gavet to talk about her hopes for the Tokyo accelerator, Japan's startup environment, opportunities in the Japan market for both startups and investors, and advice for aspiring entrepreneurs.

Gavet sees Japan as full of potential: "As of today, I would say the tech ecosystem in Japan is undersized compared to the overall Japanese economy. The positive way of looking at it is that there's major upside. That's how investors are seeing it, and we see Tokyo as a hub for future investment across Asia."

Several factors emerging in parallel are generating momentum in the startup business: Building on Japan's already positive attributes—such as large market size, reliable and high-quality infrastructure (both physical and economic), highly educated citizenry, stable regulatory environment—Gavet points to a "shifting mindset" with both central and local governments talking more about startups and putting more money into ecosystems. She also sees growing interest from young people in Japan in becoming entrepreneurs—and from overseas entrepreneurs in building their businesses in Japan.

One reason why Gavet is bullish on Japan as an investment destination is the Japanese government's renewed focus on growing a thriving domestic innovation ecosystem—an essential component not only for driving economic growth but also for finding solutions to social problems and ensuring safety and security. "There are lots of ways to foster an ecosystem, but it takes time: it's usually a 10- to 20-year journey. But that's what's exciting for us—we have an opportunity to shape to some extent where the innovation is going to go."

For its part, the Japanese government, through initiatives such as the Integrated Innovation Strategy, is creating an innovation ecosystem by fostering the venture capital market and strengthening the mechanism for the continuous birth and growth of innovative tech startups with expanded public–private R&D investment.

Gavet sees the startup venture capital industry as having undergone a dramatic shift since the beginning of the pandemic. On the one hand, there has been an influx of people who see entrepreneurship as a viable path—something they want to explore. On the other hand, fundraising has never been harder for startups: "Venture capital is doing a lot more due diligence, and they are now much more mindful about what they want to see in a startup," explains Gavet.

Artificial Intelligence (AI) marks another trend in the innovation economy. Recent advances in the field have given people who are not technical specialists in AI the opportunity to incorporate it into their startup idea. Gavet likens the current "moment" that AI is enjoying to previous "moments," including the launch of the iPhone (and the market for apps it spawned) and the emergence of cloud computing services. But the effects of AI are likely to be even more pervasive and far-reaching: "AI touches every single vertical, from health-tech to fintech, food-tech, agri-tech and defense-tech—all industries right now are experiencing some AI impact," says Gavet.

Gavet's outlook on Japan's future as an innovation hub is driven in part by her positive take on Japanese government efforts to build robust innovation ecosystems, not just in Tokyo but in places such as Kyoto and Fukuoka, too. "I'm very positive about what the Japanese government is trying to do. There's the Silicon Valley model, which people talk a lot about, and a European model, but there are lots of ways to foster an ecosystem. It will take time, but I'm confident Japan will find its own path to develop a unique innovation ecosystem in the decades to come," she concludes.