Barrier Against Entrepreneurship

April 09, 2024

Is it easier to be an entrepreneur in Japan compared with 30 years ago? I wonder why there has been no change. It doesn’t mean there is nothing to support Japanese to become an entrepreneur since then. We have a lot of presentation events which is called “pitch.” In this presentation, the presenters who will be future CEOs of startup companies present their business plans. If investors at the event like the presentation, they can contact the presenter and invest their money to them to start the business.

I attended the pitch event held in Tokyo last month. At this event, six groups of entrepreneurs had their pitches. All of them introduced their applications, which they created on their own, to the audience. Their big goals of their business are to popularize the use of their applications. I feel that it is necessary to have the knowledge about programming if we start our own business today. At the same time, I strongly feel that we don’t have to have our own offices if the main business is to spread the original application. We can work in a rural area without paying the high rent, and it will be a big advantage for entrepreneurs. Considering this part, the first barrier against entrepreneurship seems easy to break if we have new ideas and IT skills. However, it is surprising that there are few entrepreneurs in Japan, and the 2021 report from Japanese government shows that we only have four unicorns (reference).

The two main reasons that hinder Japanese to be an entrepreneur are anxiety and lack of knowledge. Japanese government is now aware that we have only few numbers of young people who aim to start their own business. The government started to support them by holding some pitch events that give a prize to the winner. The aim of giving the prize if to enhance young people to be an entrepreneur, but some of the presenters at the pitch events are sometimes swindlers who are not serious about establishing their companies and attend the events for getting the prize. Japanese entrepreneurs will not increase under this situation. In addition to this, Japanese government has provided benefits for investors regarding to their tax payment since 1997, but this doesn’t work well. In addition to its complicated procedures, this benefit is only for individual investors. This is one of the reasons why this benefit doesn’t work well.

The pitch event that I attended was to decide first prize and second prize among the six groups of entrepreneurs, but the prize was not cash. The three judges listened to their pitches and asked several questions to them. All of the participants looked highly interested in starting their business, and it was impressive that three groups were composed of students. With their lack of investigation and knowledge about scheduling for the business, they couldn’t appeal to the judges, but they may have other chances to be successful in the future. In fact, the other three groups were also not ready to launch their business since they couldn’t explain the presumed income. In order to attract capitalists, we need to talk about Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) in addition to the content of the project (reference). It seems that not many entrepreneurs know about this.

<The Pitch Event Held in Tokyo taken by the author>

In the US, primary school students learn about entrepreneurship, but it is not the case in Japan. One of the other reasons that Japan has few entrepreneurs is school education. Our company has tried to find a new business through effectuation done by employees. Honestly speaking, it is easy to come up with some ideas at first, but we have difficulties to make it into real business without enough knowledge about entrepreneurship.

On the contrary, thinking about being an investor, we also need to have the basic knowledge to judge the presentation with a correct view. We can see enthusiasm of the presenters at the pitch event, but it is necessary to think that enthusiasm and success of the business is totally different. The book published on March 21st, 2024 and written by Mr. Toshiyuki Yamamoto, who is a CEO of Chatwork Co., Ltd., told elementary investors how to be a successful investor in his book. He has the experience of investing to 70 startup companies and has knowledge about investment. It is true that investors also need the bible not to choose the wrong investee.

At present, Japan has few entrepreneurs and investors. It is not realistic to introduce the new subject to current school education since the compulsory subjects at Japanese schools are already established, but we are still able to add the new subject for colleges. For instance, we can just make it possible to take an entrepreneurship class for those who are not the students for the business management. By providing more opportunities for young people to study entrepreneurship, we are able to promote social implementation of great ideas and create a risk-free environment for them to start their own business without having anxieties and embarrassment toward failure. To increase the number of entrepreneurs will eventually lead to Pax Japonica.

Thank you for reading,

Yuki Kondo