How the “elite career path” in Japan has evolved under the radar

日本語／English

Hi there! I am Paul McInerney, General Partner at Incubate Fund.

Japan is a country rich in cultural and financial assets — but also a country that is dogged by perceptions from the rest of the world that fail to keep up with the dynamic reality.

One example of this is how Japan’s smartest young people shape their careers: the perception globally is that top scoring Japanese students graduate from a handful of national and private universities (at least this part is still generally correct), and they then go on to join either the public service, or a large bank or trading company… and stay there for life — with a subset of them doing an MBA and going on to a career in consulting or investment banking.

One of the most striking shifts in the labor market in Japan over the past decade is how rapidly this “elite career path” has changed — as students preference for safe, lifelong jobs has started to shift to a desire to be involved in dynamic startups that have a purpose that resonates with their own values.

Let’s look at some data related to this point:

• If you take the background of the CEOs of top 25 venture-backed startups by value founded in 2010–2011 and compare the same list in 2020–2021 there is a noticeable shift in the university they attended: of companies founded in 2010–2011 seven of the top twenty five companies’ CEOs attended a national university or Keio or Waseda (two of Japan’s top ranking private universities), while if you take a snapshot of companies founded in 2020–2021 that number rises to twelve. Admittedly a rough measure — but a nevertheless noticeable change
• In a similar vein there has been a material shift in destination of professionals leaving the ranks of the top consulting firms — taking McKinsey & Company, Boston Consulting Group and Bain & Company as a proxy and looking at where a random sampling of 80 professionals who left these firms prior to 2010 and from 2011 and after there is a clear shift — for those who left prior to 2010 only 15% currently work at a venture-backed startup — while post 2011 that number jumps to just over 50% — again a rough measure but the broader theme of top talent shifting their aspirations from large domestic and multinational companies to startups holds

You can find some excellent anecdotes of how the profile of Japanese startup founders is evolving in this article by Kenji Kushida at the Carnegie Endowment

This is a promising trend for the future of the VC ecosystem in Japan — and the good news is there is even more that investors and educators can do to engage at the university level to build awareness and appetite for a startup career.