Japan Market Entry Tips — Pro Level

Tokyo FinTech had the opportunity to discuss Japan market entry, among other topics, with Yuki Kishi, FinTech Director at Plug and Play Japan. While the full conversation is available via our Podcast, we have extracted some of the highlights here. Please note that the application window for the Summer/Fall 2020 batch closes on March 6, so please act soon if you would like to get the support from the awesome PnP team to evaluate your product’s Japan market fit, regardless of industry.

You have been running the FinTech program for two years now — how do you compare the first to the current batch of startups?

We have seen tremendous amount of improvement in our own processes, as well as in the quality of startups applying. This is especially true for startups from Japan, because Plug and Play’s brand recognition has significantly increased, so we are attracting more and better companies.

Initially, we were very focused on the more traditional FinTech areas, like payments, core banking, money transfer. However, we have seen the themes shifting almost a little outside of FinTech, such as an emotion recognition startup for example. This is not necessarily a “core” FinTech company, but they joined the FinTech program, because we think that they can improve the operational efficiency in financial institutions. We should look at what kind of solution or service a startup provides rather than get hung up on how to categorize it.

How competitive is the program?

We receive about 150 applications per industry. One third of the applications tends to come from Japan, and the rest from foreign domiciled startups, quite evenly split between the Americas, Europe and Asia. Starting with these 150 applications, we run a monthlong selection process to narrow the field down to between 10 and 20 startups, and we run such program every six months. It is worth pointing out that we do not take equity from participating startups, so our program is getting more and more popular, and it is pretty competitive to get accepted.

What transformation have you seen in your Japanese corporate partners over these two years?

Japanese corporates tend to be very slow in decision making, and they just did not have any experience working with a startup. So everything was a little challenging at the beginning, not only the interaction with the assigned corporate representative, but also more broadly the respective company.

Throughout these two years, we have seen the greatest transformation in the corporate people designated to work directly with the startups, their mindset has truly changed, and they have become a lot more positive about and supportive of the startups. They really help startups to connect to the right stakeholder within their respective organizations. So, these individuals have changed a lot, however, the company culture as a whole, there is still lots of work to be done, but it is a good start.

What is your advice for startups that want to enter the Japanese market?

First, of course, they should come to Plug and Play Japan. Second, they need to hire the right person, hire a Japanese speaking local person here in Japan, that will be the fastest way to get traction.

Whenever international startups come to Japan, we always try to manage their expectations. Given the slow pace of decision making discussed earlier, you cannot expect to achieve 10 Proof-of-Concepts (PoCs) and one or two commercial deals after our three months program.

Of course, we will help you succeed, but you should spend your time here determining product/market fit, and validate that your business model is transferable to the Japanese market. Use the three months build as many relationships as possible with Japanese corporates. In the end, they will be the essential supporters for your business.

Naturally, you want to achieve tangible outcomes, but you need to recognize that this network will be very valuable for you in the future. Some of our most prominent success stories come out of the batch we ran about a year ago, fore example. It simply took that much time to get into in-depth conversations with the right division, the right business, the right person.

How important is an investment by a Japanese VC/CVC for acceptance in this market?

If you manage to get an investment by a Japanese company, then that could accelerate the overall timeline, of course. Japanese corporations want to evaluate how viable your startup is. If you are backed by large financial institutions or large companies that is also be very strong advantage. And having gone through the due diligence process with a Japanese investor certainly provides a quality seal of approval.

One of the challenges every startup faces, once you start building an operation here, and you need to hire technical talent, where do you go to hire?

I always ask the Japanese FinTechs the exact same question. Interestingly, many seem to hire from the gaming industry in Japan. The gaming industry here is very strong and attracts good talent. So the FinTechs are apparently hiring a lot from that sector.

Japanese startups seem to be very focused on the domestic market — what is your perspective on Japanese startups going global?

So far, we have not had any cases where we supported a Japanese startup going global through our network. However, having said that, one interesting observation has been that quite a few Japanese founders, instead of starting a business in Japan, go to Singapore, Vietnam, or Cambodia first. And then they treat the Japanese market just as another market across Asia. So things are happening a little bit differently.

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