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Author and Editor: Yunchieh Tsou, Translator: Athena Chen

Even as the world’s third largest economy with a domestic market population of 125 million, Japan has to maintain an international outlook, and take into consideration language and cultural barriers when growing their digital economy. And for the Japanese, it is not Silicon Valley or China– but the 1 billion people market in Southeast Asia, where smart devices are currently experiencing a surge of popularity. Taiwan startups can become the strategic ally the Japanese need to expand to SouthEast Asia.

Coming just behind the economies of United States and China, however, economic growth has not fared well in recent years for Japan. With distinct cultural and historical factors at play, the Japanese market has always been characterized as incestuous compared to their Western counterparts. After the economic bubble burst in 1987, though the Japanese transnational corporations could not relive their past glory, with a domestic market of 125 million, they at least maintained a facade of stable prosperity.

However, with the following long stagnation, ageing labor workforce, and high youth unemployment, a critical crisis looms large ahead for Japan. Japan’s stagnant economy has led to politicians bringing to the table all sorts of economic reforms and liberalization policies imaginable. In the past 10 years, Japan’s innovative entrepreneurship policies have grown alongside global trends of software innovations. Since prime minister Shinzō Abe was elected, in face of rising global forces of digital economies, Japan’s policies have all pointed to the inevitable move of pressing the “reset button”, in order to achieve new heights for the Japanese economy.

Japan’s internet startups, with their eyes set on expansion abroad and rising with the tide of digital economies, are the ones who wield the power to press the reset button. To support local startups and encouraging Japanese corporations to grow business overseas, are the the main focus of Japan’s digital economy policies.  

The Japanese “edge” in SouthEast Asia Expansion

In the past 10 years, Japan has certainly nurtured a batch of digital native entrepreneurs, who are looking to become the seeds that the Japanese startup scene will sow globally.

“Instead of growing within the local market and then rolling out overseas, why not position to serve the global market on day one of starting your company? ” asks Taizo Son, serial entrepreneur and founder of online gaming company GungHo and Softbank.

The frequent moves overseas that Japan is making, has created a new opportunity for Taiwanese entrepreneurs. “Taiwan’s opportunities lie in going down South with the Japanese, ” says Mark Hsu, general partner of Pinehurst Advisors. Japan’s presence and partnerships in Southeast Asia have been expanding swiftly, and Hsu’s advice to Taiwan startups is to leverage that force as going it alone is a less effective than strategic alliances.

Mark Hsu tells us that, “The two largest economies in the world, China and the US all have a sizeable domestic market. The US have beat everyone in terms of industry development, but the focus has been solely on their domestic market needs; China has leaped and bounded forward, but with a population of 1.3 billion they have also created a domestic economy and market unique to themselves.

What Japan differs from them, is that in face of a rapidly ageing society and shrinking economy, Japanese entrepreneurs face the reality of having to go abroad in order to survive and sustain. If you visit Vietnam, you will find that most investors there are Japanese.”

Mark Hsu thinks that Japanese companies are quite international in outlook, and have a strong advantage to expand overseas, the Japanese auto industry and consumer electronics have all begun their quest of international expansion early on, and have invested heavily in SouthEast Asian factories. “Now the internet companies have come to realize the need to expand internationally. But the Japanese, like the Americans, do not have an international frame of mind. This is evident in their uniform language and culture. In the past, it was traditional corporations that have gone overseas, and now the internet startups need to go abroad as well. ”

Why Not Head to SouthEast Asia, Since Taiwan Startups Have Needed to Go Global Since Day One?

From government policies, market size, to capital funding, the fundamental conditions that bolster the startup economy are lacking in Taiwan, stunting the growth and developments of Taiwanese startups. So looking for opportunities and resources beyond the border should be top of the list, and most importantly to enlarge the outlook of one’s entrepreneurship.  

Jamie Lin of AppWorks thinks that, “SouthEast Asia might be Taiwan’s last golden opportunity. Only by redefining the role of Taiwan regarding SouthEast Asia, can there be a chance of growing a digital giant, standing a chance against China and the US.”

Compared to other Asian countries, Taiwan and Japan are culturally quite similar, which gives it great potential for collaboration between the two countries. “Taiwan will be a great testing ground for the Japanese if they want to go down South. With similarities in history and culture, Taiwan is the go to for testing products they want to take to SouthEast Asia. If a Japanese product doesn’t work in Taiwan, then it won’t stand a chance in SouthEast Asia.”

A great example of Taiwan and Japan alliance is the low-cost carrier search engine HelloWings, who have just closed a seed round funding with Pinehurst leading, and Singapore’s KK Fund and COENT Venture Partners onboard as well– their focus is set on SouthEast Asia’s low-cost carrier market.

Taking a closer look at HelloWings’ investors, the latter two are all Japanese founded venture firms. Koichi Saito, founder of KK fund, has worked within the Japanese venture capital industry in the past,  and founded this venture fund to focus on SouthEast Asian startups two years ago. COENT VEnture Partners is also managed by Japanese, and has funded innovative startups all over Asia.

The current case of HelloWings points to a promising start of strategic partnerships between Taiwan and Japan in terms of resources and capital, but the real question at hand is– does Taiwan entrepreneurs have what it takes to scale globally and expand into the international market?

中文連結:【TO直擊 / 進擊の日本創業圈】前進東南亞,台灣是日本人的最佳戰友──專訪Pinehurst Advisors 合夥人許安德