[No. 631] Part 4 - "A Robust Economy, a Free and Kind Society" ~The World That Can Be Realized by Taro Yamada, a Startup Founder and Practitioner~ (2025/06/11) #TaroYamadaSanChannel [Transcript]

Overview of this episode

This is Taro Yamada's San Channel.

Today, we are presenting the fourth installment of our series, titled "The World That Can Be Realized by Practitioner Taro Yamada: Startup Theory to Change the Nation." While I am a current member of the National Diet, I am also the only one who has experience as a founder and CEO of a publicly traded company. From that perspective, I would like to explain startups in an easy-to-understand way.

The first episode of the series was about robots, the second was about the content industry, and the third was about how to change industrial "monozukuri" (manufacturing). And for this final installment, we will be focusing on "startups" themselves.

Last time, we established eight pillars under the theme of "Robust Economic Policy." As I touched upon briefly in the discussion on industry last time, today we will look specifically at how startups are influencing things. In fact, the presence of startups is extremely important in fields like content and robotics. For example, to realize humanoid robots or highly versatile robots, the power of startups is absolutely necessary. In the content industry as well, growth will be difficult unless new companies enter the market.

Furthermore, in order to create new things, it is necessary to develop centered on intangible assets such as intellectual property (IP). Also, startups are premised on investment, and management that prioritizes the balance sheet (asset/liability management) over the profit and loss statement (P/L) is required. Investment in research and development (R&D) and the promotion of digitalization are essential for startup growth to support a "robust economy." I want to focus today on the fact that the growth of startups is extremely important for Japan to truly change.

The Role of Startups and the Future of the Japanese Economy

First, a "Five-Year Startup Development Plan" has been presented, and the particularly important points are fundraising and the promotion of open innovation. From these perspectives, I will organize how startups grow and lead to the resolution of social issues.

The first thing I want to focus on is GDP. Unfortunately, Japan has fallen far behind the United States and China. China overtook Japan's GDP around 2009 to 2010, and the United States has also been continuously growing its GDP. To break this situation and put Japan's GDP back on a growth trajectory, I believe the role played by startups is extremely significant.

Another social issue is population decline and aging. In Japan, the working-age population is rapidly decreasing, and the aging rate is rising. If things continue this way, there is a possibility that national power will be significantly exhausted by 2050. Startups are also important in solving these issues.

Also, from the perspective of regional revitalization, startups are key. As I mentioned before, when the population of a local municipality falls below 20,000, many services disappear. It becomes difficult to maintain offices for professionals such as patent attorneys and lawyers when the population falls below 20,000 to 50,000. Out of the 1,741 municipalities in Japan, a full one-third have a population of 10,000 or less. The existence of startups is important to solve such regional issues and revitalize the regions. Large companies concentrate in urban areas like Tokyo and Osaka, but startups have the potential to contribute to regional revitalization as well. I would like to explain this point in detail today.

Furthermore, I will touch on why American startups are strong. Looking at the S&P 500, the American economy is almost no different from Japan's TOPIX or Nikkei 225 if you exclude GAFAM (Google, Apple, Facebook, Amazon, Microsoft) and NVIDIA. In other words, the source of American economic growth is actually a handful of companies represented by GAFAM and NVIDIA. From this, I think the secret to startup success becomes clear.

Also, the strength of American companies lies in intangible assets. Companies like Apple, NVIDIA, Microsoft, and Google largely support their market capitalization.

On the other hand, as for Japanese companies, as I mentioned last time, they are mainly centered on "monozukuri" and finance. About 80% of the market capitalization of Japanese companies is supported by the manufacturing industry.

The Japanese government is aiming to shift to an economy centered on intangible assets by 2035, but it will be difficult for intangible assets to account for 90% of corporate value as they do in the United States. It is required that we aim for a Japanese-style economic growth after all.

So, can startups really promote the growth of the Japanese economy? The economic effects of startups are already clear.

Currently, Japanese startups are directly generating an economic effect of about 10 trillion yen, with about 520,000 direct jobs, and including related industries, the impact is said to be about 20 trillion yen. When converted to GDP, this is equivalent to the scale of Hokkaido. Looking at it this way, I think you can understand the magnitude of the economic influence of startups.

Also, we need to think not only about economic benefits but also about the power to change society. There is a concept called "Ten-X," which refers to "mutational" innovation rather than conventional improvement. While improvement changes society gradually, Ten-X is a change where new industries suddenly emerge from completely different fields. If we do not promote such rapid changes, national power will decline without us noticing, like a boiling frog. We need to foster startups that have the power to cause such changes.

The above is the important role and positioning of startups that I want to convey this time.

Now, we often say "startup" or "venture," but I think it is better to organize what the actual definition is first.

For example, what is the difference between opening a bakery, a greengrocer, or a ramen shop in town and what we call a "venture" or "startup"? It lies in whether or not there is a clear "exit" in mind. An "exit" often refers to an IPO (Initial Public Offering), and this is very simple to understand.

The difference lies in whether the essence of the business is balance sheet-based or profit and loss (P&L) statement-based. In a P&L-based business, you generate sales, pay costs from that, and reinvest the remaining profit to grow the company or continue operations. On the other hand, a startup accepts investment, uses that capital upfront, and then generates profit later to recover the investment—in other words, it is balance sheet-based management. This difference in sequence is precisely the characteristic of a startup.

Furthermore, when launching a company or business as a startup, "enterprise value" must be inherently present. How much the company's added value, represented by its stock price, can grow is extremely important, and whether or not capital gains can be targeted is what is required of a startup.

Now, when comparing Japan and the United States, what kind of companies are currently supporting the economy? In conclusion, they were all startups, venture companies, or owner-managed companies in the past. There were ups and downs between 2000 and 2003, and many companies rose and fell, but taking Japanese companies as an example, Toyota Motor Corporation was also originally a startup. It was started by the Toyota family. Sony is also a startup company started by Mr. Ibuka and others. Fast Retailing (Uniqlo) was started by Mr. Yanai, and Recruit, Nintendo, SoftBank, and other current major companies were also startups at the beginning. However, these companies have already grown into large corporations and can no longer be called "startups." I think the current situation for Japanese companies is that the rankings do not change very easily.

On the other hand, looking at the recent situation in the United States, Apple, Microsoft, Alphabet (Google), Amazon, NVIDIA, Meta (Facebook), and Tesla all started as startups. Moreover, many of these companies were not widely known around 2010, and they have grown rapidly into companies that lead the economy over the last decade or so. In the United States, a phenomenon is occurring where the top industrial companies are occupied by startups born within the last 10 to 15 years.

Japan, of course, has a history of startups and ventures creating new companies and changing society, but there is a big difference from the United States in terms of this growth speed and the rapid expansion of company scale. I think this is a point that deserves particular attention.

Here is some data comparing the founding years of the top 500 companies by sales in Japan and the U.S., so let's take a look at this. The dark purple color indicates Japanese companies; in Japan's case, many of the companies with large sales volumes were established immediately after the war. Also, there is a characteristic that many companies were newly established around 2000 due to corporate restructuring, such as the splitting of major companies. In other words, many Japanese startups were born in the dozen or so years immediately after the war. On the other hand, in the United States, the founding years are dispersed, and new companies are being established continuously regardless of whether it was before or after the war. There is a big difference here.

Many of Japan's recent top-selling companies were formed through the splitting of large corporations, such as the breakup of NTT. Therefore, Japanese companies were established in a concentrated period, and as startups, they often face the challenge of struggling at a certain growth stage or level, failing to survive, and seeing their growth slow down.

I myself took my company public in March 2005, and it took only three and a half years from its founding to reach the IPO. Based on that experience, I will talk a little about how venture companies grow.

My company generated about 200 to 300 million yen in sales in its first year, then about 1 billion yen, and then grew into a 20 billion yen company before going public. After that, to grow the company further, I acquired about six companies and expanded the sales scale to 4 to 6 billion yen. However, after that, impairment losses occurred due to overseas investments, and although I rebuilt the company, I resigned to take responsibility.

Through this experience, I felt that there are walls of scale in companies: the 30-person wall, the 100-person wall, and the 300-person wall. It is very difficult to overcome these walls when a company is growing, and I experienced that difficulty myself. Venture companies can manage with effort and momentum up to about 1 billion yen in sales, but once they exceed that and the number of employees approaches 100, management often cannot keep up and they hit a wall. I feel this is one of the important hurdles that startup companies must overcome.

Now, I would like to look a little at the positioning of what kind of ventures create added value domestically.

It is often said that one should "create added value," and last time I explained a little about the concept of the smile curve. The process by which companies create added value is mainly in the upstream stages such as design and development. Of course, the stage where the idea of "I want something like this" is born is actually the most valuable.

Also, another thing with high added value is the "brand." I used Hermes as an example, but regardless of what the cost price is, having a brand makes it possible to set a very high price. Furthermore, because the price is high, the quality of after-sales service can also be improved, and an additional price can be added for that service. Companies with strong sales power can also sell products at a higher price.

These two frameworks—design/development and brand/sales power—are the reasons why enterprise value is increased and products can be sold at high prices. However, there is a difference in these two roles. Sales power, after-sales service, and brands are still strong points for major companies and platformers, and the reality is that it is difficult for newly created ventures to establish a brand or enhance after-sales service. The entities responsible for increasing these added values are likely existing major companies and platformer forces. In particular, GAFAM plus NVIDIA are extremely powerful as platformers.

On the other hand, when considering the fields of research and development, product development, and product creation, companies like GAFAM plus NVIDIA are still acquiring venture companies one after another. Many people may feel that GAFAM plus NVIDIA themselves are venture-like and conducting cutting-edge research, but in reality, those companies also risk gradually losing their freshness and falling into old corporate structures as the years go by. Therefore, in order to actively incorporate new products, services, and technologies, they take the form of acquiring many venture companies and forming an ecosystem. M&A (mergers and acquisitions) is being carried out very actively.

The venture companies that become the targets of such M&A are the ones that are actually creating research and development, products, and services. When thinking about the overall added value of enterprise value, I think it is necessary to clearly separate the roles of large companies and ventures.

Companies have various elements such as brand power, management ability, financial power, production technology, and development technology, but brand power, management ability, financial power, and production technology are the roles of major companies and platforms, while the field of development technology is the role that ventures should play. Such collaboration is important; it is difficult for large companies alone to produce new, innovative products, and there is also the circumstance that large companies find it harder than ventures to make bold investments or secure excellent talent.

Recently, it is said that we have entered an era where intangible assets such as brand capital and human capital are valued far higher than physical capital. However, there is a division of roles, and while major companies are mainly forming brand capital, I believe that ventures are playing a major role in the human capital that supports it.

This combination is important, and I believe this is the "Japanese-style" way of doing things. In the United States, the idea is that ventures exist around platformers as a premise. However, in Japan, as we saw earlier, manufacturing and monozukuri (craftsmanship) companies are very powerful large corporations based on production technology. However, when it comes to creating new products or innovations, large companies alone become slow to move.

For this reason, many large companies have recently been adopting a method called "carve-out." In other words, they separate specific business divisions within their own company, clarify responsibilities, and forcibly create ventures. On the other hand, there are also an increasing number of cases where large companies acquire newly created ventures. This is a method known as Corporate Venture Capital (CVC), which is also becoming popular in Japan. However, the reason why corporate venturing and M&A are not progressing much in Japan is due to the issue of "goodwill amortization." I will explain this in more detail later, but there is a challenge where collaboration between venture companies and large companies is difficult unless reforms are carried out in Japan.

Another topic that often comes up is "productivity," and it is said that Japan has low productivity. However, the reason for low productivity is not that Japanese people are lazy or that the people on the front lines are clumsy. Productivity refers to added value, and what is important is the level of sales. Of course, cost reduction also increases added value, but there is a bigger problem of "selling too cheaply." Pricing that is just a small markup on the cost price does not increase added value.

So, where do we increase added value? As I showed earlier with the smile curve, there is a method of adding value through new products and technologies in the upstream process to aim for higher prices. Alternatively, it is also important to raise prices through brand power, after-sales service, and sales capability, even for the same product. I believe that being conscious of these two directions is the key to improving productivity.

Up to this point, I have talked about how Japanese startups and ventures should be within a strategic framework, but from here on, I would like to look at the current situation of startups.

Recently, the government has also been implementing quite aggressive venture policies. Honestly, in my opinion, they are investing funds so thoroughly and trying to create so many ventures that I sometimes think it might be a bit too much. The result is actually an amazing situation.

As of the end of fiscal year 2023, there are 22,000 startup companies in Japan. Among them, there are a particularly large number of university-originated ventures, accounting for about 4,200 companies. The amount of funding raised by startups is also on the scale of 800 billion yen, and a very large amount of money is moving.

The situation has changed significantly compared to around March 2005, when I was actually running a business. At that time, the Mothers market had been established in 2001, and there were still fewer than 100 listed companies. Considering that the company just before mine went public was Ms. Namba's DeNA, you can see how few companies there were at the time. Also, there were almost no venture capitalists yet, and I myself was desperately trying to generate profits under the strict condition that a venture had to make very high profits to go public. At that time, ventures existed on the extension of generating profits on a PL (Profit and Loss statement) basis.

However, nowadays it is possible to go public even if you are in the red. The mechanism is such that if you can demonstrate future corporate value and successfully raise funds, M&A or an IPO is possible at that point.

However, the biggest problem facing Japanese ventures is that there are very few "unicorn companies." A unicorn company refers to a company with a market capitalization of 100 billion yen or more, and refers to companies that have an impact that significantly changes the industry, like the next Honda, Toyota, or SoftBank. The current situation is that it is difficult for such companies to grow in Japan, and I would like to look at the reasons for this as well.

There is also an issue with the business startup rate. In Japan, the annual business startup rate is very low, at only about 4.4% of the total number of companies. In other countries, it is generally around 10%, with new companies being born every year and a certain number exiting accordingly.

However, in Japan, companies do not go bankrupt easily, and there are few new companies, so the liquidity of human resources and capital is in a low state.

Another point is the international comparison of "unicorn companies." While there are 687 unicorn companies with a market capitalization of 100 billion yen or more in the United States, there are only 8 in Japan. In emerging markets such as China, Europe, and India, the presence of these unicorn companies is significantly promoting the economic growth of those regions. It is necessary to increase these unicorns in Japan as well.

Looking at the 8 unicorn companies currently existing in Japan, there are so-called deep-tech companies such as Preferred Networks in the AI field, Spiber, which develops artificial proteins using spider silk, and Sakana AI, which utilizes AI. There are also platform-type companies such as SmartNews (a news distribution platform), SmartHR (a human resources management platform), and GO, a taxi dispatch platform. The current situation is that Japanese unicorn companies are concentrated in the fields of deep tech and platforms.

Furthermore, Japan is characterized by a very large number of small-scale listings. As I experienced myself, there is a phenomenon in Japan called "down-round IPO." This refers to cases where the current market capitalization is lower than the market capitalization at the time of the initial listing. Originally, the market capitalization at the time of listing should not be the peak. It is ideal to continue to increase market capitalization even after listing.

In fact, for many listed companies in Japan, the market capitalization at the time of listing is 20 billion yen or less, and about 80% of cases remain unchanged with almost no growth thereafter. Also, the current situation is that very few companies grow to a market capitalization of 100 billion yen or more.

I personally believe that while it is important to increase the number of new ventures, it is even more important to grow companies that are already listed to the next stage. It is very important how to grow companies with sales of 10 to 20 billion yen and a market capitalization of 100 to 200 billion yen to 10 times that scale (200 billion yen in sales) and foster the next Sony, Honda, or SoftBank. Unless such companies are continuously born, I think it will be difficult for the next generation of listed companies to grow even larger.

There are some companies that are called unicorn candidates, but I think the important task from now on is to first grow companies with a market capitalization of 10 to 50 billion yen to the next stage of 100 billion yen, and to grow companies with a market capitalization of 200 billion yen or less even further.

Finally, I will introduce the trends of mapping promising startups by field. For those aiming to become a venture, knowing which fields have the potential for growth will be important information.

In the mapping shown here, the horizontal axis is the "average of the top 30 companies in the sales industry," and the vertical axis is the "estimated valuation." Among these, the field with particularly high room for sales growth is the field called "SaaS." Next, there are the media (SmartNews, etc.) and e-commerce fields, and the AI field is also attracting attention.

Next is the field shown in blue, which is a group of technologies. There are fields such as robots, deep tech, mobility, space, and materials. In this field, there are many companies with low market capitalization, but if you take the top 30 companies in the industry, they have a certain scale. However, the technology-based venture company group is struggling a bit, and I think they could grow a little more.

Looking at the big picture, there are groups of platform-based, deep-tech, and technology-based companies, but the ones with the highest potential for extreme growth are likely the deep-tech and platform-based groups. I believe these fields will be the targets to watch in the future.

Next, let's look at the challenges startups face. We want to foster more "Japanese-style ventures" by solving these issues, and there are four major challenges.

The first is fundraising. The challenge lies in how to raise capital and how to proceed with M&A.
The second is global expansion. The domestic market has its limits, and global expansion is necessary to obtain funds from overseas markets.
The third is how to grow high-value-added industries like deep tech.
The fourth is regional ecosystems. In Japan, everything is concentrated in Tokyo, but to solve regional issues and grow the entire region, it is necessary to form ecosystems for each region.

It is important to think strategically about fostering Japanese-style ventures from these four perspectives.

First, regarding the supply of growth capital and M&A, looking at the situation in the United States, there are many cases where a fund invests over 10 billion yen at a time, which is about twice the scale compared to Japan. What is particularly characteristic is the investment method by stage. In the U.S., there are an overwhelming number of cases where large-scale funds are injected at the late stage, that is, just before an IPO or M&A. On the other hand, in Japan, small-scale funds are often invested at the seed or early stage, when the company is still growing and the risk is extremely high.

Because the U.S. injects large amounts of capital all at once into companies that have a certain prospect of growth, it becomes possible for those companies to grow rapidly. This difference in capital supply is one of the factors behind the difference in venture growth between the two countries.

Next, comparing the amount of capital raised at the time of IPO in Japan and the U.S., the U.S. raises a very large amount of capital. It is common to raise over 10 billion yen in an IPO. On the other hand, the current situation is that Japanese IPOs are very small in scale, and the amount raised is low. The average opening price of a Japanese company at the time of listing is around 10 billion yen. When my company went public, it was about 20 billion yen, but generally, it is around 10 billion yen.

However, when comparing the IPO market capitalization of each city, the median in Silicon Valley is about 250 billion yen, which is 25 times that of Japan. The average is also very high at about 860 billion yen, as there are many huge companies that significantly pull up the average. Boston is about 75.1 billion yen and London is about 7.3 billion yen, which are levels close to Japan, but even so, the U.S. boasts an overwhelmingly high scale. Tel Aviv in Israel is also large in scale, which shows that cities with large market sizes have an advantage. As you can see, the market capitalization at the time of IPO varies greatly depending on the region.

Also, when comparing the scale of startup M&A, it is about 7 million dollars (about 1 billion yen) on average in Japan, while it is about 43 million dollars (about 6 billion yen) on average in the U.S., which is a big difference in scale. However, even in Japan, there is a tendency for M&A to be carried out at relatively high prices in fields close to the core business of large companies.

A characteristic of M&A in Japan is that there are many cases where both the buyer and the seller are startup companies.

I myself acquired six startups immediately after going public, and cases like this where startups acquire other startups are very common in Japan. It is no exaggeration to say that there are situations in Japan where companies went public for the purpose of making acquisitions.

One of the reasons why this situation occurs is the issue of "goodwill." Since joining the Liberal Democratic Party in 2019, I have continued to argue every year within the party that "goodwill amortization should be abolished and we should comply with international standards (IFRS)." We are currently moving in the direction of abolishing goodwill amortization, and I believe this will further revitalize M&A in Japan.

"Goodwill" refers to the value-added portion that exceeds net assets in the corporate value at the time of acquisition. For example, if a company's net assets are 1 billion yen and you acquire that company for 10 billion yen, the difference of 9 billion yen becomes goodwill. Under Japanese accounting standards, this goodwill is to be amortized equally within 5 or 10 years.

This is a problem, because if you acquire a company at a high price, a large amount of amortization expense is recorded in the annual P&L (profit and loss statement), which can cause the company's performance to fall into the red. These issues are a major factor hindering M&A in Japan.

But I want you to think about it: an acquired company does not disappear, and if that company itself continues to generate profits, its value does not decrease. Then, the question arises as to whether it is really necessary to amortize goodwill.

If amortization is necessary, it would be in cases where the content of the acquired company has changed or it turned out that it did not actually have value. In such cases, you can evaluate it annually according to accounting standards and perform impairment processing as necessary. However, in Japan, even if the company's value has not actually decreased, you are forced to amortize goodwill equally every year, which makes high-priced M&A difficult.

The reason why it is said that an IPO (Initial Public Offering) is the best method in Japan is because M&A is not carried out much due to these reasons. In the U.S., 90% of exit methods for venture companies are M&A, while in Japan, about 70% are IPOs and about 30% are M&A. If M&A does not go well, we return to the challenges mentioned at the beginning.

As I mentioned at the beginning, platforms, after-sales service, maintenance, and brand formation are the roles of large companies, while research and development and upstream product development are the roles of venture companies. For these to fuse, it is very important to integrate them through M&A. However, in Japan, venture companies often continue to exist independently even after an IPO, and this causes problems.

An IPO itself is not a bad thing, but by continuing to exist independently, the circulation of human resources becomes difficult. You have to fight a lonely battle on your own, and because there is no partnership with large companies, the circulation of human resources and funds is also limited. On the other hand, if you partner with a large company, liquidity of human resources is created, and you can receive abundant capital supply from the large company, so you can gain great benefits.

When a large company conducts M&A, if there is goodwill amortization, an accounting loss occurs, which becomes a risk for management to be criticized by shareholders. Therefore, if the goodwill amortization system is abolished, the possibility of M&A being revitalized will increase. I have been arguing for the abolition of goodwill amortization since I joined the Liberal Democratic Party, and it is currently moving in that direction, so the promotion of M&A is expected.

Now, next, regarding the role as a hub for the global ecosystem, I would like to look at how funds and human resources mix and expand globally.

A characteristic of recent fundraising is that investment from overseas into Japanese startups is increasing. In particular, 2021 saw very large-scale fundraising. Looking back, 2021 was right in the middle of the COVID-19 pandemic, but during that period, there were multiple large-scale fundraising deals exceeding 10 billion yen. So-called unicorn companies like SmartNews, Spiber, and SmartHR succeeded in raising 20 billion or 16
0 billion yen, which was very exciting.

However, following the war in Ukraine and other events, the global fundraising environment became severe, and funding for venture companies in the United States decreased by approximately 59%. China and the UK were also in very difficult situations, but Japan remained relatively stable, with a smaller decline in fundraising, and is currently being re-evaluated. However, in Japan's case, the issue remains that the amount of funding per deal is still very small.

From the perspective of the ecosystem, San Francisco and Silicon Valley are the absolute centers for global capital flows and the relationship between entrepreneurs and investors in deep tech. New York is also important in terms of fundraising. Other important hubs include Tokyo, Tel Aviv (Israel), London (Europe), China, and Singapore. Japan is currently ranked 10th in the global startup ecosystem, but whether it can become even more attractive as a global hub for finance, human resources, and technology is a key challenge.

When comparing Japan's situation specifically, there are weaknesses in performance, fundraising capability, and corporate experience. While it is highly rated in technical fields such as marketing and patents, it is rated very low in other areas, so these areas need to be strengthened.

On the other hand, global venture capital firms and accelerators are gradually entering the Japanese market, but this information is not widely known.

Also, the introduction of a startup visa is an important policy. The challenge is how to attract investors and talented engineers from around the world to Japan. Of course, this is completely different from accepting refugees; the goal is to bring global technology and capital to Japan.

Furthermore, it is also important for Japanese startups to expand overseas, provide know-how locally, and develop new markets. In other words, we need to strengthen the flow in both directions: from overseas to Japan, and from Japan to overseas.

Last year, I visited Silicon Valley and Stanford University, and the local atmosphere was very open and free. In Japan, there isn't much of an image of being able to visit the University of Tokyo casually, but Stanford University's campus itself is a tourist attraction. It is a very open environment where you can freely visit places like the Memorial Church, where Steve Jobs gave his commencement speech, and interact easily with research teams. I believe this environment is very different from Japan and is something the Japanese venture ecosystem should learn from.

Then, another thing is that Silicon Valley itself is like a textbook for ventures and also exists like a museum. For example, Intel has a museum where you can learn about the history of computer technology and how IT has developed. Does Tokyo have such facilities? I think this kind of environment is also one of the major factors that attract people.

I also feel the difference between Japan and the US in corporate initiatives. For example, I visited the Amazon headquarters in Seattle last year, and there are fairs (exhibition facilities) that the general public can enter, as well as facilities that look like a jungle. There is a banana stand at the entrance, and anyone can get a banana for free. When I asked, "Do I need to pay?", they said, "Anyone can take one freely." I actually had one, and I didn't necessarily have to be an Amazon employee.

Microsoft also has a well-equipped visitor center and actively welcomes many people, including engineers from all over the world. This kind of "open door" attitude is well-established. Japanese companies tend to be closed off, and there is no atmosphere where you can easily enter the company. I think these prominent Japanese companies need to create a slightly more open environment to attract talent and capital from around the world. I believe that creating this kind of environment is a prerequisite for playing a role as a hub.

Next, I will touch upon the growth of deep tech. Much of deep tech is born from university-originated ventures, and the number of university-originated startups in Japan is also increasing very rapidly.

The most numerous are from the University of Tokyo, and ventures are being born from many universities, including Keio University, Kyoto University, and Osaka University. About 420 companies have been established from the University of Tokyo alone.

However, as a challenge, the investment amount per deep tech company is very low, remaining at about half that of SaaS companies, for example. Even within deep tech, there is a difference in fundraising between platform-type deep tech and pure deep tech.

However, deep tech companies, centered on university-originated ventures, are among the many domestic startups that are succeeding in fundraising. Conversely, it means that if it is not in the form of deep tech, it is difficult to raise funds from around the world. In that sense, I think the existence of deep tech is very important.

Also, although many people have a negative view of Japan, in terms of technical capability, Japan is still a strong presence in the share of patents and patent families. While the US has many patents in the fields of biotechnology and chemistry, Japan has many patents in electrical engineering, general machinery, and control systems, and the number of basic technology patents in Japan is overwhelmingly higher than in China and other countries. On the surface, it may look like China and others are growing, but I would like you to recognize that from the perspective of basic technology, Japan's strengths are still very much alive.

Furthermore, in the fields of inventions and scientific papers, Japan is said to be in a very strong position within global clusters. It is not that having a large quantity is necessarily good, but I think it is an opportunity that both quality and quantity are being maintained.

Also, regarding environmental technology, Japan is one of the countries with great strengths, leading the world alongside countries like Brazil. As energy resource issues and the power supply challenges associated with the spread of AI become important, the framework of GX (Green Transformation) investment will also become very important.

In the United States, they have been promoting GX investment, but with moves like Mr. Trump's attempt to stop GX investment, the competition surrounding GX is intensifying globally.

In any case, for deep tech, it is necessary to establish a mechanism where talent, capital, and business circulate.

At the same time, since the proportion of startups in private sector R&D spending is still small, I believe this area needs to be strengthened.

Furthermore, when analyzing the differences between university-originated ventures and those that have gone through an IPO, it became clear that the presence of a business manager as CEO is overwhelmingly important for a successful IPO. While many university-originated ventures are centered around faculty, staff, and students, almost all companies that actually reach an IPO have a CEO with business management experience. Therefore, it is necessary to recognize that management capability is extremely important.

Also, there is the issue that procurement from startups by the national government is very low in Japan. I feel that it is necessary to relax regulations so that government demand also actively includes procurement from startup companies.

Although the U.S. government takes the position that it does not directly support startups, there is no doubt that it fosters startup companies through large-scale government support in fields such as space development. I believe such a flexible mechanism is also necessary in Japan.

The Importance of Regional Contribution and University-Originated Startups

Overall, startups are generally concentrated in the Kanto region, especially Tokyo. However, when looking at university-originated startups, they are not necessarily limited to Tokyo because universities are located in various regions. From this, it can be said that university-originated ventures play an important role in supporting regions and contribute significantly to regional revitalization.

Even though the Kanto region is overwhelmingly the most common, the Kansai region and Hokkaido are attracting attention as attractive areas. In each region, startups are gradually increasing with universities at the center.

However, when it comes to fundraising, it is overwhelmingly concentrated in Tokyo, and this situation needs to be improved.

Also, each region has its own characteristics in fields of expertise. The capital region, especially Tokyo, is overwhelmingly dominant in all fields, but the Tohoku region stands out in the electronics field. This is because Tohoku University is excellent. The Kinki region, especially around Kyoto, is strong in the bio field, with many bio-related and chemical-related companies clustered there. In the space field, entrepreneurship is progressing in Hokkaido by taking advantage of its vast land.

In this way, there is potential for forming industrial clusters that leverage the research capabilities of universities in each region. I think the role of venture companies in changing regions is also significant. From this perspective, the concept of an industrial cluster ecosystem will also be important.

Furthermore, the cooperation of local governments is essential. Currently, the impression that local governments are actively working on venture development is weak, so for regional revitalization, it is necessary for universities and local governments to cooperate to support ventures.

Challenges of Japan's Startup Ecosystem

It is required that startups, large companies, university laboratories, venture capital (VC), and local governments each play their roles and work together.

However, unfortunately, although the number of startups in Japan is increasing, their corporate value has not increased sufficiently. In particular, fostering companies, especially those in deep tech and those capable of global expansion, is extremely important for future growth.

Based on this situation, the government created the "Five-Year Startup Development Plan." I am one of the members who served as an officer of the subcommittee involved in this plan and submitted the proposal to then-Prime Minister Kishida. I am also involved as the person in charge of startup policy within the party.

The U.S. ecosystem is very circular and functions well. When a startup is launched, capital is provided abundantly, and many VCs exist. As it grows into a unicorn company, talent flows in, and companies that could not become unicorns can also obtain funds in the secondary market through IPOs or M&As. Stakeholders who have succeeded and gained capital gains from unicorn companies use that experience to launch the next startup or participate as managers. This kind of circulation is the strength of the U.S. ecosystem.

On the other hand, the current situation in Japan is severe; there is a shortage of funds from the beginning, and the company size is small. There are few incentives such as stock options, and it is difficult to attract attractive talent. It is thought that working at a regular company has better treatment. Furthermore, in Japan, the secondary market is immature, and M&A does not progress, so it is difficult to go public. There is also the issue of amortization of "goodwill," which makes it difficult for large companies to actively engage in M&A. Since sufficient capital gains cannot be obtained, it has become difficult to create a cycle where managers who have had successful experiences create the next venture company.

For this reason, even if it is not to the level of the U.S. model, Japan needs to provide sufficient funding from the start and enhance the secondary market, including not only IPOs but also M&As. A mechanism where successful companies gain capital gains and circulate them into the formation of the next venture is important.

Against this background, the "Five-Year Startup Development Plan" was organized around the pillars of human resource development, capital supply, and the promotion of open innovation. The government also has a wealth of support menus available according to the growth stage. Although the scale is not yet sufficient, I would like you to understand that such a government startup support strategy is being implemented.

Specifically, measures such as funding from the Japan Investment Corporation, tax incentives for angel investors (Angel Tax System), and support measures for deep-tech companies are being implemented.

Furthermore, as part of "Japan Campus Innovation," a hub center has been established in Silicon Valley, and initiatives such as introducing systems to promote corporate spin-outs (carve-outs) and utilizing public procurement to foster ventures are also being promoted.

Regarding human resource policy, the enhancement of the stock option system is a key point. We are advancing policy support so that we can offer the appeal that while joining a startup carries risks, it also provides opportunities greater than those in large corporations. In this way, the government is also working to form a startup ecosystem through various policies.

Summary of this session

Now, I would like to summarize this again. I will organize this as a personal proposal for realizing venture-led economic growth.

As I mentioned at the beginning, many large corporations were originally venture companies. Starting with Honda and Sony, Japan's major companies were also founded as ventures. However, there is a current situation where the rankings of companies established during the post-war high-growth period have hardly changed.

On the other hand, in the United States, companies born in the last 10 to 15 years occupy the top positions. Ventures are creating innovation one after another and building new industrial structures. Similarly, in Japan, unless ventures pioneer the era and emerge as a new force that surpasses existing industries, significant industrial growth cannot be expected. Even if existing companies do their best, there is a limit to growth on its own, and it is also a factor of anxiety about the future of the Japanese economy.

Another important point is the resolution of social issues. As the aging society progresses, new services such as robot technology are needed to solve problems like nursing care. The development of such problem-solving services is difficult with existing businesses alone, and the role played by venture companies becomes extremely significant.

Until now, it was common for the government not to intervene much in the economy, but now is an era where it is necessary to clarify the direction through technology maps and the like. AI and robot development require enormous initial costs and carry high risks of failure, so a mechanism is required where the government bears some of the risk to support initial investment. In particular, semiconductor and AI development require massive investment. From my perspective as someone with an economic background, the government indicating a direction might not be inherently desirable, but I believe it is undoubtedly necessary in this day and age.

Regarding Japanese-style ventures, the form of "AI x Monozukuri (Manufacturing)" is important. Recently, when I interact with the younger generation, such as students at the University of Tokyo, everyone mentions AI as a new business. Among the approximately 430 ventures originating from the University of Tokyo, I suspect that about half are related to AI. When asked where to apply that AI, it is, after all, in the field of manufacturing. Considering that about 80% of Japan's corporate market capitalization is supported by the manufacturing industry, it is extremely important for the AI technology possessed by ventures and the manufacturing technology of existing large companies to cooperate and collaborate, including through M&A. For a time, the popularity of Japan's manufacturing industry had declined, but I feel that if it takes the form of "AI x Monozukuri," there is a possibility of a revival.

Furthermore, we need to be strongly aware that manufacturing is an information industry and focus our efforts accordingly. It would be difficult for Japan to grow its economy solely through intangible assets or platform-type companies (GAFAM + NVIDIA) as in the American model.

The three markets that Japan should particularly grow are robots, content, and "Shin-Monozukuri" (New Manufacturing). In the robot field, I believe we absolutely cannot afford to lose. Against the backdrop of an aging population, labor shortages, and an increase in single-person households, the demand for robot technology is increasing, and we should aim to be the world's number one robot industry without losing to China.

Content industry is also important. As for export scale, the automotive industry has a scale of 20 trillion yen, and the next is the content industry at 5.3 trillion yen. The government also aims to grow the content industry to a 20 trillion yen export scale by 2033. Since it is the only field among domestic industries that can increase its annual growth rate from 6.8% to 10-15%, there is no reason not to grow this field.

And we cannot abandon "Monozukuri," which currently supports 70-80% of the Japanese economy's market capitalization. We need to transform this into "Shin-Monozukuri" by combining it with AI, and create high-productivity and high-value products together with venture companies.

There are other industrial opportunities such as biotechnology and medicine, but for the time being, we should focus on the three fields of robots, content, and Shin-Monozukuri. In robots, we possess technical capabilities that overwhelm China; in the content industry, we establish Japanese manga, anime, and games as the world's number one; and in manufacturing, we maintain a world-leading level. By having such a clear industrial strategy, anxiety about the Japanese economy will be reduced, and people's incomes will naturally increase.

I believe we should focus on these fields and aim for even greater growth.

Also, as a point to keep in mind, as I mentioned earlier, it is not enough to have only ventures, nor is it enough to have only large companies. Ventures may be good at upstream processes such as design and development, but large companies demonstrate their strengths in terms of brand power, management capabilities, and platform construction.

I think it is important for both sides to collaborate and create a circular economic structure, including through M&A. Since M&A has not really taken root in Japan, there are cases where large companies forcibly create ventures in the form of carve-outs to grow themselves. However, carved-out employees may feel as if they have been kicked out, or they may harbor dissatisfaction because their treatment worsens under the same management methods as the large company despite the higher risk. It is important to solve these problems and for large companies and venture companies to cooperate firmly.

I also expect venture companies to become a source of research and development (R&D) and human resource development.

What do you all think? I believe that if we firmly implement these venture policies, the Japanese economy will truly be revived.

Regarding a "robust economy," I am confident that if we implement the policies I just described, the eight pillars I initially proposed will be improved. Together with all of you, I would like to revitalize the Japanese economy once again.

Well, this concludes the content I have presented as the fourth installment of the "Things Only Practitioner Taro Yamada Can Do" series.

Summary of the "Things Only Practitioner Taro Yamada Can Do" series

The first installment was about robots. Robot technology is essential for solving the social issues Japan faces. If the introduction of robots does not progress, we will not be able to cope with the problems of labor shortages and the decline in the working-age population due to the falling birthrate, and the Japanese economy will become unsustainable. Since immigration policy also has difficulties unique to Japan, I believe there is no choice but to introduce robots.

The second installment, the content industry, is also extremely important. Currently, the content industry is the only one achieving growth of over 5%. While it is difficult for manufacturing industries other than automobiles to see significant growth, the content industry has no upper limit to its growth, and demand is expanding globally. It is growing at an annual rate of 6.8% worldwide, and Japan already has strengths in areas like manga and games. There is no reason not to grow this further.

In the third installment, I conveyed the necessity of changing the industrial structure. In particular, the "manufacturing industry" needs transformation. Startups are required to involve regions and major companies to innovate the industrial structure.

The startup theory I covered in this fourth installment is related to all of these. I believe it is necessary for startups to promote the transformation of the entire Japanese economy through regional revitalization and collaboration with major companies.

There are likely many other ways to grow the Japanese economy. However, as the person in charge, I have worked thoroughly within the party on the fields I am responsible for. In the robotics field, as the leader of the Robot Parliamentary League, I led the review of the government strategy that had been neglected for 10 years. Also, in the content field, I have spent the last six years at the Intellectual Property Strategy Council examining how to turn intellectual property, such as copyrights, into a plus for the industry, and have actually contributed to the growth of the content industry.

On the other hand, the freedom of the field is also important. If we do not protect this, Japan's content industry will decline. Furthermore, the manufacturing industry, where I myself come from, is a core technology that has supported Japan, so I will never abandon it. I have been working on this field as a life's work since I was in my 20s. In particular, I take pride in being one of the top figures in Japan in the Product Lifecycle Management (PLM) field.

And I am the only member of the National Diet who has founded a company from scratch and experienced taking it public. In addition, a total of three companies I have been involved with have gone public. Furthermore, I have also experienced corporate acquisitions and the sale of my own company for its revitalization. I want to return this practical experience to the Japanese economy through politics.

I will do my utmost to ensure the success of these four pillars: robots, content, manufacturing, and startups. I would like everyone to know about these four pillars of "Taro Yamada's Reform" that only a practitioner can achieve.

If you found this program worth watching, please press the "Like" button. Also, I would appreciate it if you could spread it widely with quote comments, so that people can learn about this initiative and provide various opinions.

How was it? This time, I did it a bit like a YouTuber, looking at the screen by myself for this four-part series. I hope my message reaches you, and that we can work hard together to make Japan better.

I'll end it here for today. Thank you very much.

Video source for the transcription summary