US startup investor Techstars is betting that Japan will be a magnet for startups across Asia, the company’s chief executive said in an interview with Nikkei Asia.
This summer, Techstars will begin a three-month program in Tokyo in which 12 selected startups will receive mentorship on their business models and pitches, as well as favorable rates on the use of Amazon’s cloud service. Techstars will also offer each startup a maximum of USD 120,000 in exchange for a stake of 6–10%.
“Japan … is an incredible market when it comes to tech startups,” CEO Maelle Gavet said. “Right now it’s a market that punches under its weight. We think that there’s an opportunity … to help that market grow.”
While Techstars has held one-time events in Singapore, its program in Tokyo will continue over multiple years, a first in Asia.
“Japan is basically the Techstars’ hub for Asia,” Gavet said. She noted that there have been over 300 applications for the program in Tokyo ahead of the March deadline, with more than half of them from outside Japan. “Japan is a very privileged place to attract people from all around Asia—and potentially even Europe and the US—because entrepreneurs are looking at Asia as a key market,” she added.
Techstars, founded in 2006, is a pre-seed investor that provides funding even before a startup has a commercial service or product. Some examples that are backed by Techstars are a blockchain analysis company, Chainalysis, and a drone startup, Zipline, both established in the US.
A feature of Techstars’ pre-seed program is that the company invests in all participating startups. In Japan, other acceleration programs, such as those run by major companies, tend to be more focused on business collaboration. The launch of Techstars’ program will provide more options for startups to materialize their ideas.
Techstars’ Tokyo program will be jointly run by the real estate developer Mitsui Fudosan, an investor in the venture capital fund that Techstars operates, and the Japan External Trade Organization, a government agency. The central and Tokyo metropolitan governments are also supporting the program.
The accelerator’s move comes as the Japanese government expands efforts to nurture a startup-friendly business environment. Japan ranks far below China, India, South Korea, and some parts of Southeast Asia in terms of the number of unicorns—startups worth USD 1 billion or more—according to data provider CB Insights.
To change this situation, Prime Minister Fumio Kishida’s administration in 2022 launched a five-year development plan to boost investment into startups by tenfold from the 2021 level to JPY 10 trillion (USD 66.5 billion) by the fiscal year ending March 2028.
Gavet said health, energy, and food tech are among the industries in Japan that startups have the potential to grow in.
She also said that companies developing core algorithms for artificial intelligence would be a “big boys game” requiring billions of dollars of investment but added that she is bullish on startups that utilize AI in their business.
According to Gavet, Techstars currently does not have plans to expand into other Asian countries, though it may open in India in the future. Forays of US acceleration programs into Asia have not always gone smoothly: the high-profile startup incubator Y Combinator closed its China branch in 2019, just a year after setting up operations in the country.
But Gavet seems confident about success in Japan: “I’m very much hoping that one day we’ll be making 100 investments a year.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.