You all know that the traditional way Japanese do business puts a great emphasis on the slow, careful nurturing of ideas. We meet and discuss what we are going to do, looking at the possible ramifications from all angles, and work up a game plan in great detail. This takes time, but we are never in a particular hurry, and when we are finally ready to launch a new idea, everyone knows exactly what they have to do.
We instinctively avoid situations where the outcome is unclear. Japanese banks are prepared to lend money only on more or less sure bets with a reasonable return to established companies with whom the bank has long-standing ties. New organizations find it difficult to break into this cozy arrangement and it has traditionally taken newly founded companies years for them to be wholly accepted.
The whole structure of Japanese society seems designed to support this way of doing things. The schools teach polite obedience and disciplined study habits. It has been the traditional ambition of young men and women just out of university to join a big, successful Japanese company with a long history and by dutiful attention to their job rise in the hierarchy, to retire after the requisite number of years with a well-earned pension. In Japan, there has been no culture of undertaking high risks for a chance at unusually high rewards. Japanese are uncomfortable with unpredictables.
But there are unavoidable signs that all this is changing. Particularly in the past two or three years, it has become apparent that many of Japan's brightest young people are not prepared to buy into the traditional system. They look around them at an economy that has been stalled for almost a decade at a time the U.S. economy has boomed. They feel the excitement of new ideas generated not by patient technicians in the pay of huge corporations but by young entrepreneurs who do their apprenticeship in a single room in a low-rent part of the city with access to the Internet. The model for them is not a lifetime job with a respected company like Mitsubishi or Sumitomo, but work they have created themselves, which will bear their own personal stamp, and which may bring quite remarkable rewards--or not. It is life as a gamble, a very unJapanese notion.
I don't mean to suggest that there are no new ideas in Japan or that Japanese companies never create anything new. There is no argument that Japan's railroad system is the most technically sophisticated in the world; that Japan's urban infrastructure is highly advanced; that the ordinary Japanese house is in the process of being wired so that when you come home you are greeted by a mechanical pet and the coffee is automatically put on to brew. Sony has just put on the market their PlayStation2 game console, which is a remarkable combination of technologies and which some say offers an alternative to the computer we use at home to get an access to the Internet.
Notice, however, that these achievements all have their roots in large organizations. That is where most new ideas have always come from in Japan and where these ideas are carefully nurtured until they emerge as new products to be offered to the public by an experienced sales operation. It has been efficient to operate in this way.
So the emergence in Japan of the lone entrepreneur with a brilliant new idea is a real cultural breakthrough. We have never seen anything like this before. But it is undeniable that it is happening.
The engine behind this great sea-change is the Internet. The Internet has made it possible to do business in a new way, to attract abundant new capital, and to make it possible for new ideas to be tested immediately. There has emerged in Japan a "Bit Valley" in Shibuya, a home-grown counterpart to Silicon Valley in the United States. It is generally accepted that Japan is two and a half years behind the U.S. in development of Internet connections. But in Japan there are at this moment five million subscribers to cellular phones with access to the Internet--a greater percentage of the population than in the U.S.--and one hundred thousand new subscribers are being added every week. Japan is catching up very quickly. By the end of next year, all 38 thousand Japanese schools are to have access to the Internet.
When InterQ, the first Japanese company to make an Initial Public Offering on MOTHERS, the new Tokyo exchange designed specifically to raise capital for new venture businesses, put its stock on the market, its shares were going up for 420 times their initial value at the end of the day. There is now no difficulty in raising capital in Japan for mold-breaking new businesses--after all, Japan has more personal savings in its banks than any other country. The problem now is how to identify those new Internet-based companies that are going to make it.
However, how to identify which new companies are going to be successful is an old, old problem of course. Potential investors first have to be able to look at a wide variety of possibilities. One way Japanese investors can make contact with young entrepreneurs with new ideas is through the regular monthly meetings of Tokyo's Bit Valley Association, which are designed to bring entrepreneurs and venture capitalists together. Three hundred people attended the first get-together of the Bit Valley Association. At the latest meeting there were 2,000 people in attendance--entrepreneurs, venture capitalists from Japan and abroad and bankers, as well as headhunters who have come to know that there are lots of bright and energetic young men and women at this meeting. Why this sudden explosion of entrepreneurial talent? How could this happen so quickly?
New ideas and new companies are blooming right now in Japan. The essential reason for this change is that Japanese entrepreneurs can now easily get money from a source of venture capital and also can raise money at the stock exchange or OTC market..
The words of Joseph Kim, senior managing director of the San Francisco investment firm of Chase Hambrecht & Quist, a quoted in the Washington Post, gives an idea of how Japan now looks to foreign investors. Mr. Kim says, "We think Japan is the best market anywhere in the world for venture-capital investing right now." Mr. Kim has so far invested 250 million dollars in new Japanese ventures and plans to invest another 750 million this year. Mr. Kim says he is attracted by Japan's mastery of the advanced technology that is going to exploit the vast possibilities of the Internet. He says: " We see involvement with Japanese venture businesses as essential to remaining competitive elsewhere."
But if raising capital no longer seems the problem it once was, there are other problems. A new venture business doesn't arrive newly hatched without the need to address the usual problems of any new business. And here most of these new businesses need some help. Venture capitalists in the United States are prepared to give benevolent guidance to operations they have invested in. That has not been the tradition in Japan, however, where investors have provided money to work with but no advice. There should be some way for the new Japanese entrepreneurial companies to draw on the business and financial expertise they will need to grow in an orderly fashion. Perhaps these new companies will more and more decide on whose money they will accept based on the degree of management back-up they can expect from the venture capitals, and will offer them a seat on their board.
I hope I've been able to give you an insight into what is now a very fluid situation in Japan. Perhaps it is the nature of venture businesses--and all adventures--to embrace an element of unpredictability. It is not always possible to see where good ideas are going to lead.
At any rate, it is clear that many new things are afoot in Japan.. And as Taichi Sakaiya, head of Japan's Economic Planning Agency, has said, "A non-active scenario will bring our economy into ruin. Our unwillingness to face risks could cause the demise of Japan."
Thank you for hearing me out.
（Address at "Asian Venture Capital Conference " at Kuala Lumpur by By Yoji Okabe, Professor,Hiroshima International University, 20thMarch ,2000 "The Sudden Emergence of a New Entrepreneurial Japan"）
