In Japan’s sprawling capital, you’ll find everything from futuristic skyscrapers and robot restaurants to landscape gardens and historic temples – not to mention capsule hotels, manga artists and Michelin starred restaurants. 

With shifting attitudes toward entrepreneurship and a strong legacy of tech innovation, Tokyo is becoming increasingly attractive for entrepreneurs seeking to set up shop – and for good reason. 

Japan is the third-largest economy in the world with a hardworking and highly skilled workforce. In recent years, a number of government-backed initiatives, such as the J-Startup program and the Tokyo Startup Gateway contest, have emerged to boost innovation and help Japanese startups scale into unicorns.

Levels of investment are also rising. In 2018, venture capital funding increased by a staggering 50 percent to ¥345.7 billion ($3.09 billion) in 2018, according to the Nikkei Asian Review.

Still, despite Japan’s historic reputation for being one step ahead of innovation, supporting entrepreneurship hasn’t always been high on the country’s agenda. This is partially because of the societal preference to work for large, established corporations that offer a relatively risk-free and lucrative way to climb the career ladder. 

“The giants that were in the spotlight in the 1990s, such as Sony, Honda and Softbank, have not yet been replaced on a global level by any trailblazing line of Japanese unicorns,” says Aryssa Isuyama, part of the startup operations team at Slush Tokyo 2019. 

In the run-up to the launch of Vol. 1 of Startup Guide Tokyo, we spoke to a handful of startups that are seeking to transform the world of work, create opportunities for young people and influence change in their local ecosystem.

It’s true that Japanese employees are some of the most hardworking people in the world. The country’s work culture is notorious for its long hours and overtime is a matter of course. Over a quarter of companies in Japan expect their employees to work for a minimum of 80 hours per week, according to a 2016 survey.  

Not only that, but the cultural emphasis on working for corporate companies has meant that many people search for jobs that provide a good paycheck, often at the expense of pursuing their interests.

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One startup that wants to change this is Wantedly. Founded in 2011 by Akiko Naka, Wantedly aims to connect employees with companies based on shared values rather than salary and benefits. 

“I think that a lot of companies, especially in Japan, focus on growth and revenue rather than what they truly believe in,” says Akiko. “Wantedly hasn’t made as much revenue as other companies that were founded around a similar time. That’s because our goal has always been to grow our user base and create an impact on society rather than just earn money.”

Launched in 2018, Clarity is a career match-making platform and employer database that helps women and minority talents find the best workplace to suit their needs. 

Founder Satomi Fuluya started the company after observing the rigidity of Japanese workplaces. She saw that many students would join a company fresh out of university and stay there for the majority of their working lives – mostly to enjoy the job security and financial benefits that come with working for a corporation. 

The ‘lifetime employment’ system not only gives young people very little opportunity to try out different professions, it gives women little wiggle-room when it comes to maternity leave. In Japan, expecting mothers are guaranteed maternity leave 6 weeks prior to the birth and then 8 weeks after the birth, while women in the UK are entitled to up to 52 weeks. 

“There has not been much flexibility in terms of the way Japanese companies are structured, and that has had a negative effect on workers’ choices, especially women’s work/life choices,” Satomi told Startup Guide. 

“A lot of women who wanted to continue their careers failed to do so because of this situation. We thought that if we could collect data about companies, including anonymous reviews by female employees, this could be shared, allowing women and others to make informed decisions about where to work.”

In addition to gathering third-party data, Clarity collects insights from companies with women- and minority-friendly cultures. Since its founding, the company has accrued approximately 20,000 data points on workplace culture in Japan and currently has 100,000 monthly users. 

Recently, Clarity has released a mentor-mentee matching community – dubbed Role Model SNS – to help existing and expecting mothers find suitable careers. The idea is to connect women with role models of other women who successfully balance work, childcare and their private lives.

Japan is known for being one of the most dominant economies in the world, but this title has come under threat in recent years. The combination of an aging population and a workforce that is rapidly shrinking is stunting growth, according to a 2018 report by the International Monetary Fund. The same report revealed that these problems may cause Japan’s average annual GDP growth to drop by 1 percent in the next thirty years. 

A startup keen to create a solution for Japan’s economic problems is Zehitomo, an app that provides an interface for freelancers to connect to customers in need of their services. After both enter their needs and offerings into the app, the match-making algorithm then makes the most suitable connections. 

Zehitomo was founded in 2016 based on a simple observation: Japan has an array of offline services, from plumbers and personal trainers to karaoke instructors, but they are notoriously difficult to access. 

Not only that, but the small-scale local service sector – which could be worth more than $200 billion according to Zehitomo’s cofounder and CEO Jordan Fisher – lacks transparency and efficiency. 

“Japan has a lot of really talented artisans, freelancers and other professionals, but there is no easy way to connect to them. The online penetration for local services is only about 2.5 percent,” he told Startup Guide.

As SMEs represent 70 percent of national employment, improving the performance of this sector could, according to a 2017 report by the Organisation for Economic Cooperation and Development, help “Japan achieve stronger economic growth.”

Jordan agrees: “We want to empower freelancers and small businesses in Japan, who are very good at what they do but aren’t necessarily good at marketing themselves. And, if we make it easier for them and their customers to find each other, then we can help increase productivity in Japan.”

Empath is a vocal emotion AI that can identify joy, calm, anger and sorrow in real time and in any language.

The company grew out of Smartmedical Corp., which used vocal emotion AI to detect negative mood in survivors of the 2011 Great East Japan Earthquake and Tsunami and refer them to mental health professionals. Empath Inc. was later established in 2017 to deliver the technology in primary care settings, but it soon expanded. 

“Empath has been hard to monetize, so, to gain revenue, we work in other sectors while continuing our research on mental health,” Hazumu Yamazaki, cofounder and CSO told Startup Guide. 

At the moment, Hazumu is targeting call centers with the technology. So far, it seems to be working. 

Companies using Empath’s Smart Call Center – which analyzes the caller’s emotional state and provides advice to operators on what to say or how to be more empathic – have reported a 20 percent increase in sales conversion, as well as a reduced employee turnover rate. 

“Our advantage is real-time analysis because our competitors need more than ten seconds of voice data [to identify emotion],” says Hazumu.

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Fast forward to the future, Empath’s CEO has plans to dedicate more resources to mental health. “We are thinking about a future where we can understand depression by not only voice but also visual and biometric cues,” he says. 

In the meantime, Empath has recently added the “My Mood Forecast” employee assistance program to its oeuvre that is able to forecast the week-to-week changes in workers’ mood through voice analysis. From a dashboard, employees can see not only their own mood but also that of their colleagues. This analysis helps teams to better understand each other while also increasing employee motivation.

While Japan’s business landscape has traditionally been dominated by large corporations with a conservative mindset, the growing number of startup ventures shows that attitudes are beginning to change. 

In collaboration with the J-Startup program, Japan External Trade Organization and the Japanese Ministry of Economy, Trade and Industry has unveiled plans to bolster the development of local startups overseas and produce 20 homegrown unicorns by 2023. Whether these ambitions will be realized remains to be seen.  

Still, Tokyo is the number one place to be in Japan to “develop one’s company and make connections,” says Aryssa. “The entrepreneurial ecosystem is brimming with the kind of excitement one would expect just before a spurt of exponential growth.”

To read more about the movers and shakers in Tokyo’s startup ecosystem, grab a copy of Startup Guide Tokyo here.