Japan: To Fix Your Economy, Honor Your Failed Entrepreneurs

Germany, like most rich countries, has various incorporation forms, some which limit liability and some which do not. The GmbH and AG (translated literally "company with limited liability" and "stock company") are the standard startup vehicles. Recently there was also a new simpler form created, the UG ("founders' company"), which is also limited liability and doesn't require the initial stock value to any particular amount, unlike the GmbH (€25k+) and AG (€50k+).

Furthermore, Germany is very much a country of entrepreneurs. 66% of Germans are employed at a company that has fewer than 250 employees [1]. Germany does not have nearly as much of the shoot-for-the-moon entrepreneurship that the US is famous for, but to claim that founding companies is an oddity is nowhere close to being factually correct.

In contrast, in the US, half of Americans work for companies of under 500 people [2].

[1] http://de.wikipedia.org/wiki/Kleine_und_mittlere_Unternehmen...

[2] http://www.ilr.cornell.edu/international/news/upload/BERLIN%...

It's a fine idea to honor peoples' attempts at entrepreneurship, but by propping up failed ventures instead of making room for new innovators sends the wrong message to their economy and is causing untold number of problems.

Yes, but no. Japan has many, many, many talented engineers. Comparatively few of them work in web applications. Of those, most work on corporate IT apps serving the needs of Japan's multi-nationals.

To the extent that there is a coherent body of practice involved in the design, creation, operation, and evolution ofmodern web applications outside of the enterprise, that body is largely understudied here. Everything from modern web frameworks to metrics to split testing to making stuff pretty (many Japanese sites are stuck in early 2000 web design, partially a function of supporting obsolete mobile clients and partially of underuse of modern technologies) is underdone here.

My views are partially colored due to living in Japan's answer to Kansas. It may be better in the trendy Tokyo startup scene.

I also see a lot of Entrepreneurs making it big in Japan (I live near a tech incubator that is now 30%(?) iphone application companies, and the companies there are doing very well. The largest web-design company in my tri-prefecture area was started by an Entrepreneur.

In addition, I think of companies like Gree, Mobage (which just got purchased by Yahoo) and other startups who are making it big right now.

Another thing to consider is the size of the market. The Japanese market is a fraction of the English-speaking market, so even if a start-up does hit it big, they are pulling from a smaller pool of possible income. This might be another reason (no big dividends) why the Japanese are less reluctant to become an Entrepreneur rather than work at a company and have (fairly) stable job security.

>>So if the business fails, they lose their house; their savings; practically everything they have. What’s worse: the Japanese and German entrepreneurs may also face criminal penalties and go to jail.

I'm curious about this. Someone I know was an entrepreneur who recently went under. He's now happily working on his next project, and has no criminal penalties, and other than losing the building and land for the offices he had built, suffered no life-altering penalties.

At the risk of sounding Wikipedian: [citation needed]

However, it's important to point out that the web/high-tech entrepreneurial industry is still fairly young and seems to be in its infancy compared to areas referenced in another comment regarding government subsidies and whatnot.

For the past four years, I worked as a head-hunter recruiting Japanese talent for companies in the web space. I've met and spoken with over 3,000 industry professionals ranging from company owners, entrepreneurs, engineers and designers. Here's what I've learned:

1. Those most considered risk-takers, confident and willing to forgo the security and stability for more entrepreneur-driven opportunities are normally educated outside of Japan, or have spent a significant amount of time outside of Japan.

2. Start-ups created in Japan, in the web space or high-tech space are considered too risky. Even foreign companies that have been successful in other markets have a stigma attached to them and are not considered as attractive options.

In my experience, most Japanese like to see either a track record of success in Japan as well as a partnership with or backing from a major Japanese company in order for the start-up stigma to be removed.

3. Tokyo is beginning to have a great start-up and entrepreneur community in the high-tech space however, there is a language barrier that, in my opinion contributes to the slow growth of the community. For example, there was recently a conference title New Context Conference 2010, in which several companies from a new YC Clone seed accelerator (Open NetworkLab) were able to demo their start-ups. A part of the program is that companies receive mentoring from international and Japanese investors, founders and the like to help improve their start-ups. Watching the presentations, it's clear that the Japanese start-up founders for the most part were struggling most with presentation skills.

My point is, when your language ability is limited and you can only access resources in Japanese, it's tough to really push and challenge yourself, especially when a lot of the most exciting things happening in this space are in English. It's unfortunate, but Japanese is not the language of business outside of Japan.

4. Have you tried starting a company here? With the long set-up time at least 1 month, expensive office space, taxes, banking fees, not to mention the difficulty in closing a company down-- they don't make it easy to take a risk.

5. If you're a former founder of a failed start-up here, unless you have a great network it's highly likely that the only companies that will find your failed start-up experience highly attractive are foreign owned. Most domestic companies would be too blinded by your failure and/or the fact the founder is used to being independent and most senior in their company, and may not be able to adjust to a team environment again.

I could go on, but overall there's a lot that contributes to the current state of Japan's lagging entrepreneur state.

There just seems to be a lot of bloat, not only from conglomerates with tons of subsidiaries but also from their ballooning cash hordes and debt free balance sheets. It makes the corporate loan demand very very low in Japan which creates issues for their banks when it comes to acquiring good borrowers for loan income.

We had this happen in the 70s when raiders went after old school economy companies (think Asher Edelman). They really helped weed out the inefficient enterprises.

The lack of biz contacts are daunting but if Softbank can make it with a Korean president, there is nothing stopping us. (or at least that's how I justify trying things here)

Regardless of this, Japan's economy will begin to recover when the government stops interfering with interest rates.

If the market set rates, marginal businesses would fail, making room for new companies.

And savers would have more incentive to save, making more capital available for businesses that stand a better chance of generating returns that justify the higher rates.

More viable business mean more capital returned to investors and more capital for investment.

These low rates are really a subsidy for mediocre investments. And we all pay for this subsidy through inflation and dumb idea bubbles.