Japanese companies are interesting partners for startups because Japan has been an extremely tech-oriented country from the very beginning that often embraces innovations faster than other markets. While people were still typing away on their old cellphones in Europe, it was already possible to watch color TV and connect to selected parts of the internet on i-mode devices in the subway in Japan as far back as 1999.
Yet Japan remains a demanding partner country, where the VC concept has only recently been accepted as a sensible approach. That’s why it’s important to carefully prepare for how you will convince potential partners that your idea a) works and b) can be transferred to Japan.
How to build trust?
It’s clear that a lot happens in the startup world through pitch meetings and expos, but particularly with large companies that are strong financially, the first obstacle is for you to prove your trustworthiness.
It is therefore of the utmost importance to give your future partner a sense of security when establishing a relationship. If possible, have a third party introduce you who will act as a kind of guarantor to emphasize your seriousness. This step can even be mandatory for reaching the right person.
“Risk” from a Japanese perspective
In all of the seminars conducted at the Japan Consulting Office, we ask how the word “risk” is understood in each participant’s culture. Without exception, Japanese participants say they might be open to a certain amount of risk as an individual, however in Japan, the word “risk” always has negative connotations.
Japan sits on the boundary of four tectonic plates, and ever since people have inhabited the country, they have constantly faced concrete threats. Not only in the form of earthquakes, but also as tidal waves or tsunamis, avalanches, typhoons and volcanos, which cause varying degrees of hardship every year. That means life is characterized by a very high level of basic risk.
In response, Japanese culture (and business culture as a result) places great emphasis on organizing every element of life that can be influenced by planning them down to the last detail. It might be understood as an attempt to counter the unpredictability of nature somewhat by attaining the highest level of precision in planning and execution.
How to convince Japanese partners: “elevator pitch” or attention to detail?
The fundamental aversion to risk in Japan is obviously a problem if you want to impress by talking about concepts such as disruption or revolutionary change. That’s why in 99% of the cases in Japan, in contrast to Europe and particularly the US, it’s not the big picture that’s initially defined before continuing on to the concrete details.
When you meet Japanese scouts for the very first time, who usually speak perfect English, an American “elevator pitch” might make a bit of an impression. But the more contact you have with the actual organization in Japan, the more precision and attention to detail become “make or break” elements.
In Japan, the final goal is always deduced from the details taken in total. That means that a project can only be accepted when each individual step is precisely defined. This approach can be understood based on the fundamental incompatibility of the concept of “improvisation” with the Japanese mindset. The motto “let’s give it a try and see if it works, because you can’t plan everything” is incomprehensible for Japanese companies or organizations. It’s important to understand that a company like Softbank, which operates quite quickly and indeed as “daringly” as Western companies, is an absolute exception in Japan.
Accuracy is the key
Always present extremely detailed information in your pitch or offer. A Japanese saying goes “proof over theory” (論より証拠/ ron yori shouko). It is imperative to have a precisely defined proof of concept with clear use case application examples, benchmarks, photos and ideally customer references.
Such a detailed presentation, which also displays information with visual aids instead of just text, firmly roots the idea or product in reality. Avoid sales pitches that are too visionary, along the lines of “imagine a world…”, and let your audience reach their own conclusions based on the facts and details you give them.
Discussions and negotiations
When it’s finally time for concrete negotiations in Japan, observing formalities is key. Learn about the appropriate greetings (“san” and so on) and always make sure to give others your business cards with both hands. Treat your Japanese partners with respect and remain modest even when you’re completely convinced of the value of your idea.
Be mindful of the hierarchy among the people present. It’s also important for you to bring the right team along to the meeting. You should ideally reflect the ranks and titles on the Japanese side with the people you bring with you. By the way: Even if your own boss “only” gives a small gift as is expected at the beginning of the meeting – the Japanese side will remember “Mr. ___, who gave them gingerbread from Germany” for a very long time.
It’s important to calmly create the right conditions for collaboration from the very beginning. A “time is money” approach is inappropriate in Japan. So be aware that just getting to know each other can take a lot more time than expected.
Communication in Japan
The English proficiency of many Japanese people, especially in tech, is often much lower than expected. That’s why it’s a good idea to bring along as much written and visual information as possible. A combination of speaking and drawing (flip chart, etc.) is also very helpful.
When communicating with Japanese business partners, there are several signals that help you interpret indirect communication properly. For example, it’s important in Japan to actively “pick up on” unspoken information through empathy and to anticipate the needs of the person you’re speaking with. If the person you’re talking with says, for example, “That is a bit difficult,” that usually means “That is impossible.” That is how people in Japan avoid forcing others to explicitly refuse something.
- Always show your Japanese partners that you respect them and their culture.
- It’s better to dress more formal than casual. Japan isn’t California…
- Be prepared for very close collaboration in which it can be necessary to quickly answer the thousandth detailed question from your Japanese partners.
- Be mindful of unspoken signals in communication!
In Japan, large trade companies in particular are currently looking for new business ideas because the traditional “man in the middle” is no longer necessary due to the internet.
Internally founded VC departments make these companies, even in the difficult current situation, interesting partners, but you first have to convince them properly.
Guest contribution by Nikolaus Mach-Hour
Nikolaus Mach-Hour lived and worked in Japan in the early 90s and looks back on more than 25 years of collaboration with Japanese partners. After working as a translator, interpreter and consultant in tourism and communications, he led a company starting in 2001 that specialized in supporting Japanese expats and their families. Since 2009, Nikolaus has been the Head of the German branch of the Japan Consulting Office, which is where he holds intercultural seminars, people management training and executive coaching.