There is no doubt that Japan is not immune to the impact of COVID-19 on its economy and like most other countries, there have been negative impacts of the virus to businesses. This is illustrated by the recent prediction that a one-month extension to the state of emergency announced by Prime Minister Abe this week will double the number of jobless in the country to just about 800,000.
It is not all bad news, however. Anyone with a finger on the pulse of inbound investment from Japan to Australia will have noticed significant movement of capital and long-term commitments made, even after the coronavirus impacts were being felt.
For example, the Japanese telecommunications giant NTT recently purchased a Melbourne based office tower for $72 million, following an announcement from NEC and the NSW government that confirms NECs intention to set up shop long-term in the new technology precinct between Sydney’s Central Station and Eveleigh.
In the last two months I have met with more than 20 Japanese corporations, mostly with new business development, innovation or corporate venture capital departments. While there were common themes across the board with these companies – like spending pauses or being more cautious about new investments –there were more than a few outliers who cited growth segments like wellness products, and health and medical technology.
Some had relatively new corporate venture capital funds and were business-as-usual in terms of sourcing and analysing potential deals.
Closer to home, the tech market entry program that I run in Japan’s second largest city of Osaka enjoyed 100 per cent contract renewal across seven large Japanese corporations who are searching for startups with smart technologies that drive ‘smart cities’, which Osaka aspires to be.
This small consortium of Japanese companies is an indicator that even in these difficult times, there are opportunities for Australian and international startups to take advantage of.
One company seizing the opportunity, iCetana, a Western Australian company that produces AI software for automatic identification of anomalous behaviours in large video camera installations (think automatic and smart detection of unusual behaviour on CCTV).
iCetana has managed to complete projects with two household name Japanese companies between November last year and this January – all whilst successfully completing its IPO on Christmas Eve last year. Business Development lead on the project, Tarique Weerasekera said “with these kinds of partnerships under our belt, we are very confident now to enter the (Japan) market”.
Travello, a Brisbane based TravelTech company raised $5 million in late 2018 to make its online travel community a true global player, and completed an initial collaboration project with a major Japanese media conglomerate this February.
The partnership saw the Travello App promoted to an expansive Japanese audience that were seeing the app for the first time.
As part of the same program run by innovation firm Rainmaking, both Sydney MediaTech darling Oovvu and Melbourne PoS technology provider HIKE took their first steps into Japan by co-designing and executing three-month projects with large Japanese firms on the lookout for competitive technologies beyond the land of the rising sun.
At the same time, Tokyo-based Australian Paul Chapman has recently completed a $45 million Series C fund raise for his Japan headquartered FinTech startup MoneyTree, after recent strategic investments from Mitsubishi UFJ Innovation Partners, Sony Financial Ventures and NTT Data in March last year.
Whilst cost-cutting and survival may be more relevant for many Australian startups during these strange times, for those that are capable of continuing to invest and work toward market expansion, 2020 may be an unlikely but good time to investigate the Japan opportunity, as stability and trust become more important for both sides of the Australia-Japan bilateral relationship.
Joshua Flannery is the CEO of Rainmaking Innovation Japan and managing director of Startupbootcamp SCALE Osaka. His is also a director of InnovationDojo.com.au. He has previously been a Director at the Sydney Startup Hub.