Industry Insights: Understanding the Startup Culture Gap Between Japan and the West

On the streets of Europe, I noticed a small but memorable detail: Many people were using their iPhones without cases. From that almost-insignificant observation, a larger question began to form in my mind. 

How do people value objects? How do they think about design, ownership, resale value and investment? This insight piece explores how small differences in behavior can reveal deeper differences in business values between Japan and the West.

Uncovering business values through everyday observation

I spend close to half of each year overseas, traveling through Asia, the United States and Europe. The cities I visit change every year, but there is one habit that does not change no matter where I am.

As a consultant, I support corporate strategy. Because I am also involved in business development that uses the intellectual property of luxury brands, I have many opportunities to meet decision-makers — such as investors, company owners and manufacturers’ representatives — at dinners and in business meetings.

I do not speak English fluently and for other languages, I can only manage simple greetings. When contracts need to be executed or legal matters confirmed, I sometimes use an interpreter. Outside of those situations, however, I basically communicate without one. That is precisely why I always observe.

I watch the other person’s facial expressions and tone of voice. I notice how they treat restaurant staff and other service workers, their table manners and the cultural gestures specific to that country. In my opinion, many things that cannot be asked directly in words appear in one’s behavior. Through those behaviors, I can understand what kind of values the person has and what they consider important.

By facing investors and entrepreneurs around the world with that attitude, I gradually began to see differences I could not have noticed by staying only in Japan: differences in the meaning of words, business values and how people think about investment.

The iPhone case: microcosm of cultural values

Those differences also appear in small, everyday situations. When I walk around cities in Europe, I notice that compared to Japan, a relatively large number of people use their iPhones without a case.

When I wondered why and asked, I received several different answers: “I have AppleCare, so if it breaks, I can fix it,” “I want to see the original design, not a case,” and “I chose a lightweight model, so putting a case on it would defeat the purpose.”

In Japan, by contrast, many people use cases, and they are particular about choosing them. Some use cases as decoration, while others say they do not want scratches because it lowers the phone’s resale value. Neither side is right or wrong, but I felt that this small difference condenses a broader difference in values toward objects.

People in Europe seem to place value on the experience granted by the item itself. People in Japan tend to think more comprehensively, starting from the object itself and including decoration and even future asset value.

How investment strategies differ between Japan and the West

These different values toward objects are connected directly to different values toward investment. In Japan, discussions often move relatively early to profitability and reproducibility. Investors ask, “If we invest this much, how much will we make?” and “When can we recover the investment?”

By contrast, when I speak with investors in the U.S. and Europe, the first thing they look at is not the numbers. Instead, they look at four key pillars:

• Vision: What kind of future is this business trying to create?
• Founder: Does the founder have the resolve and ability to realize that future?
• Team: Is there a team that can execute the plan until the end?
• Market impact: Will it expand the market, or will it change the market itself?

In many cases, they make investment decisions by looking at these elements comprehensively. They believe the numbers will follow later.

Lost in translation: The true meaning of a startup

When this difference in values is translated through words not in my native language, it creates an even larger gap. I feel that the word “startup” has vastly different meanings in Japan and overseas.

In Silicon Valley, a highly evaluated startup is a company that creates a new market, rewrites the rules of an existing industry and tries to change the world through technology or new values. In Japan, a company may be called a “startup” simply because it was recently established. If the word becomes a corporate buzzword without its original meaning being preserved, both entrepreneurs and investors lose sight of the essence of the term.

For example, if someone introduces their business by saying, “We are a startup,” and the two parties have different definitions of the word, the conversation begins with a gap in understanding. Similarly, if a founder says, “We want to strengthen marketing,” the Japanese side may think of social media management or advertising, while the overseas side may understand it as market strategy or business design. The same word is being used, but what each side is comprehending and responding to is completely different.

At first, that gap may look small. But as the conversation progresses, it accumulates. Eventually, it can lead not only to a waste of time and money but also to a breakdown of trust. A business that proceeds with misaligned definitions will inevitably fail.

Why every founder needs a one-page business plan

When I am invited to speak at domestic venture capital lectures or study sessions for young entrepreneurs, I feel this gap even more. Many young entrepreneurs who exchange business cards with me say, “I would like you to consider investing,” or “I would like advice on my business.”

Their buzzwords are always out in front: “We want to scale as quickly as possible,” or “We aim for a multibillion-yen buyout.” But when I ask what the actual business is, it is often an existing model, such as recruitment or social media management.

That isn’t necessarily a problem. However, when well-funded companies with proven results already use the same business model, a competitive advantage is needed to compete with them head-on. If you lack capital strength, you cannot compete on price or scale. Yet, founders often project massive financial figures without addressing this fundamental issue.

When I become concerned and ask, “Do you have a business plan?” the answer is usually, “We will make one now.” When I briefly explain how to write one, their eyes light up and they say, “Thank you. I will think about it.” So far, however, not one of them has come back to me with that plan.

Not having a business plan means the business has not yet been clearly articulated by the founder. That is why their explanation changes every time they meet someone. Because their explanation changes, their vision is not communicated correctly. Because it is not communicated correctly, they fail to attract investment and support.

A business plan also clarifies what kind of funding is necessary and where it should come from. If the company needs investment for growth, they should speak with venture capitalists or angel investors. If they need working capital or capital expenditure, banks or public finance institutions become options. If the goal is strengthening capital for business expansion, it requires negotiations with investment companies or funds.

The phrase “I want investment” communicates almost nothing without a business plan. What kind of business, how much money and for what purpose? Only when that is visible can the other party make a judgment. Before talking about the vision or the founder that overseas investors look for, the starting point is whether you can write your business plan on a single sheet of paper. 

The annual Japan Market Expansion Competition (JMEC), meanwhile, trains candidates to write professional business plans of up to 100 pages over several months at a fraction of the regular industry price. JMEC is accepting applications for the course that starts every November from individuals who want to learn how to create a comprehensive business plan and companies who require one. The next JMEC information session in Tokyo is on August 27. 

Bridging the gap for future global business

If this gap is understood, it becomes an opportunity for both investors and the companies receiving funding.

As the weak yen endures, interest in overseas investment and business entry into Japan is increasing. For Japanese companies, opportunities to partner with international players are growing. At that moment, noticing this gap in language and values is the first step.

Both sides must try to understand not just the surface meaning of the words but the values and culture behind them. That alone can expand the possibilities of business. For those interested in the Japanese market, understanding this gap is invaluable. Before looking at the numbers, understand what the people in that market value. That should be your first step when doing business in Japan.