Home / Business / BBC – Future – Why Fukuoka is Japan's most innovative city

BBC – Future – Why Fukuoka is Japan's most innovative city

Located between the mountains and the sea in Japan's western corner, Fukuoka is a city trying to reinvent itself. In a country long dominated by megaconglomerates and Tokyo's unstoppable move, the country's fastest-growing urban area seeks to be Japan's response to Silicon Valley.

Despite the country's reputation for hi-tech wizardry, Japan's start-up scene remains surprisingly stunted. The world's third largest economy has only one "unicorn" – a private company valued at over $ 1 billion – compared to 127 in the United States and 78 in China.

The charismatic young mayor of Fukuoka is determined to change that, and he is convinced that the city is confident that it has the ingredients to repeat the success of the innovation centers on the US West Coast. In 201

1, he said Fukuoka would become Japan's start-up city, and has since led the country's Business Creation League.

Whether it can really compete with the capital remains to be seen, as funding and talent continue to focus in Tokyo, but the city leaders are convincing with their pitch. A close-knit founder community, a young workforce and an affordable city that promises this elusive goal of a work-life balance – something that they hope will appeal to a new generation of entrepreneurs who want to avoid the race in Tokyo ,

Shortly after being elected as the city's youngest mayor in 2010, 44-year-old former television presenter Soichiro Takashima visited Seattle and was impressed by the similarities with his hometown. Both are compact, naturally surrounded seaside towns with a well-developed transport infrastructure and abundant human resources, he says. In Seattle, these ingredients support titans like Amazon and Microsoft as well as a thriving start-up ecosystem. Takashima believes that Fukuoka can repeat this success and help bring out of the rut the Japanese economy that it has had since the early 1990s.

"The existence of start-ups that create new innovations and values ​​is necessary to overcome economic stagnation," he says. "Against this background, I have positioned support for startups as the growth strategy of our city."

He has been employed ever since. In 2014, the central government approved its proposal to designate the city as a "national strategic special zone" for start-ups, allowing them to lower corporate taxes on new businesses and create a special visa for foreign entrepreneurs. In addition, they were able to relax the planning rules to redevelop the city center and mobile network regulations to create a faster and easier Internet of Things (IoT) experimentation and technology demonstrations, incorporating sensors, communication and computer hardware are everyday objects.

Takashima has aggressively promoted the city at home and abroad, led business delegations and signed cooperation agreements with start-up hubs such as San Francisco, Taipei and Helsinki, which offer support to Fukuoka start-ups to expand overseas or foreign start-ups. ups who want to enter Japan.

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Back in Fukuoka, the government has renovated an old school in the central business district of Tenjin to create Fukuoka Growth Next (FGN), a one-stop shop for aspiring entrepreneur, which was opened in 2017. "Simply put, our mission is to educate future unicorns," says Yasunari Tanaka, general director of the FGN Secretariat.

Facilities include discounted office space, a prototyping lab, a start-up café where consultants provide free business, legal and accounting advice, and the Global Startup Center, which helps founders in Fukuoka or local entrepreneurs are expanding abroad. There is also a bar to lubricate the networking process, and regular meetings, seminars, and events to connect start-ups with clients and investors.

Although the city's first unicorn is probably still a long way off, it's encouraging progress. The initial target for FGN was for tenants to raise Yen 500m (£ 3.37m) by September 2018, but that target was shattered, increasing $ 7.1bn (around £ 50m). Fukuoka also has the highest new business rate (7% registered in one year) in the country, well above the 4% in Tokyo.

The city has some strong fundamentals in its favor. Japan's aging population and shrinking workforce provide sleepless nights for politicians and economists, but Fukuoka is the country's fastest growing city and has the highest proportion of young people. The rent is about 60% in Tokyo, and the city is closer to Seoul and Shanghai than the capital, which she considers Japan's "gateway to Asia."

This combination led Fukuoka-born Yasuhiro Ide to transfer the home of his e-commerce business New World back to his hometown. He moved to Tokyo looking for business opportunities in 2015, but decided last year that his goal of expanding to China is easier from Fukuoka. "At Fukuoka, it's easy to recruit engineers and designers with little effort and lower office costs," he says. "And if I want to go to China, it's two hours by plane. There are four from Tokyo.

The compactness of the city also means that the business community is close and diverse, says Hashimoto Masanori, CEO of software company Nulab and a veteran of the Fukuoka startup scene. This facilitates team building and networking. "When I go, I drink someone in a connected IT company," he says. "In Tokyo I go to community events and it's just programmers, but in Fukuoka I go to these events and I meet programmers, designers, marketers."

Another important element in the government's pitch is "viability" the city. The international airport is a 15-minute subway ride from the center. The paths are short and you can get to work on foot or by bike. You are never far from nature with mountains that are located near the city limits and picturesque beaches nearby. "Fukuoka is more relaxed," says Tanaka. "If you're looking for a good work-life balance, Fukuoka is a very attractive city."

That's what led French entrepreneurs Yasmine Djoudi and Thomas Pouplin to settle in the city.

They were part of a student exchange program for the first time and when they decided to start their start-up Ikkai, an online platform for short-term students, they decided to stay in Fukuoka instead of moving to Tokyo

"The lifestyle here is really beautiful," says Djoudi, adding that the lower cost at the beginning was also a great blessing. "We did not regret it because we realized that the burn rate is much lower. We would not have done half of the things we did in Fukuoka if we went to Tokyo.

The couple was the first recipient of the city's startup visa and helped shape the application process. Pouplin acknowledges that language barriers and inflexible regulations still make Japan a tricky place for outsiders, but he says Fukuoka is ahead of the times in facilitating foreign founders.

The rebranding of the city has attracted a great deal of attention, both domestically and in the US, but despite the positive coverage, two main ingredients remain scarce – talent and funding. According to Pouplin, only limited risk capital is available in Fukuoka. As start-ups grow, they generally need to capitalize on investments and customers. "Fukuoka is a great starting place, but not a great place to grow," he says.

One of FGN's most successful graduates is Skydisc, which uses artificial intelligence to boost factory productivity, and has been named the "Future" Unicorn by financial newspaper The Nikkei. Yoshihiko Suenaga, the strategy expert for overseas, praises the city government's approach and says that her time at FGN has opened many doors. "They gave us cheap rents and many options," he says. "We actually met one of our partners as well as one of our big customers at a suitable event."

However, he admits that they only stay in Fukuoka because it is the hometown of the founder. Their operation is now split between Fukuoka and a Tokyo office three years ago, as most of their customers are located there. Talent was also a big driver – while competent developers can be found in Fukuoka, more advanced technical skills are focused on the capital. "AI-oriented engineers are relatively hard to find elsewhere than Tokyo," he says.

To lure this kind of talent into the city, the government recently declared itself an "engineering-friendly city" and continued with recruiting events in Tokyo. But even the brightest of Fukuoka find it hard to resist the capital's appeal, says Suenaga, who has spent 15 years in Tokyo. He comes from the neighboring city Kitakyushu and returned only for family reasons. "After graduation, you have no choice but to go to Tokyo," he says. "That's the normal way of thinking."

That does not mean that Fukuoka does not change in the capital. Shun Nagao, who heads the Tokyo office of global venture capital firm White Star Capital, says there has been much excitement throughout the city over the past two years thanks to the mayor's efforts. However, it is still considered a relatively immature ecosystem.

"I do not think there is any understanding of what distinguishes Fukuoka," he says. He believes the city needs better branding and points to Kyoto, which has made a name for itself as a hotbed for hardware start-ups by building an ecosystem around top-notch Kyoto University and the city's major electronics companies such as Kyocera , Omron and Rohm.

A great opportunity for the city, Nagao says, is its proximity to Asia, which could allow the city to attract foreign talent instead of visiting Tokyo. However, in terms of attracting more funding, he believes there must be clear success stories or great reviews before investors provide serious resources for the city.

Fukuoka officials acknowledge this, but they also know that they lay the foundations for this success. It takes time. Their current goal is to create one hundred yen worth of startups over the next five years, says Naokatsu Matono, director of the city's start-up department. "To create a unicorn, we first believe we need a lot of start-ups," he adds. "Our goal is to help one of the hundred companies become a unicorn."

And the city does not rest on its laurels. FGN was redesigned at the end of March, and when re-launched in May, it will join forces with an internationally renowned start-up accelerator to advise and help finance a new group of startups ,

The government is also in the process of creating an ambitious new "smart city" – a city that uses technologies such as IoT and data analytics to provide smarter service in areas such as transportation, utilities and administration – on a former 124 hectare site large former university campus Fukuoka, only 4 km from the center.

Typically, these projects land on green fields far from urban centers or layering technology on existing infrastructure, says Kouichi Matono, who heads the project. This smart city will be unique as it is built from the ground up in the heart of the city with the jointly developed infrastructure and technology.

The demolition work has already begun, and the government plans to work with a consortium of companies to create an open-source testing ground for advanced technologies such as 5G, driverless vehicles and telemedicine. The goal is to drive the founding of many new start-ups, says Matono, and serve as a test site to show the rest of the country how to use technology to solve Japan's most pressing problems.

"We're trying to create a new lifestyle, not just buildings," he says. "Japan has many problems. The number of old people is growing and we have a low birth rate so we will have problems with work and health care. That's why we want to use new technologies like AI and IoT to solve these problems. "

Developing the ecosystem of talent, expertise and funding needed to support the kind of" living lab "the mayor has previously said he wants to put Fukuoka into will need time. But the unique combination of entrepreneurial energy, quality of life and a supportive government make the city an ideal place for anyone looking to build a more liveable future.

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