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Startups

Entrepreneurship beckons Japan's bright young bureaucrats

Cabinet Office alum's wandering around Singapore in a lion suit reaps dividends

Government buildings in central Tokyo. Japan's startup scene is beginning to lure larger numbers of bureaucrats out of government ministries.

TOKYO -- It was 1996, Tomotaka Goji had graduated from the University of Tokyo, Japan's most prestigious academic institution, and joined what was then the Ministry of International Trade and Industry. He was on the elite track in one of the country's most powerful ministries.

Two years later he helped craft the Limited Partnership Act for Investment under Kaoru Yosano, then the minister of international trade and industry. It was part of Japan's "Big Bang" financial deregulation. Goji created a system of direct financing, which aimed to funnel money into startups through venture capital funds.

His career at what became the Ministry of Economy, Trade and Industry held promise, but while studying at Stanford University in the U.S., starting in 2001, Goji grew enamored with the idea of becoming an investor.

Stanford put Goji on the doorstep of Silicon Valley and exposed him to an ecosystem in which venture capital executives and entrepreneurs mingled freely and sparked innovation. After returning to Japan in 2003, he began thinking about how he could seed a similar innovation hub at his alma mater, the University of Tokyo, which, like Stanford, is rich with homegrown technologies. He left the ministry at the end of that year.

Goji is now managing partner and president of UTEC Venture Partners. "We will help you from hiring to managing intellectual property to auditing," he tells the executives of companies in which UTEC invests. Since it was founded in 2004 as a venture capital firm authorized by the University of Tokyo, UTEC has invested in more than 100 mostly science-based businesses.

Success did not come quickly. After opening his firm on the University of Tokyo campus, Goji was turned down by 140 investors. Nevertheless, he managed to raise capital from 22 companies and individuals over the next 12 months, then launch his first fund, worth 8.3 billion yen ($79.5 million), in 2004.

Tomotaka Goji was an elite-track bureaucrat before becoming a managing partner and president of UTEC Venture Partners.

"It took us five years before our first portfolio company bore fruit," he said. "I had stabbing pains in my stomach every day."

UTEC's portfolio now includes biopharmaceutical startup PeptiDream and artificial intelligence startup Neural Pocket. Its market capitalization surpasses 1 trillion yen.

Goji is now part of a trend in which promising young ministry bureaucrats are moving into the startup sector, distancing themselves from an outdated bureaucracy and work culture. 

According to a survey of central government workers compiled by the Cabinet Personnel Bureau in June, one in seven respondents 30 or younger said they will leave the ministry within a few years. With multiple answers allowed, "I want a more attractive job" was the most common reason, at 49.4%.

Amid booms in artificial intelligence and other technologies -- and as the traditional Japanese career track begins giving way to job mobility -- startups have been luring some excellent talent out of government bureaucracies.

Hiroaki Okahashi, partner and representative director of Miyako Capital, was inspired by Goji to launch a venture capital fund with Kyoto University's backing. He joined the METI in 2001, under the first Junichiro Koizumi cabinet. He helped abolish minimum capital restrictions and revise corporate laws under a mantra of "from the public sector to the private sector." The idea was to open the government sector and use the private sector's expertise to grow the economy.

"When I joined the ministry," Okahashi said, "I thought I would decide if I would stay in the ministry once I turn 30." He served some big-name officials, including Takaya Imai, former chief secretary to Prime Minister Shinzo Abe, and Satoshi Kusakabe, former commissioner of the Agency for Natural Resources and Energy. The job was rewarding, but Okahashi's drive to nurture companies grew stronger, and he left the ministry in 2010.

Okahashi joined Mitsui Sumitomo Insurance Venture Capital, intending to launch a business and start his career as an investor. At one time, Goji told him that it would be nice if the University of Tokyo and Kyoto University had their own venture capital funds. Later, he decided to apply for a venture capital fund approved by Kyoto University, which led him to start Miyako Capital in 2013, with Goji's help.

Takehiro Tahara, an entrepreneur in Singapore and Japan, joined the Cabinet Office in 2009. On his first day, he was stunned to discover how senior bureaucrats work. No one had left the office by 9 p.m. Finally at 11 p.m., his superior told him he could go home early because it was his first day. Not wanting a career running errands for ministers, he quit the Cabinet Office after a year and went to work at a hedge fund.

Singa Polah founder Takehiro Tahara

Later, Tahara launched his own investment company and almost immediately built a vast fortune. He has also founded a Singapore-based startup, Singa Polah, that is in the character business. Tahara serves as chief operating officer.

The eponymous character is a lion loosely based on the iconic statue in Singapore's Merlion Park, a tourist hot spot. Tahara wandered around downtown Singapore wearing a Singa Polah stuffed suit, becoming a walking billboard for his new company.

It was the kind of persistent marketing effort that was unimaginable as a fund manager, and it paid off: A Singapore government agency decided to adopt Singa Polah as its mascot.

The lion now has 34,000 Instagram followers and is bringing in more revenue as it sets its sights on becoming Singapore's Kumamon, the young black bear that is one of Japan's most popular regional mascots, for Kumamoto Prefecture, southwestern Japan.

Former Cabinet Office bureaucrat Takehiro Tahara is in costume with the Merlion statue over his left shoulder.

This year, Tahara got together with some friends from junior high and high school to establish Bright Future Group, an employment placement startup that helps bureaucrats change jobs. Tahara is betting that there are plenty of Japanese civil servants who harbor pent-up desires for new careers in the private sector, just as he once did. The startup is struggling amid the coronavirus crisis, but Tahara is determined to support aspiring ex-bureaucrats.

Not all former functionaries have luck. Shinsuke Ito, founder and CEO of Tokyo-based rimOnO, said the startup's development of ultrasmall electric vehicles was "hampered by regulations."

Ito joined the former Ministry of International Trade and Industry in 1999. While assigned to the automotive division and working on plans to develop electric vehicle batteries, he was overcome by the urge to "directly feel what it's like starting a company myself." He quit the ministry in 2014 to chase a business idea that dovetailed with the transport ministry's "ultrasmall mobility" program.

The program certifies vehicles that are more compact and maneuverable than cars, have superior environmental performance, can accommodate one or two people and provide easy community transportation.

Tokyo-based startup rimOnO’s ultrasmall electric vehicle prototype

He developed a prototype with Mitsui Chemicals and Teijin Frontier, with his sights set on going into mass production. But a regulation prohibits these ultrasmall vehicles from crossing city, ward, town or village borders, and there was no amending it.

Vehicles that are corralled within small neighborhoods are difficult to sell in large numbers, which makes profitability unlikely. The company had no choice but to pull the plug on the project.

"When the vehicle was completed," Ito said, "I felt a special joy that I had never felt when I was a bureaucrat."

He plans to start another business related to mobility.

Asked why they launch their own businesses, many reborn entrepreneurs say they want to tackle societal challenges they were unable to reach as government functionaries.

Many public servants who set off on private sector careers bring goals that are not easy to attain.

"I was used to being flattered," said Kent Yamauchi, an ex-bureaucrat who went on to found Glocal Innovation Holdings. At the outset of his second career, Yamauchi "didn't know who I should turn to for help."

As they take their lumps and chase their dreams, Japan's former civil servants are shedding light on what the government needs to do to promote innovation.

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