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Startups

Kyoto's business gentry nurture next generation of innovators

Japan's cultural capital also boasts thriving ecosystem of entrepreneurship

In Kyoto, innovators like Nidec's Shigenobu Nagamori, top, Horiba's late Masao Horiba, center, and Kyocera's Kazuo Inamori have actively nurtured new generations of innovators like MR Support's Shigeo Kusaki, shown flying a drone in Osaka.

KYOTO -- Kyoto is home to a number of high-tech companies that have created global markets with their unique technologies. One of the oldest is Shimadzu, founded in 1875 by Genzo Shimadzu. Some of Japan's leading entrepreneurs, including Horiba's late Masao Horiba and Kazuo Inamori of Kyocera, laid the foundations for their future growth here. But why did these companies spring up in Kyoto?

Kyoto features a system of mutual support in which members of the city's upper crust support the tea houses and traditional restaurants, which are in turn clients of their own businesses. This creates a vibrant atmosphere in the ancient city. The business world is following suit, with established executives reaching out to young entrepreneurs. They know that the next generation of innovators will lead the evolution of local industries.

"It sounds interesting," said Shigenobu Nagamori, founder of Nidec, at a 2018 meeting of the Kyoto City Venture Companies Connoisseur Committee to determine A-ranked companies. "Go ahead and try it."

Nagamori, then the chairman of the committee, was encouraging Shigeo Kusaki, 46, and others at the surveyor MR Support who had demonstrated a new method of using digital technology to dramatically improve the efficiency of surveying road surfaces for repair work.

A-ranked companies receive subsidies and business support from specialist coordinators. Similar systems exist throughout Japan, but in Kyoto business luminaries like Horiba and Inamori have been actively involved. Nagamori also uses some of his valuable time to listen to the ideas of entrepreneurs.

Nagamori himself was once in a similar position. Shortly after its founding in 1974, Nidec was planning to build a new factory to meet the growing demand for motors. It received help from a venture capital company established by the Kyoto business community and headed by Kazuma Tateishi, the founder of Omron.

When Tateishi visited Nidec's factory, still small at the time, he was encouraging. "This is magnificent," he said. "You'll succeed, Nagamori." The venture capital company decided to fund the construction of Nidec's new plant.

"Tateishi took great care of me and offered guidance when I first started the company," Nagamori said. "He is one of the managers I respect the most."

Tateishi, who founded Tateisi Electric Manufacturing (now Omron) in 1933, had himself received advice from a classmate working at Shimadzu when he was developing a timer for X-ray photography. Innovators nurture innovators. This ecosystem is still alive and well in Kyoto.

A drone photographs road surface conditions in Nishinari Ward, Osaka.

In early December 2020, Kusaki and his team from MR Support were on a two-lane highway in Osaka with a small drone. He attached his smartphone to the controller and started operating the machine, which took off from the palm of his hand with a high-pitched whir. When it was about 10 meters above the ground, Kusaki's phone displayed an aerial image of the highway. While watching the screen, he moved the drone a few meters at a time, taking a series of pictures. In about 10 minutes he photographed a section of road 20 meters wide and 100 meters long.

When repairing a 100-meter stretch of pavement, Kusaki said, workers usually need to "work on the road itself for about a month" to ascertain its condition. As cars buzz by, workers with tape and rulers visually check for cracks and ruts. With a drone, the process takes only about 10 minutes. All that remains is to return to the office and superimpose three-dimensional data of the road measured by a ground-based laser scanner.

Kusaki previously supervised public works sites for a construction company in Kyoto, and felt that on-site work was "inefficient and dangerous." As personal computers became more widespread in the late 1990s, he sought to digitize on-site work through computer-aided design (CAD). He went independent in 2004. MR Support's unique system, which combines a drone and laser scanner, was developed by Takamitsu Mori, 40, general manager of the company's information communications technology business. He is a unique talent who worked as an artist and specializes in programming. In fiscal 2019, MR Support was awarded the i-Construction Grand Prize by the Ministry of Land, Infrastructure, Transport and Tourism for its efforts to improve the efficiency of construction sites through innovative technologies.

MR Support can reproduce 1-mm cracks in a road, surface unevenness and color using computers.

Nidec started out in a prefab shack with four employees. In less than 50 years it has become one of the world's largest players in the motor sector thanks to its advanced technological capabilities and its skillful use of mergers and acquisitions. But in recent years, Tokyo has lured most of Japan's people, goods and money. Kyoto has not produced any promising companies since Nidec. Now one woman is trying to create a global unicorn from Kyoto. Sachiko Kuno, 66, successfully launched an incubation facility in the U.S. Now she wants to create an entrepreneurial ecosystem in Japan's ancient capital.

In a sleek modern building in a residential area not far from Kyoto University's Yoshida Campus, members of unicorns in the making were having a heated discussion about how to start a business. Employees from some of Japan's major companies had gathered at an incubation facility set up by Kyoto-based Phoenixi, a company that supports entrepreneurs. Fujifilm Holdings, Mitsubishi Chemical Holdings, Omron and six other companies are working together to foster more entrepreneurs. The project features not only Kyoto luminaries such as former Kyoto University President Juichi Yamagiwa and Horiba Chairman Atsushi Horiba, but also famous executives like Mitsubishi Chemical President Hitoshi Ochi and Tokio Marine Holdings Chairman Tsuyoshi Nagano, who participate as advisers.

Kuno was the brains behind the project. Although she is not widely known in Japan, Kuno was selected by Forbes magazine in 2015 and 2020 as one of the "top 50 America's richest self-made women." She is an entrepreneur herself, having started numerous companies, including a pharmaceutical business. She rose to prominence in 2014 when she founded Halcyon Incubator in Washington, D.C., to support entrepreneurs. So far, 111 startups aiming to address social issues such as health care and the environment have participated in Halcyon's dormitory-style training program, raising a total of $152 million in capital.

Sachiko Kuno was chosen by Forbes magazine as one of the 50 most successful women in the U.S.

Kuno has been working to create an ecosystem for entrepreneurship in Japan for some time. She started working on the project in earnest around 2016. Her key insight was that large corporations generally have most of the talented workers in Japan. Keeping these individuals "away from Tokyo and putting them somewhere different from normal" could help foster entrepreneurial spirit and trigger innovation within their companies, she said. Kuno chose Kyoto as a test site as she tried to develop an entrepreneurial ecosystem fit for Japan. A graduate of Kyoto University, Kuno had experienced the city's culture firsthand.

"Kyoto has the entrepreneurial environment that will be needed for the next 30 years," Kuno said. One part of that is "avoiding unnecessary competition." Although companies work in related fields, such as electronic parts and analytical instruments, they exist separately as they each develop their own technologies and markets. Put differently, repackaging existing ideas is not a respected model in the city's business circles.

In the U.S., there are a growing number of "social model" entrepreneurs that aim to solve social issues through business. "I want to create a 'Kyoto model' of entrepreneurship that is indigenous to Japan," Kuno said, "rather than the 'winner-take-all' model of Silicon Valley."

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