"The need of corporations to save on costs during the coronavirus, might lead to a certain slowdown and the appetite for innovation might shrink, or on the other hand, this is an excellent time to find out who is really thinking like a major player in working with startups and who is a player that's faking it and disappears at the moment of truth," said Nobuyuki Akimoto, Managing Director of AT Partners, a Japanese venture capital fund that invests in Israeli funds. He was talking at the "Big in Japan" webinar hosted from Tel Aviv.
Akimoto added, "The money for the most part comes from corporations to venture capital funds, and so the corporations are the very important players in the Japanese ecosystem."
Yinnon Dolev, Head of the Israel Digital Lab of Japanese insurance giant Sompo, said, "There will now be pressure on the corporations to cut expenditure and to become more efficient, and consequently startups will be required to show their economic advantages and especially how with their help it is possible to streamline work and cut costs. Unfortunately, most presentations by Israeli startups focus on what we can do and how we can increase your ability and that's great. But what is your ability to help me as a corporation to cut costs? A large corporation will find it difficult to adopt any new technology without the strong marketing value and so the key to entering Japan is the need to create this effectiveness and present it to the corporations."
Dolev continued, "During the coronavirus period, there began an increase in interest by the Japanese in innovation in the health system. This is different from what we see in the American health system, which is working under pressure and must speed up regulatory procedures in order to bring things to market as swiftly as possible. Compared with the US, the cost of a home visit from the doctor in Japan is not high and so they are generally conducted face to face but at the moment, the system understands that there are efficiencies in health services through digital means. In this context, we see an increase in demand by Japan for technologies in the health sector and I assume that this will only continue to grow."
Adv. Guy Lachmann, senior partner in the Hi-Tech Group at the Pearl Cohen law firm, who moderated the event, said, "In recent years, we see major interest from Japanese companies in Israeli industries. There are more than 220 Japanese companies with activities in Israel, and some of them have local teams and this trend is continuing to grow. 70% of the investments are made by companies for whom this is the first investment in Israel and this is a very optimistic sign. In 2019 we also saw dedicated Japanese investment funds as well as the setting up of innovation centers and other R&D. All this was the case until the outbreak of the coronavirus, which changed the rules, as everybody knows."
Adv. Lachmann added, "Japan has the world's most aging population. The Japanese government has declared a state of emergency and allocated close to US$1 trillion in order to support the domestic economy, while research shows that the Japanese economy has gone into recession and the influence of the coronavirus on Japan is becoming more and more significant. However, there are also good things growing out of this new reality and some of them are related to the shift to digitalization. The new remote work environment is also causing the Japanese to find technological solutions."
In geopolitical terms, Adv. Lachmann points out that in his opinion, "There will be changes in the relations with powers in Asia, and it's possible that there will be a falling off of the power of China in Israel, and we hope that Japan will take advantage of the opportunity, and this will be a way for us to see more and more Japanese companies investing in Israel in other sectors and not only technology."
Eitan Naor, managing partner at IN Venture, the Israeli venture capital fund of Japan’s Sumitomo corporation said, "Like every post traumatic syndrome, the influence of the coronavirus in the short term will disappear, people will exit lockdown and will see that there is still a world outside, so the appetite to implement technologies and investments will recover. We are very optimistic but still cautious about the investments and looking for entrepreneurs and companies that manage their money carefully. During a crisis cash really is king, and we want to make certain that investors will understand the importance of managing money and will understand the importance of being very precise about the marketing abilities of the product."
"Most of the world was in lockdown for the past three months," added Naor. "In Tokyo, only three people died on average every day and that's less than 1%. So we were locked up, and there was enormous fear from uncertainty, but I believe that this will pass. There will be an influence for the short term and perhaps for the medium term. From the perspective of the coronavirus, it was more of an economic virus than a health one. So generally, I am optimistic, the economy will strengthen and this might take two years, perhaps three but generally I am very optimistic about the future."
Shirley Binder, head of the Israeli branch of Japan’s Samurai Incubate fund Israel said, "Concern about a recession in Japan will have no dramatic influence on our investments. We understand that startups need financing and as investors, we want to support them and speed up the process. We know that every dollar that we bring to the table today is valued much more than in the past, and we are not only talking about money but also supporting startups that are entering Japan and connecting them to future companies and investors. As a Japanese-Israeli venture capital firm, we must be more attentive to startups and provide them with immediate responses. This is something essential that all of us investors must currently adopt."
Binder continued, "We can grow from the crisis and the stronger that you get then the more resilient you are. We set up the fund after the 2008 crisis, against all the odds, and we value very much mental strength. Through the coronavirus crisis, we can get many indications that will show us who are the potential startups for investment and who are not. Who has mental strength and who can adapt their products and who has a broader perspective. From the perspective of the investor, that is what we are looking for and a crisis is a marvelous way to find out who is good. So from my point of view, I am completely optimistic."
Arun Poojari, General Manager Asia-Pacific and Japan for startup SparkBeyond, "External changes always worked well in Japanese history. The Japanese market opened up after being closed for 300 years and there are many changes that have taken place over the past 10 years. I hope that we are talking about continuing change for Japanese corporations. We clearly see that there will be large corporations that will adopt new work practices and will encourage innovation, and will give a prominent place to technology companies. It's difficult to see the stages but the coronavirus will lead us to important questions: how do we stay quick and sharp? How do we build durability? The future is challenging for all of us."
Published by Globes, Israel business news - en.globes.co.il - on May 27, 2020
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