Restaurant Fever
Startup talent attraction, dual-use startups, and big PE deals!
It’s no secret that Japan is a leading, if not, *the* culinary capital of the world.
Tokyo boasts more than 200 Michelin-starred restaurants and somewhere between an astonishing 140,000 to 160,000 restaurants in total - more than any other city in the world by either measure. For reference here, New York City - renown for its culinary prowess in its own right - only has 25,000-30,000 restaurants!
The international accolades here are despite the fact that anecdotally, more than a few chefs in Japan have declined the Michelin awards to avoid inbound tourists.
The proliferation of the restaurant industry goes beyond local cuisine and sushi as well - mass market international brands have also found local success here.
For instance, Japan has the 4th highest number of Starbucks outlets in the world with 1,640 stores, and ranks 2nd globally for the number of McDonald's with 2,900 restaurants. Notably, localization efforts have yielded creations like the Yakimo Caramel Frappuccino or the Samurai Mac - things to try next time you’re in town.
This is all to say that it’s no surprise that startups serving the market have found success in recent years given the wave of digitization, inbound tourism, and electronic payments. Exemplifying this, Dinii, a cloud-based restaurant management platform akin to Toast - a SF-based decacorn - has been making headlines this past month for raising a $45M Series B from notable investors such as Bessemer Venture Partners in their very first Japan investment.
And with that in mind, we leave you with this quote by Anthony Bourdain and the news of the last two weeks!
“I love Tokyo. If I had to eat only in one city for the rest of my life, Tokyo would be it. Most chefs I know would agree with me.
For those with restless, curious minds, fascinated by layer upon layer of things, flavors, tastes and customs, which we will never fully be able to understand, Tokyo is deliciously unknowable. I’m sure I could spend the rest of my life there, learn the language, and still die happily ignorant.
It’s that densely packed, impenetrable layer cake of the strange, wonderful and awful that thrills. It’s mesmerizing. Intimidating. Disorienting. Upsetting. Poignant. And yes, beautiful.” - Anthony Bourdain
The Headlines
More middle-aged job changers in Japan switching to startups; improved wages a factor (The Mainichi)
Japanese Govt to Create Framework to Use Startups’ Advanced Technologies for Development of Defense Equipment (The Japan News)
Pangaea Ventures on the hunt for Asian deeptech with new $85m fund in Japan (Global Venturing)
Bain to buy Japan's largest smartphone retailer for $980m
Deep Dives
More middle-aged job changers in Japan switching to startups; improved wages a factor
Startups in Japan are becoming an increasingly attractive option for job changers, particularly those over 40, according to data from Recruit Co. While startups have traditionally been seen as less stable, the number of people moving to unlisted startups has grown significantly, with the 40-plus age group leading the trend. Rising salaries, improved work-life balance, and government support for startups are contributing to this shift, though the sector still faces a labor shortage.
Growth in Job Changes to Startups: The number of people switching to startups grew 3.1 times between fiscal 2015 and fiscal 2023, with a notable 7.1 times increase in the 40-plus age group.
Higher Salaries Offered: The proportion of startups offering salaries between 4 and 6 million yen increased, with more companies offering competitive pay above 6 million yen.
Improved Work-Life Balance: Startups are increasingly focusing on work-life balance, addressing concerns that employees work too hard, which has historically deterred older job seekers.
Labor Shortage in Startups: Despite the growth in interest, startups face a labor shortage, as job postings increased 6.8-fold while the number of job seekers rose only 3.1-fold during the same period.
Japanese Govt to Create Framework to Use Startups’ Advanced Technologies for Development of Defense Equipment
Japan's Defense and Economy Ministries announced a new framework to integrate advanced technologies from startups into the development of defense equipment as dual-use projects. The initiative, called the "dual-use startup ecosystem," aims to strengthen Japan's defense capabilities by utilizing private sector technologies such as satellites and drones.
The government will promote cooperation between startups and defense needs, streamline procurement, and assist companies in mass production, while relaxing eligibility criteria for startups to participate in defense contracts.
New Dual-Use Framework: Japan’s ministries are launching a "dual-use startup ecosystem" to encourage private sector technologies, like satellites and drones, to be used in defense equipment.
Three-Stage Process: The process includes identifying defense needs, matching startups with suitable technologies, and negotiating contracts for procurement and mass production.
Support for Startups: Startups with promising technologies will receive assistance from a defense innovation technology research institute set to launch in October, and procurement criteria will be relaxed to make participation easier.
Modeled After U.S. DIU: The initiative is inspired by the U.S. Defense Innovation Unit (DIU), aiming to overcome Japanese companies' hesitation to transfer their technologies for defense use and enhance public-private cooperation in the defense sector.
Pangaea Ventures on the hunt for Asian deeptech with new $85m fund in Japan
Pangaea Ventures, a Canadian venture firm focused on hard science startups, is opening its first Asian office in Japan. This expansion aligns with the increasing emergence of deep tech startups in Asia, particularly in semiconductors, and follows the closing of Pangaea’s fifth and largest fund at $85 million. The firm’s expansion is also driven by strong partnerships with several Asian corporations, who are investing as limited partners (LPs) in its funds.
Diverse Asian LPs: The firm has attracted 13 Japanese, 2 Korean, and 1 Taiwanese corporations as LPs across its funds, including notable names like Mitsubishi Chemical Group and JX Nippon Mining and Metals. GC Ventures, part of Thailand’s PTT Global Chemical, is also among the investors for this fund.
Focus on Hardtech: Pangaea invests in materials science, biology, and chemistry-oriented startups, aiming to drive innovation in sectors like climate, sustainability, health, and semiconductors.
Long-Standing Corporate Relationships: Pangaea has partnered with corporate LPs for nearly 25 years, providing a collaborative ecosystem where corporations gain insights into innovation, startups gain valuable partners, and Pangaea benefits from these synergies.
Bain to buy Japan's largest smartphone retailer for $980m
Bain Capital announced plans to acquire Japan's largest cellphone sales agent, T-Gaia, by purchasing stakes from major shareholders Sumitomo Corp. and Hikari Tsushin for over ¥140B JPY($980M USD). T-Gaia, which operates nearly 1,800 stores for providers like NTT Docomo, KDDI, and SoftBank, has faced declining profits as the smartphone replacement cycle lengthens. Bain Capital's acquisition marks another significant move in the firm's expanding investments in Japan, with potential plans for further industry restructuring.
Bain's Strategic Approach: Bain is launching a takeover bid at a discount to T-Gaia's recent stock price surge, citing the company's earnings potential. The firm is also considering further mergers and acquisitions in the cellphone agent industry.
Broader Japan Investment: This acquisition is part of Bain's broader buying spree in Japan, which includes investments in Fuji Soft (software), Red Baron (second-hand motorcycle dealer), and Trancom (logistics), indicating its growing presence in the Japanese market.
Challenges and Risks: T-Gaia's profits have been declining as the smartphone replacement cycle slows, making the business more difficult, despite the company’s dominant market position with 1,781 stores.
Word on the Street
More Food for Thought
｢すごいベンチャー100｣2024年最新版･全リスト - The Top 100 Japanese Startups of 2024 (Toyo Keizai)
Toyota to invest $500m in electric air taxi startup Joby Aviation (Nikkei Asia)
Lawson to launch 'Real x Tech' convenience store with AI, robots (Nikkei Asia)
Japan self-driving startup takes on Tesla, Google with open source tech (Nikkei Asia)
Seiko Epson to buy U.S. printing software company for $590m (Nikkei Asia)
AI Startup Sakana Hits $1.5 Billion Value as Japan Inc. Piles In (Bloomberg)
Sidec handpicked these 9 M’sian startups to pitch to the Tokyo govt. Here’s what they learnt. (Vulcan Post)
SoftBank’s Son envisions AI running households in the next few years (The Japan Times)
Japan's ispace prepares for second private moon landing attempt (Nikkei Asia)
Notes from the Team
Thanks for reading and hope to see you around the streets of Tokyo!
Have a question or any feedback? Let us know!
Jeremy (Investor @ Headline) / Kenneth (Global Platform Lead @ Headline)