How to leverage the European Startup Ecosystem



The Tokyo Metropolitan Government’s X-HUB TOKYO, which supports global expansion of startups in Tokyo, held the second seminar “How to leverage the European Startup Ecosystem” on October 5th. We delivered realities of successes and failures of expanding into Europe as well as tips on how to pitch, which startups should keep in mind if they want to expand globally.
Following the speech titled “Innovation – Germany anticipate in developing with you”, this event featured a lecture on how to take advantage of Startup Ecosystem in Europe and overseas pitch strategies that startups in Japan need to keep in mind.
We shared the latest information that would be useful not only for startups but also for organizations such as VCs and corporations offering various supports to startups.

Innovation – Germany anticipate in developing with you

Germany Trade & Invest GmbH Director Japan Mr. Hiroshi Iwamura

We would like to start this event with the introduction, German ecosystem, by Mr. Iwamura-Director Japan, Ms. Nungesser-Director Trend & Innovation Scouting and Ms. Schön-Senior Manager Tax & Legal Services from Germany Trade & Invest GmbH.
Germany Trade & Invest is a public agency that supports developments of German and international economy. It has more than 50 offices worldwide and a network in various business communities. In addition to supporting external trade of German companies, we also encourage foreign companies to enter German market.
As for our activities in Japan, We held annual German Japanese industrial forum (scheduled for November 10th and 11th this year online, ) and seminars on a regular basis to promote communications between Japan and Germany by introducing cutting-edge initiatives in Germany and delivering their attractiveness as a location for investment.
Our Tokyo office serves as a permanent contact point for Japanese companies interested in expanding their business into Germany, providing market analysis and assistance in selection of potential sites. We also introduce German industrial associations and industrial clusters to companies interested in research in Germany.
What kind of supports and programs startups can have in Germany?
Germany is committed to fostering an ecosystem across the country. For example, de:hub, an initiative of German Federal Ministry for Economic Affairs and Energy, has set up 12 hubs across the country to create a digital ecosystem. It has formed networks of more than 1,500 companies and more than 500 startups. It also has implemented more than 240 international collaboration programs. In the wake of COVID-19 outbreak, we currently organize events, round-table talks and workshops online.
Other features of German government’s efforts include promotion of research and development for companies and startups. “The High-Tech Strategy 2025”, launched in 2018, aims to increase R&D investment from current 3 percent of GDP to 3.5 percent by 2025. In particular, research and development in the fields of life sciences and mobility has gathered much attention.
Germany became the first country in Europe to enable automated driving on public roads in 2017. There are currently 14 fields in the country where “Level 4” experiments can be conducted without human operations. We think that automated driving research and development has strong affinity with Japanese automotive industry.
Germany has extensive programs to support research and development for companies and startups at both federal and state government levels. Companies and startups can apply for various programs for one single project. They are also obliged to commercialize the results of their R&D projects in the region where they receive support. The European Union (EU) offers a variety of programs and can build relationships with various stakeholders. We think it is one of the merits for companies expanding into Germany can have.

How to leverage the European Startup Ecosystem

SWAT Lab Inc. Co Founder Mr. Keiichiro Kay Yano

Next, we will ask Mr. Yano from SWAT Lab Inc. Co Founder, characteristics of startup ecosystem in Europe.
I think European startups have different characteristics from those in Silicon Valley, such as organizing talented teams remotely across countries and developing small and self-sustaining businesses. Market maturity and interested trends that are attracting attention is also different in many cases from that of Japan. In Europe, people really appreciate and offer enough support for cutting-edge technologies at academic paper levels, arts, and environment. I highly recommend that you develop your business in these kinds of fields in Europe.
On the other hand, there are some points that Japanese startups should be aware of when expanding into Europe. When doing business in Europe, experience and credibility is the most important factor. France and Germany have high corporate tax rates, which makes it expensive just to maintain company. It’s better to keep in mind that the concept of data privacy is much stricter than in Japan.
What is important for Japanese companies and startups to keep in mind when they want to expand into Europe?
As Europe has different laws, regulations and taxation systems depending on states , it is important to understand unique characteristics of each country and state. There are benefits that you can receive as a member of EU and also advantages that you can get because of non-EU. Make sure you understand what business you want to develop and you are aware of the regulations and rules. It is also important to consider political risks.
As I am based in Berlin, Germany, I feel that it is of importance to do research thoroughly in advance so that you can do business with people you can trust. Europe is very complex with a wide variety of languages, currencies and laws. Rather than setting up a local company right away, I recommend that you research the market well through remote sales or other means and gather information from people who are actually doing business in Europe.
In Europe, “work sharing” is becoming more and more prevalent as a way of working and working remotely is also widely accepted. It is a real pleasure to work with talented people from across the world. We encourage you to continue building your business steadily with a reliable local partner.

Overseas pitch strategies that Startups from Japan need to keep in mind

500 Startups Japan Country Lead Ms. Ayumi Ode

Lastly, we would like to learn from Ms.ode, about activities of 500 Startups, which supports open innovation around the world.
500 Startups is a U.S. venture capital which helps build startup ecosystems around the world. We have invested in more than 2,450 companies over 76 countries since its founding in 2010.
In Japan, we also support open innovation activities in corporations. We have invested in more than 55 companies to date and also run “500 KOBE ACCELERATOR” entrepreneurship training programs since 2016 . The accelerator program aims to create Japanese startup ecosystem from Kobe. More than 71 companies participated and total funding reached over 11 billion yen.

500 Startups Kobe EIR Mr. Ajay Chainani

Then We talk to Mr. Ajay Chyanani, Entrepreneur-in-Residence at 500 Startups Kobe, about what startups need to know about pitch strategy if they want to go abroad.
We think there are four important points when structuring a pitch. The first point is to include traction (driving force behind the business). Show the data that your company or service is growing well. It’s better to present that there is significant potential for further growth if you can receive additional investment.
The second point is to introduce your product. Make sure how the services or products you are developing can solve challenges with your business model. You also include the timing of market entry and why.
The third point is to introduce your team members. Let audiences know how enthusiastic your members are and whether they have a right knowledge and experience needed to drive the business forward. For startups, members you work with are the most important factor.
The last point is a market size. Be sure to state clearly how much demand there is in markets for your service or product.
When presenting these four points at your pitch event, try to make a story structure and start your talk with the strongest points. At the end of your pitch, make it clear and tell what kinds of support your company needs to investors and audiences.
What have you noticed in pitches that Japanese startups presented so far?
When it comes to pitch materials, there are so many cases with too much text. In order to make your materials clear, try to use less text and prepare “killer slides” that will attract attention of investors.
Design isn’t sophisticated and there is too much introduction of your product only in some cases. The visuals are also very important for your pitch materials. We recommend that you brush up on them well in advance by hiring a designer. You can learn a lot by taking a look at pitch materials of startups that won at accelerator events and seeing how they presented themselves.
The event delivered how to take advantage of startup Ecosystem in Europe as well as points Japanese startups should be aware of when they expand into the global market. Through various upcoming events, X-HUB TOKYO will continue to provide useful information for startups looking to expand globally as well as the latest trends in open innovation.