Japanese investors turn to Europe in lieu of own ecosystem

“Japanese firms — and so they’re old, most of them that we’re talking about, right — they’re just sitting on a pile of cash. They have been saving money throughout the last century, and now they’re beginning to spend it, to attempt to grow as a big corporate and increase their footprint outside of Japan,” said Sarah Fleischer, co-founder and CEO of Germany-based battery materials recycling startup Tozero. 

“You see that investment appetite is way stronger than [in] any strategics I’ve seen here in Germany or in Europe,” she added. Tozero has raised 14.5 million euros up to now and counts NordicNinja, Honda and JJC amongst its investors.

It is not just in regards to the check. Japanese corporates and industrials have robust manufacturing and automotive know-how, Fleischer and Sohara noted respectively, meaning they’re well positioned to plug Europe’s knowledge gaps in terms of scaling large manufacturing projects.

Fleischer added that Japanese firms have long shored up their critical minerals supply chain and long-established trading firms, meaning they know the way to secure essential components needed for the energy transition. For Tozero, that is an added plus, Fleischer said, given it’s within the business of recovering such materials from spent batteries. 

Within the age of political uncertainty amid choppy U.S.-China relations, Japan also acts as a superb bridge to the Asian markets, Fleischer said.

Back in Japan, the variety of entrepreneurs is “still very limited,” Sohara said, because the older generation and “great talents” desired to work for “a Toyota and Honda or Sony,” he added, however the younger generation’s mindset is starting to alter.  

Europe has also turn out to be the house to ambitious would-be founders trying to find a tech ecosystem to construct their firms in, Sohara said.

Nevertheless, as collaboration between Europe and Japan scales, language stays a barrier as fluency in English just isn’t widespread in Japan, he added.  

For Fleischer, this also poses challenges. “There’s a lot miscommunication and native translation that would damage a partnership immediately. And there is also some kind of cultural aspect as well, one must probably pay attention to,” she said, adding that she recently spent weeks in Japan attending to know her investors face-to-face, “because that is still the sentiment” there.  

Decision-making can subsequently be slower, the founder said, as a result of thorough research and preparation. “They simply do their homework,” Fleischer said, noting that Japanese partners were hands-on in helping the corporate understand “the way to construct our next future business plant, potentially ranging from Japan after which going worldwide.”

Indeed, “without the support from NN [NordicNinja] it might have been rather more difficult to construct the proper relationships,” said Aaike van Vugt, co-founder and CEO of Dutch nanotechnology engineering firm VSParticle.

That is in contrast to perhaps probably the most well-known Japanese player: Softbank. Softbank is “totally different” from traditional Japanese investor cultures, given it’s driven by founder Masayoshi Son’s decisions somewhat than operating on a consensus basis, like most Japanese business, Sohara added.  

The enterprise firm, known for its lofty bets on WeWork and, more recently, chip company Arm, poured huge sums of money into tech startups amid the 2021 enterprise capital tech boom, which saw no less than one Japanese-linked investor involved in deals price 11.2 billion euros, per the report. Softbank stood out during this era; it was involved in 22% of deals with Japanese-linked participation in 2021.