Why French start-ups choose Japan

Those involved in the start-up industry may already know that France plays a very important role in the development of start-ups in Japan. In this article, we look at the economic relationship between France and Japan and give some examples of why French companies are setting up in Japan.

The beginnings of Franco-Japanese economic relations
 

This year marks the 166th anniversary of friendly economic relations between Japan and France. The foundations of this economic friendship were laid with the signing of the Franco-Japanese Treaty of Peace, Friendship and Trade in 1858.

This treaty established diplomatic relations between France and Japan, enabling trade to be initiated between the two countries. They established privileged regimes for certain products and industries and facilitated access to each other's markets.

In addition, one of the catalysts for the acceleration of cooperation between France and Japan was the ‘20 Measures of Franco-Japanese Cooperation for the 21st Century’ action plan, adopted in 1996.

It was signed by the French President at the time, Jacques Chirac, and the Japanese Prime Minister, Ryutaro Hashimoto.

The measures are characterised by three main elements:

•  a joint declaration that Japan and France will be on the same wavelength to strengthen relations between Asia and Europe
• That Franco-Japanese relations play a leading role in the world by setting an example of how bilateral exchanges should be conducted.
• That they will jointly implement 20 concrete actions to build a new international order.

Representatives of the two countries have issued a joint declaration and a top-down plan has been implemented, which includes a number of concrete actions, such as the creation of a Franco-Japanese dialogue forum, the expansion of staff exchanges and the deepening of relations in the field of science and technology.

In addition, a major partnership between French and Japanese companies, the Renault-Nissan Alliance, was created in 1993 and, in 2005, representatives of the two countries published the Declaration of the New Partnership between France and Japan, which sets out a policy of

Franco-Japanese relations on Startups
 

These government agreements have had a knock-on effect and economic exchanges between France and Japan have grown rapidly since the 2000s.

In 2013, La French Tech, a programme run by the French government to promote digital technology and innovation, was launched and Tokyo was chosen as the third overseas base, after New York and Tel Aviv. Today, La French Tech has 67 foreign bases.

Although Japan is a little behind when it comes to start-ups, in November 2022 the Tokyo Metropolitan Government announced the concept of the Tokyo Innovation Base. This will be an initiative aimed at accelerating the development of start-ups, taking inspiration from France's STATION F. 

Why choose Japan?

At a time when economic exchanges between France and Japan are on the increase, why would French start-ups choose Japan, a geographically and culturally distant country, to set up in? 
We believe there are three main reasons

1.     The size of the consumer market: 

In January 2023, France's population was around 68 million, whereas Japan's population was 124 million in November of the same year, giving access to a consumer market almost twice as large. On the other hand, Japan has a unique culture and economy, and is considered a difficult market for foreign companies to tap into. However, as mentioned above, the long history of economic exchanges between France and Japan has led to a better understanding of the Japanese market. Especially for the French fashion industry, which is particularly good at marketing, the Japanese market, known for its high barriers, can be relatively easy to conquer compared to other countries. 

2.    Less regulatory and political risk:
 

Secondly, there is less regulation and political risk. In democracies, regulations are generally clear and government transparency is high. As a result, they are more politically stable and have lower regulatory and political risk than other Asian neighbours. In addition, high political predictability means that the business environment is more stable, which can make them attractive investment destinations for foreign investors and companies. 
In addition, Japan is at one with the US and EU in the international community and this ensures confidence in international partnerships and agreements. As a result, the country plays an important role in developing common responses to global challenges by actively participating in international agreements and treaties. 

3.    Pacific or Asian market hub 
 

The final reason is its ability to develop and lay the foundations for the Asian market. Japan has abundant human resources thanks to its high level of education and can develop effectively in the Asian market by securing excellent human resources. In addition, it is economically stable and geographically located in the heart of the Pacific, which enables it to function as a hub city. These reasons are interrelated and are seen as an incentive for French companies to enter the Japanese market. 

Introducing French startups in Japan 
 

We would now like to present a few start-ups that are developing in Japan
 

EXOTEC

EXOTEC was founded in Lille, France, in 2015 and is one of France's unicorn companies. The company designs and manufactures the Skypod system, which enables order picking in logistics chees retailers in all business sectors. 
The Skypod system removes specialist boxes from three-dimensional shelving and transports them to employees at the picking station. It consists of a rack that can be extended to a height of 12 metres, transport robots, picking and order-picking stations and automated conveyors. When an order is placed, the robot moves in three dimensions through the rack and automatically transports the order boxes to the station outside the rack, where the order is then transported by conveyor to the dispatch area. All these systems are manufactured in-house by EXOTEC, which also offers advice on equipment configuration based on the data obtained from these systems.

 

In addition to its headquarters in Lille (France), EXOTEC also has offices in Atlanta (USA), Munich (Germany), Seoul (South Korea) and Tokyo (Japan). The Tokyo office was established in 2019 as the first overseas office, as a hub to strengthen customer support in Asia. Since entering the Japanese market, against a backdrop of a declining workforce due to falling birth rates and an ageing population, as well as the expansion of e-commerce, the company has been using its flexible adaptability to grow its business. 

Partnerships have also been signed with Fast Retailing, known for UNIQLO in 2020, and Yodobashi Camera in 2022, with the Skypod system installed in several warehouses. 

Dental Monitoring

Dental Monitoring was founded in 2014 in Paris, France, and offers AI-based remote monitoring solutions for dental and orthodontic care. 

It has also developed a cloud-based app and analytics platform that allows dental professionals to assess and monitor the condition of patients' teeth, not only in the practice itself, but also remotely. 

The dental monitoring platform is based on proprietary AI technology that can analyse, detect and report on more than 130 different oral events using images taken by patients with their smartphones. This technology enables consultations in a virtual environment, highly realistic simulations and remote treatment monitoring, increasing the efficiency of practices and patient engagement in the dental sector.

The company has several offices abroad, including London (UK), Sydney (Australia) and Austin (USA), while in Asia it operates two branches in Hong Kong and Tokyo. 

The Tokyo branch was chosen as the Asian base after Hong Kong and opened in 2022. At the same time as entering Japan, the company became the first Japanese dental company to sign a partnership agreement with Brace. 
Japan was chosen as a base because of its many mature markets that have not yet been fully digitally reformed. We also believe that Japan was chosen as a place to deploy AI-based orthodontic solutions because of its advanced technological development, including AI technology, and its ability to adapt to innovation. 

Back Market

Back Market is an online second-hand marketplace founded in 2014 in Paris, France. What differentiates Back Market from other services such as Mercari and Rakuma is that it is first and foremost a platform for buying and selling second-hand electronic devices, and is primarily B-to-C rather than C-to-C. 

Also, those are refurbished products that have been professionally serviced, and the platform only allows refurbishers who have passed its own rigorous process to sell their devices.

Back Market's main reason for coming to Japan is to gain access to the Japanese second-hand market. 
Japan has just over 120 million consumers, and studies show that the smartphone ownership rate is 77.3% (in 2022). 

Japan is also a country where, unlike the global average, iPhones are more popular than Android, which includes relatively cheaper products, and this is one of the factors driving up the size of the second-hand market for electronic devices. In addition, thanks to external factors such as the SIM lock ban in 2021, consumers are more likely to buy second-hand smartphones, which may be one of the reasons why they have entered the Japanese market.

Conclusion
 

On the other hand, cultural, linguistic and geographical barriers remain between Europe and Japan, and it cannot be said that the two sides communicate fully. 
In particular, it is often difficult to obtain information about Europe from Japan, and even when Japanese companies send representatives to Europe to obtain information, they have to create a network from scratch there, which often results in a lack of human resources and time, as well as difficulties in understanding which networks contain the information they are looking for. 

This is why RouteX strives to lower the trade barrier between Europe and Japan as much as possible by promoting the Japanese market to European companies and introducing Japanese companies to industrial and technological trends and to European companies. 
If this topic interests you, or if you're looking to expand your business or enter a new market, don't hesitate to contact us. We are experts in innovation, particularly open innovation and start-ups, linking Japan to France and Europe. We can provide specific support to your company's needs. If you'd like to discuss this in more detail, or find out more about our approach, please don't hesitate to contact us via the CCIFJ member page.
 

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