The start-up scene in Japan has historically lagged behind the Silicon Valley and China, but several investors told CNBC that things are changing.
Workers have traditionally seen starting a company as "kind of a Plan B," according to James Riney, head of 500 Startups Japan. Finding entrepreneurial talent in the country used to be difficult because of an aversion to risk among Japanese workers. Many wanted the stability of corporate or public-sector jobs.
"If you didn't get into the major companies, the brand name companies, entrepreneurship was kind of like this second option that you could consider," Riney told CNBC.
Today, many young people are joining start-ups even as corporate Japan grapples with a labor shortage.
There are several reasons for the shift. First, the success of e-commerce and internet players like Mercari, Rakuten, DeNA, GREE, and Mixi produced role models and mentors available to guide new entrepreneurs, and many successful founders are also investing in the new companies.
The stigma of "failure" is also decreasing, and many science and engineering students from the top universities are now interning for start-ups. The quality of entrepreneurs is also increasing as many left their jobs in consulting or banking sectors to either start their own company or join the management teams of existing start-ups.
Extra notes: Due to a language barrier, Japanese start-ups tend to focus mostly on the domestic market—which is big, since the country's economy is the world's third biggest. When foreign competitors from the U.S. or elsewhere try to enter the Japanese market, they find it "very closed off and hard to penetrate," Riney said. On the same note, it's also challenging for Japanese start-ups to expand beyond Japan, because of those same cultural and language barriers.