Competition Is for Producing Winners: On Supporting the Global Expansion of Startups
This article was machine-translated from Japanese by AI (Claude). It may contain errors. Read the original Japanese article.
The strength of American and Chinese companies in new industries such as software seems to owe something to the real demand and the depth of competition in each country's mother market.
In the United States, for example, many startups are born in a single field, and competition between products happens as a matter of course. In China, too, in fields such as electric vehicles, entry and shakeout repeat themselves. Many losers are produced at home, yet the few survivors, such as BYD and NIO, have become companies with a global competitive advantage. (The tweet below happened to go viral.)
EV makers that survived in China and EV makers that were weeded out. Seen negatively, it ends with "China is crazy, it's scary," but seen positively, it feels like this is how far you have to go to build a world-class industry. pic.twitter.com/NcC1M5muSR
— Makoto Yoshikawa🇯🇵Shenzhen (@mako_63) September 21, 2025
In the past, Japan too had fierce domestic competition in manufacturing, and it seems the products that resulted from that mutual sharpening swept the world market. Even today, in fields such as "entertainment" and parts of the restaurant industry, winners refined through fierce competition within Japan are winning demand overseas.
For a single company, it may be true that
"Competition is for losers"
Competition is for losers (by Peter Thiel)
but when we look at an industry or a field as a whole, I think that creating a healthy and intense competitive environment at home is one part of building the environment that produces winners who succeed globally, that is, products tempered at home that go out into the world and win.
Of course, if a company follows domestic needs too closely, there is a risk that it will develop in a Galapagos-like way. But if a path from the domestic market to the world market is properly designed, the domestic market can function as a mother market or an incubation market that nurtures the nation's industries.
Volume Is for Refinement Through Competition and Shakeout
Let us now turn to startups.
Within the startup ecosystem, the discussion of quantity versus quality, and breadth versus height, has also taken place among Japanese startups, and until a little while ago, quantity and breadth were emphasized.
Looking back, I think the purpose of increasing the number of startups at home, along with ensuring diversity, was to bring about renewal through competition.
However, when the following two conditions are not met,
- (1) There are enough entrants for refinement through competition to occur
- (2) The domestic market connects seamlessly to overseas markets (with standards, language, sales, certification and other pathways in place)
and there is already a sufficiently large market at home, I think it was hard to rationally choose to go to overseas markets.
Also, because we promoted entrepreneurship in general rather than startups specifically, there may have been more founders who aimed at niches to avoid competition. The result was merely a fragmentation of the market, and there may have been even fewer opportunities for products to be refined through competition.
Building the Mother Market in Order to Go Global
Going forward, it is said that increasing the number of startups that go global is important for building "height." Against that background, several programs to support global expansion have also begun.
But if we simply encourage startups to go out into the global market as things stand now, they will end up fighting formidable players who have been tempered in the competitive environments of their own home countries as described above, without having competed enough in Japan's mother market. In a sense, that is like throwing them into a ravine, and it could even amount to telling them to "go on a suicide mission."
Even so, there are times when a founder's rare brilliance or good timing lets them win. From the standpoint of support, however, I think we also need to consider properly building a foundation on which winners emerge in succession.
In that sense, I think we need more of the idea of creating "designed competition" to some degree at home. In an environment like Japan's in particular, where the number of startups is small, protection of small and medium-sized enterprises is generous, and there is a reasonably large market, competition is hard to come by and survival is relatively easy. So, concretely:
- Incentives toward priority fields: Gather startups in fields where a winning path is foreseeable, and encourage competition.
- Setting up venues for demonstration and procurement: Standardize demonstration procurement in which government agencies and large corporations can try things quickly in small lots, and generate the first revenue at home.
- Designing a fair competitive foundation: Avoid lock-in by, for example, ensuring data portability.
- Smooth exits: Increase M&A and wind-downs, and lower the cost of challenges that did not work out.
I think what is needed is this kind of environment building and industrial policy: intensifying competition in specific fields to create winners, and then encouraging them in succession toward the global market. It will take some time, and identifying the industrial fields carries risk, but building such an environment should be the foundation that raises the probability of startups succeeding globally.
There Are Other Strategies for Taking on the Global Challenge
Of course, I also think that using the mother market well is not the only path.
This is my personal view, but it seems that several types of companies taking on global challenges have already emerged.
- Born-Global type: Design the product and sales for overseas customers from the start (Josys seems to be doing this, for example).
- Winning with core technology: Compete on specifications and performance, as in measurement, materials and foundational software.
- Domain-first type: Build a winning path first in an industrial field where Japan is strong (such as manufacturing), and then spread that knowledge across the world.
- Global-problem type: Tackle problems that cross borders, such as climate change, head on.
Unless we look at several alternative routes like these and think about what strategy to use to take on the world, I think it will not be very effective. And I think that simply imitating the American way will make it difficult to bring global startups out of Japan. (I have written about this in the article below, among others.)
In Closing
I am writing all this because I recently attended an event on supporting the global expansion of Japanese startups.
I think producing startups that can win globally is very important. That is precisely why, rather than simply multiplying the call to "go global" and asking entrepreneurs to take the risk, I believe it would be more effective, and would leave more learning for the ecosystem, if the supporting side reflected on the past, thought through a strategy, and built a foundation on which hypotheses can be tested before promoting it.
Let me also add that, once a global startup has been produced, I think the issue that arises is the relocation of headquarters. If we are going to support them with taxpayers' money, I think advance measures are needed on that point as well.
I only skimmed the Draghi Report, but my impression was that its challenges are similar to Japan's: green industry, labor force decline, security and so on. There are somewhat different challenges, though, such as "after starting up in the EU, companies move their headquarters to the US and elsewhere (40 of 147 companies!)." The prescriptions also seem a bit different.https://t.co/RHpDsREJ2S
— Takaaki Umada 🐴 Takaaki Umada (@tumada) September 16, 2024