Editor’s Note: Japan Awaits

When it comes to exports, most people think first of China. After all, with a population of 1.4 billion, it is the worlds largest economy. But while a handful of corporate giants like Starbucks are minting money there, Chinas unfriendly regulators and rampant intellectual property theft are giving many American companies pause.

Enter Japan. Once infamous for its impenetrable markets, Japan is putting out the welcome mat. Just ask Tom Sato,

a Japanese national who has spent decades representing American firms. Last summer, he traveled to Kirkland to establish Innovation Finders Capital, a venture capital firm, to connect Seattle companies and potential Japanese partners.

Why now? Sato says Japanese corporations are sitting on $2 trillion in cash, for which they are getting almost no interest. With their revenues stagnating, the companies are desperate for new products to drive growth. Earlier this spring, Sato worked with the Washington State Department of Commerce to bring a group of Japanese executives to Seattle to do reverse pitches presentations to local entrepreneurs explaining what kinds of products theyre looking for.

Among the companies that presented was Hikari Tsushin, a mobile phone retailer. The company is looking for compelling smartphone apps, and wants to acquire exclusive rights in Japan to offer the apps on a subscription basis through its network of 8,000 salespeople. Dentsu, Japans advertising colossus, is interested in connecting with companies that have financial and artificial intelligence technology. A representative from Softbank, which owns big chunks of Sprint and Alibaba, says the company wants digital marketing expertise, wellness apps and robotics technology.

Acrodea, a company established jointly by Japans three largest mobile companies, is interested in internet-of-things solutions.

If he can find the right match, Sato says he will encourage companies from the United States to sign distribution deals with Japanese partners. Innovation Finders Capital will then make equity investments in the U.S. companies to help pay for localization and other costs. If a Japanese partner is happy with the product, it may acquire the U.S. partner.

Two Seattle-based robotics companies are already exploring deals with Japanese industrial robot manufacturers. Japanese companies produce excellent robots, but they face a saturated market and need new software and artificial intelligence expertise to expand the capabilities of their robots. The software savvy of Seattle companies marries well with the hardware capabilities of Japanese giants.

Arzeda, a synthetic biology company, made its own deal with Mitsubishi Rayon to develop proteins and enzymes that might allow the Japanese company to avoid using petroleum in its plastics and other synthetic materials.

If youre happy with your Chinese partner, great. But if youre looking for a new partner and you cant find one among the excellent manufacturing (see page 23) and other companies in Washington state, you might consider Japan or another country that has a better reputation than China for protecting intellectual property. It is less likely to show up a few years later as a direct competitor. And it may well offer a better return on investment.