Reported by Isao Tokuhashi
Edited by Jennifer A. Hoff
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Many cities in Japan are becoming centers for startups. In addition to Tokyo, which is one of the most global cities in the world, other places such as Osaka, Fukuoka, Nagoya and Sendai are actively supporting startups.
There is one more place that should not be forgotten when talking about the startup scene in Japan – Kobe, one of the metropolises in the Kansai region where city and nature exist in beautiful harmony.
People of Kobe, the third largest port city in Japan, are open-minded and have been quick to adopt new cultures. This temperament of theirs is reflected in its administration and Kobe City has been focusing on supporting startups since 2016. They believe that the power of people who have new ideas and technologies that will help create the future is essential for economic growth.
⟨Some of Kobe City’s Startup Support Measures⟩
–500 Startups Kobe Accelerator: Held in partnership with 500 Global (formerly 500 Startups), a global seed investment fund based in Silicon Valley, since 2016.
–Urban Innovation Kobe: The first innovation summit initiative held by a local government in Japan, in which startups and city officials collaborate to solve local and administrative issues.
–SDGs Challenge: Kobe and UNOPS (United Nations Office for Project Services) collaborate on a program to provide support for business growth and overseas expansion to startups and small businesses aiming to solve SDGs issues.
*UNOPS opened its third global base called “UNOPS S3i Innovation Centre Japan (Kobe)”, in November 2020.
Thanks to the success of these attempts, a number of “social startup” companies have emerged from Kobe. From among them, we introduce you to Compass Inc., which successfully completed its 200 million JPY (2 million USD) fundraising campaign in October 2021.
Press Conference announcing the fundraising of Compass Inc. at EGG JAPAN (Chiyoda-ku, Tokyo) on October 18, 2021
Social startups are ones that use technology to solve “market failure” (socially undesirable conditions such as environmental destruction, wealth disparity, regional disparity, etc.). Despite the fact that it is generally considered to be an unprofitable field, Kobe has been supporting companies that struggle with these issues by holding events such as Urban Innovation Kobe and SDGs Challenge.
In March 2020, Japan’s Cabinet Office issued a call for applications for projects that would be subsidized by a grant aimed at supporting the “employment ice age generation”. Known as people who graduated from school between 1993 and 2004, there are approximately 900,000 of such employment ice-agers nationwide who were unable to find a job they wanted (according to the Japanese Statistics Bureau).
In Hyogo Prefecture, there are seven regional offices specializing in support for this generation of people. However, the service is available only during the daytime on weekdays, so the city of Kobe was looking for a project that could utilize SNS and AI to provide job seekers consultations and job matching, and they found it in Compass, who stepped forward to form a partnership with them.
Compass is a startup that works to support mainly this employment ice age generation. It was founded in September 2017 by Ai Otsu, who has experience in helping people known as “hikikomori” (social withdrawers) and NEETs (Not in Education, Employment or Training) in finding new jobs.
Ai Otsu, President of Compass Inc.
Compass provides a human resource matching service on LINE, which specializes in giving assistance to middle and low income groups (annual income under 50,000 USD). Users can receive career counseling via chatbots and consult with career consultants via video calls. Based on the content of the consultation, an AI-based job placement service is provided to job seekers. In addition to the ice age generation, they also support people including single parents whose employment contracts had not been renewed due to fallout of the pandemic.
Otsu says, “Our strength is that we constantly connect with people in need online, so we can always offer a helping hand to them.”
Starting with Kobe, their services have been adopted by Takarazuka in Hyogo Prefecture, Kyoto, Sakai in Osaka Prefecture, and other municipalities mainly in the Kansai region. With the slogans “Eliminate the working poor from Japan” and “Create a society where everyone can dream”, they raised funds in order to expand services and increase the number of partner municipalities as soon as possible. In particular, Otsu asked Hataraku Fund and Monex Ventures, which actively invest in social startups, to sink money into their project.
-Hataraku Fund: Invests in startups that work on social issues such as childcare, nursing care, and new ways of working.
“We invested in Compass because we were really impressed by the fact that they have been able to grow their business rapidly while working to solve social issues.” – Yuya Kato, Director at Hataraku Fund
-Monex Ventures, Inc.: Invests in Internet-based services that transform people’s lives for the better.
“I started my career in the human resources industry. The business that Compass has been involved in is dealing with what’s right in the middle of that, and I’m very happy to be working with them to solve the issues that I used to feel were challenges.” – Seiichiro Wada, Representative Director of Monex Ventures, Inc.
Compass, which participated in the 500 Startups Kobe Accelerator 2017 and SDGs Challenge held by Kobe City in the past, has launched and expanded its business. In August 2021, the number of users of their service exceeded 10,000, and annual sales exceeded 100 million yen (10,000 USD), despite their business being in a field that is considered “difficult to generate revenue”.
Taku Takeda of Planning and Coordination Bureau of Kobe City, who has planned and implemented a number of social start-up support measures, spoke emphatically;
Taku Takeda, Director of New Business Promotion Division at Kobe City Government
“The creation of social startups that use technology to solve local problems will be really beneficial for Kobe. We would like to make Kobe a city where social startups are launched one after another. At the same time, we have accumulated knowledge and experience in startup support while collaborating with overseas entrepreneurship development organizations. We would like to support 1,000 startups in the next five years, or 200 companies a year.”
It may not be long before Kobe is called the “mecca of social startups” and “Japan’s leading startup city”.
Together with Yuya Kato of Hataraku Fund and Seiichiro Wada of Monex Ventures