How Osaka became an innovation hub for startups in Japan

Osaka might not be the first city that comes to mind when thinking about where to start a business, but this city in central Japan is courting entrepreneurship with an open mind – and startups are taking notice.

It’s been alternatively called “the nation’s kitchen” for its historical importance to the Japanese rice trade; “the Venice of Japan” for the diverse waterways, such as canals and locks, that crisscross the city; and even “the city of eat until you drop” for its diverse and plentiful cuisine.

Osaka is where ingredients, such as business and innovation, come together.

As cities across Japan open up to an increasing number of foreign startups and businesses, it might be Osaka – not Tokyo – that’s pioneering the shift to a more open and diverse global economy. For city government officials and startup pioneers in Osaka, this is a positive development. These organizations, such as the Osaka City Government and the entrepreneurship hub Osaka Innovation Hub, are working to make things easier for international businesses to get started and make connections in the portside city.

Investment in Osaka’s ecosystem has skyrocketed, with the roughly 300 startups that are part of the local innovation ecosystem at Osaka Innovation Hub raising more than $42 million in seed capital over the past three and a half years. Osaka has a booming private sector, with nearly 200,000 private businesses, making it a unique Japanese city according to Hiroyuki Tahara, Assistant Manager for Innovation at the Economic Strategy Bureau of Osaka City Government.

“Osaka has been grown not by authority or the government, but mainly by the private sector and by the people, so it’s called a city of commerce, a city of industry,” Hiroyuki explains. “It’s full of the atmosphere of open-mindedness and willingness to attract and receive all different cultures and people, an open and flat and friendly atmosphere. That open-mindedness has formed the mindset of Osakan people.”

As a startup city, Osaka has a number of things going for it.

First, there’s the history. Osaka was initially the main entry point for the people, goods and material from China and Korea. Also, Osaka’s Sumiyoshi shrine was serving as a starting point for the delegation from Japan to China around the 7th century. By the mid-sixteenth century, Osaka already had the features of a major cultural and economic powerhouse. Tragically, during the Osaka Winter and Summer Battles of 1614 and 1615, the city was all but burned down – and had to be rebuilt from the ground up.

But Osaka is also resilient. Today’s Osaka – built back up by industry and commerce during the Edo Period – has more than 2.5 million people, highly ranked universities and a thriving life sciences industry. It remains a key manufacturing hub, especially for small- and medium-sized enterprises, or SMEs.

“If foreign startups would like to make some prototype or product, not on a mass manufacturing level, but rather medium-sized manufacturing, and better quality prototypes, that’s what Osaka is for,” says Nae Nakamura, Global Network Facilitator at Osaka Innovation Hub.

Then there’s the strong private sector. Other opportunities for entrepreneurs exist within a number of multinational companies that have made Osaka their innovation and manufacturing homes, such as Panasonic, Sony, Sharp and several major pharmaceutical companies.

“Being part of Osaka’s ecosystem puts you in a position to connect with major international global players,” Nae adds. “There are huge opportunities to connect with them through Osaka Innovation Hub or other government organizations we are connected to.”

Finally, there is a willingness – across the ecosystem – to support startups.

The government has actively sought to bring smaller companies and startups – which, despite representing a small part of total employment in Osaka (about eight percent), are the places where a higher proportion of new jobs are being created (about 40 percent) – into the game through the creation of a one-year startup visa program.

For startups, having a backbone of government and private sector support is critical. The Osaka Startup Ecosystem Consortium offers a number of resources for entrepreneurs who want to make the city their base, including networking events, startup technical support and access to more than a dozen coworking spaces.

A number of innovative startups have already made Osaka their home. These include some, such as Akippa (a platform for making municipal car-parking more efficient) and Beautiful Smile (which resells unwanted fruits and vegetables), that are solving environmental and social challenges through an impact lens.

These opportunities are available not just to the 2.5 million people who live in Osaka City but also to those living throughout the Kansai region, which includes the cities of Osaka, Kobe and Kyoto. The Kansai region has an economic might nearly as great as The Netherlands. In all, the area provides for about 15 percent of Japan’s GDP and is home to more than 20 million people.

Still, despite its size, Kansai is easy to get around, thanks in large part to its advanced transportation system: Bullet trains can take you to Kyoto or Kobe in less than an hour, creating an urban conglomeration entirely accessible by public transport, and the Kansai International Airport, which saw the number of total passengers more than double between 2011 and 2018, is a key hub for foreigners coming in and out of the region.

Being connected within the Osaka Innovation Hub ecosystem can make this world feel even smaller, putting foreign and domestic startup founders in the room with investors and accelerator programs and facilitating a number of important hand shakes.

“Osaka Innovation Hub is definitely open to foreign startups to access networks and information. We can reach out to proper people or proper organizations in Osaka, in the Kansai area, to connect to those appropriate people,” says Megumi Ishitobi, Director of Global Networks at Osaka Innovation Hub.

Hiroyuki, at the Osaka City government, echoes this sentiment. “A friend or friend of someone will be your friend,” he says. “Every stakeholder is quite close to each other and it’s very easy to get connected and acquainted with each other.”

For startups and established companies alike, Osaka is an exciting place to be – and will continue to become even more so. The city is looking squarely toward the future and thinking critically about how to improve efficiency and equality across a number of fields, such as smart city planning and urban design. In 2025, the city will host the World Exposition, with a focus on “designing the future society for our lives.”

Glimpses of this future Osaka are already visible in Shin-Osaka, Umeda, Nakanoshima, and Namba, all parts of the Osaka business area.

For startups, these business districts – open, efficient, and forward-facing – are another reason to consider coming to Osaka. Nae, at Osaka Innovation Hub, puts it simply and clearly: “The Kansai area is the next destination for startups.”

-up runs out of money, it will mean the end, so in the early stages it’s important to gather as much money as possible while you can.