The Hongo Pipeline

Hongo is the district of Tokyo around the main campus of the University of Tokyo. It is also, on paper, one of the most thoroughly engineered startup funnels in Japan. A student can take a course in entrepreneurship, build a prototype in a university workshop, rent a desk from the university, and take money from an investment firm that the university helped create, all without leaving the neighbourhood.

The question for Japan’s government is whether that funnel can be copied. The question for students is whether it changes what a good career looks like. The evidence supports a more careful answer than either side tends to give.

A machine with three stages

The numbers come from the university itself, so they should be read as a prospectus rather than an audit. By its own count, 577 UTokyo-related startups had been launched as of 31 March 2024. Its Division of University Corporate Relations, which has supported such companies since 2004, runs four incubation facilities across the Hongo, Komaba and Kashiwa campuses.

The funnel has three stages. The first is teaching. Entrepreneur Dojo, which marked its twentieth anniversary in 2024, runs courses; the Spring/Summer Founders Program gives student teams up to 300,000 yen in development money; the Hongo Tech Garage, normally restricted to students, offers a workshop with 3D printers, laser cutters and lathes. The second is housing. Incubation rooms at Hongo let a young company stay for between one and three years at a time, renewable to a maximum of ten. FoundX, launched in fiscal 2019, gives graduates free workspace near the campus and, in the words of the university’s Taketo Sugawara, is open on a simple basis: “Any UTokyo graduate is eligible to apply, regardless of their business idea.”

The third stage is money, and it is the one that has changed most. UTokyo’s two investment firms, UTokyo IPC and UTEC, sit inside the ecosystem. The university says more than half of the entrepreneurs it has profiled in its own series received funding from at least one of them. In February 2022 UTokyo IPC closed its second fund, AOI Fund 1, at 25.6 billion yen, with 14 portfolio companies so far, according to Global Venturing. The year before, Global Venturing, citing the Nikkei, reported a separate 60 billion yen fund to invest in university companies, with a stated goal of 300 new ventures and a plan to turn the Hongo district into a Silicon Valley-style hub. That fund depended on a legal amendment, due in April 2022, that would let the university invest in its portfolio companies directly.

The state arrives

In November 2022 the government of Fumio Kishida announced a Startup Development Five-Year Plan. Its headline target is to raise startup investment to 10 trillion yen by March 2028, more than ten times the 2021 level, with a longer-term ambition of 100 unicorns and 100,000 startups. The plan is, in effect, an attempt to take the Hongo model national. It sets aside a new 100 billion yen fund for university startups, promises support for more than 5,000 commercialisation cases from university research, and expands mentor-led talent programmes from 70 students a year to 500 by March 2028. Its slogan for universities is “One University One Exit”: the aim is 50 startups from a single research university, ultimately producing one successful exit.

That slogan is revealing. It treats a startup exit, a listing or a sale, as the unit of proof that a university’s system works. UTokyo has produced listings. Aidemy, founded in 2014 by Akihiko Ishikawa while he was an undergraduate, raised 92 million yen from UTEC and others in 2018, 830 million yen in 2020 from UTokyo Innovation Platform and others, and listed on the Tokyo Stock Exchange Growth section in June 2023. Ishikawa was 30 at the listing. Even so, the company reached that point after abandoning its first consumer apps. As Ishikawa told UTokyo Focus: “Learning from my previous failures, I didn’t rigidly adhere to my own ideas.”

Do students still need the salaryman path?

The popular version of this story says that Japanese students are skipping the salaryman path in favour of founding companies. The sources we reviewed support a narrower claim. In a 2023 policy paper from the research institute NIRA, Yutaka Matsuo, the University of Tokyo AI professor, argues that many student entrepreneurs already see starting a business as a less risky option than working for a large company. That is a statement about a particular kind of student, at a particular kind of laboratory.

Matsuo’s lab is where the claim looks most solid. Almondo, an AI company that Kota Ito founded in February 2023 during his first year at UTokyo, employed about 30 people by December 2023, most of them University of Tokyo students, according to Toyo Keizai. Ito credited both Matsuo and the lab’s wider startup ecosystem for where he had arrived.

Elsewhere the data point the other way. Sugawara says that most participants in Entrepreneur Dojo go on to join established companies, with more than 100 becoming entrepreneurs five to ten years later. Katsuya Hasegawa, the project professor who explained the university’s support in 2020, was blunt about why: “Among the founders of startups, the success rate is higher for those who have working experience.” The funnel, in other words, does not abolish the first job. It shortens or postpones it for a minority.

The wider cultural picture is also unsettled. In the same NIRA paper, Fukushima, another contributor, says “there is little interest in Japan in startups in the first place,” and Odashima describes the difficulty of starting a business as still high. Another contributor, Takamiya, notes that Silicon Valley has around 60 years of history against Japan’s 25 at most.

What to watch

Three things will decide whether the Hongo model travels. First, whether the 577 figure turns into companies that raise follow-on rounds and exit, rather than staying as university-affiliated shells; the 577 figure we found does not separate student founders from professor spinouts. Second, whether regional universities can replicate not just the fund, but the density: a Dojo, a workshop, a landlord and an investor within walking distance. Third, whether the 2028 investment target can be measured. We found no official assessment of progress against it, and the plan’s own timetable has now passed its midpoint.

For a student at Hongo, the answer is already practical. The route to a first round is shorter than it has ever been. Whether it leads anywhere better than a graduate job at a large company is, for now, the one thing the funnel cannot guarantee.