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Taizo Son, brother of SoftBank CEO, explains what's hindering Japan's innovation culture

A lack of safety nets designed for risk takers, and a push by many Japanese parents — who expect their children to secure cushy, well-paying jobs in Japan Inc — has hindered innovation culture in the world's third largest economy, according to serial entrepreneur and investor Taizo Son.

Son has been at the forefront of Japan's internet industry for years. He previously founded GungHo Online Entertainment, a publicly-listed Japanese gaming company. His latest project is Mistletoe — a company he set up in 2013 with his own funds. Mistletoe is a combination of a venture firm but is also partly an accelerator and incubator. Recently, Son moved to Singapore and plans to invest in startups around Southeast Asia.

His older brother, Masayoshi, founded what is arguably one of Japan's most prominent tech names today — SoftBank.

Akio Kon | Bloomberg | Getty Images

Speaking to CNBC at the sidelines of the Innovfest Unbound conference in Singapore, the younger Son said, "Today, the people's mindsets — especially parents, mothers — they expect their children to work for the big, established companies."

He added even if some were inclined to shoulder some risk and start a company by themselves or work for existing startups, often their parents would urge them to first try out their hands at a big corporation.

"Their parents, especially conventional mothers, (would) say no, you should learn how to make a business by working in a big company," he said. " And then if you like to (work in a startup), then you start."

This is where Japan tends to lose out on the potential of entrepreneurs to drive the country's innovation, and generate new avenues for economic growth. According to Son, many become too comfortable with the stability of life in corporate Japan.

"They begin to be afraid of leaving the company and stand in the frontier."

Local media pointed to a recent report from Japan Venture Research, where Japanese venture capitalists raised 276 billion yen ($2.49 billion) in 2016. But the Nikkei business daily said that VCs aren't doing much with the funds they are raising — investments into local startups were getting smaller in value, in comparison to other markets.

"In my gut feeling, in my opinion, we need a safety net to leave" -Taizo Son, CEO, Mistletoe

But in recent years corporate Japan has stumbled: first, Sharp, a storied electronics maker with dwindling fortunes, was bought over by Taiwan's Foxconn. Meanwhile Toshiba is struggling to turn its fortunes around and will likely have to sell its prized memory business. Can this shift the mindset in Japan and draw more talented individual to the entrepreneurial and innovation sector? Not until the social set-up in the country changes, according to Son.

"In my gut feeling, in my opinion, we need a safety net to leave," he said. "Japanese society is designed so that people can be comfortable working for a big company."

He explained critical services such as insurance, the medical systems or housing loans are designed for with workers of big companies in mind. When employees leave their corporate jobs and become self-employed, he said, they might see a decline in their standard of living.

"So we need every kind of safety net, so that even though they leave to start a company by themselves, the quality of life or safety of life is the same as before."

He has been previously critical of the Japanese government and its efforts in fostering the startup culture in the country. Son told CNBC his decision to set up Mistletoe's second headquarters in Singapore was motivated by the local government's stand on innovation and entrepreneurship.

"The Singapore government is one of the most advanced and forward-thinking governments," he said, adding Japan's size limited the government's ability to swiftly introduce policies that are more supportive of innovators. "They have to think of every stakeholder of the country, so the speed is relatively slower than the small countries."

The Singapore's government's investment arm, Temasek, for example has backed some of the most successful startups in the region, including Grab and Lazada. To foster risk-taking in controlled environments, Singapore has set up regulatory sandboxes in areas such as fintech and data analytics.

Son also said he felt the symptoms of change — in people's mindset — is in the horizon in Japan. To propel it forward, he believed it was necessary to offer people new options, models and technologies to choose from. That's where nurturing young entrepreneurs and innovators was critical — hence his interest in fostering a start-up-friendly ecosystem.

"That's why I started, not for an economic reason, nor to be a celebrity. This is our family's life work," Son said.