Despite Japan's startup sector being one of the largest in the world, it lags behind other regions such as the US, China and UK in terms of the number of unicorns and the scale of venture capital investment. For years, an aging population, general economic deflation, and the tendency for salaried employees to work for traditional large corporations have made startup life unattractive to many.
Background: According to a recent IMF report citing data from CB Insights, as of October 2023, there were approximately 661 unicorns in the US, 172 in China and 52 in the UK. did. There were only seven unicorn companies in Japan. (PitchBook puts the number of Japanese startups at nine, so there may be more unicorns in the market than these datasets suggest.)
However, the situation is starting to improve somewhat. Young graduates are increasingly breaking the stereotypes and choosing to strike out on their own rather than work within the existing corporate system. And the Japanese government is once again trying to draw attention to Japanese startups.
As an example, the government's “Five-Year Startup Development Plan” will start in 2022 and aims to create 100,000 startups by 2027 by promoting incubators, strengthening financing through venture funds, and diversifying exit routes. We aim to support the creation and development of 100 unicorn companies. Earlier this year, the Tokyo metropolitan government launched Tokyo Innovation Base, a startup hub that organizes networking events, pitch contests, and provides workspace for founders. There is also a startup visa that makes it easier for venture capital firms, startups, and accelerators to set up in Japan, and there is also a special tax system for angel investors. It helps that there are around 130 accelerators in the country, which isn't too bad considering the size of the market.
Despite these advantages, most venture capital invested in Japan comes from outside Japan. According to the IMF report mentioned, from 2010 to 2023, investors from the US accounted for 50% of investments in Japanese startups, investors from the UK accounted for about 10%, and investors from the UK of investors lagged behind by just 5%.
For example, Bessemer Venture Partners recently made its first investment in a Japanese startup called Dinii, a food delivery company. Brian Wu of Bessemer Venture Partners said at the time, “We have been fortunate to be a major investor in Toast in the US and have helped Toast become a $13 billion company, and we believe the same success factors will help Dinii.'' It can also be seen in
Japanese startups typically decide to go public earlier in the development stage than startups in other countries. For example, thanks to the Tokyo Stock Exchange's generous IPO rules, it's possible to go public with just two or three funding rounds. Therefore, the unicorn companies listed below are likely to IPO sooner or later.
Here are some notable Japanese unicorns.
Spiber
Total amount raised: $653 million
Final funding round: $65 million (10 billion yen) in April 2024
Major investors: Baillie Gifford, Fidelity Investments, Goldwin, Kansai Paint, Iowa Economic Development Authority, Shinsei Bank, Carlyle Group.
Spiber is an eco-friendly biomaterial with a vast array of applications and quickly attracted the attention of investors and customers. Companies in the fashion, cosmetics, and automotive industries use Spiber's materials in place of animal, plant, and synthetic materials, and their customers include Pangaia, The North Face, Goldwyn, Woolrich, Shiseido Japan, Toyota, and more. Contains.
In April of this year, the company raised about $65 million (10 billion yen) to expand production of “brewed protein” materials that can be applied to fiber production. The company has 300 employees and last year opened an office in Paris to further its European operations.
smart news
Total funds raised: $479 million
Last funding round: $69.3 million venture debt round in January 2024
Major investors: Atomico, Asian Capital Alliance, Development Bank of Japan, Globis Capital Partners, Japan Post Capital, JIC Venture Growth Investments, SMBC Venture Capital, Social Venture Partners, Princeville Capital, Woodline Partners.
Founded in 2012, news aggregator SmartNews sought a new approach as a news provider. We partnered with publications to provide users with a personalized and streamlined news feed. It was launched in the US in 2014 and its fortunes quickly skyrocketed. The company became the first news startup to reach a $1 billion valuation since 2015, before jumping to a $2 billion valuation in 2021.
But the startup has found it difficult to retain users as social media platforms like X, Threads, Mastodon, and Bluesky try to establish themselves as the place to read breaking news. According to SensorTower, the company had 1.7 million daily active users from Q1 2023 to Q3 2023, down nearly 30% year-over-year.
smart HR
Total funds raised: $362 million
Last funding round: $140 million in Series E in June 2024
Principal investors: Beenext, Coral Capital, KKR, Light Street Capital, Sequoia Capital Global Equities, Teachers' Ventures Growth (Ontario Teachers' Pension Plan Division), World Innovation Lab, and Whole Rock.
SmartHR, co-founded by Kensuke Naito and Shoji Miyata in 2015, has seen strong demand in recent years for SaaS platforms that help companies manage and streamline their people and operations. The company's ARR reached $100 million in February 2024, up from $80 million in FY2023. SmartHR joined the unicorn club after raising approximately $115 million in Series D at a valuation of $1.6 billion in May 2021.
Fish AI
Total funds raised: $344 million
Last funding round: $214 million in Series A funding in September
Major investors: Dai-ichi Life, Fujitsu, Global Brain, Itochu Corporation, JAFCO, Khosla Ventures, Lux Capital, Mizuho, Mitsubishi UFJ Financial Group (MUFG), New Enterprise Associates, Nomura, NVIDIA, SBI, Sumitomo Mitsui Banking Corporation (SMBC), Sony, Translink Capital, and 500 Global.
Founded in 2023 by former Google AI engineers, Sakana AI focuses on training low-cost generative AI models using small datasets. David Ha, the company's co-founder and CEO, previously served as head of research for Stability AI and was also a researcher at Google.
The startup is collaborating with Nvidia, the University of Oxford, and the University of British Columbia on research, data centers, and AI infrastructure. Sakana has a staff of 20 people and has attracted a lot of attention in Japan, which is trying to catch up with the US and UK in the AI race, and has even managed to secure processing time on one of Japan's supercomputers. The startup raised a large Series A round (approximately $214 million) in September from major Japanese banks and technology companies at a valuation of $1.5 billion.
preferred network
Total amount raised: $152.19 million
Previous funding round: $8.1 million Series C in 2018
Major investors: Chugai Pharmaceutical, Fanuc, Hakuhodo DY, Hitachi, JXTG, Mitsui & Co., Mizuho Bank, Tokyo Electron, Toyota Motor Corporation.
Founded in 2014, Preferred Networks designs semiconductors for use in AI, develops software, and builds generative AI foundation models. The company has deep learning and machine learning models for applications such as robotics, manufacturing systems, drug discovery, 3D scanning, autonomous driving, e-commerce, and food testing.
In September, the startup secured a huge investment of 69 billion yen (approximately $463 million) from Japanese financial services company SBI Holdings to develop semiconductors specifically for AI applications. It also signed a deal with Samsung to manufacture 2-nanometer chips for AI.
OPN
Total amount raised: $222 million
Last funding round: $120 million in Series C+ funding in May 2022
Major investors: JIC Venture Growth Investments, Mars Growth Capital, MUFG, Sumitomo Mitsui Banking Corporation
OPN, formerly known as Synqa, is a fintech startup that first started operations in Bangkok, Thailand in 2014. OPN provides a wide range of services including mobile payments, online payments and virtual cards to over 7,000 merchants. Customers include Toyota and other Thai companies such as duty-free store operator King Power, telecommunications company True and online insurance provider LooJ.
The company currently operates in Japan, Singapore, Indonesia, Malaysia, the Philippines and Vietnam. In 2022, the company acquired US-based MerchantE for approximately $400 million, establishing a presence in the US. Recently, the company announced a strategic partnership with BigPay, a Malaysian e-wallet platform that was recently launched in Thailand.