Japan's startup scene, despite being among the largest globally, has trailed behind the U.S., China, and the U.K. in the number of unicorns and the scale of venture capital investment. Historically, factors like an aging population, economic deflation, and a preference for stable jobs at established companies have made the startup path less appealing.
According to an October 2023 IMF report using CB Insights data, Japan had only seven unicorns, compared to 661 in the U.S., 172 in China, and 52 in the U.K. (PitchBook estimates Japan has nine unicorns, indicating there may be more than initially reported.)
However, there are signs of change. Young graduates are increasingly choosing entrepreneurship over traditional corporate careers, and the Japanese government is making efforts to rejuvenate interest in startups.
In 2022, the government introduced the "Startup Development Five-Year Plan," which aims to create 100,000 startups and foster 100 unicorns by 2027. This plan includes promoting incubators, increasing venture capital funding, and creating more exit opportunities for startups. Tokyo also established the Tokyo Innovation Base in 2023, offering networking, pitching events, and workspaces for founders. In addition, a Startup Visa and tax incentives for angel investors have been introduced to attract more venture capitalists and accelerators to Japan.
Despite these efforts, most venture capital in Japan comes from international investors. Between 2010 and 2023, U.S. investors contributed 50% of all startup investments in Japan, while U.K. investors made up 10%, and Japanese investors accounted for only 5%.
For instance, Bessemer Venture Partners recently made its first investment in a Japanese startup, Dinii, a food delivery company. Bessemer’s Bryan Wu highlighted the potential for success, drawing a comparison to their previous investment in the U.S. company, Toast.
Japanese startups often go public earlier than those in other countries, sometimes after just a few funding rounds, thanks to lenient IPO regulations on the Tokyo Stock Exchange. This trend suggests that several of Japan’s unicorns could pursue an IPO sooner than expected.
Notable Japanese unicorns include:
Spiber: This company, which produces eco-friendly biomaterials, raised $65 million in 2024 and is used by major brands like Toyota and The North Face.
SmartNews: A news aggregator that raised $69.3 million in early 2024 but faces challenges in retaining users amid competition from social media platforms.
SmartHR: A SaaS platform that streamlines HR operations for businesses, reaching $100 million ARR in 2024.
Sakana AI: A 2023 AI startup that raised $214 million in Series A funding to develop low-cost generative AI models.
Preferred Networks: Focuses on AI hardware and software, recently securing $463 million to develop AI-specific semiconductors.
OPN: A fintech company that started in Thailand, offering online and mobile payment solutions across Southeast Asia and Japan.