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Series B investment in Japan

Guide to Series B Investment in Japan

Thinking of expanding your business and meeting your consumer’s demands? This article is just for you! A Series B investment in Japan is an opportunity for a business to do so. As you continue reading this article, you will learn more about how different it is from Series A, how to attain Series B investment, and future outlooks for Series B investment in Japan!

By the way, if you haven’t already read our previous article on startup funding in Japan, we highly recommend taking some time to read about Series A Investment in Japan!

What is a Series B Investment in Japan?

Series A vs. Series B

Depending on where a company is in its development stage, it may need either a Series A investment or a Series B investment. Series A investments are usually the first round of business funding in which a company is still developing its product. A Series B investment comes into the picture once companies start looking to scale their business.

Series B investment in the Japanese market

Market maturity

One trait of the Japanese market that may make it different from other countries is its maturity. Compared to other emerging markets in Asia and the rest of the world, Japan’s market is widely considered as mature and stable. Such a market trait could make a positive impact on risk assessment and expected growth trajectories of Series B investments.

Risk aversion

Japanese investors are known for being intricately particular about their decisions. This implies a higher tolerance for risk in venture capital investments compared to other countries’ markets. The investors’ willingness to engage in calculated risks thus plays a significant role in the growth and dynamism of Japan’s venture capital landscape. 

Startup ecosystem

While the startup ecosystem in Japan is relatively small compared to that of the U.S. or China, it is still continuously growing. Under Prime Minister Fumio Kishida’s cabinet, financial incentives and support will make it much easier for ventures to thrive. Japan will see a handful of regulatory reforms that encourage startup growth in the country.

Top 5 Sectors for Series B Investment in Japan

tech sector series b investment

  1. Tech: Leading the world in technological advancements, investing in Japan-based tech startups might pique one’s interest. Those specializing in AI, robotics, and semiconductor technology hold great growth potential.
  2. Healthcare: Japan currently sees a growing demand for healthcare solutions. So, biotech startups concerned with pharmaceuticals and medical devices are great companies to invest in.
  3. Fintech: The financial sector in Japan is currently transforming thanks to an increase in fintech startups. These companies focus on payment processing, blockchain technology, and financial services innovation to make online financial transactions more convenient.
  4. E-commerce: Given the convenience of online shopping, there is a growth of online retail in Japan. Companies provide supply chain innovation, consumer data analytics, and more.
  5. Sustainability: A rise in global environmental concerns prompts individuals to commit to sustainability and green technology. That being said, we recommend investing in Japan-based startups focusing on renewable energy, energy-efficient technologies, and sustainable practices.

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Investor Perspectives

A series B investment can come from investors who have been there from the start (or during the Series A funding). New investors from venture capital firms, private equity corporations, and the general public (through equity crowdfunding platforms) may also contribute.

Those investors who have been investing since the early stages may want to increase or raise their shares in your company. They can do this by continuing their contributions into a Series B investment.

From the perspective of a venture capitalist, they would feel more drawn to invest in a business that is venture-backable. All this means is that a company’s business model and technology show that investors will be able to gain significant returns from their investments.

Part 2: VCs in Japan with Schyler Alexandra Cole

Curious about corporate venture capital in Japan? We’ve got your back with our podcast on Corporate VC with Gerrard Lai!

Now that we have a gist of Series B investment in Japan, the next section is for those of you who are interested in receiving one!

How do I prepare for a Series B Investment in Japan?

To know if you’re ready for Series B funding, we’d like to explain how different it is from pre-seed, seed, and Series A funding. (Yes, that’s a lot of terms, but we’ve got you!)

Pre-seed and seed funding are basically for those who are still in the business preparation stage. These are usually used as capital to help a business establish itself and enter the growth stage. Series A funding comes in when you would like investors to have stocks or shares of a company for significant returns after a certain amount of time.

Similarly, Series B funding is provided by the same people who provide Series A funds. The difference is that Series B investment takes place when a company has already established its foundations and is now prioritizing meeting consumer demands.

Networking events are melting pots for investors and businesses seeking new connections. These are especially helpful because they allow space and time for conversations with one another. Regarding networking, we have a couple of articles you might be interested in. If you want to know about what cities are best for startups, consider reading our guide to startup cities in Japan! We also have an article on chambers of commerce in Japan if you’re looking for a community you’d like to be a part of!

Japan Investor List

When seeking for Series B funding from investors, it’s also best to come prepared to reel them in. One way to do this is by strategizing a plan. For example, you can start by assessing your company’s key performance indicators (KPIs). Knowing your company’s strengths (and weaknesses!) is a great way to learn if you’re ready to scale the business. Doing this will also show investors your commitment to running and continuously improving it!

Cultural and Business Practices

gift giving business practice

Doing business in Japan as a foreign founder may be different from doing business in your home country. For example, the Japanese corporate management style places a heavy emphasis on principles such as loyalty. That being said, we recommend focusing on building fewer yet stronger connections rather than many unsustainable ones.

Furthermore, there are a handful of opportunities to strengthen current business relationships. One way to do so is through gift-giving during ochugen. For more details about this check out Top 10 Ochugen Gift Ideas for Businesses.

Top 3 Series B Funding Success Stories

oVice

Sae Hyung-Jung, a South Korean national, founded oVice in Japan. His company aims to make remote teamwork just as fun as it would be in physical offices. In August 2022, oVice was able to raise USD 32 million thanks to a Series B funding round. This funding came from investors from in and out of Japan. As of September 2022, Sae’s company can make around USD 6 million in annual recurring revenue.

Sierra Space

Thanks to the support of MUFG Bank, Kanematsu, and Tokio Marine & Nichido Fire Insurance, Sierra Space raised USD 290 million from a Series B funding round. This round is part of the company’s pursuit of a long-term strategic relationship with Japanese investors and industry partners. For those who are learning about Sierra Space for the first time, it is a commercial space company that aims to use a technology platform in space to the advantage of its consumers’ life on Earth.

Techtouch

Based in Toyo, Japan, Techtouch is a Japanese startup in the IT sector focusing on improving user experience. According to its founder, Naka Imuta, the company was able to open up to a Series B funding round in January 2023. In doing so, they were able to raise JPY 1.78 billion from about nine investors.

Series B Investment Trends and Future Outlook

Sustainability and strategic partnerships

As mentioned in one of the earlier sections, companies focusing on sustainability and green technology are seeing a rising demand. As it is, a current trend in Series B funding is that investors are drawn to investing in a company that contributes to sustainable development, clean energy, and social welfare. 

In addition, a slowly growing startup ecosystem in Japan leads these businesses to build strategic partnerships with one another. Be this with investors, fellow businesses, or clients, building strong relationships fulfills a business’ pursuit of better market access, expertise, and support.

Forecasting trends

Given Japan’s status as one of the leading countries in technology and innovation, one may forecast a continued investment focus on this sector. Further technological advancements such as AI, robotics, and fintech could contribute greatly to making work much more efficient.

There is also a likelihood that foreign venture capital firms would enter the Japanese market. This is due to a handful of factors such as Japan’s stable economy, its market size and consumer base, an interest in diverse investment portfolios, and more. The global economy is also slowly becoming more interconnected. Thus, foreign venture capital firms may want to expand to a market like that of Japan.

Prime Minister Fumio Kishida’s cabinet is currently pushing to invest more in people and startups. With this, we can anticipate increased regulatory and government support. These policies aim to provide financial incentives and regulatory reforms. Ultimately, this will create a more conducive environment for Series B investments.

Final Thoughts

In summary, a Series B investment in Japan is a funding round for businesses that want to scale their company and meet the demands of their established consumer base. There are many ways to prepare for this round such as knowing what your company needs, pitching your business, and networking.

The success stories provided earlier along with the future outlooks combined also imply an optimistic view of the startup ecosystem in Japan. With this, we hope you are further inspired to take your business toward the next step!

2X-5X YOUR BUSINESS IN JAPAN

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