Guide To Venture Capital in Japan

Despite a relatively small market compared to many other countries, startups in Japan have a very unique ecosystem that contributes to the global economy. Because of various initiatives fueled by the government to drive Japan’s innovation and entrepreneurship, and the deep money pockets of both institutional investors and large Japanese corporations, the industry of venture capital in Japan has been favorable to many interested investors. But what is Venture Capital and how does it help startups scale their business? Let’s find out!

What is Venture Capital?

Considered a private equity investment, venture capital (VC) is given to early-stage, high-growth startups that have the potential to develop to be significant and prosperous. Usually, in tech, startups receive funding from VCs because they are considered to be catalysts of growth that solve problems with innovative thinking. In return for an ownership share, typically in the form of preferred stock or convertible debt, venture capital firms invest in these startups. 

Startup companies are usually characterized by their fast-paced scale and vision for disrupting an existing market or creating a new one. The funds that they source from investors are usually allocated to management expenses such as legal and accounting fees, office space, salaries, and other overhead costs. The percentage of which can vary widely depending on the size, stage, and industry of the startup.

What are the differences between Venture Capital in Japan and the USA?

Compared to other countries, particularly the US, the venture capital industry in Japan is still relatively young and small, with fewer startups looking for investors to fund their business. Consequently, pre-series A funding is most common in Japan. In addition, check-size investments in Japan are smaller compared to the US. Japan’s pre-seed and seed fundings typically range from 35,000,000 – 100,000,000 yen or roughly 230,000 – 670,000 US dollars. Contrarily, pre-series A and series A fundings range from 100 – 500 million yen or approximately 670,000 to 3.4 million dollars.

Although there are fewer startups in Japan looking for investors, it is still slightly harder to seek lead investors because Japan’s venture capital is just growing compared to the US. Shizen Capital, an independent capital fund in Japan, shares an informative infographic of VC Radar, showing the most active lead venture capitals in Japan. Out of the active VCs shown in the graph, three companies emerge at the top that led more than 10 times in 2023, as listed below:

• GlobalBrain
• Shizen Capital
• Anobaka

What are the similarities between venture capital firms in Japan and the USA?

Despite some differences in culture, investment focus, and size, both Japan’s and the US’s venture capitalists seek out startups with a solid management team, a clear business plan, and a distinctive product or service offering. Similarly, the common goals of venture capital firms in Japan and the US are to encourage innovative entrepreneurs and produce strong returns for their investors. With due diligence, they look for the same triggers in who they want to invest.

Do Venture Capital firms in Japan invest in foreign founders?

Yes, venture capital firms in Japan invest in foreign founders. However, this may be in fewer instances than they do for Japanese enterprises. Several Japanese venture capital firms concentrate their investments on businesses with a presence in Japan, such as foreign companies’ subsidiaries or partnerships with Japanese firms.

But, there are also venture capital firms in Japan that are enthusiastic about funding startups and foreign founders. Recently, the Japanese government has been encouraging entrepreneurship and globalization, and there has been an increased interest in investing in firms with worldwide potential.

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Where can I find a VC in Japan?

It may take some time and effort to discover the best venture capital firm in Japan for your startup, but by utilizing the right tools and network, you can improve your chances of finding the right investor for your business. There are several ways to find venture capital firms and angel investors in Japan:

1. Investor List for Foreign Founders in Japan. Scaling Your Company has successfully created a comprehensive list of venture capital firms and angel investors who have invested or are interested in investing in foreign founders in Japan. You can check it out by accessing this spreadsheet.

2. Protocol is a social network for Asia’s tech communities. Their extensive website lists venture capital firms, angel investors, startup companies, funds, and even jobs in Japan and Asia so it caters to your interest, whether you are looking for a VC, a job, or if you’re a VC, a startup to invest in. Creating an account is totally free and easy and you can set it up to optimize your profile according to your needs.

3. Almost similar to Protocol is Initial Enterprise. While Protocol focuses on listing VCs, CVCs, etc., with some featured articles, INITIAL is the CrunchBase of Japan and is a startup information platform. It allows a one-stop search, viewing, and management of startup funding, partners, related news, and analysis reports. Initial has a free trial period when you create a profile on their website. This is the place to go to find information on WHAT venture capital firms have invested in what companies.

4. The Bridge website is another great platform to check if you would like to find venture capital in Japan. Mark Bivens, a partner of Shizen Capital, has recently posted a very useful article about Japan Lead VC Radar which shows the most active and leading investors in Japan as of the latest time. The article, which is updated annually, discusses independent venture capital funds. 

Companies previously funded by Venture Capitals in Japan

1. Zehitomo. The company was founded by two Americans who saw an opportunity to easily connect high-quality human resources and services to the public through their online platform. Because the business idea had a lot of potential, it was not hard for them to look for investors to launch their business. The investors that funded their company are listed below:
   • DG Daiwa Ventures Coral Capital (formerly 500 Startups Japan) 
   • Environmental Energy Investment Co., Ltd. 
   • Mitsubishi Estate Co., Ltd. 
   • SMBC Venture Capital Co., Ltd. 
   • Mizuho Capital Co., Ltd. 
   • PERSOL INNOVATION FUND LLC 
   • Vector Co., Ltd. 
   • KVP DNX Ventures Accord Ventures Co., Ltd. 
   • AirTrip Social Starts Co., Ltd.

2. Scene. Scene is another company with a foreign founder. Established in 2019, the company’s business involves easing the transmission of manufacturing information and enables concurrent engineering frontloading. Their major shareholders are the following:
   • CyberAgent Capital
   • GREE Ventures
   • East Ventures

3. Aquila Systems. Funded by one of the most active lead venture capital firms in Japan, Aquila Systems’ business is on lean solutions for healthcare. The company is mainly funded by Shizen Capital.

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Top 3 Investors For Your Business in Japan

There are many foreign lead companies that have received funding from venture capital firms in Japan, including Aquila Systems, 908 Devices, and Tellus, to name a few. We have created a list of Japanese venture capital firms and angel investors who have or are interested in investing in foreign founders. Below are the top 3 firms that invested most in foreign lead companies in Japan that can be worth checking out:

1. Shizen Capital is an independent VC investment firm based in Tokyo that was founded by former entrepreneurs. They invest in early-stage start-ups that focus on scaling digital transformation in Japan and the US.

2. UTEC have provided hands-on support and invested in over 150 start-ups in innovative technology and science sectors. They utilize the human resources and technologies of research institutions and universities to fund management operations.

3. Another investor who supports foreign start-ups is Yakumi. Yakumi is an angel investor and advisory platform that connects aspiring entrepreneurs to investment opportunities in Japan. They are a group of full-time professionals with global experience in foreign investments, focusing on supporting start-ups that want to enter the Japanese market.  

Reaching out to these companies can be quite a challenge, but with the right introduction, they will be more than happy to share what they do in regard to venture capital investments in Japan. We have created a list of venture capital firms and angel investors who have or are interested in investing in foreign founders in Japan. Please refer to this page to access the list.

We were fortunate to get solid information about venture capital firms that have or are interested in investing in foreign founders in Japan and so we reached out to them to connect and acquire more information to share with the public. Our list aims to provide valuable insights to foreign entrepreneurs who are seeking venture capital funding in Japan. To name a few, we reached out to Shizen Capital’s Managing Partner Mark Bivens, Monozokuri Ventures, and Minami. Reaching out to these companies can be quite a challenge, but with the right introduction, they will be more than happy to share what they do in regard to venture capital investments in Japan.

Many foreign lead companies have received funding from venture capital firms in Japan. To name a few:

• Ai.detect
• Aquila Systems
• Authentic Indication
• Tellus (in the health tech industry)
• 908 Devices
• Fyusion (Automotive Space industry)

Among the venture capital firms listed, the top three firms that invested most in foreign lead companies in Japan are the following and worth checking out.

• Shizen Capital
• UTEC
• Yakumi

Some VCs and most major VCs don’t focus on where a company was established – whether they were incorporated in Japan or not. However, this mainly applies to companies incorporated in the US state of Delaware because that is what they understand. Delaware, for example, is a desirable option for businesses wishing to incorporate in the US due to its business-friendly laws and regulations, effective court system, tax advantages, privacy and confidentiality protections, and well-established business environment. 

Since VCs invest huge amounts of money in startups, it’s just right for them to be critical even at the start of the conversation. Not to blow your confidence, but this should always be the case anyway in reaching out to people in general, especially to professionals. So, here are some tips that you can be mindful of when reaching out to venture capitals in Japan:

1. Understand Japan’s market. Before reaching out to a potential VC, it is best to be updated on Japan’s market and its investment landscape. Doing some research to know what type of companies they are most interested in can help you gauge the list of VCs to look into. 

2. Build relationships. It is a key factor to build relationships in Japan, just like in any other country as well! You should take time to know more about a potential venture capital and their interest so that when you are introduced to them, it is easier for you to pitch in your business idea. One effective way to do this is by attending industry events and conferences. You can also build your network online through LinkedIn. Our guide to business networking in Japan will be a good starting point for building long-lasting relationships here.

3. Get an introduction. Venture capitals in Japan typically prefer to connect with people who were recommended by their already established connections. You can try to get an introduction through a mutual connection or a trusted advisor in Japan. This is the reason why the number 2 tip is very important!

4. Understand the cultural differences. The general rule is to be respectful. Understanding Japan’s culture and business etiquette will go a long way for you to be able to easily establish connections and conduct business in the country. Respecting their traditions and practices is very much appreciated by the Japanese. 

5. Be patient. The venture capital industry in Japan has just recently started growing and this may mean a slower investment process compared to other countries. Let them take their time and make follow-ups but avoid being pushy. They will get back to you when they are interested in the business plan you are pitching in.

6. Have traction/results. VCs look for indications of the company’s growth to see potential and be reassured that the team behind has more than just a good idea and that the product/service actually works. Create a solid business plan that can surely attract potential investors. Thorough research about your intended industry and marketplace can help to have a financially sustainable process for revenue growth.

There are also some great tips from people who are experts in the field of venture capital in Japan and here’s what they have to say about reaching out to VCs in Japan.

“It’s vital to establish connections with individuals in the Japanese startup ecosystem, such as investors or founders, as this lends credibility to you and your company. It can be highly effective to seek introductions to VCs from these contacts, given that most venture capitalists are less inclined to respond to cold calls. You might begin by attending startup networking events and engaging in casual conversations to gain insight into the primary concerns of Japanese investors. Moreover, it’s beneficial to foster long-term relationships rather than just reaching out right before you need to fundraise.”

Yui Fujii
CEO, Minami Incubate 

Using the right channels for your startup in Japan should be the way for you to be able to effectively and efficiently launch your business. More than researching information and people online on your own, it is still best to get proper guidance from an expert. At Scaling Your Company, we believe that every leader needs a coach to pull them further and faster. Our team utilizes two methods to 2x – 5x your business startup.

• Method 1: Listen to our podcast!
  Learn from the best on how to grow, expand, and rock out in the land of the rising sun.

• Method 2: Hire us for coaching or a marketing agency
  Using our tried-and-tested methods from our own businesses, we’re here to help increase your exposure, leads, sales, and presence on the internet.

• Method 3: Consider an accelerator
  When you are able to establish connections with the right people, it is the best time to reach out to accelerators in Japan.

Scaling Your Company CEO Tyson Batino has been advising more than 25 businesses from a variety of industries to get the right people, and systems to develop them, and how to get more inbound and outbound sales through utilizing marketing. With extensive experience from starting 3 successful businesses, he served as a resident mentor (highest level of commitment) for the Accelerate Aichi 500 Global startup accelerator program in 2022 – 2023 – doing seminars on market entry to Japan and lead generation and doing one-to-one with the 17 startups who were a part of the program.

Scaling Your Company is equipped and well-prepared to help your startup launch effectively in Japan. With its tried and tested methodologies and wide scope of connections in the industry, your business startup is sure to operate smoothly and successfully in Japan.

Our CEO, Tyson Batino, Has founded 3 Successful business
in Japan

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