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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. It is a powerhouse of unique opportunities that significantly contribute to the international economic landscape.  Coupled with the substantial financial resources from institutional investors and the considerable investments of heavyweight Japanese corporations, venture capital in Japan has emerged as an increasingly attractive sector for savvy investors.

Over the past decade, The Japanese startup ecosystem has been invigorated by a range of government-led initiatives aimed at propelling innovation and fostering a spirit of entrepreneurship. 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?  Understanding the mechanics of venture capital is essential for startups looking to escalate their growth trajectory and leverage their funding to scale their businesses effectively.

Understanding Venture Capital in Japan

U.S. Venture Capital

In the United States, venture capital is an established industry, especially vibrant in Silicon Valley. It is characterized by high-risk, high-reward investments supported by a culture that views failure as a stepping stone to innovation. The robust ecosystem includes seasoned investors, multiple funding rounds, and extensive mentorship programs.

Japanese Venture Capital

Japan’s venture capital scene is more conservative and risk-averse, influenced by cultural attitudes that favor long-term relationships and business stability. Large corporations and government entities play significant roles, often focusing on incremental innovation within established industries rather than disruptive technologies.

Market Size and Investment Stages

Japan’s venture capital industry is relatively young and small compared to the U.S., with fewer startups seeking investors. Pre-series A funding is most common in Japan, with smaller check sizes compared to the U.S. Japanese pre-seed and seed funding typically ranges from ¥35,000,000 – 100,000,000 yen ($260,000 – $750,000), while pre-series A and series A funding ranges from ¥100 – 500 million yen ($750,000 – $3.7 million).

Investment Pace and Strategy

The U.S. market thrives on high transaction volumes and a fast-paced, competitive environment. In contrast, Japan’s market emphasizes meticulous planning, strategic partnerships, and a measured approach to growth. These differences reflect the broader business cultures of the two countries, each with its own strengths and challenges in fostering startup success.

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What are the differences between Venture Capital in Japan vs the USA

Venture capital in the United States and Japan presents a study in contrasts, shaped by differing market dynamics, cultural attitudes, and business practices. In the U.S., venture capital is a well-established industry, characterized by an aggressive pursuit of high-risk, high-reward investments, particularly in Silicon Valley. The ecosystem is bolstered by a spirit of entrepreneurship and a cultural acceptance of failure as a step towards innovation. This has led to a robust infrastructure of support for startups, including a vast network of seasoned investors, a multitude of funding rounds, and extensive mentorship programs.

In contrast, Japan’s venture capital landscape is more conservative and risk-averse. Historically, Japanese culture has not been as conducive to the high levels of risk associated with startup investment, which has influenced the strategic approach of investors as multinationals matter in Japan’s economy. Moreover, the Japanese market features stronger involvement from large corporations and government entities, which can lead to a focus on incremental innovation within established industries rather than disruptive technologies. The venture capital environment in Japan also tends to emphasize long-term relationships and business stability, which can mean a slower pace of investment and a preference for startups that demonstrate a clear path to profitability.

Compared to other countries, particularly the US, Japan’s venture capital industry is still relatively young and small, with fewer startups looking for investors in funding 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 260,000 – 750,000 US dollars while pre-series A and series A fundings range from 100 – 500 million Yen or approximately $ 750,000 to $3.7 million. 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 which shows Japan’s most active lead VCs.

While the U.S. venture capital market thrives on a high volume of transactions and a fast-paced, competitive environment, Japan’s market is characterized by meticulous planning, strategic partnerships, and a measured approach to growth. This fundamental difference in attitude towards venture capital reflects the broader business cultures of the two countries, each with its own strengths and challenges in fostering startup success.

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Top 5 leading Venture Capital firms in Japan

  1. Shizen Capital: Shizen specializes in investments that promote sustainability and environmental innovation. They focus on startups that contribute to a circular economy and renewable energy solutions.
  2. Incubate Fund: Japan’s largest seed-stage investment group, the Incubate Fund supports early entrepreneurial ventures and offers extensive incubation programs, providing mentorship and operational support to startups.
  3. Genesia Ventures: Genesia Ventures targets early-stage startups in the digital and technology sectors across Southeast Asia and Japan. They are for backing ventures that leverage technology for consumer internet services and mobile applications.
  4. JAFCO; Known as one of Japan’s oldest and largest venture capital firms with a broad investment portfolio, JAFCO provides growth capital and hands-on management support to a diverse range of sectors, including IT, biotechnology, and healthcare.
  5. DNX Ventures: Focusing on B2B startups, DNX Ventures particularly specialize in the enterprise software and tech industries, across Japan and the US. They offer cross-border expertise and support, facilitating the global expansion of Japanese startups

Commonalities of Venture Capital 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 whom they want to invest in.  

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. 

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Do Venture Capital firms in Japan invest in foreign founders

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

Venture capital firms in Japan are increasingly open to investing in foreign-founded startups, particularly as the country seeks to globalize its economy and encourage cross-border innovation. Recognizing the value of diverse perspectives and international market potential, Japanese VCs are expanding their portfolios to include companies led by foreign entrepreneurs who demonstrate strong business acumen, cultural understanding, and a clear vision for growth within and beyond Japan.

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

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 see the Japan Investor List.

We were fortunate to get solid information about venture capital in Japan that have or are interested in investing in foreign founders 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 funding from venture capital 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 investment through venture capital in Japan.

Many foreign lead companies have received funding from venture capital 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.

Where can I find a VC in Japan

Since venture capital in Japan is still developing, 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.
  1. Protocol is another source that you can check on. Protocol is a social network for Asia’s tech communities. Their extensive website talks about venture capital in Japan and 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. Easily appeal to investors or startups by curating your profile.
  1. Initial Enterprise is another platform that is almost similar to Protocol. While Protocol focuses on listing VCs, CVCs, etc., with some featured articles, INITIAL is the CrunchBase of Japan and is a startup information platform that 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 which venture capital firms have invested in what companies and to know more information about venture capital in Japan.
  1. The Bridge website is another great platform to check if you would like to find VCs in Japan. Mark Bivens, a partner of Shizen Capital, has recently posted on the website about 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. 

Let us help you 2x-5x your business in Japan

We can help you scale your company in Japan and internationally through one on one and group coaching, online courses, and a marketing agency service.

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You can also check companies that got funded by VCs. A few great examples are

  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. Zehitomo definitely utilizes what they understand and know about how venture capital in Japan works. The investors that funded their company are listed below as also shown on their website:
    • 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. 
    • DNX Ventures
    • Accord Ventures Co., Ltd. 
    • AirTrip Social Starts Co., Ltd.
  1. 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
  1. 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.

It is indeed slightly hard to look for investors in Japan for foreign founders as venture capital in Japan is still growing, but with the right tools such as the above, you can save time and just worry about how to effectively reach out to them. 

All of the websites listed above including the investors’ list created by Scaling Your Company include both venture capital firms and angel investors in Japan. Scaling Your Company helps business startups in Japan scale their business 2x – 5x without the need for unnecessary trial and error. Our services include:

Struggling to scale your business in Japan?

Book a free consultation with us today and let us 3X – 5X your business!
dealing with venture captial in Japan

What tips do you have for reaching out to VCs in Japan

On top of being knowledgeable about venture capital in Japan, it is also highly important that reaching out to VCs in Japan is as effective as how you see your business idea. 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 VCs 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. It is good to know your way around the venture capital industry in general, but it is best to understand how venture capital in Japan works.
  1. 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 VC 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. 
  1. Get an introduction. VCs 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!
  1. 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.
  1. Be patient. The industry of venture capital 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.
  1. 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.

I think what many startups both foreign and Japan forget is that the analyst or associate you are speaking to is an employee with a boss. At the end of the day, their job is to keep their job, so introducing a company to their boss that does not have traction puts them in a tough spot and they have to go out on a limb to promote a company without solid traction. The more traction you have, the less riskier it is for them to introduce you to their boss, who makes the big decision.

I am also sometimes surprised to meet founder who won’t even invest their own money and savings to build their company, but at the same time get mad that VCs won’t meet them. Additionally, if you don’t have family and friends or angel investors invest in you, that makes it harder for you to convince an associate to risk introducing you to their boss. Understanding and empathizing with a venture capitalist in Japan’s situation can go a long way.

Tips from VCs in Japan

I also got some great tips from an expert in the field of venture capital in Japan and here’s what she has 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 FujiiCEO, Minami Incubate 

How can I build traction for my startup

Venture capital in Japan can be quite challenging without using the proper channel and network for your startup. Doing so should be the way for you to go 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 methods to 2x – 5x your business startup.

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

2X-5X YOUR BUSINESS IN JAPAN

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