Japan’s Startup Scene Is Growing

japan startups

March 21, 2022

Japan’s startup scene is growing. Japanese startups raised $3 billion in funding in the first half of 2021, nearly as much as in all of 2017, according to a report by INITIAL. They raised around $5 billion in 2020 and 2019.

The $145 million Series D funding of SmartHR, a provider of cloud HR software, was the largest deal in Japan in the first half of 2021. Other large funding rounds were for SmartNews, a mobile news app, and Paidy, a buy-now pay-later service.

Japan’s startup success doesn’t compare to the size of its economy, according to McKinsey. It has only a handful of tech unicorns, and it has less startup funding than in the US, China, and other parts of Asia. But there have been encouraging signs of improvement. Several major Western investment firms have been investing in Japan, and the Japanese government has taken a more active role in trying to encourage startup activity through tax breaks and other measures.

Paul McInerney, a general partner at Incubate Fund, told McKinsey that Japan’s startup scene is “growing very rapidly.” He said there is now more capital available, and investors like KKR, Goldman Sachs, and Sequoia have all invested significant amounts recently in Japanese startups. He also said there is now a stronger pipeline of founders and people joining venture-backed startups. However, he said that Japanese startups need to set “global aspirations from the get-go.”

Small and medium-sized businesses account for 55 percent of GDP in Japan, according to Startup Jedi. A record 52 Japanese startups presented at CES (Consumer Electronic Show) 2022 in Las Vegas, and a record 6 Japanese startups won the CES 2022 Innovation Awards.

Top publicly traded Japanese tech companies include Sony, Fujitsu, and Panasonic, all makers of electronic technologies, as well as Keyence, a company that makes sensors, barcode readers, and more, and Tokyo Electron, an electronics and semiconductor company.

Top unicorns in Japan include Preferred Networks, an AI company that automates business processes; SmartNews, a mobile news app; SmartHR, a provider of cloud HR software; Spiber, a biomaterials company; Liquid, a crypto trading platform; and Playco, a gaming company. Other Japanese unicorns include Clean Planet, a clean energy company; TBM, which is developing an alternative to paper and plastic; and Mobility Technologies, a provider of a taxi booking service.

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