Foreign venture capital (VC) firms are significantly increasing their investments in Japanese startups, a trend analysts attribute to a shift of funds from China to Japan due to the ongoing U.S.-China trade conflict.
According to the startup information site Speeda, foreign VC investments in Japanese startups reached approximately $153.5 million (22.5 billion yen) in the first half of this year (January to June), marking a 69% increase compared to the previous year. This amount accounts for about 20% of all VC investment in Japan. The growth rate of foreign VC investments far exceeds the overall 4% increase in the VC sector.
The Nihon Keizai Shimbun (Nikkei) reported, “The U.S.-China tensions have redirected investment funds into the Japanese market, with the Japanese government’s supportive policies drawing in overseas VCs. This influx of foreign capital is expected to boost the growth of emerging companies.”
Large-scale fundraising has notably surged. The amount raised by startups from overseas VCs exceeding 1 billion yen increased by 51%, reaching 16.3 billion yen (about $111 million).
For instance, Sakana, founded by former Google AI researchers, raised about 4.5 billion yen (around $30.7 million) last January. Zehitomo, a professional intermediary site, secured 1.1 billion yen (approximately $7.5 million) from Taiwanese VCs.
Since July, HR software company SmartHR raised about 10 billion yen (around $68.3 million) from the U.S. investment firm KKR, while management system company Loglass secured 7 billion yen ($47.8 million) from Sequoia Heritage, also based in the U.S.
Yo Kurabayashi, Managing Partner at DNX Ventures, remarked that the number of Japanese startups meeting the scale and management standards required by international investors is limited, resulting in funds being concentrated on a few projects. He emphasized the importance of leveraging foreign venture capitalists’ expertise to advance globally or developing management talent to increase the number of high-growth startups to fully capitalize on investments.
