Japan's startup sector, one of the world's biggest, had lagged behind regions such as the U.S., China, and the U.K. in terms of unicorns—companies said to have crossed the unicorn threshold, with valuations over $1 billion—and by the scale of venture capital investment. For decades, an aging population, economic deflation generally, and the common preference among salarymen to work for established, big corporations meant that the startup life wasn't an attractive one for many.

For context: According to a new report from the IMF, referencing CB Insights data, as of October 2023, there were around 661 unicorns in the United States, 172 unicorns in China, and 52 in the United Kingdom. As for Japan, there were but seven unicorns. (PitchBook counts nine Japanese startups, so it's possible that we are not giving sufficient credit to a larger universe of unicorns existing within the market itself).

But things are looking up — sort of. Young graduates are increasingly breaking from the mold and opting to go out on their own rather than seek employment within existing corporate systems. And the Japanese government is once again trying to attract interest in the country's startups.

For instance, in 2022, the government established and started the "Startup Development Five-Year Plan" with an aim of creating 100,000 startups and nurturing 100 unicorns by 2027 through incubators, funding, diversified exit routes, and many more. Early this year, the Tokyo Metropolitan Government instituted Tokyo Innovation Base, a hub for startups with networking events, pitch competitions, and workspaces for founders. There is, therefore, a Startup Visa that facilitates venture capital firms, startups, and accelerators to set up in Japan and a special tax system for angel investors. Not to mention that the country hosts about 130 accelerators, which is not too shabby considering the size of the market.

After all, most of the venture capital invested in Japan is actually from outside of it. According to one of the reports of the IMF, between 2010 and 2023, US invested in Japanese startups, which accounted for 50% of investments, UK invested around 10%, and only 5% were comprised of investments from Japanese investors.

For example, Bessemer Venture Partners recently invested for the first time in a Japanese startup, a food-delivery company called Dinii. "Having been fortunate to be a key investor in Toast in the U.S., supporting it to become a $13 billion company, we see a similar element of success in Dinii," Bryan Wu of Bessemer Venture Partners said at the time.

Japanese unicorns tend to list much earlier in their lifecycle than their international peers. Take Spiber, for example. They listed after only two funding rounds because the rules surrounding IPOs are very relaxed on the Tokyo Stock Exchange. So, it's likely we're going to see the following unicorns listed soon.

Here are some of the unicorns from Japan worth looking out for:

Spiber
Amount of Total Funds Raised: $653 million

Latest Round: US$65 Million in April 2024 (10 billion JPY)

Prominent Investors: Baillie Gifford, Fidelity Investments, Goldwin, Kansai Paint, Iowa Economic Development Authority, Shinsei Bank, Carlyle Group.

Spiber very quickly drew investors and customers through its environment-friendly biomaterials, which have a huge array of applications. Instead of animal or plant-based materials or synthetic materials used by companies in the fashion, cosmetics, and automotive industries, it uses biomaterials. Some of its customers include Pangaia, North Face, Goldwin, Woolrich, Shiseido Japan, and Toyota.

It has only just recently raised about $65 million (10 billion JPY) this April for the mass production of its "Brewed Protein" materials, which find uses in textile production. The firm employs 300 workers, and last year it established an office in Paris to promote its business in Europe.
 
SmartNews
Aggregate funds raised so far: $479 million
Series funding round: $69.3 million venture debt round completed on 1 February 2024

Such key investors include Atomico, Asian Capital Alliance, Development Bank of Japan, Globis Capital Partners, Japan Post Capital, JIC Venture Growth Investments, SMBC Venture Capital, Social Venture Partners, Princeville Capital, and Woodline Partners.

Founded in 2012, news aggregator SmartNews wanted to take a different approach as a provider of news: it partnered with publications to offer users a personalized and streamlined news feed. Launched in the U.S. in 2014, its fortunes burgeoned quickly. It became the first news startup to achieve a billion-dollar valuation since 2015, and then in 2021, its valuation shot up to $2 billion.

Despite the efforts of the social media platforms like X, Threads, Mastodon, and Bluesky to promote their services as sources of content in which people can find breaking news, the startup has failed to retain users. The company had 1.7 million users daily between Q1 2023 and Q3 2023, while this was almost a 30% drop from the prior year, SensorTower reported.

SmartHR
Total funding raised so far: $362 million
Last funding round: $140 million Series E in June 2024

Key investors: Beenext, Coral Capital, KKR, Light Street Capital, Sequoia Capital Global Equities, Teachers' Ventures Growth (arm of Ontario Teachers' Pension Plan), World Innovation Lab, and Whole Rock.

Founded by Kensuke Naito and Shoji Miyata in 2015, SmartHR has seen the demand for its SaaS platform that lets enterprises manage and streamline human resources and operations grow high in the last two years. Its ARR hit $100 million in February 2024, up from $80 million in FY 2023. SmartHR joins the unicorn club after raising about $115 million Series D at a valuation of $1.6 billion in May 2021.

Sakana AI
Raised so far: $344 mln

Last round: In September, raised Series A round for $214 mln

Lead investors in the round: Dai-ichi Life, Fujitsu, Global Brain, Itochu, JAFCO, Khosla Ventures, Lux Capital, Mizuho, Mitsubishi UFJ Financial Group (MUFG), New Enterprise Associates, Nomura, Nvidia, SBI, Sumitomo Mitsui Banking Corporation (SMBC), Sony, Translink Capital, and 500 Global.

Founded in 2023 by a former Google AI engineering staff, Sakana AI trains low-cost generative AI models on small datasets. Co-founder and CEO David Ha was previously head of research at Stability AI and a researcher at Google.
The startup is working in collaboration with Nvidia, the University of Oxford, and the University of British Columbia on research, data centers, and AI infrastructure. With 20 staff, Sakana has attracted good quantities of attention in Japan, which is hot to get ahead of the U.S. and U.K. in the race for AI-it even won processing time on one of Japan's supercomputers. The startup raked in an enormous Series A round-about $214 million-September at a valuation of $1.5 billion from major Japanese banks and tech companies.
 Preferred Networks
Total amount raised: $152.19 million

Last funding round: $8.1 million Series C 2018

Key investors: Chugai Pharma, FANUC, Hakuhodo DY, Hitachi, JXTG, Mitsui, Mizuho Bank, Tokyo Electron, Toyota.

Preferred Networks was launched in 2014. It designs semiconductors for AI use, develops software for them, and builds generative AI foundation models. The company possesses its deep learning as well as machine learning models for various applications including robotics, manufacturing systems, drug discovery, 3D scanning, autonomous driving, e-commerce, and food inspection.

The startup in September raised a crucial 69 billion yen (or around $463 million) investment from Japanese financial services firm SBI Holdings to produce semiconductors exclusively for AI use cases. And it has signed Samsung to manufacture 2-nanometer chips for AI.

OPN
Total funding raised so far: $222 million

Last funding round: $120 million Series C+ funding in May 2022

Key investors: JIC Venture Growth Investments, Mars Growth Capital, MUFG and Sumitomo Mitsui Banking Corp.

Originally called Synqa, OPN is a fintech company that started its operations in Bangkok, Thailand, back in 2014. OPN counts over 7,000 merchants on its books for mobile payments, online payments, and virtual card offerings. Its customers include Toyota and local Thai groups like King Power, the operator of duty-free shops; Telco firm True; and online insurance firm Roo Jai.

The company is currently operating in Japan, Singapore, Indonesia, Malaysia, the Philippines, and Vietnam. Last year, the company acquired U.S.-based MerchantE for approximately $400 million to establish a presence in the U.S. Most recently, the company said it has a strategic partnership with BigPay, a Malaysian e-wallet platform that was recently launched in Thailand.