Venture Capital in Japan: A Guide to Startup Funding in 2026

Japan's startup scene has been quietly evolving over the past few years, and understanding how venture capital (VC) fits into this ecosystem can make all the difference for founders and investors.

Japan has been making serious strides in building a more robust funding environment for startups, and we’re here to tell you all about it. Let's break down everything you need to know about venture capital in Japan, from the basics to the latest trends shaping the market in 2025.

What is Venture Capital in Japanese?

In Japanese, venture capital is called "ベンチャーキャピタル" (benchakyapitaru), and it refers to a specific type of private equity financing.

Think of venture capital as money invested in young companies that have serious growth potential. Unlike traditional bank loans, where you have to pay back the money with interest, venture capitalists invest in exchange for equity, which is a piece of ownership in your company. 

The investors simply gamble on whether your company grows significantly, which will eventually lead to a big payday for them when the company either goes public through an IPO or gets acquired by a larger corporation.

VCs typically work with startups and early-stage companies that banks wouldn't touch with a ten-foot pole, because, let’s face it: These companies are high-risk. They might not have steady revenue yet, nor a finished product, but they have innovative ideas and the potential to disrupt entire industries. Venture capitalists are willing to take on this risk because when one of their investments hits it big, the returns can be massive.

That being said, venture capital isn't just about money. Good VCs bring expertise, mentorship, and valuable connections to the table as well. They often take board seats and play an active role in helping companies grow, introducing founders to potential customers, helping with hiring decisions, and providing strategic guidance based on years of experience building businesses.

Types of Venture Capital Companies in Japan

Not all venture capital is created equal. There are actually several different types of VC firms, and understanding these distinctions can help you figure out which ones might be the best fit for your company.

Independent VC Firms

These are standalone venture capital firms that aren't affiliated with any larger corporation or financial institution. 

Simply put, independent VC firms raise funds from limited partners, like wealthy individuals and institutional investors like pension funds and university endowments, and then invest that capital in promising startups. 

Independent VCs make investment decisions based purely on potential returns and strategic fit with their investment thesis. Examples in Japan include firms like Globis Capital Partners and Incubate Fund.

Corporate Venture Capital (CVC)

Corporate venture capital arms are investment vehicles created by large corporations to invest in startups. 

These firms have two motivations: Financial returns and strategic advantages. Essentially, they're looking for startups that might help their parent company innovate, enter new markets, or stay ahead of competitors. 

In Japan, CVCs have been growing rapidly. In 2024, the number and size of CVC funds actually increased even as overall fund formation slowed down. Companies like CyberAgent Ventures and SoftBank's Vision Fund fall into this category.

Bank-Affiliated VCs

These are venture capital firms that operate under major financial institutions. They leverage the bank's resources and relationships to support startups, though they typically focus on more mature companies with some established revenue. 

In Japan, major banks like Mizuho, SMBC, and MUFG all have venture capital divisions actively investing in startups.

Government-Backed VCs

Government venture capital firms are funded by public money and often have a mandate to support economic development and innovation.

In Japan, the Japan Investment Corporation (JIC) is a major player here, with funds specifically designed to help create more unicorn companies and support the government's ambitious Startup Development Five-Year Plan.

Regional, University, and Micro VCs

Some VC firms focus specifically on supporting startups in certain geographic areas or those that originate from university research. These tend to be smaller funds that play an important role in fostering local entrepreneurship ecosystems.

Lastly, there are also VCs that are called “Micro VCs.” These are smaller funds that focus specifically on very early-stage companies, often writing checks of a few hundred thousand to a few million dollars. They fill an important gap between angel investors and larger traditional VC firms.

Benefits of Receiving Investment from Venture Capital

So why would you want to take money from a VC instead of taking a bank loan? There are several compelling reasons for this.

First and foremost, you get access to capital without having to pay it back on a fixed schedule. Unlike a bank loan that requires monthly payments regardless of how your business is doing, equity financing doesn't put the same cash flow pressure on your company. If your startup fails, you don't owe the VC firm anything.

In addition to the money, you also gain access to expertise and networks that can accelerate your growth. Many VCs have operational experience building companies themselves, and they can help you avoid common pitfalls.

Getting funded by a well-known VC firm also adds credibility to your startup. It signals to potential customers, partners, and future investors that knowledgeable professionals have vetted your business and believe in its potential.

Disadvantages of Receiving Investment from Venture Capital

Of course, venture capital isn't all sunshine and roses. There are some real trade-offs to consider before you start seeking investors.

The most obvious one is that you're giving up ownership in your company. Each funding round means your stake becomes smaller and smaller, and if you're not careful, you might end up owning a minority share of the business you founded.

VCs also typically expect you to aim for a big exit, either via an IPO or acquisition. If your goal is to build a sustainable lifestyle business that generates steady income, venture capital probably isn't the answer for you. VCs need massive returns to justify the risk they're taking, so they'll push you to grow fast.

Taking VC money can also mean less control over major decisions. Investors often get board seats and voting rights on key issues like hiring executives, major strategic shifts, or when to raise more money. This loss of autonomy can be unsettling for some founders.

There's also the pressure to meet aggressive growth targets and hit specific milestones. If your company isn't performing, VCs might push for changes in strategy, management, or even replace you as the CEO. 

Recent Funding Numbers in Japan

Let's talk about what's actually happening in Japan's VC market right now. The numbers tell quite an interesting story.

In 2024, Japanese startups raised a total of ¥779.3 billion (roughly $5.2 billion USD), which shows a modest 3% increase from 2023. While this might not sound like explosive growth, it's actually quite stable compared to the wild swings seen in other markets. The number of startups receiving funding also remained steady at around 2,869 companies.

What's particularly interesting is the trend in deal sizes. The average value per deal jumped from ¥250 million to ¥310 million, suggesting that investors are writing bigger checks even if they're not doing more deals overall. This shift was especially significant in the second half of 2024, when we saw more rounds over ¥5 billion.

The biggest story of 2024 was Sakana AI, which became the fastest company ever to reach unicorn status in Japan, hitting a valuation of over ¥200 billion just one year after founding. Other notable raises included mobility company newmo with ¥18.7 billion and Gojo & Company with ¥17.5 billion.

In 2025, the first half saw startups raise ¥339.9 billion, which is a 4% increase compared to the same period in 2024. However, there's been a shift toward smaller funding rounds, with the median deal size dropping from ¥83.6 million to ¥67.9 million. This suggests that while early-stage activity remains strong, founders are being more cautious about valuations and dilution.

One major development is the growing presence of foreign VCs in Japan. Top-tier US firms like Khosla Ventures, New Enterprise Associates (NEA), and Bessemer Venture Partners have been actively investing in Japanese startups. This influx of international attention is a big switch-up for Japan’s startup ecosystem.

Is it Possible for Foreigners to Receive VC Funding Japan?

It absolutely is. Foreign entrepreneurs running businesses in Japan can and do receive venture capital investment. In fact, some of the most successful recent fundraises have involved foreign founders. 

Sakana AI, for instance, was co-founded by David Ha and Llion Jones, who are both renowned international AI researchers, alongside Japanese entrepreneur Ren Ito. The company had no problem attracting hundreds of billions of yen from both Japanese and international investors.

That said, navigating Japan's startup ecosystem as a foreigner does come with some challenges. Language barriers can be real, for instance, especially when dealing with more traditional Japanese VCs. Cultural differences in business practices, like the emphasis on relationships and consensus-building, can also catch foreign founders off guard.

The Japanese government has also been actively trying to attract more foreign talent and investment through initiatives like the Startup Development Five-Year Plan. Many Japanese VCs are specifically looking to back companies that have global ambitions, and having an international perspective can actually be an advantage, especially if you're targeting markets beyond Japan. 

If you’re interested in Japan's growing roster of successful companies, be sure to check out our post on unicorn startups in Japan.

Differences Between Japan and Other Markets: Venture Capital Investment in Japan

Japan's venture capital scene is quite different from other major markets, so, understanding these differences is crucial if you're trying to start a business here.

Japan vs. United States

Though Silicon Valley comes to mind as an obvious comparison, it’s important to remember that the US VC market is massive compared to Japan. 

In the first half of 2025 alone, American VCs deployed over $26 billion, which is significantly more than Japan's entire annual venture capital investment. The US has a much deeper pool of venture capital firms, more experienced investors, and a culture that's more comfortable with risk-taking and failure.

American VCs also tend to be more hands-on and aggressive about pushing for growth. They're comfortable with companies burning cash for years if it means capturing market share. The exit landscape is different, too. While Japan heavily favors IPOs, the US market sees far more acquisitions as exit strategies, with tech giants regularly acquiring promising startups.

Another key difference is in how VCs make money. In Japan, venture capital investment recoveries from 2019 to 2023 came from stock listings about 70% of the time. While in the US, M&A accounts for the majority of exits. This difference shapes everything from investment strategies to the pressures founders have to face.

Japan vs. China and Other Asian Markets

Compared to China, Japan's VC market is also considerably smaller, though the gap has been getting smaller. China has been producing unicorns at a rapid pace and has embraced a winner-take-all approach in many industries. However, China's market faces its own challenges, including recent regulatory crackdowns on tech companies and concerns about government intervention.

Within Asia, Tokyo stands out as a unique tech hub that balances innovation with stability. While Singapore has positioned itself as a regional hub with strong government support and English as a business language, Japan offers advantages like a massive domestic market, world-class engineering talent, and deep expertise in areas like robotics and manufacturing.

It's also worth noting that tech communities in cities like Osaka and Kyoto are growing stronger, creating vibrant ecosystems outside of Tokyo that foreign investors are beginning to take notice of.

Unique Aspects of Japanese VC Culture

Japanese VCs tend to be more conservative and risk-averse compared to their Western counterparts. They place heavy emphasis on relationships and trust, which means fundraising can take longer as investors get to know founders. Decision-making processes often involve more people and take more time here.

There's also a unique focus on "down-round" prevention. In Japan, raising money at a lower valuation than your previous round is seen as particularly shameful, and VCs will work hard to avoid forcing this situation. This can sometimes mean that companies struggle to raise the necessary capital because investors are reluctant to participate in a down round.

The pressure for early IPOs is another Japan-specific phenomenon. Many Japanese VC investment agreements require startups to make "maximum efforts" toward an IPO, and with typical fund lifespans around 10 years, VCs often push for listings even when companies might benefit from staying private longer. 

This has contributed to Japan's problem with "small-scale listings," where companies go public while still relatively small and struggle to grow afterwards.

However, Japan is starting to adopt some better practices from overseas markets. New rules for foreign funding are beginning to revise some of these problematic Japanese practices. M&A activity is on the rise as an alternative exit strategy, too, which should help create a healthier ecosystem overall.

Top Venture Capital Companies in Japan

If you're looking to raise capital in Japan, it helps to know who the major players are. Here are some resources to help you identify potential investors.

The Japan Venture Capital Association maintains a directory of member firms, which is a good starting point for understanding the landscape. For a more curated list with detailed information, Base Templates has compiled the top VC investors in Tokyo, including details about their investment focus and notable portfolio companies.

VCList.jp is another excellent resource that provides a comprehensive database of Japanese venture capital firms, searchable by industry focus, stage, and other criteria. If you're looking for a more global perspective with data on Japanese VCs, OpenVC offers profiles and portfolio information for venture capital firms investing in Japan.

Some of the major independent VCs in Japan include Globis Capital Partners, Incubate Fund, ANRI, and Coral Capital. Leading CVCs include SoftBank Vision Fund, CyberAgent Ventures, and various subsidiaries of major corporations like Mitsubishi, Toyota, and Itochu. The government-backed Japan Investment Corporation (JIC) and its various funds play a significant role in larger, later-stage rounds too.

Each of these firms has its own investment thesis, preferred stages, and areas of focus. Some specialize in deep tech, others in consumer applications, and others in enterprise software. So, do your research well to understand which firms are the best fit for your company's stage, industry, and goals.

Important Notes on Approaching VCs in Japan

If you're planning to approach Japanese VCs, there are some cultural and practical considerations to keep in mind. Japan's venture capital scene, while increasingly global, still operates somewhat differently from what you might expect in Silicon Valley.

First of all: Relationships matter enormously in Japan. Cold emails rarely work as well as warm introductions. Try to get connected to VCs through mutual contacts, like other founders they've invested in, angel investors, accelerator programs, or even university professors if your company has academic roots. That personal connection can make all the difference.

Second, be prepared for longer fundraising cycles. Japanese investors typically take more time to make decisions, often wanting multiple meetings and extensive due diligence before committing.

Communication style also matters. While you should definitely be passionate and ambitious about your company, overly aggressive or pushy sales tactics can backfire. Japanese business culture values humility and earned confidence over shameless self-promotion.

Language can be a barrier, especially with older, more traditional firms. While many younger VCs and those at internationally focused firms speak excellent English, having materials available in Japanese and ideally a team member who can communicate in Japanese will significantly expand your options.

For founders who want to understand more about navigating Japan's investment landscape, it's worth checking out our angel investor tax system in Japan article to understand all of the funding options available.

Final Word on VC in Japan

Japan's venture capital scene has come a long way. There's more money flowing into startups, foreign investors are paying attention, and the government is backing ambitious plans to grow the ecosystem. Companies like Sakana AI are proving that Japan can produce world-class startups that compete globally.

That said, Japan's VC world still has its quirks. The emphasis on relationships, longer fundraising cycles, and cultural differences around risk-taking mean you can't just copy-paste Silicon Valley strategies here. Still, if you're willing to adapt and understand how things work, the opportunities are very much real.

Whether you're a founder thinking about raising capital in Japan or an investor looking at the market, the key takeaway is simple: Japan's startup ecosystem is maturing, the doors are opening wider, and now's definitely an interesting time to get involved.