At the recent Takeoff Tokyo event, Takeru Kawashima, Executive Director of 01Booster, provided valuable insights into Japan’s evolving startup ecosystem, particularly highlighting international startups’ opportunities, trends in corporate innovation, and shifts in venture capital strategies.
01Booster invests globally without strict requirements for startups to operate within Japan immediately. According to Kawashima, while there’s no mandatory condition for international startups to have a Japanese presence initially, establishing operations locally is strongly recommended due to Japan’s robust enterprise market. Kawashima noted, “Japan remains a strong market in enterprise software and government spending, providing considerable opportunities compared to other Asian regions.”
Navigating the investment process
Investing in international startups poses unique challenges, mainly due to limited knowledge of foreign markets. Kawashima explained that while the fundamental investment process mirrors domestic practices, understanding overseas markets is difficult. Consequently, despite numerous opportunities, many investments are skipped due to insufficient market insights. “We often partner with European venture capital funds to bridge this gap,” he explained, underscoring the importance of local expertise in their decision-making.
Unique characteristics of Japan’s accelerator market
01Booster runs around 80 to 90 accelerator programs, selecting roughly 900 startups so far. Interestingly, less than 10% receive investment post-acceleration. Kawashima highlighted this as unique in Japan, contrasting with countries like Korea or Singapore, where accelerators typically include equity investment.
Post-Covid corporate innovation trends
Japan’s corporate innovation landscape experienced significant shifts following the pandemic. Pre-2020, open innovation through accelerators was prevalent. Post-COVID, a surge in Corporate Venture Capitals (CVCs) reshaped the ecosystem. Kawashima emphasized, “CVCs continue to grow, with new ones emerging every few months. Yet, corporates increasingly partner with venture capitalists rather than manage investments independently.”
Challenges and opportunities in Japan’s startup ecosystem
Japan’s venture capital environment faces specific challenges, especially regarding liquidity and exit strategies. Kawashima revealed that IPOs historically dominate exits but acknowledged the shrinking IPO valuations post-pandemic. This change necessitates a shift toward mergers and acquisitions (M&A), which remain unfamiliar to many Japanese enterprises. He described this as “a maturity issue,” highlighting the need for greater adaptation to alternative exits.
Emerging trends and diverse portfolios
When discussing investment trends, Kawashima noted the cautious but growing interest in generative AI. Unlike the U.S. or Korea, where significant capital flows into GenAI, Japan remains exploratory, with investments comprising about 20% of the total venture capital market. “Japanese investors are still identifying winning strategies in GenAI,” Kawashima explained.
01Booster is diversifying its investments beyond traditional sectors, actively exploring opportunities in construction technology, deep tech, pharmaceuticals, and content IP related to animation—capitalizing on Japan’s unique strengths.
Kawashima previewed upcoming accelerator programs, mentioning initiatives focusing on energy innovation, B2B acceleration, and government-backed programs to attract international startups. These programs promise comprehensive support, including funding and operational assistance for market entry.
Kawashima concluded by expressing enthusiasm for future collaboration, reinforcing 01Booster’s role in connecting international innovation with the robust potential of the Japanese market.
