Japan’s startup sector, despite being one of the biggest in the world, has lagged behind other regions like the U.S., China, and the U.K., in terms of the number of unicorns and the scale of venture capital investment. For years, an aging population, overall economic deflation, and salarymen’s inclination to work at traditional, big corporations meant the startup life wasn’t an attractive one for many.

For context: Per a recent IMF report that cites CB Insights data, as of October 2023, the U.S. had about 661 unicorns, China counted 172, and the U.K. had 52. Japan had a mere seven unicorns. (PitchBook pegs the number of Japanese startups at nine, so it’s possible we have more unicorns in the market than these datasets suggest.)

But things are looking up — somewhat. Young graduates are increasingly breaking from the mold, opting to strike out on their own instead of working within existing corporate systems. And the Japanese government is trying to attract interest in the country’s startups once again.

The government’s “Startup Development Five-Year Plan,” for one, was launched in 2022 and aims to help create 100,000 startups and foster 100 unicorns by 2027 by promoting incubators, strengthening funding with a venture fund, diversifying exit avenues, and more. The Tokyo Metropolitan Government earlier this year launched Tokyo Innovation Base, a startup hub that organizes networking events and pitch competitions and offers workspaces for founders. There’s also a Startup Visa that makes it easier for venture capital firms, startups, and accelerators to set up in Japan, and there’s a special tax system for angel investors. It helps that the country is home to about 130 accelerators, which isn’t too bad given the size of the market.

Despite these advantages, most of the venture capital invested in Japan comes from outside it. The IMF report mentioned found that between 2010 and 2023, investors from the U.S. accounted for 50% of investment in Japanese startups, investors from the U.K. made up about 10%, and Japanese investors lagged at only 5%.

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 startups usually decide to go public sooner in their development than startups in other countries. For example, they may go public after just a couple of funding rounds, thanks to the Tokyo Stock Exchange’s lenient IPO rules. So it’s likely we might see the unicorns listed below doing an IPO sooner than later.

Here are a few unicorns from Japan that are worth keeping an eye on.

Spiber

Total funding raised: $653 million

Last funding round: $65 million (10 billion JPY) in April 2024

Key investors: Baillie Gifford, Fidelity Investments, Goldwin, Kansai Paint, Iowa Economic Development Authority, Shinsei Bank, and the Carlyle Group.

Spiber grabbed investor, and customers’, attention quite quickly with its environment-friendly biomaterials that have a huge array of applications. Companies across the fashion, cosmetics, and automotive industries use Spiber’s materials instead of animal, plant, or synthetic materials, and its customers include Pangaia, the North Face, Goldwin, Woolrich, Shiseido Japan, and Toyota.

In April this year, it raised about $65 million (10 billion JPY) to scale up production of its “Brewed Protein” materials, which have applications in textile production. It has 300 employees, and the company last year set up an office in Paris to promote its business in Europe.

SmartNews

Total funding raised: $479 million

Last funding round: $69.3 million venture debt round in January 2024

Key investors: 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 sought to take a new approach as a news provider: It partnered with publications to offer a personalized and streamlined news feed to users. It launched in the U.S. in 2014 and quickly saw its fortunes burgeon. 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.

The startup, however, has found it difficult to retain users as social media platforms like X, Threads, Mastodon, and Bluesky try to position themselves as places to read breaking news. The startup counted 1.7 million daily active users between Q1 2023 and Q3 2023, down nearly 30% from a year earlier, according to SensorTower.

SmartHR

Total funding raised: $362 million

Last funding round: $140 million Series E in June 2024