TOKYO - Japan counts only eight unicorns -- unlisted startups valued at over 150 billion yen -- compared with 690 in the United States, and has yet to produce a single 'hectocorn,' the term for companies worth more than 100 billion dollars such as ByteDance’s TikTok, OpenAI, or SpaceX.
The Ministry of Economy, Trade and Industry will revise its investment contract guidelines by the end of September to allow mergers and acquisitions (M&A) as an explicit exit option alongside initial public offerings (IPOs). Traditionally, Japanese venture capital firms have required startups to pursue IPOs as their primary path, which has shaped the country’s startup ecosystem. Akiyo Iriyama, a professor at Waseda University specializing in corporate strategy, explained that while startups worldwide generally exit through either IPOs or M&A, Japan has long relied almost exclusively on IPOs. In contrast, more than 90 percent of US startups are acquired through M&A, with IPOs accounting for less than 10 percent.
The result, Iriyama noted, is that Japanese startups often go public at much smaller valuations—sometimes as low as a few billion yen in market capitalization—long before reaching unicorn scale. This explains in part why Japan has so few unicorns compared with the US, where startups often raise multiple funding rounds and delay IPOs until valuations reach 1 trillion yen or more.
One structural reason is the ease of listing in Japan. The Tokyo Stock Exchange has historically maintained lenient conditions, enabling relatively young startups with modest valuations to go public. While this system has provided early returns to founders and investors, it has also led to the phenomenon known as “IPO goal”—startups going public early and then stalling in growth. Many founders, after securing wealth through IPOs, lose incentive to aggressively scale their companies.
The upcoming guideline revision is designed to shift this dynamic by encouraging M&A as a viable alternative. Iriyama stressed that while IPOs are not inherently negative—having produced visible role models for aspiring entrepreneurs—Japan needs more pathways to sustain growth beyond early listing. “If listing requirements remain too easy, startups stop growing at an early stage,” he said, arguing for stricter standards and more diversified exit strategies.
Another factor is funding scale. Japanese venture capital tends to offer smaller amounts with shorter investment horizons, often pushing startups to list quickly. By contrast, in the US startups may raise round after round, sometimes even through Series H, without listing. To compete globally, Japanese startups require not only longer-term domestic capital but also greater inflows of overseas investment. Iriyama expressed cautious optimism, noting that foreign venture capital funds have previously invested in Japan at a much larger scale, often with “one extra zero” compared with domestic firms. Such capital could enable the growth of deep-tech companies requiring years of development.
However, he also warned that overseas funds can be quick to pull back when markets turn. “Foreign investors can bring in large amounts of capital, but their exit can be just as fast,” he said, recalling a period when international funds rapidly withdrew from Japan.
As the government pushes reforms and venture capital practices evolve, the central question remains whether Japan can foster startups that not only go public but also scale into the kind of global giants increasingly defining the modern economy.
Source: テレ東BIZ
