Introduction to the startup market in Japan
Are you someone who’s interested in joining a hot startup in Japan? Or are you a venture capitalist who finds a good startup to invest in? Maybe you are a journalist for a tech magazine that’s interested in Japanese startups for some reason. If you fall into any of these cases, you have come to the right place!
We have previously gone deep into describing the tech industry in Japan, in the article, 8 things you should know before getting a job in Tech & IT in Japan. In the article, we have explained the current situation and how the tech industry in Japan is planning on going forward. However, in this article, we would like to focus on the startup market and specifically 3 startup companies that are gaining a lot of attention in Japan.
What is the current situation of startups in Japan?
In Japan, it is considered that the startup market is not as active as the United States, Europe, or China. However, recently that trend is starting to change. According to the research made by Kearny, it is said the amount of money raised by startups has been growing rapidly, and they are increasingly raising billions of yen in a single round of funding.
Here are some other factors of startup market heating up in Japan:
– Technology/ideas: SaaS-based business using the latest digital technology
– Funding: An increase in the absolute amount of money due to monetary easing and qualitative changes due to diversification of sources such as direct investment by CVCs and operating companies.
– Human resources: Influx of human resources with business expertise, including people with entrepreneurial experience, people from large companies and consulting firms
– Customers and support institutions: Active global accelerators; entrepreneurs with EXIT experience are supporting young companies as angel investors
Other: An important pillar of growth strategy
– Others: Strengthening of government support as an important pillar of growth strategy
*source: Kearny
It is eye-opening to see that there is this much heat in the startup world in Japan, but this is not a surprise for anyone who has been following the market for a while. Below is a graph from a report, “Japan Startup Finance 2020” made by INITIAL. If you look at the graph, you can tell that there has been a steady rise in the tall amount of funding for startups in Japan since the year 2011.
In 2011, there has been a total of 82.2 billion yen worth of funding towards 1,067 startup companies. Compare that to the year 2019, there has been a total of 525.4 billion yen worth of funding towards 2084 startup companies. From here, you can see that the total funding valuation has grown 6 times, and the number of companies has almost doubled.
Now that we’ve looked into the current situation of the startup market, let’s move on to the 3 major startup companies that are gaining a lot of attention in Japan.
Why you should keep an eye on these startup companies in Japan
In Japan, there are a lot of startups that should get more attention. There is a lot of potential in a lot of different industries, to be transformed, especially digitally. A lot of entrepreneurs and their talented teams are trying to reshape the old business market of Japan, and ultimately trying to expand overseas.
With that being said, we have selected 3 major startups that are really changing the game. Here are the 3 companies that we have selected.
1.Preferred Networks
2.SmartNews
3.SmartHR
Now, let’s get right into it.
Preferred Networks
Website: https://www.preferred.jp/en/
Preferred Networks is a company that has an estimated valuation of, 356 billion yen, as of August 2021. This company is called the “Google of Japan”, and is considered the top tier startup which has the highest level of engineering talent in Japan. Preferred Networks has a portfolio of AI services, and we will briefly explain the 7 services they are focusing on right now.
The 7 services are,
-Develop technologies related to autonomous driving and connected cars.
-Development of robots that work in human living spaces.
-Deep learning for omic analysis, medical image analysis, and compound analysis.
-The application of deep learning in illustrations, comics, and animation.
-Deep learning framework “Chainer” and extensions.
-MN-Core, a dedicated processor for deep learning
-Deep reinforcement learning library “PFRL” for PyTorch users.
SmartNews
Website: https://www.smartnews.com/en/
SmartNews is a company that has an estimated valuation of, 191.6 billion yen, as of August 2021. SmartNews is essentially a news application. SmartNews has more than 50 million monthly active users in Japan and the U.S. combined. Social networks often use algorithms to determine the news to be published based on the interests of users, but SmartNews in the United States adopts a completely opposite idea and introduces an algorithm called the “political balance algorithm” to increase the number of users. This algorithm distributes politically balanced news in order to avoid a filter bubble.
SmartHR
Website: https://smarthr.jp/
SmartHR is a company that has an estimated valuation of, 173.1 billion yen, as of August 2021. The company provides cloud-based HR software. Through SaaS, SmartHR is trying to solve the analog and cumbersome processes that a companies’ labor management and human resource departments face, such as entry procedures, social insurance document preparation, and application, which require paper, stamp, and government office procedures. According to, “HRTech Cloud Market Status and Outlook FY2020”, SmartHR has the largest share of the domestic labor-management cloud service market, with more than 30,000 registered companies.
From Japan to the world
The unique characteristic of these 3 companies is that they are all ranked on the top of the estimated valuation ranking for a startup company in Japan. The table below shows the Startup Valuation Ranking in Japan, and as of August 4th, 2021, these 3 companies rank in the top 3. These companies not only have the ability to maintain top shares in their respective fields but also have the possibility of expanding globally.
SmartNews is mainly a B to C company and already has a large number of users overseas. On the other hand, Preferred Networks and SmartNews are both B to B companies. There has not been a lot of B to B companies that have gone global out of Japan, but presumably, these companies may be one of the few startups that can take a large share in the global market.
