Leading South Korean venture capital (VC) firms have identified Japan as their prime target for investment expansion. This shift comes as Japan, previously seen as lacking in startup activity, is swiftly enhancing its startup ecosystem, fueled by the demand for digital transformation and supportive government policies. Korean VCs are not only investing in Japanese venture funds but are also setting up their funds directly.
According to the VC industry, on Feb. 13, major Korean VC firms like Atinum Investment, IMM Investment, and Shinhan Venture Investment made strides in Japan by establishing their venture funds. This marks a departure from their traditional focus areas, such as the United States, China, India, and Southeast Asia, where Japan was once considered a secondary option.
Atinum Investment has chosen to enter Japan by backing a local venture fund. It has invested approximately $4.99 million (6.5 billion won) in a fund managed by DNX Ventures, a Japanese VC, and is looking to broaden its investments after establishing a stronger local network.
IMM Investment initiated a venture fund to invest in Japanese companies specializing in materials, parts, and equipment late last year. This was done with a parallel fund raised by its Japanese subsidiary, IMM Japan. Shinhan Venture Investment had already teamed up with a Japanese VC in October of the prior year to launch the first local venture fund in Japan.
Other firms, like LB Investment, Laguna Investment, and WE Ventures, actively seek entry into the Japanese market by partnering with local VCs. An industry insider mentioned, “Every major Korean VC has visited Japan recently, indicating a significant spike in interest.”
The surge in interest from Korean VCs in Japan is attributed to the perception that Japan’s startup ecosystem is in its early stages. The increasing support from the Japanese government, traditionally focused on enhancing the competitiveness of established industries, is now extending towards startup revitalization policies, raising the prospects for investment opportunities.
In 2022, the Japanese government unveiled plans to expand the number of startups to 100,000 and foster 100 unicorns, each valued at over $1 billion, within five years, committing 10 trillion yen (89.9 trillion won) to the sector. Moreover, deregulation efforts, such as easing disclosure rules for unlisted company trading, are underway. The push for digital transformation in Japan after COVID-19 also attracts Korean VCs familiar with digital trends and online platform growth.
The expectation is that more Korean VCs will venture into Japan, drawn by the country’s low-interest-rate environment, which could enhance startup valuations and the yen’s weakness, offering potential foreign exchange gains and investment returns upon exit.
Indeed, at the Global Brain Alliance Forum (GBAF), a networking event in Tokyo organized by Japan’s leading VC, Global Brain, late last year, more than ten Korean VCs were in attendance. One VC participant remarked, “Japan is increasingly seen as a land of opportunity for Korean VCs.”
