Gocho & Co. (Shibuya, Tokyo), which provides micro-loans to emerging economies, has raised a total of 12.5 billion yen from three major domestic investment firms, attributing the startup promotion measures implemented under the Kishida administration. In Japan, the lack of investors to support growing companies that are close to making an IPO has long been an issue, but the number of sources of funding is gradually increasing due to deregulation and a host of other factors. Kohei Katada, CFO of Gocho, said, “it was great to be able to get institutional investors before we went public, allowing us to make our debut on the capital markets.”

Crossover investment, which involves investing across the boundaries between unlisted and listed companies, has been common in Europe and the US for around 10 years, and the trend is accelerating in Japan too.

The ‘Five-Year Plan for Startup Development’ launched in 2022 acted as a catalyst in developing an environment for investing in unlisted shares. One example of this is the inclusion of unlisted shares in publicly offered investment trusts. In response to the Financial Services Agency's policy, the Investment Trusts Association revised its voluntary rules in February 2024, leading Gocho to be able to raise funds.

However, there are still issues to be addressed, such as the expansion of angel investment by individual investors and the attraction of funds from overseas VCs. Although preferential measures for angel investment have been introduced, they are not being used to their full potential due to the strict conditions for use. Overseas VC interest in the Japanese market is increasing, but this has not yet led to a full-scale inflow of funds.

It is necessary for the public and private sectors to work together to address the remaining issues and create an environment in which Japanese startups can compete on equal terms with overseas competitors.

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