Japan's Startup Moment Has Arrived
For many decades, the world has known Japan for quality. Sony, Toyota, and many other Japanese companies built the idea of “Japan Quality.” Our highest level of precision and craft was our source of competitiveness and our point of differentiation. That reputation is still strong today.
But Japan has not been as strong in startups, and I want to be honest about why. Then I want to explain what is changing, and why my partners and I at Vertex Ventures Japan believe 2026 is the right moment to put serious capital behind Japanese founders.
What Has Held Japan Back
I see three reasons.
First, our corporate culture has been risk-averse. Japanese companies prefer to protect what they have. They do not change easily, and they have been reluctant to challenge new and innovative ideas. For a manufacturer, this is a strength. For a startup ecosystem, it is a weakness.
Second, talent mobility in Japan has been low. We have a strong culture of long-term, lifetime employment. This gave us stability, but it also kept the best engineers and managers inside large corporates. When a startup needed talent for new ideas or new technology, it was very difficult to find them.
Third, investment in long-term research and development has been low. Japanese companies focused too much on short-term profits, and our universities did not have a clear path to commercialize their research. The science was there, but the connection between the science and the market was missing.
“For a manufacturer, risk aversion is a strength. For a startup ecosystem, it is a weakness.”
These three problems are real. But they are now changing.
Three Forces Revitalizing Japan
I believe there are three main forces that are bringing Japan’s startup ecosystem back to life.
The first is government support. In 2022, the Kishida administration announced the Startup Development Five-Year Plan. The goal is to create 100,000 startups by 2027, and 100 unicorns from inside that group, supported by around ¥10 trillion of public investment.
This is the largest startup push in our history. The unicorn target is still far away. Japan today has 10 unicorns, with Sakana AI becoming a unicorn in just 13 months, the fastest in Japanese history. But the policy direction is now clear, and it is supported across parties. METI’s J-Startup program, NEDO’s ¥30 billion deep tech budget, and the 25% Open Innovation tax credit for corporates investing in startups are no longer experiments. They are infrastructure.
The second force is collaboration between universities and industry. In Silicon Valley, and in Singapore, this connection is one of the most important conditions for innovation. In Japan it has been weak for a long time. Now it is finally being built.
The University of Tokyo’s IPC manages over $400 million. Kyoto University’s iCAP is raising a third fund of around $140 million in early 2026. About 85% of Japan’s top universities now have venture funds, compared to fewer than half a decade ago. University-affiliated startups raised ¥197.8 billion in 2025 alone. This is the pipeline we have always needed.
The third force is the arrival of foreign venture capital. Japanese capital has always been large, but foreign capital brings something different. It brings access to overseas markets, foreign talent, know-how, and connections to global enterprises.
“Government policy, university science, foreign capital, and founder ambition are all moving in the same direction.”
Andreessen Horowitz opened its first Asia office in Tokyo in 2024. HongShan, the firm formerly known as Sequoia China, opened a Tokyo office in February 2025. Eurazeo, Pangaea Ventures, and OpenAI have also established Japanese bases. When global investors decide to come to Japan, it is also a vote of confidence in our founders.
Three Investment Areas We Focus On
At Vertex Ventures Japan, we focus on three investment areas where we believe Japan can win.
- Digital Transformation (DX)
Japan still has significant upside in DX, especially in real estate, finance, hospitals, logistics, and human resources.
About 60% of Japanese enterprise IT systems are more than 20 years old. METI has warned that the “2025 Digital Cliff” could cost our economy up to ¥12 trillion every year if companies do not modernize. The Japanese DX market was around $77 billion in 2025, and it is forecast to reach $236 billion by 2030, growing at about 25% per year.
Startups will lead this transition, and we want to back them.
- Deep Tech and AI
The second is deep tech, especially AI. The Japan AI market was about $19.8 billion in 2025 and is forecast to grow to almost $195 billion by 2033.
IDC expects Japan’s AI infrastructure spend alone to pass $5.5 billion in 2026, seven times the level of just a few years ago. The best-known example today is Sakana AI, which raised $135 million in November 2025 at a $2.65 billion valuation.
Preferred Networks, valued above ¥300 billion, continues to ship frontier work in materials and mobility. But what excites us most is the layer below: the university spinouts in robotics, materials, quantum, and life sciences.
“The science was always there. What was missing was the bridge between research and the market.”
These are the kind of deep tech companies the world is now asking Japan to build. We want to support them in deep partnership with the universities.
- Creator Economy
The third is the creator economy. Japan has a competitive advantage here that very few countries have. Our IP, including anime and manga, is loved everywhere in the world.
In 2024, the Japanese anime market reached ¥3.84 trillion, up 15% from the year before. Japan’s total content exports reached ¥5.8 trillion in 2023, which is actually larger than our semiconductor exports.
Under the New Cool Japan strategy announced in October 2025, the government has set a target of ¥20 trillion in overseas content sales by 2033.
This is one of Japan’s most valuable assets, and we believe several globally important companies are still to be built on top of it.
Why Vertex
The reason Japanese founders should choose Vertex is our network.
Vertex Holdings has global innovation hubs in Southeast Asia, Singapore, India, China, Israel, and the United States. We have more than 300 active portfolio companies, and strong relationships with major global enterprises across these markets.
Vertex Ventures Japan wants to become the platform for Japanese startups going overseas. We launched our first fund of ¥10 billion in 2024, anchored by Vertex Holdings, and we completed our first close in March 2025.
By joining the Vertex ecosystem, Japanese founders can use our global network to enter overseas markets and raise their presence outside Japan. We believe this is the missing piece for many Japanese startups, and it is what we are here to provide.
Why 2026
For a long time, Japan had the science, the engineering, and the talent, but not the right conditions for startups.
Now the conditions are changing all at the same time. Government policy, university science, foreign capital, and founder ambition are all moving in the same direction. This kind of alignment is rare.
In my view, it is the right moment to bet on Japan.
“The Japan that Sony and Toyota built was known for quality. The next Japan will be known for global startup ambition.”
The Japan that Sony and Toyota built was known for quality. The next Japan will be known for something more: the willingness to build new companies, with global ambition, from day one.
That is the Japan we believe in at Vertex Ventures Japan, and that is the Japan we are putting our capital behind in 2026.
Takashi Tomita is Managing Partner of Vertex Ventures Japan, a network fund that is part of the Vertex platform.