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Japan's Plan to Nurture Green Transformation Startups

Source: The Ministry of Economy, Trade and Industry (METI)

Toyko, Japan - The Japanese government unveiled new guidelines to promote the growth of green transformation (GX) startups as the country seeks to achieve carbon neutrality by 2050 while strengthening industrial competitiveness and economic development.

The Ministry of Economy, Trade and Industry (METI) outlined strategies to overcome the unique market risks faced by GX startups, such as using letters of intent (LOI) to demonstrate demand and diversifying startup funding based on expected returns.

According to the International Energy Agency, approximately 35% of the emissions reductions needed to achieve net zero by 2050 will come from technologies that still need to be commercially available. 

The guidelines emphasize the importance of nurturing GX startups to drive technological innovation and capture growth markets early.

GX startups often require significant funding for research and development before their technologies and businesses are established, resulting in longer timelines for commercialization than traditional startups. 

The guidelines identify the pre-series mid-stage as a significant hurdle, where startups struggle to secure funding without sales prospects.

To address this challenge, the guidelines recommend using demand letters such as LOIs and off-take agreements, as well as the use of debt financing. 

The document provides concrete benefits and practical tips based on case studies.

Japan's GX startups lag behind their international counterparts in number and size. 

However, the country has certain technological advantages in the GX field, indicating growth potential. 

The guidelines also emphasize diversifying financing methods and expanding the talent pool for startup formation.

METI held a public event to discuss the guidelines with panelists from successful GX startups, investors, and government officials.

The event aimed to share practical insights and best practices for managing and supporting GX startups.