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Japan's Startup Ecosystem: Growth Trends and Geographic Distribution of Emerging Businesses

Photo by Louie Martinez / Unsplash

The Japanese government declared 2022 the “First Year of Startup Creation,” unveiled plans to boost startup investment, and announced the “Five-Year Plan for Startup Development.”

As a result, startups are expected to play a crucial role in revitalizing the Japanese economy.

A breakdown of Tokyo’s 2,549 startups shows that Minato City has the highest concentration (22.6%), followed by Shibuya City (22.1%), Chiyoda City (14.8%), and Chuo City (11.2%). Each area has a different industry focus, including e-commerce, entertainment, fashion, technology, and healthcare.

The data shows that the eighth year of a startup’s life marks a turning point in its growth, with companies founded in 2013 having the highest average capitalization of around ¥305.5 million.

Conversely, companies founded in 2015 have an average capitalization of about ¥143.3 million.

Indirect financing becomes more common in the second year of operation as financial institutions and other lenders become more accessible.

The average age of startup founders is shifting, with support for older entrepreneurs resulting in an average age of 40.0 for second-year startups.

However, university-led entrepreneurship support reverses this trend, potentially leading to younger founders in the future.

Although 59.8% of startups reported revenue growth in their most recent fiscal year, 64.3% remained red.

Many startups prioritize initial investments to prepare for rapid growth rather than focusing on immediate profits.

Tech-related fields such as “DX” and “Biotech/Healthcare” are popular among startups, with 12.2% and 8.2% of companies focusing on these sectors, respectively.

The emphasis on innovative and unique business models driven by new technologies is expected to drive growth in the Japanese startup ecosystem.

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