After two years of decline, VC dealmaking in Japan is surging, with deal value for this year expected to surpass 2023’s total.
Here are six charts from PitchBook’s 2024 Japan Private Capital Breakdown, highlighting key data points on the country’s VC recovery.
Japan broke its record for total VC deal value in Q3 with $2.2 billion invested across 363 pacts. Deal count reached its highest quarterly figure in just over two years.
The increase in deal value was largely due to a handful of outsized rounds, including AI startup Sakana AI’s $200 million Series A and HR management specialist SmartHR’s $140 million Series E.
At the current funding pace, the country’s annual total is expected to stand at around $5.5 billion—a 7.8% increase from 2023. Deal count is projected to land just above last year’s figure, at 1,294.
As Japan’s VC ecosystem matures, the share of deals in the late-stage and venture growth categories has risen, with the former now accounting for the highest percentage of rounds.
From 2015 to the end of Q3, the number of late- and venture growth-stage deals has more than doubled as a proportion of all VC rounds. Combined, the two stages represent 41.3% of all rounds in the year’s first nine months.
With more mature startups raising capital, the size of VC rounds is swelling. Average VC deal value reached a record $6.6 million as of Q3, compared to $5.7 million in 2023.
As of the end of September, the year’s largest VC deal was translation startup PockeTalk’s $300 million investment from investors including Shochiku Ventures and Spiral Capital.
Foreign investors have helped Japan’s VC market flourish, with around half of the year’s deal value featuring non-domestic capital.
Rising tensions between the US and China have pushed more investors toward Japan as they seek greater exposure to Asian markets outside China.
For the year through Q3, 86 VC-backed exits have been completed, worth $2.7 billion combined. This puts Japan on track to surpass last year’s levels, but would remain well below 2021’s peak of 114 exits totaling $10.1 billion.
Acquisitions remain the most frequent exit route for VC-backed companies—accounting for 62.8% of the count. Buyouts have accounted for an increasing share of exit value. As of Q3, they represented 5.8% of overall exit count compared to just 2% last year.
Japan has seen a meaningful drop in VC fundraising this year, with just 40 vehicles closing on $2 billion combined. Capital raised is expected to fall to its lowest annual figure since 2017.
Only one fund worth over $250 million closed in the first nine months of the year: the $307.8 million Niterra Hydrogen Forest Fund, managed by Global Brain and NGK Spark Plugs.
Featured image by Marco Bottigelli/Getty Images
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