IMF Working Papers

Riding Unicorns: Startups and Venture Capital in Japan

By Salih Fendoglu, TengTeng Xu

December 6, 2024

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Format: Chicago

Salih Fendoglu, and TengTeng Xu. "Riding Unicorns: Startups and Venture Capital in Japan", IMF Working Papers 2024, 246 (2024), accessed January 11, 2025, https://doi.org/10.5089/9798400294518.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The startup ecosystem in Japan has seen gradual growth, supported by the government’s recent "Startup Development Five-Year Plan" and a significant interest from overseas venture capital. This paper lays out the startup financing ecosystem in Japan, with comparison to international peers, and studies potential drivers of startup financing and their relevance for startups’ performance. The results, based on country-level aggregate analysis, underscore the critical role of firm dynamism and entrepreneurship in supporting capital investment and firm valuations. Further analyses at the firm level suggest that equity funding helps startups innovate, grow, and successfully exit. Moreover, the impact of funding on the likelihood of a successful exit appears to be higher in cultures that seem to reward risk taking.

Subject: Development, Development strategy, Financial markets, Initial public offering, Labor, Self-employment

Keywords: Development strategy, Firm dynamics, Funding affect startup performance, Global, Helps startup, Initial public offering, Japan, Self-employment, Startup ecosystem, Startup financing, Startups, TengTeng xu, Venture capital

Publication Details

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