Riding Unicorns: Startups and Venture Capital in Japan

Salih Fendoglu and TengTeng Xu

No 2024/246, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Startups; venture capital; Japan; firm dynamics; funding affect startup performance; startup ecosystem; helps startup; startup financing; TengTeng xu; Self-employment; Initial public offering; Development strategy; Global (search for similar items in EconPapers)
Pages: 20
Date: 2024-12-06
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-sbm
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