Link: Japan has too many startups that IPO too early amid a lack of late-stage funding, hurting unicorn ambitions; data: funding is set to fall ~33% from 2022 to 2024 (Leo Lewis/Financial Times)

When EcoNaviSta listed on Tokyo’s Growth Market, its shares initially soared, signalling a promising start for this AI-driven sleep analysis startup. However, the company soon faced a declining trajectory, shedding 60% of its market value and joining a group of underachieving start-ups known as "punycorns."

The prevalence of punycorns reveals much about Japan's cautious approach to innovation and risk since its economic peak 35 years ago. This conservative stance is becoming increasingly problematic as Japan's need for growth intensifies.

Japan aims to foster genuine unicorns—start-ups valued over $1 billion—but struggles to create the necessary ecosystem for such high-value companies. Unicorns thrive on bold VC investment and a culture that embraces disruption and high aspirations.

The goal set by Japan's Keidanren business lobby to cultivate 100 unicorns by 2027 appears out of reach, with start-up funding declining yearly. Japan's venture capital scene is too immature to support the later-stage funding essential for achieving unicorn status.

Early IPOs often stunt Japanese start-ups, with many becoming punycorns whose market values never surpass a few hundred million dollars. Only about a third of shares in the TSE Growth Market 250 Index have gained in 2024, with the index overall down by 14.5%.

While Japanese start-ups exploit inefficiencies and replicate successful business models, they rarely achieve the global ambition needed for significant innovation. This domestic focus results in a landscape where minimal improvements appear innovative, but may not sustain as economic and demographic challenges loom. #

--

Yoooo, this is a quick note on a link that made me go, WTF? Find all past links here.