Building a Startup Ecosystem for Japan – Going Global with the Japan Bank for International Cooperation (JBIC)

In October 2024, Japan Bank for International Cooperation (JBIC) newly established its Startup Investment Committee to support Japanese startups that aim to expand globally. IGPI Group’s Makoto Shiono, who is a member of the Startup Investment Committee and also works with JBIC in global startup investments, speaks with JBIC’s Makoto Uchida on the objectives of their support and the challenges Japanese startups face.

Utilizing the Knowledge from Global VC Business to Startup Investments in Japan

Makoto Shiono　How did JBIC decide to begin investing in Japanese startups?

Makoto Uchida　Support for startups is one of the important pillars of Japan’s economic growth policies. The Startup Development Five-year Plan was announced during the Kishida administration, and as part of the measures, the JBIC Law was amended in 2023 to enable JBIC to invest in Japanese startups.

Makoto Shiono　It’s impressive to see how JBIC wished to support startups even by revising the law. What was the desire behind this?

Makoto Uchida　JBIC had been investing in global startups through funds. For example, at JBIC IG Partners, which we established together with IGPI in 2017, we jointly launched the “NordicNinja” fund and supported startups in the Nordic and Baltic region. However, since JBIC is a public financial institution, we wished to not only contribute to open innovation through global startup investments, but we had always wanted to support the global expansion of Japanese startups. This strong desire was part of what drove the legal revision.

Makoto Shiono　JBIC has been known for its overseas loans. Why did JBIC expand its services to the field of innovation through equity investments like NordicNinja, and managing a venture capital firm?

Makoto Uchida　One of the roles JBIC is expected to play is “risk-sharing”. There is a limit to how much risk we could share with just loans, so we wanted to fortify our risk-sharing through the product of equity. While there are various restrictions, we established JBIC IG Partners to enable investment activities through fund management, and by actually investing in other regions such as India through funds, we have been able to accumulate experiences that we could not have gained simply from books. Currently, we are thinking of what we could do for Japan based on these experiences.

Makoto Shiono　In Japan, few institutional investors invest in venture capital firms as an asset class, and since the funds here are comparably smaller than VCs in the U.S. and Europe, there are not many Japanese VCs that operate abroad. There are very few people who could conduct investments in English as well. Despite it being the first time to launch a VC, why do you think JBIC was able to exert a strong presence?

Makoto Uchida　What I find interesting about the startup ecosystem in Europe is that, since there are many small countries, startups are looking to the global market from Day 1. I once had an opportunity to speak with Ilkka Paananen, CEO of the Finnish unicorn startup and game development company Supercell, who mentioned the same. JBIC is a bank that mainly provides loans, but the work we do is all overseas projects. I believe it was significant that we, JBIC as a whole, were not surprised at “Global from Day 1”, and thus naturally able to take on it.

However, JBIC’s traditional overseas projects tend to be sizable, such as large copper mines, natural gas development, and power generation businesses, and often focus on the relationship with the host country. It’s impossible to think outside the box with just our existing knowledge and experience, which are very different from the SaaS (Software as a Service) type of businesses that are often looked to by startups. Luckily, we were able to partner with IGPI, which helped us view companies and industries from a different angle than JBIC’s. I believe this synergy is one of the factors that contributed to our presence.

Makoto Shiono　JBIC has confronted large government agencies without hesitation and expanded its business overseas. There are not many players like that in Japan, so it is valuable for JBIC to be able to provide support in that respect. I believe the two organizations complemented each other very well, between JBIC’s macro perspective and IGPI’s micro perspective from the hands-on experience of transforming business management from the field, as well as in terms of being global and domestic.

I also believe that the phrase you mentioned, “Global from Day 1” is very important. In general, Japanese startups first focus on the domestic market, and after some time of achieving success there, they start to consider expanding abroad. However, the product and service development would differ greatly if they were to target the Japanese population of 130 million as opposed to a target selected from the global 6 billion. I assume Japanese startups hadn’t looked abroad because the domestic market was historically somewhat large enough, and they could generate sufficient revenue thanks to the fairly homogenous market. However, the reality holds that the players who have gone global from Day 1 are seeing large growth. It’s important to consider what would fit the global market from the beginning.

Global Network – The Investment Strategy that Optimizes JBIC’s Strengths

Makoto Shiono　It has long been said that despite its immense population and industry, Japan has not seen the emergence of large startups such as those represented by the big tech companies of Silicon Valley. What are some challenges you see in the Japanese startup environment?

Makoto Uchida　Supercell’s CEO spoke about his wish to be on a par with the Japanese game company giant, Nintendo. Japan has a track record of producing globally competitive companies since the post-war rapid economic growth. There is some excellent research in the area of deep tech, a focus area in recent years. This shows that Japan does not need to do anything special; it already has potential for companies to expand globally.

On the other hand, the Japanese society values order and discipline. We do not want to bring disorder; it is vital to build mechanisms and environments that can nurture new ideas. Especially, the key to creating unicorns would be to establish an environment that finds and nurtures innovative talent from the younger generation.

Makoto Shiono　What can startups expect from having JBIC, a public financial institution, as their stakeholder?

Makoto Uchida　JBIC’s value lies in our global network, which we have utilized throughout history to support Japanese companies operating abroad. It’s important to provide added value for Japanese startups to expand overseas, and we believe that is what is expected of us.

Makoto Shiono　Many of the startups aiming to expand abroad have already received funding from Japanese VCs. For other VCs that co-invest with JBIC in a deal, what kind of presence will JBIC show to them?

Makoto Uchida　As often said, one of the challenges of the Japanese startup ecosystem is that global VCs are not investing in Japanese startups. To break the wall of such a closed environment, we would like to build synergies with other VCs and establish a global startup ecosystem together.

Makoto Shiono　I heard that this time, JBIC expanded its investment area to Singaporean startups as well, keeping ASEAN in mind. Please share the story behind this.

Makoto Uchida　Japan has a history of valuing ASEAN, and has executed various overseas policies with ASEAN at the core. For example, we have been conducting a survey on overseas investment trends for Japanese manufacturing companies for over three decades, and among the ten ASEAN countries, the following five are considered promising mid- to long-term investment targets: Indonesia, the Philippines, Malaysia, Thailand, and Vietnam. There are many Japanese companies that have expanded to these regions. However, when we look at the number of unicorns, Japan’s total is in the single digits, while that number triples or quadruples in ASEAN. If we are to provide added value, we thought it necessary to connect Japanese startups, with the global startup ecosystem from Day 1, on top of making investments in them. We believe it would have a positive effect on Japan’s ecosystem as a whole. This led to the idea of expanding the investment policy to foreign startups at the same time.

Creating Success Stories that could Change the Japanese Startup Market

Makoto Shiono　I believe startup founders would love to know when they could receive investment from JBIC. Please tell us your investment criteria.

Makoto Uchida　Currently, later stage investments only consist of less than 10% of all startup investments, so we would like to focus on that stage. Our two main focus areas are industrial transformation and sustainability transformation, considering the knowledge and expertise we have accumulated in the energy and natural resources, environment, and manufacturing, as well as maintaining consistency with our legally mandated missions.

Makoto Shiono　How large are the investments?

Makoto Uchida　We plan to deploy 20 billion Japanese yen in the next three years. Each ticket size will be around 1 billion yen, and we plan to invest in at least 10 companies.

Makoto Shiono　In Japan, there are very few VCs that can deploy 1 billion yen in one round, so JBIC can definitely exert a presence with the scale of its investments. Going back to our conversation – you mentioned the investment stage earlier. In recent years, the Japanese stock market has been very positive, as can be seen with the Nikkei stock index reaching record-breaking highs. At the same time, IPOs (initial public offerings) with small market caps are raised as an issue. Is there anything JBIC could contribute in this respect?

Makoto Uchida　We see that as an issue of the Japanese startup market, so we hope to create success stories by investing in “startups that aim to go global”, our main policy. From there, it’s important for the successful investors to invest in the next global startups, like the Skype Mafia, PayPal Mafia, Asia’s Gojek and Grab. Once we start seeing more of these cases, I believe Japan’s startup market will begin to change.

Create New Hondas and Nintendos through Investments

Makoto Shiono　While it is greatly supportive to have JBIC as a stakeholder, there may be concerns over the decision-making process being lengthy as it is a public financial institution. How is this point compared to other existing VCs?

Makoto Uchida　That is where our years of experience with JBIC IG Partner become useful. We also spent a year of preparation since the legal revision to consider the appropriate mechanism that would enable us to invest with the same speed as the market. In conclusion, we established a Startup Investment Committee within JBIC, and asked external members such as you, Shiono-san, to be part of the decision-making. This is our first attempt at such a company meeting, but we gained understanding from JBIC’s management and have been able to set up the structure.

Makoto Shiono　In addition to our activities at JBIC IG Partners in which we worked on together with JBIC, we have history of supporting deep tech through investing in Japanese startups, as well as identifying technologies born in universities and bringing them to commercialization and social implementation at one of our group companies, the Advanced Technology Acceleration Corporation (ATAC). We hope to support JBIC’s activities in various ways possible.

Lastly, could you give a message to the startup founders in Japan and ASEAN?

Makoto Uchida　Japan has a track record of small companies developing into global companies, like Honda and Nintendo, and the basic elements are being nurtured. We wish to create new Hondas and Nintendos together with Japan’s next generation youths and founders. At the same time, Japan has a large industrial system and is full of opportunities for collaboration, so we hope to connect the startups in ASEAN with Japan’s industries. Through such activities, we would like to create a startup ecosystem in Asia including Japan that is just as powerful as Silicon Valley.

Makoto Shiono　It would be historic if we see startups with a global presence emerge from Japan with JBIC’s new initiative. JBIC and IGPI have collaborated with JBIC IG Partners in launching a global VC fund, but we would like to work together in domestic startup investments as well to develop business opportunities abroad for entrepreneurs to spread their wings on the global stage.