University of Tokyo capitalises on law change to invest £399 million in startups

The University of Tokyo has revealed plans for a wave of startup investment through a new 60 billion yen (£399 million) fund, designed to support the creation of unicorns and help Japan catch up in the global tech race.

The institution will begin with a 10 billion yen investment which it hopes to increase to 60 billion yen in 10 years and support the formation of 300 startups, according to Nikkei Asia. This is set to double the number of startups the university produces a year and take the number to 700.

The university is capitalising on an upcoming change in Japanese law, set to be introduced in April next year, that will make it legal for educational institutions to invest in startups. So far Kyoto University, Tohoku University, and six other institutions have also expressed interest in funding new ventures.

To date, the university has been forced to rely on private sector partnerships in order to bypass the law, investing in over 110 startups through venture capital firm The University of Tokyo Edge Capital Partners.

The University of Tokyo, which has created 323 startups as of October 2020, is hoping to establish new companies through this initiative and make Japan's startup scene more competitive internationally, which has only produced a handful of unicorns so far, according to CBInsights. In total, the country has six unicorns, behind APAC competitors South Korea with 11 and India with 41. When it comes to the most startup friendly countries in the world, CEO World ranks Japan at 13, coming behind India at 5 and Malaysia at 8.

The university is also aiming to transform its Hongo district campus into a hub for startups and investors, with the intention of creating Japan’s own version of Silicon Valley.

Although Japan lags behind other nations, investment is on the rise. Over the first half of 2021, Japanese startups raised around ¥324.5 billion (£2.1 billion) in investments, which is nearly as much as in the whole of 2017, according to the consulting firm Initial. Overseas investors are also taking more interest in Japanese startups, with five of the country's top 10 fledgling companies revealing they had received funding from foreign investors.

In September, PayPal revealed it was acquiring Paidy, a Japanese ‘buy now, pay later’ (BNPL) startup for ¥300 billion ( US$2.7 billion). PayPal said the acquisition would help it expand its capabilities, distribution, and relevance in the domestic payments market in Japan and complement its existing cross-border e-commerce business in the country.