The Harsh Truth About Fundraising in Japan — with Lauren Nham
- Sushmita Khattri
- Nov 7
- 4 min read
Raising venture capital in Japan isn’t just about convincing investors — it’s about understanding a very different game with its own rules, pace, and expectations.
In this session, I had the opportunity to sit down with Lauren Nham — investor, operator, and long-time ecosystem builder connecting San Francisco and Tokyo — to uncover the realities behind Japan’s venture scene. From cultural conservatism to global benchmarks,
Lauren’s insights revealed how founders are navigating a unique ecosystem, where local norms collide with international expectations.
🎥 Watch the full video here-
Here are seven key takeaways from our conversation — practical, unfiltered, and essential for founders building in Japan.
1. VCs Play Different Games
In Japan, venture capital operates on a fundamentally different risk-return philosophy compared to Silicon Valley. While top-tier global VCs target 10x+ returns, many Japanese investors are satisfied with 2–3x returns.
This has several implications:
Growth expectations: Investors targeting 2–3x focus on stable, sustainable growth. They prefer predictable revenue and incremental market expansion. Aggressive scaling, hiring sprees, or international expansion are often discouraged.
Decision-making: A Japanese investor may prioritize risk mitigation and operational excellence over bold experimentation. This can affect product launches, go-to-market strategies, and even hiring decisions.
Founder alignment: Founders chasing rapid global growth may clash with local investors. Misalignment can lead to tension, slower decision-making, and pressure to conform to local norms.
Practical Tip: Before fundraising, decide whether you’re playing a “stability-focused” or “moonshot-focused” game. The wrong match can cost years of effort and misaligned expectations.
2. Dilution Is Real — and Ruthless
Every funding round dilutes ownership, often by ~20%. After multiple rounds, a founder can retain a small fraction of the company they started.
Ownership vs. control: Beyond losing equity, dilution reduces your voting power, strategic influence, and ability to make decisions independently.
Alternative funding paths: Japan’s low-interest environment and venture debt options allow startups to grow with minimal dilution. Profitable businesses can leverage these methods rather than raising capital out of habit.
Long-term consequences: Dilution affects exit payouts, incentives for early employees, and your ability to maintain a vision for the company.
Practical Tip: Fundraise with intention. Only raise money if it accelerates growth meaningfully or is necessary for scaling. Otherwise, bootstrap or explore debt alternatives.
3. The New Rule: Unit Economics Wins
Investors today demand proof that growth is sustainable — not just flashy top-line revenue.
Meaning: Every dollar spent should have a measurable return. If you raise VC funding, your burn rate must be justified with growth, revenue, or clear strategic value.
Impact: Poor unit economics can sabotage a business before it reaches scale. A company can appear to grow rapidly while quietly bleeding cash, which becomes evident to investors during due diligence.
Global vs. local: Even Japanese investors, traditionally more conservative, now expect robust financial discipline combined with traction.
Practical Tip: Build your financial model around strong unit economics. Demonstrate that every acquisition, hire, or expense has a quantifiable payoff.
4. Japan’s Untapped IP Goldmine
Japan has decades of industrial innovation in robotics, automotive, electronics, and manufacturing. Yet, much of this IP hasn’t been leveraged in software, SaaS, or digital-first solutions.
Opportunity: Startups can bridge the gap between hardware expertise and software innovation — for example, IoT solutions, robotics-as-a-service, or AI-powered industrial analytics.
Challenge: Success requires fluency in both local and global mindsets: respecting Japanese precision and patience while moving at the speed expected by international investors.
Competitive edge: Founders who understand local IP, regulatory frameworks, and industrial processes can unlock opportunities that others might overlook.
Practical Tip: Study Japan’s industrial strengths and identify software layers that can unlock hidden value. This is a fertile ground for innovative startups.
5. Small Rounds, Big Expectations
Japanese investors often provide smaller check sizes than U.S. VCs. However, their expectations for traction and execution are disproportionately high.
Implication: Founders must validate product-market fit, demonstrate growth potential, and provide a clear financial plan — even with limited capital.
Efficiency focus: Every resource must be used effectively. Investors scrutinize milestones, KPIs, and operational rigor.
Founders’ advantage: While small rounds may seem limiting, they encourage discipline, creative problem-solving, and sharper execution skills.
Practical Tip: Prepare meticulously. Investors in Japan expect precise projections, deep market understanding, and validated milestones, even in pre-seed rounds.
6. What Makes a “Good” Investor in Japan
Not all investors add the same value. In Japan, the ecosystem is evolving, and funders vary in priorities, capabilities, and patience.
Corporate VCs & family offices: May invest opportunistically or change priorities with internal politics. They can be helpful but unpredictable.
Institutional VCs: More structured but slower in decision-making and follow-on support.
Alignment matters: The right investor aligns with your stage, growth ambition, and operational philosophy. This relationship is more strategic than simply getting a check.
Practical Tip: Ask about fund size, lifecycle, expected returns, and stage focus before pitching. Treat fundraising as a partnership, not a transaction.
7. The Real Advice for Founders
Lauren’s advice is practical, yet often overlooked: ask investors about their fund cycle.
Why it matters: An investor who has deployed most of their capital can’t invest in you, regardless of interest. This avoids wasted time chasing unavailable funds.
Human factor: Investors operate under pressure from Limited Partners (LPs), internal mandates, and performance targets. Understanding their constraints helps you pitch strategically.
Strategic advantage: Founders who consider both sides — their own and their investor’s — can save months of misaligned efforts and focus on partnerships that actually work.
Practical Tip: Know your investor’s context before pitching. It’s not just about your startup’s readiness; it’s about their capacity to support you effectively.
A Big Thank You
A heartfelt thank-you to Lauren for sharing her unfiltered perspective on fundraising in Japan.
This wasn’t just a conversation — it was a masterclass in understanding a unique ecosystem. Lauren peeled back the curtain on the realities founders face, from cultural nuances to fund dynamics, and the discipline required to thrive here.
Her insights remind us that the most successful startups aren’t just chasing capital — they’re building meaningful, scalable ventures that fit both their market and their ambition.
The future of entrepreneurship in Japan isn’t about hype or imitation — it’s about mastering the game, playing it strategically, and choosing the right partners to navigate it.
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