Japanese investors look to Europe instead of their own ecosystem

Huge amounts of capital are flowing from Japan to European tech startups, helping to expand the continent’s burgeoning deep tech cluster as risk-averse investors favor more mature entrepreneurial ecosystems.

Europe’s startup and venture capital ecosystem has long operated in the shadow of Silicon Valley, but the domestic market has become fertile ground for young Japanese companies.

Venture capital funds with Japanese investors, also known as Japanese investors or limited partners, have participated in more than 33 billion euros ($38 billion) worth of European funding rounds since 2019, when the European Union-Japan trade agreement came into force, according to research by venture capital fund NordicNinja and data platform Dealroom.

Total investment in the five years leading up to the Japan-EU Economic Partnership Agreement reached 5.3 billion euros.

At the time, “there was no Japanese capital other than SoftBank” in Europe, Chisaku Sohara, co-founder and managing partner of Japan-Europe VC Nordic Ninja, told CNBC. NordicNinja manages €250 million in assets and is a joint venture between Japan’s JBIC IG Partners and private equity firm BaltCap.

“SoftBank had already acquired Finnish gaming company Supercell, so they were already quite active at that point,” Sohara said, noting that the acquisition energized Finland’s startup ecosystem.

now, mitsubishi, Sanden, Yamato HoldingsAccording to the report, companies directly supporting European technology include Marunouchi Innovation Partners, as well as NordicNinja, Byfounders, toyota‘s Woven Capital has cut checks to start-ups across the continent.

According to the report, Europe has more than twice as many VC-backed startups per capita as Japan, and 4.3 times as many unicorns.

Japan’s appetite for investment has always been there, Sohara said. Like many multinational corporations, the multinational headed stateside in early 2000 to establish a corporate venture capital arm. I wanted a piece of the action at a time when some of today’s biggest companies were just being founded in dorm rooms.

“At the time, no one wanted to look at Europe, but after a few years, I think they realized, ‘Maybe American culture is completely different from Japanese culture,’ and started thinking, ‘Hey, maybe we need to look at other regions, like Europe,'” Sohara said, adding that the profile of European entrepreneurs, many of whom came from large companies at the time, was more in line with Japan. This is in contrast to younger founders who come from Stanford or university research and development departments, he said.

“They have corporate experience and they also have an entrepreneurial spirit. Unfortunately, Japan lacks that entrepreneurial spirit,” Sohara added, referring to the founders, many of whom are from Europe. nokia And Skype.

Investors connected to Japan have a strong interest in one sector in particular. Deep technology refers to companies that build on a foundation of scientific or engineering innovation. Deep tech and artificial intelligence will account for 70% of deals made by these investors in Europe in 2024, reflecting trends in the broader startup ecosystem with booms in AI, energy and defense industries.

Companies that have attracted the most funding from Japanese participation include British self-driving car startup Wave, which raised $1.05 billion in an investment round in May 2024, British quantum computing company Quantinum, which secured €273 million in January 2024, and Spanish quantum company Multiverse Computing, which wrote a check for €189 million from investors in June 2025. The round was supported by SoftBank, Mitsui & Co., and SoftBank. Toshiba respectively.

However, such companies typically require significant growth capital and industrial experience to successfully grow, two elements that are notoriously lacking in Europe.

“Japanese companies – and most of the companies we talk about are old – they’re just sitting around with piles of money. They’ve been saving money over the last century, and now they’re starting to use it to grow as big companies and expand their footprint outside of Japan,” said Sarah Fleischer, co-founder and CEO of Tozero, a German-based battery materials recycling startup.

“I see that the investment appetite is much stronger than in any strategy I have seen here in Germany or in Europe,” she added. Tozero has raised €14.5 million to date, with investors including NordicNinja, Honda and JJC.

It’s not just a matter of checking. Mr. Fleischer and Mr. Sohara respectively pointed out that Japanese companies and industry have strong manufacturing and automotive know-how and are well-positioned to fill Europe’s knowledge gap when it comes to scaling up large-scale manufacturing projects.

Fleischer added that Japanese companies have been strengthening their critical mineral supply chains and established trading houses for years, which means they know how to secure the essential elements needed for the energy transition. For Tozero, Fleischer said, this is an added plus, given that the company is in the business of recovering such materials from used batteries.

At a time of heightened political uncertainty amid volatile U.S.-China relations, Japan also serves as a good bridge to Asian markets, Fleischer said.

Back in Japan, the number of entrepreneurs is “still very limited,” Sohara said, adding that while the older generation and “high-quality talent” want to work for “Toyota or Honda or Sony,” the younger generation’s mindset is starting to change.

Europe is also home to ambitious would-be founders looking for a technology ecosystem to build their companies, Sohara said.

However, as cooperation between Europe and Japan grows, language remains a barrier as fluent English is not widespread in Japan, he added.

For Fleischer, this is also a challenge. “Communication inconsistencies and too much local translation can quickly kill a partnership. There are also certain cultural aspects that you probably need to be aware of,” she said, adding that she recently spent a few weeks in Japan getting to know investors firsthand.

Therefore, decision-making can be slow due to the need for thorough research and preparation, the founder said. “They’re just doing their homework,” Fleischer said, noting that the Japanese partner has been hands-on in helping the company understand “how to build the next future commercial plant that could potentially start in Japan and expand around the world.”

Indeed, “without the support of NN (NordicNinja) it would have been much more difficult to establish the right relationship,” says Aake van Vugt, co-founder and CEO of Dutch nanotechnology engineering company VSParticle.

This is in contrast to perhaps the most famous Japanese player, Softbank. Sohara added that SoftBank is “completely different” from traditional Japanese investor culture, given that it is driven by founder Masayoshi Son’s decisions rather than operating on a consensus basis like most Japanese companies.

The venture firm, known for its big bets on WeWork and more recently on semiconductor company Arm, has poured huge amounts of cash into tech startups amid 2021’s venture capital technology boom, with reports saying at least one Japan-linked investor was involved in deals worth 11.2 billion euros. Softbank stood out during this period. In 2021, it was involved in 22% of Japan-related transactions.

Looking to the future, Sohara and Fleischer look forward to further cooperation between Europe and Japan. However, according to a report by Dealroom and NordicNinja, Japanese investors are expected to participate in rounds worth 3 billion euros in 2025, which is down compared to last year.

As many eyes turn to the Middle East as an investment destination, Fleischer said interest in Japan appears to be increasing. Anecdotally, “people contact me asking for introductions to meet with LPs in Japanese companies, which is fun,” she said, noting that while this is a new development for her, it may simply be because she has such investors.

“I think that in Japan as well, we are being politically driven by the government to position itself more wisely geopolitically, to have companies and industries grow within certain ecosystems, and to strengthen our position as a country,” she said.