The Importance and Necessity of Early-stage Financial Support for Startup and Venture Companies in Japan

Abstract

For startups and venture companies, I conducted research not only on the period before starting a business but also on the early stages of the business from the immediate aftermath of starting. In this study I examined financial support during this period, considering financial assistance from the preparation stage to the early stages of the business in its entirety. The year before last, the government of Japan announced the "Grand Design and Implementation Plan for New Capitalism - Realization of Investment in People, Technology, and Startups." It formulated a "5-years Startup Development Plan" and strengthened its startup support policies, especially those aimed at promoting entrepreneurship, declaring 2022 as the "Year of Startup Creation." Currently, there is an increase in support policies for entrepreneurship, and their content is becoming more advanced. However, it is still said that there are few startups and venture companies that continue to the business stability period.In this context, I conducted the questionnaire survey targeting companies in business incubation facilities nationwide. I have also added questions to evaluate the deliberations on the introduction of the new collateral system, business growth collateral rights. The business incubation facilities targeted 17 (16 prefectures) of the national facilities established as public industrial creation support facilities in Japan. All facilities are currently operated by public interest incorporated foundations of local governments. The questionnaire survey consisted of 22 questions and was conducted by using mail methods. Surprisingly, the results show that funding and fundraising in the early stages of business after starting a business are difficult. Many companies are experiencing a serious lack of operating funds and research and development funds. Specifically, fundraising is an important management issue regardless of industry, and that the evaluation of the past support policies is low regardless of company size, indicating a need for improvement in the future.Although the survey period and target were different from previous studies, the results were found to be similar or more severe. It is also significant that the surveyed companies were in an environment where they could receive sufficient advice from various consultation services and incubators from the startup preparation stage. It also became clear that there is a strong desire for the introduction of theｄ newly planned business growth collateral rights regardless of industry. It was confirmed that fundraising is an important management issue regardless of industry, company size, or founding background. Financial support in the early stages of business is very important for companies in business incubation facilities. It is necessary to improve the situation of insufficient operating funds and research and development funds. The establishment of business growth collateral rights is seen as a policy that is expected to be implemented. It is necessary for companies, incubation facilities, and financial institutions to understand this system and to make it a major means of fundraising in the early stages of business. Considering the utilization of this system, it is becoming increasingly important to enhance corporate value.

Keywords: Startups, Financial Support, Business Incubation, Business Growth Collateral Right, Questionnaire Survey

DOI: 10.54941/ahfe1004935