Is it Possible to Start a Startup in Japan with Zero Funds? Organizing Work Visa
bizmowa
Business Manager Visa Requires Over 5 Million Yen
In Japan, is it possible for foreigners to start a business with zero or minimal funding? The answer is both yes and no.This is due to the requirement of having a work visa to operate in Japan, where entrepreneurship typically demands obtaining a business manager visa. Acquiring a business manager visa necessitates conditions like having over 5 million yen in capital or investments. In essence, to sustain a business in Japan, one needs over 5 million yen in funding.
Recently, for obtaining a business manager visa, many opt to utilize the Startup Visa system. This allows individuals to prepare requirements such as capital and office establishment within six months after entering Japan. Using the Startup Visa, one can launch a business in Japan even without sufficient funds upon arrival, given the completion of preparations within six months.
Securing Funds from VC: Balancing Risk and Business Continuity
Securing funds during the initial six months after entry is a significant challenge for the managerial team. Despite having some time, without a work permit, temporary employment in Japan isn’t feasible. Hence, external funding becomes necessary if there’s no personal funding available.
Various way like family, acquaintances, banks, among others, exist. However, during the startup phase, realistically, only venture capital(VC) or corporate venture capital(CVC) can typically shoulder the risks associated with such ventures.
However, even when raising funds from venture capital, it’s necessary to consider maintaining a certain level of control by the management team, requiring them to invest their own capital and retain ownership of shares. Even if multiple rounds of funding occur, each resulting in an increase in valuation from VC, a considerable amount of cash will be necessary.
When funding comes in from entities like VC or CVC, it implies a continuous decrease in the ownership ratio of the management team. In this case, due to the assumed shortage of funds by the management team, it becomes challenging for them to raise capital by themselves. Moreover, as the company’s growth prospects improve, the company’s value rises, demanding more substantial capital.
There’s a risk involved in utilizing VC and similar entities: uncertainty in collecting sufficient funds immediately after entry. In case funds cannot be raised, the consequence might be withdrawing from Japan. To prevent the worst-case scenario, it’s crucial to engage with multiple VCs or CVCs early on, pitching business ideas and diversifying the sources of funding.
Nevertheless, obtaining funding from external sources like VC or banks has its advantages as it establishes a certain level of credibility. When renewing a business manager visa, the continuity of the business is required and judged based on the financial status in the second period’s financial statements. Positive performance is ideal, but if the gross profit is negative or there’s excessive debt, the continuity of the business might not be acknowledged as a principle. However, if efforts towards funding through investment or grants are underway, flexibility in evaluating the business’s continuity is feasible.
In Conclusion
Utilizing the Startup Visa allows starting a business in Japan with minimal funds immediately upon entry. However, obtaining a business manager visa demands preparation of over 5 million yen in capital or investments within six months after entry. Utilizing funding from VC or similar sources enables entrepreneurship with limited personal capital.
