What It Now Takes to Raise and to Exit in Japan and Southeast Asia

Authored by: Takashi Toyokawa.

• Both markets are posting rising totals on falling deal counts. That is concentration, not recovery.

• Japan is closing off the small domestic IPO by design, which makes trade sales, secondaries and offshore listings the base case rather than the fallback.

• In Southeast Asia the binding constraint is liquidity rather than capital, and the buyer most likely to take you out now sits outside the region.

Founders keep showing me the same headlines. Southeast Asian tech funding doubled in the first half; Japanese deal value is running at twice last year’s pace. They then ask whether the window has reopened.

It has reopened for a small number of companies and closed further for everyone else. Both markets are producing rising totals on falling deal counts, which is concentration rather than recovery, and it requires a different approach to a raise than most companies are preparing.

Japan

Japanese startups raised JPY 761.3 billion (USD 4.8 billion) in equity in 2025, effectively flat year on year. The average round held at JPY 310 million while the median fell from JPY 77.6 million to JPY 62.4 million, and the number of companies raising fell roughly 6% to about 2,700.[1]

The round-size breakdown is the useful cut. The JPY 10 to 500 million band, where a normal Series A sits, thinned by 115 companies. The band below JPY 10 million grew by 98.[2] Companies that would have raised an A round two years ago are taking small bridges from existing holders instead.

2026 has extended this. Through June, Japan recorded roughly USD 4.25 billion across 376 equity rounds against USD 1.85 billion across 396 rounds in the equivalent 2025 period.[3] Value more than doubled; deal count fell. PitchBook reaches the same conclusion across Asia-Pacific: venture investment accelerated sharply in H1 2026, but the recovery has stayed confined to larger, higher-conviction opportunities.[4]

Two structural facts matter more than the annual totals.

Foreign capital has arrived and does not price like domestic capital. Andreessen Horowitz has announced a Tokyo office; Khosla, NEA and Bessemer are all deploying.[5] They are concentrated in deep tech, robotics, semiconductors and physical AI, and they price against global comparables. A robotics business with defensible IP and a management team that can run diligence in English faces a materially different valuation environment than a domestic SaaS company with identical revenue. That gap is the largest arbitrage in the Japanese private market today.

The domestic IPO route is narrowing by design. From 2030, a Growth Market company whose market capitalisation remains below JPY 10 billion (USD 63 million) five years after listing faces delisting, replacing a JPY 4 billion (USD 25 million) threshold at ten years.[6] The effect is already visible: Japan recorded 17 to 18 IPOs in H1 2026, the fewest since 2011, with domestic equities near record highs.[7] For a generation of Japanese startups the small domestic listing was the assumed destination and the thing that made the cap table work. Trade sales, secondaries and offshore listings have moved from alternatives to base cases. PayPay’s Nasdaq listing shifted that conversation more than any domestic transaction of the last decade.[8]

The M&A market is where the liquidity is. Mergermarket recorded USD 41.7 billion of Japanese M&A in Q1 2026, against USD 47.3 billion in Q4 2025 and USD 34 billion in Q1 2025.[9] Across Asia, H1 2026 produced roughly USD 347 billion across 8,164 transactions, with continued foreign sponsor appetite in Japan evident in KKR/Taiyo Holdings (USD 2.5 billion), Apollo/Nippon Sheet Glass (USD 2.6 billion) and the competing EQT and Bain/LY Corp bids for Kakaku.com.[10] Demand is not the constraint. Preparation is.

Southeast Asia

Southeast Asian tech companies raised USD 7.4 billion in H1 2026, up 130% on USD 3.2 billion a year earlier.[11] Roughly USD 4.5 billion of that went to one Singapore data centre operator, DayOne, and Singapore absorbed about 94% of the total. Excluding that transaction the region raised around USD 2.9 billion, less than H1 2025.[12] Fintech fell to USD 685 million while enterprise infrastructure took USD 5.2 billion. Round count fell to 127.

The annual series confirm it. DealStreetAsia recorded 461 equity deals in 2025, down 27% and among the weakest in six years, on value of USD 5.38 billion.[13] PitchBook, on a different basis, has regional VC deal value down 33.9% in 2025, driven by fund-level fundraising difficulty, reduced cross-border participation and tighter diligence.[14] Q1 2026 produced the highest quarterly value since Q4 2022 on the lowest quarterly deal count in at least eight years.[15]

Seed is the bright spot: up 128% year on year to USD 328 million in H1 2026, with 63 companies taking institutional money for the first time. Early-stage funding of USD 1 billion was up 90% year on year but down 8% against H2 2025.[16] Early, and not linear.

Exits are the binding constraint. PitchBook’s framing is that the regional problem is no longer deployment but liquidity.[17] Tech M&A recorded 129 transactions in 2025, up 7.5% but still 41% below the 2022 peak and the third-lowest count since 2018. Foreign acquirers completed 87 of them, 67.4% of volume against a 57.5%/42.5% split in 2024, with domestic buying down 17.6% to its lowest in the series. Only 14 sponsor-backed companies were acquired in H1 2026.[18]

The buyer for a Southeast Asian technology asset is increasingly not from Southeast Asia. A founder who has not built relationships with Japanese, North Asian or Indian acquirers before a process starts is relying on an adviser to manufacture them in sixty days.

The fund layer compounds this. Asian PE fundraising fell to USD 31.7 billion in 2025, a second consecutive decline, and only 70 funds closed, down 50% and the lowest in a decade, with LPs moving away from emerging managers toward established platforms.[19] Fewer and larger funds mean slower committees and higher evidentiary bars.

What investors are underwriting

Revenue quality over growth. Contracted, recurring or repeatable revenue with named counterparties. Subsidised growth now reads as a liability. This is the largest change in how Southeast Asian consumer businesses are assessed relative to 2021.

Demonstrated capital efficiency. An evidenced relationship between cash deployed and revenue retained, not a breakeven projection. Investors know which companies cut burn between 2023 and 2025 and are pricing accordingly.

Technical or structural defensibility. In Japan, IP and manufacturing know-how. In Southeast Asia, regulatory licences, distribution lock-in or physical infrastructure, which is why capital rotated to data centres. First-mover position in a large addressable market is not, on its own, defensibility.

International logic, which is now an exit question. Whether the business travels determines who can eventually acquire it.

Structure that survives diligence. Accumulated convertibles, stacked preferences, unresolved founder equity and ad hoc cross-border holding structures kill more processes than valuation disagreements. In a Singapore holdco over a Japanese opco, or the reverse, this is where three months disappear.

On price: PitchBook’s US secondary data shows companies whose last primary round was in 2026 trading at no discount, 2025 vintages at 4.7%, and 2021 and 2022 vintages at 59.1% and 54.1%.[20] Two businesses with identical revenue price differently on the basis of the year on the last term sheet, because a stale round provides no current reference point to negotiate against. The data is American; the mechanism is not. A 2021 mark is not protecting you.

Where equity has tightened, debt has not closed entirely. Atome opened 2026 with a USD 345 million syndicated facility.[21]

The corridor

Japan’s problem and Southeast Asia’s problem are partial answers to each other, and the traffic has already started.

Japanese corporates are among the most consistent strategic acquirers of Southeast Asian assets, driven by domestic demographics and TSE-led pressure on capital efficiency.[22] In Q1 2026 Japanese companies completed 91 cross-border transactions across Asia-Pacific, with Singapore the largest destination at 18 deals (19.8%), Thailand at 10 and Malaysia at 8, with Malaysia’s share nearly doubling year on year while Vietnam’s halved. Roughly 70% was investment-oriented rather than divestment.[23]

Traffic moves the other way too. Southeast Asian deep tech companies are turning to Japan for capital and market access as regional funding stays weak; around 70 startups and organisations from Singapore, Malaysia, Thailand, Vietnam, Indonesia and elsewhere were among the 770 exhibitors at SusHi Tech Tokyo in April, and one Singapore-based investor said it is increasingly looking to Japan for its next fundraise.[24]

These transactions are not straightforward. They involve a Japanese acquirer’s internal approval culture, a regional cap table with conflicting preferences, valuation frameworks that do not reconcile, and execution across at least two jurisdictions. They are also where the gap between a well-run and a badly-run process is widest in cash terms.

Six points for companies going out

1.  Run the raise and the exit as one exercise. Investors are explicitly underwriting how they get out. A pitch without a view on likely acquirers answers half the question.

2.  Assume eighteen months of runway, not twelve. Fewer and larger funds, slower committees, higher bars.

3.  Prepare the dual track from the outset. Turning to a sale after a financing stalls is the weakest position from which to negotiate one.

4.  Finish the structural work before the data room opens. Cap table, holding structure, IP assignment and inter-company arrangements settled beforehand, not inside diligence.

5.  Take the strategic buyer’s frame seriously. Corporates have been outbidding sponsors. Bloomberg puts the median strategic EBITDA multiple in H1 2026 at 11.6x, above private equity.[25] But a Japanese acquirer underwrites on strategic fit, integration risk and internal precedent, not your last round’s multiple.

6.  Be honest about the mark. A structured round at a realistic price with clean terms beats a headline valuation carrying preferences that will haunt every subsequent negotiation.

This article is provided for general information only. It does not constitute legal, tax or investment advice, and no investment decision or transaction should be undertaken on the basis of it without specific professional advice.

Sources:

[1]Speeda / INITIAL, Japan Startup Finance 2025 (January 2026). Equity only, excluding debt; prior-year comparable JPY 779.3 billion on a like-for-like collection basis. USD equivalents are indicative, converted at JPY 159.5 per USD (spot, 13 August 2026); period totals are not restated at period-average rates.

[2]Speeda / INITIAL, Japan Startup Finance 2025, as above.

[3]Tracxn, Japan geography data, June 2026, USD-denominated. Different currency and inclusion criteria from Speeda; not directly comparable to note 1.

[4]PitchBook, H1 2026 APAC Private Capital Breakdown (July 2026).

[5]Japanese venture coverage, 2025–2026, including Japan Dev (February 2026) and Growth List (March 2026).

[6]Tokyo Stock Exchange Growth Market listing maintenance reform, effective 2030. Via Stellex Law Firm (November 2025) and JPX follow-up materials (14 January 2026).

[7]Forbes, “Japan Bets $2.3 Trillion To Reboot Its Innovation Engine” (15 July 2026); also 161 Growth Market companies out of compliance as of November 2025.

[8]Japan Go IPO Summit 2026 materials (July 2026).

[9]Mergermarket data, via Datasite, “Market Spotlight: Japan’s M&A boom still has room to run” (April 2026).

[10]LSEG data as at 7 July 2026, via Herbert Smith Freehills Kramer (July 2026).

[11]Tracxn, Southeast Asia Tech H1 2026 (3 July 2026).

[12]Same dataset via Tech Wire Asia and SpinDepth (July 2026).

[13]DealStreetAsia data and reporting cited in Nikkei Asia / KrASIA, “Southeast Asia’s deep-tech startups look to Japan for growth” (28 April 2026).

[14]PitchBook, 2026 Southeast Asia Private Capital Breakdown (June 2026).

[15]DealStreetAsia DATA VANTAGE, Southeast Asia Deal Review: Q1 2026.

[16]Tracxn, Southeast Asia Tech H1 2026, as above.

[17]PitchBook, 2026 Southeast Asia Private Capital Breakdown, as above.

[18]DealStreetAsia DATA VANTAGE, SE Asia Tech M&A Review: 2026 (July 2026). Reporting lags may lift the final H1 2026 tally.

[19]PitchBook data and the 2026 Southeast Asia Private Capital Breakdown, via PitchBook News (April 2026).

[20]PitchBook, Q2 2026 US VC Valuations Report (10 August 2026), using Forge secondary pricing. US market data.

[21]Tech Collective (January 2026).

[22]Financier Worldwide, “Q&A: Japanese M&A in 2026.”

[23]Syntax Partners, Asia-Pacific Cross-Border M&A by Japanese Companies, Q1 2026 Review (July 2026), observation-date basis.

[24]Nikkei Asia / KrASIA (28 April 2026), as above.

[25]Bloomberg, M&A, PE and VC Chartbook: H1 2026 (August 2026).