In a bid to augment the funding pool for burgeoning growth sectors, Japan’s financial watchdog, the Financial Services Agency (FSA), intends to amplify the amount retail investors can allocate to unlisted startups, as reported by Nikkei Asia.
The current regulation allows retail investors to contribute up to 500,000 yen ($3,339) annually to individual startups via crowdfunding platforms. The FSA’s proposal seeks to elevate this cap to 1 million yen or potentially higher, contingent on the investor’s yearly income. This revision is anticipated to come into effect next year.
Prime Minister Fumio Kishida has championed the transition of household savings to investments and the support of startups as central objectives. Through the relaxation of crowdfunding norms, the administration aspires to cultivate a productive growth investment cycle.
Japan had modified its financial instruments legislation in 2015 to instate a crowdfunding scheme for startups. Since the inception of these services in 2017, startups have been leveraging crowdfunding platforms like Fundinno and Ecrowd to attract funds from retail backers.
The FSA’s proposed framework aims to introduce caps predicated on an individual’s income or assets, permitting investments exceeding 1 million yen, aligning more closely with the U.S. structure. Additionally, the FSA contemplates allowing startups to secure greater capital via crowdfunding, considering raising the current annual limit of 100 million yen to nearly 500 million yen.
Reflecting the expanding fundraising necessities, analytics firm Initial highlighted that 48.8% of Japanese startups secured a minimum of 100 million yen in the first half of the current year, a considerable surge from the 25.7% in 2014.
In comparison to global standards, Japanese startups encounter stricter crowdfunding constraints, with caps in the U.S. and Europe set at $5 million and 5 million euros ($5.27 million) respectively. From 2017 to August 2021, Japan amassed 12.4 billion yen through crowdfunding, whereas the U.S. and the U.K. raised 73.8 billion yen and 100.1 billion yen in 2020 alone, respectively.