Early-stage startups are struggling to raise funds, with 2025 funding plummeting 42% year-over-year to 199 billion yen—the lowest in a decade. Tokyo Stock Exchange's revised listing criteria for its Growth Market have reduced IPO opportunities, causing investors to apply stricter selection. Companies valued below 500 million yen have been particularly affected.

The stricter listing standards have forced VCs and investors to scrutinize early-stage investment opportunities more carefully. Seed and early-stage startups without proven track records now face significantly heightened barriers to fundraising. This shift reflects a broader trend of investor selectivity becoming more pronounced across the market.

The trend is likely to persist, potentially threatening the foundations of Japan's startup ecosystem by drying up early-stage funding sources. The era of more rigorous and clearly defined investment criteria has arrived, with implications for long-term startup development and innovation potential.